Negative Buzz Increases Post Launch of “Cash for Clunkers”

In the two months prior to the official launch of the CARS (Car Allowance Rebate System) program, 10.5 percent of all discussions were positive, while an additional 10.7 percent of the discussion focused on actual intent to purchase a car through the Clunkers program. On the other side of the argument, 7.9 percent of the discussions were negative, containing sentiments like this New York Times blog comment:

“The worst part about this program is that the government is encouraging people to take on more debt. Those clunkers are mostly PAID FOR. Why on earth are we telling U.S. citizens to go and take out another big loan on a depreciating asset? It’s absolutely ridiculous.”

While positive sentiment around the U.S. government’s program outweighed the negative in the weeks prior to the launch of the program, bloggers began to shift their opinions in the week following the official launch, with negative buzz increasing to 10.1 percent of all discussions and conversations that focused on purchase intent fell to 7.1 percent. As the program quickly ran out of money, negative buzz again increased, growing to 11.4 percent while intent to buy continued its downward trajectory, this time falling to 6.1 percent of all CARS discussions online.

CARS.gov Attracts the Wealthy

Online visitors were also heading over to the government Web site created specifically for the program, www.cars.gov. Month-over-month, unique visitors to the site increased 733 percent, from 287,000 unique visitors in June 2009 to 2.4 million in July. Unique visitors between the ages of 35 and 49 were 35 percent more likely than the average Internet user to visit cars.gov. Contrary to what many may assume, visitors to the site also over-indexed among the wealthy. People who make between $100k and $149k were 33 percent more likely to visit the site, and visitors who earned over $150k were 36 percent more likely to visit the site in July.

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Julie Enzweiler,  Automotive Research Director, The Nielsen Company

SUMMARY: In economic terms, the auto industry was hit by the perfect storm: high gas prices, tight consumer financing, plant closings, brand reductions, dealership pruning, employee layoffs, longer vehicle retention, surplus inventory, manufacturer bankruptcies and waning consumer confidence. Despite a 37% decrease in total auto sales over 2008, bright spots persisted: the redesigned Forester revved up Subaru sales while price leaders Hyundai and Kia gained traction from new models. Online media has changed the rules of the road for auto marketing by placing consumer generated media squarely in the driver’s seat.

Unprecedented. Unbelievable. Unfathomable. The state of the auto nation is shaky at the moment, but all is not lost. Offsetting the unrelentingly negative news are 2009 highlights like a 69% spike in Sorento model sales, a 48% increase in Sedona sales, and the successful launch of the economically-priced Hyundai Genesis and Kia Soul, both targeting younger drivers.

Conversely, luxury vehicles that attract middle-aged consumers managed to outpace the market, although the category experienced a long tail effect, a two to three month delay from shopping to closing the sale. Only one domestic car manufacturer—Lincoln—outperformed the market, even though sales remained in negative territory on a year-to-year basis.

Fueling sales

The Nielsen online panel, comprising 250,000 individuals representing the U.S. online population, detected another hopeful sign for new vehicle sales based on Internet new vehicle shopping patterns. While online new car shopping downshifted by 9%, this represented a mere fraction of the precipitous 37% sales decline, suggesting the existence of pent-up demand. Consumers sought out roadworthy vehicles like the new Ford Fusion, proven gas sippers like the Toyota Prius and Honda Civic, or buttoned up their wallets and opted to maintain their current car or buy used.

Foreign automakers benefited disproportionately from escalating gas prices because of the consumer perception that their vehicles—especially hybrid and diesel models—are more fuel-efficient. German and Korean automakers realized the largest gains in online vehicle shopping activity, posting 1.7 and 2.2 percentage point share increases respectively, while their U.S. counterpart slid 5.5 percentage points. The Volkswagen Jetta and CC models, BMW 1- and 3-series and Mercedes-Benz E class were among the variants driving shopping inquiries.

Model behavior

Sport utility vehicles, with some 61 models available, continue to hold the “most shopped” position and rank number one in the U.S. for share of new vehicle shopping. Although activity waned with rising gas prices, consumers appeared to be hedging their bets, shopping longer in the hopes that gas costs would plummet and justify the purchase. And while the government is putting pressure on automakers to reduce these larger vehicles from their fleet, demand at the moment is not supporting this mandate.

The biggest disappointment among model types proved to be the basic economy vehicle, which peaked with a nearly 30% online shopping share in May 2008 when gas prices were at the highest (around $4.00/gallon), and dropped to half that a year later when gas prices declined to about $2.00/gallon.

Upper middle car models like the Fusion, Camry, Accord and Altima maneuvered into the second most shopped segment by April 2009, with hybrid variants moving the sales needle. Hybrids remain an exciting, but emerging segment, as consumers wrap their heads around the concept and take their time investigating the genre. Luxury entrants cruised along with steady sales, experiencing a boost from the Hyundai Genesis introduction. Luxury models attract aspirational buyers who savor the shopping experience and take their time to consider price before taking the plunge, elongating the buying cycle.

