State of Luxury Car Sales and Distribution to Generation Y Essay

Custom Student Mr. Teacher ENG 1001-04 17 February 2017

State of Luxury Car Sales and Distribution to Generation Y

Luxury vehicle is a marketing term used to describe cars with greater performance, comfort, innovation, and features that convey a brand image. As the industry has grown, it has become much more complex; there is more intense competition and new needs for consumers. By doing a SWOT analysis of the luxury car industry, the data reveals that although there are constant threats to this industry, there are also many opportunities. Some of the strengths for many of the established manufacturers are their high brand equity.

They are world leaders and consumers view them that way; being the ‘finest’ in the industry, companies like Mercedes can charge high prices for their cars. This also leads to one of their weaknesses. The high prices and high maintenance costs of these vehicles make them available to only those who can afford this luxury. Most of these cars are marketed towards middle-aged wealthy white males. Luxury car manufacturers are challenged in finding new ways to market to consumers outside of this group.

The changes in upcoming generations pose a huge threat to the luxury car market; yet, this threat can be turned into an opportunity. With a new target market come new ideas, new technology, and new and exciting ways to market. Not only do these companies face the threat of a new generation, they also face intense competition. Mercedes, BMW, Audi and Ferrari are among some of the top competitors in this market. How do you set yourself apart? Many of these companies are expanding around the world and creating competition globally.

Due to the fact that there is a whole new generation to market to, luxury car manufacturers have other opportunities to look forward to. With technology constantly changing and improving, they also have a chance to make huge improvements to their cars. Innovative sound systems, touch screens, and rear view cameras already exist in many of today’s luxury cars. New technologies will give manufacturers even more features that can entice new consumers. This is a chance to gain a huge market share. These existing opportunities all contribute to a chance for future success in the luxury automobile industry.

The new target market, Generation Y, is the huge group of consumers which the luxury car market has to look out for. They are also known as the ‘Millennial’ Generation or the ‘Echo’ Boomers. This group was generally born between the late 1970s to late 1990s although some argue that this even extends to the early 2000s. Many of them are children of ‘Baby Boomers. ’ Generation Y is known for having an increased familiarity with communications, media, and digital technologies. They are familiar with social media and can navigate almost any smart-phone. They are more culturally liberal than generations before them.

In order to meet the needs of Generation Y, automobile manufacturers must realize that this generation has different expectations than some of our past generations. This group has taken on the green movement. They are actively aware of their environment and are willing to take steps and buy products which will contribute to its health. In a survey taken on Autotrader. com, 44% of Echo Boomers would consider purchasing a hybrid vehicle. Echo Boomers said they would be open to owning an echo friendly car, but would also like more information on this since not everyone had enough knowledge about hybrid vehicles.

This gives manufacturers a chance to raise awareness among this demographic to gain their interest. Since this demographic is also the most technologically savvy, they expect to have the best technology in their vehicle. “The Gen -Yers are constantly exposed to technology reason why they have come to expect it to be standard in all of their major purchases. ” Although this generation wants all the latest technology, they are not as willing to pay for it. They want to purchase it all at a reasonable price. Many automobile manufacturers have already taken notice of this market and have begun to make cars specifically targeted towards them.

Some of these cars include the Nissan Cube, Kia Soul, and Ford Fiesta (http://www. prnewswire. com). Some of the top selling luxury cars come from companies like Mercedes Benz, BMW and Audi. BMW very successful model X1 SAV is likely to sell around 2,500 to 3,000 units next year. Without the X1’s contribution to the company, they would have only managed a growth of about 30%. Now Audi on the other hand also had a successful model, the Q5 and the Q7. These additions to the line have helped the company give an excellent performance even in a month like November. Mercedes Benz car sales for the month of September were 120,982 cars.

There was a 2% increase in sales from last September which reported they sold 118,559 cars. Mercedes-Benz sales were up 7. 6% at 919,288 cars after 853,987 vehicles in the prior-year period. The sales of luxury car will always continue to rise no matter what the economic status a country is. People who have a lot of money won’t necessarily think that they are spending a lot on a car. It is some very tough for these high end luxury cars to do good for themselves based year on year to year. The sales of Lamborghini were down by 38% in 2009 and the company posted a net loss of $48 million dollars the previous years.

