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Luxury Automotive Outlook

Featuring the Forbes Insights Luxury Car Buzz Index

2012 Special report:

Contents
Introduction................................................................................................................ 2 A Focus Group With Wine................................................................................... 3 Boosting Brands in a Sluggish Economy........................................................ 4 The Regional Reality............................................................................................... 4 The Forbes Insights Luxury Car Buzz Index.................................................. 6 So Whats in a Name?.......................................................................................... 10 The BIG Picture........................................................................................................12 Democratizing Luxury.......................................................................................... 14 The Truth About Affluence.................................................................................16 Whats Next for American Luxury?..................................................................17 Even More of an Underdog.................................................................................19 A View From the Top.............................................................................................21 The New Contender..............................................................................................22 Conclusion................................................................................................................23 Appendix: Luxury Car Buzz Index Methodology......................................24

Introduction
Three years after a market cataclysm vaporized real estate and stock values, luxury automakers are still grappling with the consequences. In 2008, wealth plummeted $11.2 trillion compared with the year beforethe biggest annual decline in household net worth since the Federal Reserve began keeping quarterly records in 1952.
With less wealth to go around, the definition of luxury is changing, and by The Luxury Car Buzz extension, so must the companies that sell high-end cars. The go-go days of Index distills a surpassing the Joneses are gone. These snapshot of luxury are sober times. And yet Baby Boomers, brand performance. who are nearing or transitioning to retirement, still crave the trappings of wealth. Meanwhile, so do their children. Generation Y was raised in heady times, when Viking ovens, Sub-Zero refrigerators and 50-inch flat screens were the norm. Bigger was better. More wasnt enough. They grew up ensconced in a premium lifestyle and now expect that for themselves. Yet theyre broke: Unemployment among Generation Y is more than 13% by some estimates. Thus, the story of how luxury car companies are reinventing themselves in the wake of this great recession has become a tale of two generationswooing the Boomers and priming Gen Yers for future purchases. Thats why blue-blood brands like Mercedes-Benz are seeking a more youthful image and formerly conservative Lexus is jazzing up its cars like never before. Doing so appeals not only to Gen Yers, but also to Boomers, who are young at heart and would rather globetrot than retire to gated communities and games of shuffleboard. Audi, meanwhile, the up-and-coming alternative luxury brand, has shored up so much clout over the past five years that the average transaction price for one of its vehicles has jumped $5,000. The underdog is overachieving. In fact, in the midst of economic uncertainty and a painfully slow recovery, the auto industry has been bouncing back from the depths of 2009, and the thirst for luxury remains powerful. In 2011, Audi and Mercedes posted their highest sales ever. BMW had such a strong year that it knocked Lexus off the top spot to become the best-selling luxury brand in the U.S. What all of this shows is how topsy-turvy things are right now. The Forbes Insights Luxury Automotive Outlook Special Report takes an inside look at the struggles and triumphs of luxury automakers through the eyes of chief marketers and general managers. Their commentary sketches out a roadmap for where brands are headed, while data from BIGinsight, a consumer insight resource based in Worthington, Ohio, paints a detailed picture of how consumers regard them right now, as well as what those consumers intend to doand buyover the next six months. Together, the two give unparalleled insight into a market overcoming turmoil. Using data from BIGinsight, Forbes Insights has devised a Luxury Car Buzz Index to rank the leading luxury automotive brands based on a composite score that measures customer satisfaction and loyalty, car owners propensity to recommend their brand to others, and the effectiveness of marketing efforts in both traditional and digital media, as well as the impact of digital word-ofmouth through social media and blogs. The Buzz Index distills all these factors into a snapshot of luxury brand performance. (See Figure 2, page 6, for the full ranking and Appendix, page 24, for the complete methodology.)