Trading places

Rankings of the Top 25 automakers based on online shopping activity wheeled in some interesting changes, with Kia jumping 11 slots from number 24 last April to number 13 in

April 2009. Volkswagen leapfrogged seven spots from number 15 to number eight courtesy of the CC—their most-searched vehicle on the Internet. The redesigned Forester sparked consumer interest as well and elevated Subaru to the number 22 slot, up from 27.

Saturn fell out of orbit, dropping 13 spots to number 23, followed by Buick’s 12 point decline, GMC’s six point downslide and Pontiac’s five point plunge. A heads-up to Volkswagen, the beneficiary of online buzz over the curvy CC: while initial online interest spikes rapidly, it can quickly taper off. The trick is to sustain interest over time and keep the vehicle top of mind with prospective buyers.

Setting your sites

The auto industry enjoys a relatively unusual electronic landscape, with a host of powerful, established third party shopping sites available to consumers like Yahoo! Autos, Kelleybluebook.com, AutoTrader.com and cars.com to name a few. Manufacturer or OEM web sites need to maintain a polished look and feel with robust content to stay in the game, offering complementary information and highly interactive features like build-a-car customization tools, 360° rotating car views, dealer information, engaging games that keep customers returning to the site, virtual experiences, testimonials and incentives.

While 86% of online shoppers rely on third party sites for price information, OEM sites are the preferred source for visualizing build-outs, researching special offers and obtaining financing information about tax incentives, special offers and government programs. The combined use of both third party and OEM sites actually enhances the consumer shopping experience, providing complementary rather than competing information.

Value of video

Kia Soul, one of the year’s most successful launches, earned kudos for an exciting web site that features techno pop music, robot animation, a personalized video from the chief designer about his “rhino with a backpack”  vision, a floating picture gallery, build-a-soul feature and “Escape from Hamsterdam” game, which leverages the primary advertising visual—hamsters. Of course, the under $14,000 price tag and 31 MPG green angle helped jump start things.

Video streaming is playing out across the computer screens of America, with 124% annual growth overall, and a turbocharged uptake rate of almost 200% for Ford videos. At last count, there were more than 80 million videos available on YouTube, and that video library is growing by some 200,000 clips per day. Nothing engages consumers like real-life clips from owners and test drivers sharing their experiences. In addition to posting videos on OEM sites, manufacturers can enhance both reach and impact by pushing out digital clips to social media outlets like YouTube, Hulu, iTunes, Facebook and others.

Ad impressions

Nielsen data show local magazines, national newspapers and local radio taking the biggest hit with shrinking ad budgets, accounting in large part for the precipitous 31% downtrend in total first quarter auto ad spending from 2008 to 2009. Online ad impressions ramped up during Q1 of 2009, stabilizing at approximately five billion impressions per month during the March to May period, with a correspondingly constant spend rate of $35 million per month.

Following a classic advertising paradigm, exposures may indeed be rekindling demand. Nielsen surveys suggest that “intent to buy” is rebounding from an all-time low in the Spring of 2009 to a more historic level as seen in summer’s past. It seems that consumers have been kicking the tires, but doing so via virtual showrooms.

Listen and learn

“Listening” is the new marketing. To succeed in a multi-media world, automakers will need to engage and interact with shoppers, delivering a complete experience from initial contact through post-purchase. In the process, they’ll need to leverage the power of search and social media, developing a cadre of independent reviewers and product evangelists willing to spread the word about their cars, without filters.

Search engines represent the first point of contact for many shoppers, and carmakers would do well to influence the tone of the conversation and their placement on the page one rotation. Deploy the power of Web 2.0 on OEM sites, incorporating quotes, surveys, reviews, testimonials, buyer videos, interactive games, audio and video feedback loops, special offers and incentives that hook the consumer and give them a reason to keep coming back.

Thanks to raves about its quality, size, style and dealer experience, Toyota achieved the highest rating of 69 followed by Honda (68), Lexus (68) and Acura (67).

Creating a positive brand image online has grown in importance because that’s where most consumers go to research their purchase decision. “Before people buy a new vehicle they are looking to the Web and social media sites,” said Julie A. Enzweiler, automotive research director, Nielsen Online.

“Auto marketers have to understand that the positive and negative comments people say will impact the sale. It can either pick up a brand up or weigh it down.”

Despite Hyundai’s new offerings and extensive advertising efforts, the brand’s rating falls lower than many other automakers because of quality issues and poor dealership experiences among survey respondents. It scored a 46. Only Isuzu (39), Suzuki (41) and Jaguar (43) ranked lower.

