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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
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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)