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Car Buying Behavior; Does Generation Y Want to Own a Car?

Car Buying Behavior: The Case of Demotorization

written by Jenny Darroch
Marketing strategy expert at Claremont Graduate University

A couple of articles have caught my attention lately. In the October 9 issue of the Los Angeles Times, Martin Zimmerman reported the results of a JD Powers study aimed at examining attitudes toward car ownership among those aged 12-18 and 22-29. Two things captured my imagination with this study. The first is that JD Powers analyzed data from social media sites such as Twitter, Facebook, Autoblogs and personal blogs. This is not a new idea but clearly shows the opportunity to analyze the discourse of a target market without the influence of an interviewer or the constraints of the interview process. Plus, younger markets are notoriously difficult to reach using traditional marketing research methods. I think the use of these newer sources of data to understand a complex marketing problem is excellent.

Aside from the research method, I found the results themselves especially interesting. Basically, Generation Ys question the economics of owning a car, see less need to meet physically since they successfully manage to keep in touch using other means of communication, and hold negative perceptions of the auto industry that might well influence future sales. We know that one of the negative consequences of the current recession is that consumers mistrust brands and corporations and the results of the JD Powers study certainly provide evidence of this.

The September 14 issue of Fortune ran a great story on the car sharing service, Zipcar. I had seen Zipcars around the campuses of the Claremont Colleges but hadn't realized how much influence Zipcars had on car consumption.

The membership base of Zipcars is growing: 325,000 individual members, 8,500 company members, and 120 college and university campus members. Zipcars enjoys annual revenues of $130m and revenue is growing by 30% a year. Individuals who give up owning their own car to use Zipcar save $600 a month. In addition to the financial rewards, drivers of Zipcar also drive 44% fewer miles and each Zipcar removes 20 cars from the road as members either sell their cars or decide not to buy a new car.

What I find interesting is the impact car sharing programs such as Zipcar have on consumer behavior. Instead of buying a car, a member pays a basic membership fee, books a car online, pays an hourly or daily rate that includes gas and insurance and then picks up a car from a neighborhood Zipcar car park.

Like many things, we won't know the final outcome of car sharing services. Will car sharing services facilitate a permanent change in consumers' behavior - especially when we add the JD Powers research to the mix and realize that there might already be shifting attitudes and opinions toward car ownership. What does this mean to traditional rental car services or car manufacturers? What growth opportunities will car sharing provide?

When a marketer detects a change "going on out there", the challenge is to recognize, filter and respond. That is, recognize the change in behavior, filter it through the mental models held of the industry, organization and brands. Part of the filtering process includes questioning assumptions held of the industry, organization and brands, asking what the change means for your organization and brands and what the change could mean for your organization and brands. And finally, deciding how to respond. This what Apple did when Steve Jobs detected a change in behavior with respect to music consumption: people were already downloading music from Napster onto MP3 players. Steve Jobs recognized this change and responded with the iPod and iTunes both of which not only changed Apple but also facilitated a dramatic change to the way in which we consume music.

At this early stage, Toyota and Ford, Hertz, Enterprise and U-Haul have recognized the change in behavior driven by Zipcar and identified the change as significant enough to warrant a response. It seems that all are working on car sharing initiatives: "The future of transportation will be a blend of things like Zipcar, public transportation and private car ownership," says Bill Ford, the Executive Chairman of Ford. As the use of car sharing services continues to grow we will no doubt see a series of other product, service and process innovations and the formation of new markets.

Jenny Darroch is on the faculty at the Drucker School of Management. She is an expert on marketing strategies that generate growth. See www.MarketingThroughTurbulentTimes.com

Follow Jenny Darroch on Twitter: www.twitter.com/Jenny Darroch

Source: www.huffingtonpost.com/jenny-darroch/car-buying-behavior-the-c_b_32...

Jenny Darroch is on the faculty at the Drucker School of Management at Claremont Graduate University, USA. Jenny combines her interest in marketing, entrepreneurship and innovation to focus on marketing strategies that generate growth.

She is an accomplished author and speaker and her publications have appeared in leading journals such as the European Journal of Marketing, Journal of Business Ethics and the Journal of Small Business Management. She recently co-edited (with George Day and Stan Slater) a Special Issue of the Journal of the Academy of Marketing Science: A Tribute to Peter Drucker in 2009.

Her first book, Marketing Through Turbulent Times, will be released by Palgrave Macmillan in November 2009 (see www.MarketingThroughTurbulentTimes.com)

 

Views: 497

Tags: Behavior, Buying, Car, Car?, Does, Generation, Own, Want, Y, a, More…to

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Comment by Keith Shetterly on December 22, 2010 at 8:51am
Jason, you may have over paid.  :)
Comment by Jason Manning on December 21, 2010 at 9:10pm

Merry Christmas Keith!  That picture cost me $10,000!  I had been saving forever!  Did I pay too much?  Great to hear from you!  Keep moving forward.  You are a warrior.

Comment by Keith Shetterly on December 21, 2010 at 8:58pm
Jason, I haven't been around here much for a while--but that's a much better pic, btw.  And an insightful post, as usual.  Merry Christmas!
Comment by Jason Manning on December 21, 2010 at 8:40pm

I live about one mile from the Claremont Colleges.  They have a huge draw from Japan for Master's Programs in Business.  It's no surprise that the Zipcars have been seen so much around those colleges.  They are cheap rentals for students who need wheels and are used to sharing public transportation anyway.  Eastern and European cultures view vehicle ownership differently than traditional American culture.  They, primarily, share mass public transportation in their countries.  There is certainly a market for sharing vehicles, but it's coming from outside our country to inside.  Not inside to out.  Generation Y is greatly influenced by cultures outside our nation.  Those cultures will make up a majority of that generation.  Toyota did the study years ago before the Scion brand.

 

So I definitely see a market for sharing vehicles.  It's a market led by Generation Y, who has more buying power than the Baby Boomers by 2015.  Generation Y is mostly made up of Non Traditional American culture.  I still believe there will be a market for traditional vehicle ownership and leasing though.  I just see vehicle sharing as a bridge between private transportation and mass public transportation (which is ideal), seen in countries who rely on the latter.  Privately owned vehicles have a lot of down time (mine is operated 3 out of every 24 hours).  I can easily see the market for sharing.  It's just a portion of the market though.

 

Great post Ralph! 

Comment by Ralph Paglia on December 21, 2010 at 1:41pm

Keith - I think we can create excitement again, and we see it in certain models like the Ford Fiesta, Kia Soul, Mustang, Camaro and some Scion models, etc., but it is getting more difficult to arouse the passions that entice people to stretch their budgets like we were able to do a generation ago.

Comment by Keith Shetterly on December 21, 2010 at 10:45am

Ralph, great article you found!  We are seeing the evolution towards not owning specific transportation revealed in Gen Y.  And Z.  Boat clubs have done this for years.  I believe that the desire for that "new car smell" . . . is lower in the latest generations than ever before.

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