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A Focus Group With Wine


One of Beth Tylers most memorable experiences involving Lexus has more to do with spiced lamb than her beloved LS 460. The Japanese luxury automaker recently selected Tyler to host a dinner at her Annapolis, Md., home. Professional chef Todd Gray, who owns Equinox restaurant in Washington, D.C., spent hours in her kitchen cooking a six-course meal for the gathering of 12. The food was out-ofthis-world fabulous. One of the courses was chestnuts. I never had a chestnut in my life, says Tyler, a real estate agent at Long & Foster in Annapolis. Mark Templin, group vice president and general manager of Lexus, joined Tyler, her husband, and eight of their friends for the dinner. Nancy Hubbell, Lexus prestige com mun ications manager, also attended, tweeting the dinner conversation as it unfolded to more than 250,000 Twitter followers. It was the sixth event of its kind for Lexus in a little over a year, all held in key luxury-car marketsBeverly Hills, Chicago, Miami, San Francisco, among others. Its a focus group, but its a focus group with wine, Templin says. The dinners arent about selling cars or pitching the brand. Theyre a chance for Templin to get inside the heads of car buyers and learn things like the fact that several people at the dinner, including Tylers husband, think that signing the paperwork for a new car shouldnt take more than 15 minutes. No one wants to sit at the dealership for hours and get up-sold, Tyler says. Interesting opinions often come to light at the dinner table. The best comment weve had yet was from a woman who bought a Land Rover, Templin says. She said, Its like a bad boyfriend: He treats you terribly, but he looks so good, referring to the SUVs notorious reputation for being unreliable. The fact that Templin, a top Lexus executive, is taking time to dine with random luxury-car buyers is remarkable on many levels. But what it perhaps shows most clearly is how car companies are taking drastic measures to change their image and the way they conduct business.

The dinners arent about selling cars or pitching the brand. Theyre a chance to get inside the heads of car buyers.

Copyright 2012 Forbes Insights | 3

Boosting Brands in a Sluggish Economy


Luxury isnt what it used to be. People no longer flaunt wealth the way they People need time given did before the market crash of 2008, says Vicki Poponi, assistant vice president of back to them. Its really product planning for Honda and Acura. the last luxury. Many simply cant afford to any longer. But even those who can are refraining, Vicki Poponi out of respect for the many whose lives Assistant Vice President of are in turmoil. Product Planning for Honda We were wondering whether it was and Acura USA going to be a permanent change or not, she says. At Acura, we believe it is. We believe theres a significant value shift in the luxury buyer. The reason is simple: People are happier, according to a 2009 wealth study by the Harrison Group. It tracked peoples attitudes after the market crash of 2008 and found that, even though times were harder and money was tighter, many were actually more content with their lives. Basically, the happiness quotient went up huge, Poponi says. Its completely paradoxical: Everybody thinks they have less money, theyre spending less money, but all of a sudden theyre happier. Our hypothesis is, everybody got off this rat race of chasing the Joneses. It just made people happieryou didnt have the stress of looking at what somebody else had and you didnt. The shift in sentiment plays to Acuras strengths. The company embodies smart luxury, Poponi says, offering a good value relative to more expensive European luxury cars, and reliability that saves hassle by avoiding repairs. People need time given back to them. Its really sort of like the last luxury, she says. Acura buyers are more rational than emotional when it comes to their car purchases. They have a longer list of requirements than those who buy other brands, and they are looking to get the most value for their money, Poponi says. Theyre not cheap. Theyre smart, savvy, maybe a little smug, looking around at all the research, seeing that theyre the most informed in their product choices.

The Regional Reality


When it comes to luxury car sales, theres no such thing as Anytown, U.S.A. Consumer data from BIGinsight reveals significant regional differences in the popularity of some luxury car brands. Figure 1 illustrates this with a few selected brands and markets, summing up the first and second choices being considered by consumers who plan to buy a vehicle in the next six months. (The table uses June and December data averaged together, both to eliminate any seasonal effects and to maximize the sample size.) Audi, for instance, is more than twice as popular in New York as in Texas or Florida. Cadillac is more than twice as popular in New York as in Florida. BMW is roughly twice as popular in New York and California as in Texas, and Lexus is almost three times more popular in Texas than in New York. Mercedes is almost twice as popular in California as in Florida or Texas.

Figure 1: Planning to Buy/Lease: What make of vehicle are you considering? First choice plus second choice:

United States: n 5.6% Audi n 10.2% BMW n 5.5% Cadillac n 4.0% Lexus n 3.6% Mercedes-Benz

Source: BIGinsight Media Behaviors & Influence (MBI) Survey, June and December 2011

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Acura owners are also some of the strongest proselytizers among luxury-car owners, according to data from BIGinsight. The Worthington, Ohio-based firm uses information from consumer surveys it conducts monthly to calculate a Net Promoter Score1, which indicates how much owners of a particular brand recommend the vehicle to others. Acura ranks third highest in this regard, behind Lexus and Mercedes, over the 12 months of 2011. Using data from BIGinsight, Forbes Insights has devised a Luxury Car Buzz Index to rank the leading luxury automotive brands based on a composite score that takes into account Brand Satisfaction (how likely a current owner is to remain loyal to a brand with his or her next purchase); Personal Promotion (the impact of proselytizing, measured by combining the Net Promoter Score with the effect of word-of-mouth on car-buying decisions); Brand Momentum (whether a brand is seeing a net gain or loss in the number of prospective car buyers considering the vehicle, versus the number of current owners); Traditional