The car sales dropped from selling 2,430 cars in 2008 to 1,515 cars in 2009. Ferrari on the other hand had record breaking sales and revenues the first six months of 2011. Sales in the United States rose by 23% to 939 vehicles sold. The United Kingdom rose by over 50% to 289 car sales. There are also companies like Porsche that do very good for themselves. The company reported increase in sales by 25% worldwide. Americans consumers were unwilling to pay premium prices for small cars even though they cars wore luxury cars and sales of such cars remain low.

Mike Jackson, who is the head of Mercedes-Benz USA, was strong-minded to keep the unpopular, expensive A-class small car out of the United States. European luxury brands have a strategy to change that in the next few years. Due to the fact that they want to increase sales they will meet strict government standards on fuel economy so that they will be able to sell their small luxury cars here in the United States. On April at a New York auto show, Benz reviled a concept version of the redesigned A-class and Jackson called it “beautiful. ”

The A-class is expected to sell around $30,000 in 2013 in the United States and European automakers are extremely confident that it will sell. Technology has become a vital part of the automaker industry, especially for luxury cars and Generation Y. Luxury carmakers are able to charge high prices for their premium products by utilizing a differentiation strategy. They need to increase a customer’s willingness to pay to compensate for their higher prices. Innovative technology is one of the main ways to achieve this. Even a small innovation could help boost sales of a particular model.

Therefore, it is very important for luxury carmakers to invest in research and development. It is important to be the first company with these new innovations because buyers crave these new innovations and it attracts them to the brand. Innovation for luxury carmakers should focus on four main goals: Appealing to tech-savvy buyers, environmental friendliness, performance, and safety. Appealing to tech-savvy drivers is an extremely important goal. As the younger generation grows older, innovation will be a huge factor in their car purchasing decision. New features in cars are being designed to make driving feel like a video game.

“Auto makers view these features as lures for younger, cash-conscious and tech-savvy buyers” (White). Environmental friendliness in luxury cars is also an important focus of innovation. As the world becomes more and more conscious of the problems with the environment, drivers will look for more environmentally friendly vehicles. Recently, luxury carmakers have begun to roll out plans for hybrid luxury vehicles. “They want to attract the lifestyle purchasers who aren’t necessarily concerned about saving a few dollars on gas, but want an environmentally conscious choice without giving up the amenities they are used to” (Hirsch).

Luxury carmakers need to continue to research the use of hybrid technologies and implement them into future models. A third goal for these companies’ innovation is to maintain the performance of their vehicles. They need to find a compromise between keeping the comfort and reliability of past luxury cars and adding new technologies and innovations. The last focus of innovation for luxury cars should be safety. Safety is always an extremely important focus of research and development. Infiniti recently introduced “Eco Pedal”, a pedal that “gently pushes back against your foot when the car’s computers decide you’re romping too aggressively on the accelerator” (White).

This new innovation both allows the customer to drive more efficiently and make it safer. The main targets of the marketing plans for luxury cars should be new drivers and young professionals, not forgetting their loyal customers. The new, younger drivers are more interested in technologically advanced cars. Technology is the main attraction and should be the focus for marketing departments when advertising to young drivers. The other target is past customers. They are more concerned with reliability and safety of the cars and their performance.

The marketing techniques being used currently by some of these luxury carmakers include TV, radio, and print ads, social networks, brand positioning, and green technology leadership. TV, radio, and print advertising are important because they reach a broad audience and are less expensive compared to other forms of advertising. Another type of marketing being used by carmakers is the use of social networks. While carmakers have started using these social tools, researchers believe that they are missing an opportunity to really reach out to the younger market (Generation Y).

A third tool used by marketers of luxury carmakers is brand positioning. One way to do that is to associate certain attributes with your brand. Mercedes and BMW have been able to create a culture to their brand that represents the ideals of business professionals. More and more people are becoming conscious of the condition of the environment. It will be important for companies to establish themselves as leaders in going green technology to attract environmentally conscious customers. Future marketing should be geared towards these Generation Y consumers.

