by Dan Sherman
It is no secret that Ford considers Echo Boomers an integral part of fueling its turnaround. In a recent presentation in New York, Chief Sales Analyst George Pipas revealed that Ford has shifted much of its product mix from trucks/vans/SUVs to cars/CUVs in the past five years. They expect Echo Boomers buying new cars (49% of whom go for small cars) will continue to propel demand for the premium small car segment.
Mr. Pipas, however, glances over the allure of the used car market. When I was in the market for a car about 6 months ago, I highly considered a new car—perhaps a VW GTI or Subaru WRX—but I ended up with a pre-loved 2006 Mazdaspeed6.
Will automakers be able to grow with a focus on Generation Y? Can premium new small cars such as the Ford Fiesta draw Echo Boomers away from certified pre-owned cars Audi A4s and the like? My network of Gen Yers, of course, provided insight.
First and foremost is the question as to whether my peers prefer new or lightly used. I gave interviewees a hypothetical $22,000 and the choice between a lightly used, entry-luxury car (e.g. 2007 Audi A4) and a new small car (e.g. 2010 Ford Fiesta). About two-thirds would prefer to purchase the former—used.
Interestingly, their primary motivation is brand; in particular, the status and perceived quality of a “better” brand is available at the same price point as a new car from “lesser” brand. Said one Emory student, “If I have the choice between a Honda and a Benz that’s almost indistinguishable from a new one, why the hell would I get a Honda?!” These Echo Boomers expect more premium gadgets, features, comfort and sport in the used car, but none stand out in particular—it’s really all about brand. The one-third who prefer new cars indicated that they like the lower risk and the intangible “new car smell.”
Perhaps older Echo Boomers a few years out of college can actually afford this hypothetical $22,000 car. My college-aged peers cannot. Parents provide the bankroll, and they therefore hold sway in the decision-making process.
Among my interviewees, about three-quarters said their parents would prefer the lightly used car out of the same two options. These parents link “brand status” with “quality” much like Generation Y, and the used option forgoes the initial depreciation hit of a new car. The remaining quarter said their parents would prefer a new small premium car due to small car fuel economy, fresh warranties, and to actually avoid ostentation (particularly in current economic conditions). An Emory pre-med imitated his father: “Kids shouldn’t be driving around in godd*mn Lexuses!”
The $1,000,000 question for automakers: who’s buying? Are parents or kids making the decisions? How reliable is manufacturer data about Echo Boomers and their preferences? The Scion xB is explicitly targeted at Generation Y, but the average age of buyers is 46. Is this a marketing failure, or are the car simply in parents’ names? I polled 94 college-aged people, and the results are overwhelming:
75.5% of those surveyed have their parent’s name on the title. Automakers aiming product at Echo Boomers must keep in mind that their data is skewed!
The data does not fully explain who wears the pants in purchasing decision; unfortunately, the results more accurately reflect how parents make auto insurance decisions. However, in talking to my poll respondents, I found out a vital nugget of information. Echo Boomers and their parents almost always come to a compromise, each having more or less equal say in choosing which car to buy. If automakers want to steal sales away from lightly used cars, they ought to appeal to both Echo Boomers and their parents. To optimally target Gen Y, a brand should have the above-par image Echo Boomers crave, but also appeal to parents’ notions of responsible consumption. The optimal car will have a hip design and creature comforts typically reserved for luxury cars, but will retain the fuel economy of a small car.
George Pipas, I hope you’re listening. Ford needs to bolster its brand image in the eyes of Echo Boomers and parents alike. If so: Fiesta, meet Success. Success, meet Fiesta.