Media (the effectiveness of its marketing efforts in TV, print, etc., as well as the impact of reviews and articles about cars); and Digital Media (marketing, as well as wordof-mouth in social media, etc.). (See Figure 2, page 6, for the full ranking and Appendix, page 24, for the complete methodology.) Acura ranks fourth in Brand Satisfaction on the Buzz Index, behind Lexus, Volvo and BMW, and it comes in fourth overall, outperforming most of its peers during 2011. One area where the company falls short is in terms of prestige. In the luxury market there is definitely a continuum of what each brand represents, Poponi says. So sometimes we find people reject Acura because they dont think its a prestigious enough brand. But those who make status a priority in their car purchase tend to be emotional buyers and arent the types of people the brand targets anyway, she says.
1

Net Promoter, NPS and Net Promoter Score are trademarks of Satmetrix Systems, Inc., Bain & Co., and Fred Reichheld.

New York: n 10.2% Audi n 17.8% BMW n 9.6% Cadillac n 2.3% Lexus n 4.9% Mercedes-Benz

California: n 8.2% Audi n 14.8% BMW n 6.1% Cadillac n 4.9% Lexus n 6.3% Mercedes-Benz Texas: n 5.0% Audi n 7.7% BMW n 4.8% Cadillac n 6.3% Lexus n 3.4% Mercedes-Benz Florida: n 5.0% Audi n 10.1% BMW n 4.1% Cadillac n 4.8% Lexus n 3.4% Mercedes-Benz

Illinois: n 7.1% Audi n 9.0% BMW n 6.3% Cadillac n 3.6% Lexus n 3.9% Mercedes-Benz

Copyright 2012 Forbes Insights | 5

Forbes Insights

Luxury Car Buzz Index

The Forbes Insights Luxury Car Buzz Index uses exclusive, forwardlooking data on consumer intentions provided by BIGinsight to assess the industrys prospects for the next six months, with a special focus on the luxury car segment. The data used to calculate the Index derives from two extensive consumer surveys conducted on a regular basis. BIGinsights monthly Consumer Survey, which has a 10-year history, includes a total monthly sample of more than 8,000 respondents and produces a uniquely powerful database, more highly predictive of consumers actions than backward-looking data on past sales. The Media Behaviors & Influence Study polls some 25,000-plus respondents and is conducted twice a year, in June and December.

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Luxury Car Buzz Index

Brand Satisfaction

Personal Promotion

Traditional Media

Brand Momentum

Manufacturer

Digital Media

total Score

Acura Audi BMW Cadillac Infiniti Jaguar Lexus Lincoln Mercedes-Benz Volvo

41.69 35.31 44.77 35.58 30.38 15.03 46.09 26.31 34.48 45.83

0.27 0.41 0.26 0.87 0.39 0.32 0.75 0.16 0.28 -0.21

11.50 5.24 6.71 5.35 11.31 -1.74 18.04 7.81 14.73 10.55

5.89 10.75 10.21 5.99 1.68 -0.63 2.39 0.53 6.05 1.85

7.72 18.99 21.74 10.13 1.27 -0.37 11.62 4.39 9.98 4.45

67.1 70.7 83.7 57.9 45.0 12.6 78.9 39.2 65.5 62.5

Source:  Forbes Buzz Index developed from data selected from: Monthly Consumer Surveys from BIGinsight, January - December 2011; Media Behaviors & Influence Study, June and December 2011

The Buzz Index comprises five factorsBrand Satisfaction, Brand Momentum, Personal Promotion, Digital Media and Traditional Mediain a proprietary formula created by Forbes Insights and used to rank 10 leading luxury car brands: Acura, Audi, BMW, Cadillac, Infiniti, Jaguar, Lexus, Lincoln, Mercedes-Benz and Volvo. (For a full discussion of the methodology, see Appendix, page 24.) BMW emerges as the clear overall winner of the Buzz Index, which seems fitting in light of the very good year the company has had. Perhaps more surprising is Lexuss second-place finish, given that much of BMWs success has come at Lexuss expense, capitalizing on the supply problems that have troubled Lexus in the wake of last Marchs earthquake and tsunami in Japan. The rivalry between these two brands showcases an intriguing divergence in

strategy: BMW pointedly stands on the strength of its ultimate driving machine, while Lexus focuses on the total ownership experience. Two factors stand out for Lexus. It wins the Brand Satisfaction category, closely trailed by Volvo, BMW and Acura. And it utterly dominates in Personal Promotion. Lexus owners clearly love their cars and will play them up to anyone who will listen, regardless of how difficult it may be to actually obtain one at the moment.