Given that the internet offers access to unlimited information, Gen Y has developed into the most well-informed consumer market and therefore the most unresponsive to advertising. They reject aggressive or concentrated advertisement and they prefer products that have reached them through word of mouth or subtle social media advertising. The luxury car market is facing some issues due to the increased customers’ expectations that have resulted due to the constantly advancing technology, increased products standards and social changes.

Luxury brands seem less different from each other which has resulted in an increase competition and a need for companies to capture younger generations and cultivate a brand identity on them. Luxury car manufactures are taking advantage of the use of digital media and online channels to get the most out of today’s luxury customers. In order to attract the Generation Y some strategies are being developed and some may also appear in a short future.

Given that the internet enables consumers not only to find information but also experience, luxury carmakers are aiming to create online campaigns and online private communities. Mercedes Benz is one of the leaders when it comes to finding ways to connect with the new generation. They have taken advantage of the Gen Y enthusiasm for digital communities by a developing a private online community called Gen-Benz. This online community was founded on 2008 and is by invitation only. The company contacts Generation Y owners and fans and connects them with the brand’s decision makers thru live chat.

The Marketing Vice President Steve Cannon said that “the project’s success has led the company to move almost entirely away from focus groups, to evolving “customer intimacy” via these networks. ” (Luxury Society, 2010). This community is successful not only because the company can obtain direct feedback about media advertisement and cars performance but because it’s attractive to members. Having the opportunity to provide advice directly to top executives, test drive new cars and provide feedback on social media is extremely exciting and attractive to the Generation Y.

Mercedes Benz has successfully figure out a new approach of how to utilize social media to conduct cost effective consumer researches that ultimately helps the company’s brand development. Researches have revealed that Gen Y like feeling part of a private group, reason why this strategy works so well. Another new approach that carmakers are following are project based competitions in which selected MBA students are invited to participate and provide ideas on how to solve current issues that the company and industry are facing.

Luxury car makers select top students from top universities in order to have direct access to the ideas of their potential future customers. Moreover, this approach is also used as a recruitment strategy. Carmakers are developing new car models targeted specifically to the young college professionals. For example, Acura has recently launched the youthful 2012 Acura TSX Special Edition which aims to attract the image seekers. Image seekers are consumers that will appreciate the styling and performance of the vehicle while addressing their need to identify with their growing personal and professional success.

(Brand insider, 2012) IN the same manner other luxury carmakers are looking to introduce similar cars at affordable prices, with a sporty interior, powerful and fuel efficient engine. Generation Y have embraced technology and video games like no other generation. Many brands, not only carmakers, are starting to show their presence in the virtual world as a marketing strategy. A game called “The Second Life” offers players an opportunity to explore beyond their reach in virtual life.

Moreover offer companies a chance to reach their targets in a different way by offering them the possibility to experience new products. Luxury car makers have created showrooms in the game where players can stop by, gather all the information they need, explore visually and most importantly experience the excitement of driving any car in a virtual test track. In this 3 D environment carmakers host events where they play videos and advertisements for interested consumers in a dynamic and entertaining way. Many carmakers have created parallel brands in order to reach a different segment of consumers.

The most popular lower cost brands create a luxury parallel brand to enlarge their market coverage. A very well know example is the Toyota brand that created Lexus. In the same way luxury car makers may create lower cost parallel brands in order to capture those customers that admire the brand and its products but are unable to afford them. The luxury car market is at a crossroad. As this new market, Generation Y, arises, they are faced with both a great threat and great opportunity. These carmakers need to adapt to these new consumers in the ways they design and market their cars.

They must succeed with this if they want this market to continue to grow. Works Cited Banks, Libby. “Mercedes Shift Strategy to Woo Younger Consumers. ” Luxury Society. 2 June 2010. Web. 25 Nov. 2011. Boyce, Carlton. “Ferrari Achieve Record-Breaking Sales in 2011 | The Global Herald. ” The Global Herald – News, Analysis & Reflection. The Global Herald, 28 July 2011. Web. 16 Dec. 2011. <http://theglobalherald. com/ferrari-achieve-record-breaking-sales-in-2011/22526/>. “Echo Boomers Look Forward to Automobile Ownership — ATLANTA, May.

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