Luxury Study 2.0 – Opportunities to Grow the Luxury Market

Luxury Brands can differentiate with the consumer experience

Retain Owners – one-third of luxury vehicle owners are open to considering non-luxury for their next vehicle

Luxury brands have an opportunity to grow by reaching those shoppers who are “on the fence” by showing the value of the luxury brand experience

Shoppers view luxury and non-luxury vehicles similarly based on interiors, despite the pricing differential

When it comes to advertising, consider highlighting the interior features that resonate most with shoppers
> Interior attractiveness is driven mainly by paneling and seats
> Warranty and dealership experience are significantly more important to luxury shoppers

Overview: Significant volume of Toyota shopping activity, Expert and Compare cars are key for Toyota shoppers, 26% Higher activity on Lexus new car pricing pages than competitive set, over 7.2M Toyota trade-in reports generated, driving qualified shoppers to Toyota, Toyota sponsorships drive more lower funnel activities, more Lexus content researched during RX homepage takeover, homepage takeover increases engagement.

Toyota Core 4 Insights:
A. The pace of growth is slowing
B. Income growth has been stagnant since the late ’90s
C. U.S. consumer confidence gains have stalled, foreshadowing a sales plateau
D. Consumer vehicle purchasing power is on the decline
E. Incentive spending is rising to sustain the record sales pace
F. Subprime is now accounting for a higher portion of the mix
G. Opportunity for non-lux OEMs to ‘turn the tides’ back if economy does stall out
H. RAV4 share of compact SUV has grown slightly
I. Cross-shopping review for Camry XS, Corolla XS, RAV4, Prius XS
J. Everything except Prius has increased in loyalty over past 2 years
K. Camry is being priced near the segment average
L. Corolla is priced below segment average – created an opportunity to translate consumers to higher trims / Affordability opportunity
M. RAV4 vs. compact SUV pricing curves
N. Prius is priced below other alternative fuel vehicles… / leads its competitive set in perceptions in nearly every category
O. Camry perceptions are very high
P. RAV4 does not lead any factor, but above average on all

Ford/Lincoln Own The Segment

KBB Traffic: Ford has maintained a strong position against key competitors with 20% of all KBB traffic – Slide 3

Own The Segment traffic to Ford Models has jumped 75% since KBBs Homepage redesign – Slide 6

Ford’s New Car Hub activities jumped 3% month-over-month with Incentives (+12% MoM), Ratings (+8% MoM) and (+7% MoM) seeing the highest month-over-month gains – Slide 10

Lincoln’s New Car Hub activities increased by 8% MoM with Photos Viewed (+125% MoM), Cost-To-Own (+67% MoM) and Pricing (+14% MoM) – Slide 13

Explores: Market Environment; Auto sales will remain high, growth will require conquesting from others; The conquest battle will largely take place online as brand preferences are developed online; Third-party sites are central to the online shopping experience; Cox Automotive owns the dominant properties in the market, but there are competitors that can take additional share; While most are satisfied with their overall vehicle purchase experience, the dealership experience can be further improved; Contacting the dealership; It is vitally important to continue to improve the mobilie experience, particularly for millennials and GenX.

Auto sales will remain high but growth will require conquesting from others OEMs and dealers will need to find ways to improve their conquest marketing efficiency and effectiveness

The conquest battle will largely take place online, as it is the place where consumers develop their brand preferences. 3rd party sites are central to the online shopping experience so it is important that:
* OEMs and dealers find creative ways to leverage them
* Third-party sites continue to: reach out to consumers across platforms increase the ease of use
provide content that meets consumers’ current and emergent needs

Cox Automotive owns the dominant properties in the market, with KBB being the strongest, but there remains significant competitors that can take additional share

Most customers are satisfied with their selling dealer, but dealers can improve satisfaction most by decreasing the negotiation and paperwork time

Takeaways for dealers: provide an experience that will drive future business to your dealership; be aware of how long buyers have been at the dealership; be transparent about pricing, particularly with young buyers; be aware of demographics when presenting F&I options