BMW emerges as the clear overall winner of the Buzz Index, which seems fitting in light of the very good year the company has had.

This leads naturally to what seems a safe prediction: As Lexuss supply problems recede into the rearview mirror,

Copyright 2012 Forbes Insights | 7

Digital Media Subfactors

mobile Device Score

Acura Audi BMW Cadillac Infiniti Jaguar Lexus Lincoln Mercedes-Benz Volvo

5.3 8.5 11.3 3.5 1.1 -.09 -1.3 -0.7 7.4 1.8

9.1 12.3 7.4 9.7 1.2 -1.1 2.3 2.0 7.5 1.1

6.6 14.6 8.5 6.9 0.0 -1.1 2.6 0.0 3.4 3.0

2.6 7.7 13.8 4.0 4.5 0.6 6.0 0.9 6.0 1.6

Digital Media Score

Social Media Score

Manufacturer

Blog Score

Internet Ad Score

5.89 10.75 10.21 5.99 1.68 -0.63 2.39 0.53 6.05 1.85

Source: Forbes Buzz Index developed from data selected from: Media Behaviors & Influence Study, June and December 2011

it may well become a contender again for best-selling U.S. luxury car. BMW, Mercedes, Audi and the rest will most likely have a fight on their hands to hold onto their market share gains. BMW and Audi seem to have the most effective marketing: They rule as numbers one and two in both the Digital and

Traditional Media categories, with Audi leading in Digital and BMW winning Traditional. A look at the subfactors in Digital Media shows that BMW exerts the most influence in both Blogs and Internet Ads, with a comfortable lead over runner-up Audi. Audi takes the prize in Social Media, with Cadillac coming in second.

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Traditional Media Subfactors

Cable TV

Acura Audi BMW Cadillac Infiniti Jaguar Lexus


Lincoln

3.0 11.8 13.7 5.8 0.7 0.8 9.6


1.4 4.9 4.2

1.5 10.1 10.0 4.4 0.7 0.1 4.1


0.3 3.0 1.8

2.2 4.8 8.0 3.3 -0.8 -0.2 4.5


3.9 4.8 0.9

3.8 5.5 6.7 2.1 2.2 -1.3 2.5


1.1 3.2 0.7

2.8 5.8 8.1 5.7 0.4 0.3 4.2


3.8 3.9 2.1

5.7 8.6 6.9 3.7 0.0 -0.6 3.7


0.4 4.9 1.3

Traditional Media Score

Magazine Score

Manufacturer

Newspaper Score

article Score

radio Score

Broadcast TV Score

7.72 18.99 21.74 10.13 1.27 -0.37 11.62


4.39 9.98 4.45

Mercedes-Benz

Volvo

Source: Forbes Buzz Index developed from data selected from: Media Behaviors & Influence Study, June and December 2011 * N OTE:  Trad Media Score is weighted to reflect greater reach vs. Digital Media, per survey responses. For 2011 data, Trad Media equals average of subscores x 2.45.

Audi also wins the Mobile Device category, with BMW coming in at number two. In Traditional Media, BMW wins four out of six subcategories: Articles, Newspapers, Radio and Broadcast TV. Audi wins Cable TV and Magazines (with BMW a very close second).

Some of these brands are tightly grouped in their overall scores, so rankings could shift within a few months. Acura, with its excellent Brand Satisfaction and solid Personal Promotion, is jockeying for third place with Audi. Mercedes, with its very strong Personal Promotion score, is nipping at Acuras heels.

