Car buying moves in a premium direction
UK car buyers are indicating that they have growing spending power, leading to a boost in the popularity of premium brands. But it is not just confidence in the economy that is driving the market.
Confidence and budgets are rising among UK car buyers, resulting in an increased demand for premium marques like BMW, new research shows.
Nearly half of drivers (44 per cent) plan to buy a new car next year, according to the poll by Motoring.co.uk seen exclusively by Marketing Week. This is up on last year, when 38 per cent said they expected to change their car in 2013.
The latest survey of more than 2,300 motorists shows a 7.8 per cent increase in the average price people expect to pay for a new car – up from £20,087 to £21,653. The budget bracket that sees the biggest increase is £25,000 to £30,0000, which is selected by 18.6 per cent of potential car buyers compared to 10.9 per cent in 2012.
Terry Hogan, co-founder and director of Motoring.co.uk, believes the increased buying activity is closely linked to the recovering housing market and rising optimism elsewhere in the economy. “When the housing market is strong and house prices are rising, new cars very swiftly follow,” he says. “It’s a reflection of confidence.”
Increased spending power is boosting the demand for more expensive car brands. For example, the survey asks motorists to name three brands they are most interested in buying. Although Ford is the most popular choice, selected by 37.5 per cent of drivers, the top five also features three premium marques: Audi (33.3 per cent), BMW (33.3 per cent) and Mercedes-Benz (22.4 per cent).
Jaguar sees the highest jump in the proportion of motorists who say they are interested in buying their car, with the figure more than doubling from 5.1 per cent to 11 per cent. This tallies with increased sales of the brand, which are up 19 per cent this year.
The sales growth is partly due to strong exports to countries like China, as well as investment from India’s Tata Motors, the owner of parent company Jaguar Land Rover. But it also reflects efforts by Jaguar to broaden its appeal and extend the reach of its brand.
This has included launching new models for different demographic segments. Last year, the company developed a new version of the XF, its most popular luxury saloon, by launching a larger estate car for families. The brand has also introduced a more carbon-efficient engine as a way of improving its credentials in the company car market.
In addition, Jaguar is seeking to appeal to a younger audience through marketing. For its Your Turn Britain campaign earlier this year, the company filmed a series of videos in which celebrities such as Twilight actor Jamie Campbell Bower and DJ MistaJam discuss what is important to them about modern Britain. The short videos were put on YouTube and Tumblr and shared on social media.
Jaguar has also innovated by integrating music discovery app Shazam into its TV advertising and augmented reality app Blippar into its print campaigns. Consumers using these apps are directed to digital landing pages where they can interact with Jaguar models or go direct to the company’s website for more information.
“We want to make sure that all our potential customers have a digital experience,” explains UK marketing director Ken Forbes. “We give people reasons to come to our website and once there, we can engage with them and see how that might lead to further interactions.”
According to the research, enjoyment factors, rather than practical concerns, are becoming more important to prospective car buyers. When motorists are asked to name their top five considerations when buying a new car, in-car technology sees the biggest jump, from 8.2 per cent of respondents last year to 11.7 per cent in 2013. The biggest fall is ‘room for children’, which was selected by 7.1 per cent last year but only 4.2 per cent this year.
Hogan at Motoring.co.uk believes that popular brands are catering for different types of customer need by expanding their product ranges and focusing on innovation. This includes Ford, which last year fitted its Fiesta model with a series of new applications such as its Sync software. Developed in partnership with Microsoft, the software connects with most smartphones and allows drivers to control their in-car entertainment system using their voice.
He suggests that less popular brands have failed to update their product ranges as effectively or with the same frequency as competitors. Citroen sees the biggest fall in desirability among car buyers, from 8.8 per cent last year to 6.5 per cent in 2013. It is followed by Peugeot (8.2 per cent to 6.2 per cent) and Renault (7.3 per cent to 6.7 per cent).
“The French brands are struggling,” he says. “Their brand perception and loyalty is low and their market share is declining because they haven’t done enough of a good job marketing their brands and because the product mix is poor.”
There is hope for struggling car brands, however, if they can get their products and marketing right. Skoda, for example, was once regarded as a joke among motorists and a synonym for poor quality and value. But in recent years, the Volkswagen-owned brand has enjoyed a significant improvement in public perceptions and in May it took the top two spots in the What Car? 2013 UK Vehicle Ownership Satisfaction Study.
Skoda’s popularity means that existing owners are likely to buy the brand again when they next change car. According to the Motoring.co.uk research, 61.1 per cent of Skoda drivers say they would stay with the brand, while 36.1 per cent say they might do. This is the third strongest result of any car brand, with Hyundai coming top and BMW second.
Heidi Cartledge, head of marketing at Skoda UK, notes that the brand has developed a strong community of loyal customers by playing on its status as a challenger brand and by focusing on customer service. “We try to punch above our weight with the creative ideas we use in our advertising and then we look at how we can bring that to life for people,” she says. “It comes back to the quality of the product and the satisfaction that people are getting from Skoda.”
Cartledge agrees that consumer confidence in the UK car market is on the rise. She suggests that while this is good for brands, it is also leading to greater choice for motorists. “Among certain segments there is a lot of disposable income and it’s great that people have the confidence at the moment to go out and buy a car,” she says.
“The flipside is that a lot of manufacturers are putting offers into the marketplace to make sure they get their portion of that market. That makes it more competitive, which ultimately is good for consumers.”
Head of marketing, Skoda UK
The main drivers of our performance are the product and our customer service. We’ve won 15 major awards this year, which is evidence that the cars speak for themselves. There was an article in the Telegraph about us this year with the headline ‘From laughing stock to top dog’. There’s a clear story there - we’re a challenger brand, we have been the underdog and people now realise that we’re not a joke but a credible player.
The brand has been on a journey to confront perceptions head-on and then build from there by having great products, customer satisfaction and the respect of the motoring industry. We have passionate customers who believe in their choice and I think that’s a powerful combination.
Marketing director, Jaguar UK
Our sales for the year to date are significantly above the market [average], which shows we have got momentum. That’s a key word that we like to dwell on because I think it’s hugely important – that momentum is predicated on making sure we’ve got the right product in the right segment. The other component is ensuring we communicate to the relevant markets in the right ways. Digital is obviously important.
In-car technology is an integral part of our proposition – we call it the ’connected car’, but there’s a whole host of different applications that we have and are looking at. Our investment in technology at the moment is significant: we’re putting around £2.7bn a year into research and development.
Buying cars online
Although consumers want to inspect and test cars in person before they buy, online is becoming an increasingly important research channel for motorists. Auction website eBay reports there were more than 300 million searches for cars on the site in the UK last year – an increase of 140 per cent compared to 2009.
Figures from the site show BMW was the most searched for brand in July, while Volkswagen was second and Ford third. “It’s essential that car brands have a digital showroom that compliments and is consistent with their bricks-and-mortar dealerships,” suggests UK head of eBay Advertising Phuong Nguyen.
He believes that car brands can set themselves apart online by utilising the wealth of customer insights available to them to make interactions more engaging and relevant. “By looking beyond simply audience demographics and instead harnessing the power of observed insights, such as purchase and search history, or stage within the purchase cycle, they can create intelligently-targeted advertising campaigns.”
Despite the rising popularity of trading used cars online, figures from Motoring.co.uk show that a third of buyers (34 per cent) are still keen to purchase new cars. Nearly a fifth (19 per cent) are looking to buy a car that is one year old, while 28 per cent say it is likely they will buy a car that is either two- or three-years old.