Kia, meanwhile, found itself in the middle with a score of 52. Price and value drove its advocacy, which is common among lower priced brands, however quality concerns dragged down Kia’s overall score.

For brands to be successful and gain advocates, Enzweiler said, “their brand pillars must resonate with consumers. If you want to be known for great quality vehicles, your top consumers need to perceive you that way. The BAQ is a snapshot in time for brands to see the lay of the land and adjust accordingly.” — Kenneth Hein

When it comes to auto ads, MySpace continues to garner more overall ad spend: Honda, Chevrolet, Ford, Nissan and Toyota all recently ran ads, with the Honda Fit campaign generating more than 600 million ad impressions in the first quarter of 2009.  A year earlier, Toyota generated over 2.5 billion impressions for its Matrix.  This year, Toyota has allocated more of its ad dollars to Facebook.

As Facebook continues to grow, it will be interesting to track whether the automotive ad spending follows. To receive detailed monthly updates on the auto industry contact Julie Enzweiler

In the past year, Nissan N.A. and Ford Motor Co. Web sites are showing signs of increased consumer interest as evidenced by comparing the unique visitors from January 2008 to January 2009. In terms of year-over-year growth in site visitors, Nissan N.A. saw an increase of 14% while Ford Motor Co. showed a 9% increase. Chrysler LLC experienced the steepest decline in site traffic at 26% followed by General Motors (-17%), Toyota Motor Sales (-11%) and Honda Motor Co. (-5%).

In January 2008, visitors to Chrysler LLC sites also visited or overlapped with General Motors sites (24%) followed by Ford Motor Co. (22%), Honda Motor Co. (15%), Toyota Motor Sales (14%) and Nissan N.A. (9%) sites. The overlap landscape has significantly changed for Chrysler in January 2009 as General Motors and Ford Motor Co. are the only automakers to be cross-shopped with 16% and 3% respectively. Further analysis of online discussion reveals that consumer confidence toward Chrysler’s products, leadership and future viability is decreasing, which poses a threat to potential sales.

Interestingly, Ford is showing signs of becoming a stronger competitor to Toyota, Nissan and Honda, while having less audience overlap with Chrysler and General Motors. In January 2008, roughly 15% of consumers that visited a Toyota Motor Sales site also went to a Ford Motor Co. site, while in January 2009 this rose to 20%. Nissan N.A. sites witnessed a similar overlap increase from 20% to 27% with Ford Motor Co.

Is this change in consumer behavior due to Ford’s improved products, a sign of consumer confidence that Ford refused to receive any government bailout money, or both? Online discussion is indicating that Ford’s strong leadership and refusal of bailout money is giving them the competitive advantage over Chrysler and General Motors. As the threat of bankruptcy grows stronger for General Motors and Chrysler, it is my hypothesis that Ford will continue to benefit from their decision to refuse government aid both in terms of site traffic as well as sentiment of online discussion.

On January 26, 2009 President Obama announced that emission standards could be decided at a state level. This decision has spurred on an extremely heated debate online among all communities.

Forty-two percent are positive towards President Obama’s decision, predominately driven by the Environmental communities, while 44% are negative.

Consumers provide in-depth reasoning behind their belief on reversing the Bush administration’s emissions ruling; however, there is a significant amount of confusion on the number of potential emission standards the Original Equipment Manufacturers (OEM’s) would need to adhere to. Most consumers believe that 50 state standards would be possible, while a few believe the limit is two standards (EPA & CARB). The American people are seeking clarity on this topic either from the Obama administration, EPA or the OEM’s.

Below is a list of consumer positive and negative opinion on this topic:

Positive

• Promotes innovation
• Creates jobs
• Lowers fuel consumption
• Reduces dependency on foreign oil
• Two (2) standards (EPA & CARB)
• Helps the environment (expands lives, cleaner air, climate change)
• Suggests OEM’s adhere to most stringent requirements & apply to all vehicles

Negative

• Hurts the economy even more
• Kills the automotive industry
• Additional taxpayer funding needed
• 50 different state standards possible
• Pay significantly more for a new vehicle
• Produces cars consumers do not want by forcing smaller vehicles on the market, when demand is for larger vehicles
• Limits vehicle selection
• Lowers vehicle performance
• Billions in R&D for OEM’s
• Too difficult at a state level and needs to be at federal level
• Logistical nightmare for all (OEM, Dealer, State, Federal & Owners)
• More government regulations
• Lack of electrical power infrastructure
• Obama paying back campaign supporters

This new direction from Washington will certainly add to the automakers’ current economic strain. Consumers are already anticipating that Honda and Toyota will support this new initiative and push for innovation, while Ford, Chrysler and General Motors are expected to push back. It will be imperative for the Domestic OEM’s to respond to Washington and the public in a delicate manner as they are no longer just potential owners, but also key shareholders.