Copyright 2012 Forbes Insights | 9

So Whats in a Name?
Couple that with the fact that their kidsGeneration One brand that does command a lot of clout is MercedesYwill eventually be the next Mercedes-Benz buyBenz. Yet when looking at Brand Satisfaction, the German ers and its clear why the company has been creating cars automaker scores seventh out of the 10 brands ranked in with more dynamic and youthful designs in recent years. the Buzz Index. In 2011, the company launched six new products, the Thats because it has been working through some qualmost it has ever debuted in a single year. Half are what ity issues, according to BIGinsight data. As we look at Cannon calls halo cars reasons that survey responlike the SLS AMG Roadster dents chose a car, in late and SLK convertiblewhich 2009 and 2010, Mercedes sell in relatively small numwas experiencing some qualbers but bolster the companys ity and style problems, says image with their high perforRoger Saunders, managmance and desirability. The ing director, Prosper Group other three are big sellers: the of Companies at BIGinsight. all-new C-Class coupe, and a They were capturing peoredesigned C-Class sedan and ple because of financing deals, M-Class crossover. old cars dying, high mileage. To promote these new Now they are capturing them vehicles, Mercedes has been based on style, added features Steve Cannon running edgier ads. Cannon and quality. This quality issue President and CEO, Mercedes-Benz USA is proud of them. He gets was driving people away from visibly excited showing Mercedes in the later portion a television spot, called of 2009. They appear to have Unchained, on his iPad. turned the corner in the conIn it, a C-Class sedan with sumers mind. chains attached to its rear doors accelerates away; the Mercedess Brand Satisfaction and Personal Promotion chains are anchored to the ground and rip the rear doors scores have both been moving up over the past six months. off to reveal the new C-Class coupe. U.S. sales in 2011 were up 17.5% over 2010 to a total of The C-Class is our entry price point, Cannon says, 264,460 vehicles, an all-time record for the brand. so if were going to start building bridges with younger Up until a few years ago, Mercedes was the automotive consumers as they start to move into our consideration set, icon for the established wealthy elite. But that is changthats the right vehicle to do it. We wouldnt be edgy and ing, thanks to the Baby Boomers. This sort of elitist kind kind of push the needle with something like the S-Class, of luxury is really a notion thats going by the wayside, because its our flagship. says Steve Cannon, who in January was appointed presiAt the same time, Mercedes is also playing up its dent and CEO of Mercedes-Benz USA. He was previously heritage in advertising. It celebrated 125 years in 2011 vice president of marketing. and has several TV spots that star classic Mercedes Thats because most wealth in the U.S. is generated by vehicles. Heritage plays really well with Gen Yers, entrepreneurs. Its made wealth, not inherited wealth, he Cannon says. says, and these entrepreneurs bring a middle-class menA spot that ran during the Super Bowl celebrating 125 tality to their wealth. years shows dozens of Mercedes cars, old and new, flockAnother sociological trend shifting Mercedess ing of their own volition to an aircraft hangar where the brand focus is the fact that Baby Boomers are not slowcompanys new line of vehicles is on display. Janice Joplins ing down as they approach retirement. Look at most of song Mercedes-Benz plays on the stereo of a classic SL them, theyre going to keel over in the gym somewhere, as convertible. It gives me chills, Cannon says. I watch it opposed to nursing homes, Cannon says. Theyre redewhenever I need to get charged up. fining old age; thats why we say things like 70 is the new His job is a balancing act: planting seeds in the minds 60. So theyre still youthful, theyre not going quietly into of future customers while still targeting existing ones. the night.

This sort of elitist kind of luxury is really a notion thats going by the wayside.

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Because those are who Im going to get measured on: sales that we make this year, not bridges that I build for 10 years from now, he says. Marketing efforts seem to be paying off. The fact that Mercedesor any other automaker for that mattercan appeal to both Baby Boomers and Generation Y simultaneously is serendipitous. Theres usually a generation gap getting in the way. With Boomers and the Silent Generation, who were their parents, there was a lot of like, I want to make the world a different place; Im not listening to you; Im doing something completely radical, Acuras Poponi says. Whereas Gen Y and the Boomers, theyre friends theyre much more simpatico. Boomers have made a point of being as connected to their kids as they can be. The Baby Boomers are involved parents that maybe their parents werent. Theyre absolutely hands-on, Cannon says. Theyre often called helicopter parents because they kind of hover around their kids and circle and make sure that they get everything right and theyre given a trophy at the end. As much as Boomers and Gen Yers may get along famously, BIGinsights December 2011 Consumer Survey does highlight some attitudinal differences among generations. For example, the younger the respondent, the more likely he/she is to feel confident of a strong economy in the next six months (Figure 5). Forty percent of Gen Yers said they were confident/very confident. In contrast, 31.7% of Generation X respondents expressed confident/very confident views, while only 20.9% of the Boomers were confident/very confident, about half as many as Gen Y. Younger respondents are also much more likely to agree with the statement Live for today because tomorrow is so uncertain, and they are much more fashion-oriented than older consumers (Figure 6).

Total Generation X Adults 1,835 Total Generation y Adults 2,123 Total Boomer Adults 2,891

Figure 5: Which one of the following best describes your feelings about chances for a strong economy during the next 6 months? Very confident
9.5 7.9 2.9

Confident
30.5 23.8 18.0

Little confidence
49.0 51.1 52.7

No confidence
11.0 17.2 26.4

0%
n Gen Y n Gen X

30%
n Boomers

60%

Figure 6: Which statement best applies to your feelings about fashion: Newest trends and styles are important to me
36.2 29.0 9.4

I prefer a traditional conservative look


27.1 32.8 37.9

Fashion is less important than value and comfort to me


36.7 38.2 52.7

0%
n Gen Y n Gen X

30%
n Boomers

60%

Source:  M onthly Consumer Survey from BIGinsight, December 2011 Total Adult Respondents 18+ 8,402

Copyright 2012 Forbes Insights | 11

The Big Picture


Data from BIGinsight can provide perspective on the outlook for the forest, not just the trees. Figure 7 below graphs the percentage of affluent consumers (household income $100,000 or more) who plan to purchase a vehicle in the next six months. One can readily see the big dips of 2009 and early 2010, as well as the drop in July/August 2011 amid the uncertainty of the debt ceiling debate and the U.S. credit downgrade. Just as clear is the overall trend line, which has moved steadily upward for the past three years. Given that the data looks ahead six months, that steady trend line bodes well for the industry. Figure 8 below underlines that rosy forecast: It graphs the percentage of those affluent prospective purchasers who intend to buy a car in the most expensive category (over $40,000). Once again, the trend line cuts through the noisy clutter of month-to-month fluctuations, revealing a steady, continuing upward trendencouraging news for the next six months.

Figure 7: HH Income $100,000+


25%

Figure 8: HH Income $100,000+


40% 35%

20% 30% 25% 20% 10% 15% 10% 5% 5% 0% 0%

15%

Dec 08

Jun 09

Dec 09

Jun 10

Dec 10

Jun 11

Dec 11

Dec 08

Jun 09

Dec 09

Jun 10

Dec 10

Jun 11

Dec 11

Yes (Planning to Buy Car/Truck) Linear Trend Line

Over $40,000 (Price Range for a Car to Buy) Linear Trend Line

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Figure 9 below provides yet another way of looking at the market: It shows aggregate luxury car demand throughout 2011 (demand for all 10 luxury brands ranked in the Buzz Index) by graphing the percentage of all prospective purchasers (all incomes) who said they were considering any of these brands as either first or second choice. This trend line also shows a steady rise. The prediction of growing luxury car sales implicit in the first half of this chart was borne out by events in the latter half of 2011. The second half of this chart signals strong results continuing through the first half of 2012.

And finally, stepping away from the luxury category for a moment provides a look at prospects for the auto industry as a whole. Figure 10 graphs the percentage of the total population with an intent to buy a vehicle over the next six months. Although the starting and ending points on the chart are not as high as with affluent consumers (Figure 7), and the trend line is not as steep, the overall direction remains relentlessly upward, predicting further growth for the next six months.

Figure 9: Aggregate Luxury Demand (1st and 2nd Choice)


20%

Figure 10: Planning to Buy Car/Truck


16% 14% 12% 10%

15%

8% 6% 4% 2%

10%

1 11 1 1 1 1 1 11 11 11 Jan Feb Mar 1 Apr 1 May Jun Jul 1 Aug 1 Sep 11 Oct 11 Nov 1 Dec 1
All HH Income Levels Considering Luxury Brand Linear Trend Line

0%

Dec 08

Jun 09

Dec 09

Jun 10

Dec 10

Jun 11

Dec 11

All HH Income Levels Linear Trend Line

Source: Monthly Consumer Survey from BIGinsight

Copyright 2012 Forbes Insights | 13

Democratizing Luxury
Thats a dramatic shift from a few years ago, when Lexuss Templin says he believes buyers are gravitating the luxury automotive sector had its own version of the more toward luxury these daysnot just for cars, but for Big Three. everything from clothing to household appliances. Everybody wants a piece of this growing marHe attributes this trend to the democratization of ket, Templin says. So even though we will grow, and luxury. Mercedes will grow, and BMW will grow, our shares The father of threeages 22, 20 and 15says chilprobably wont be as big dren like his grew up during as they were back in 2007, an economic boom, and prebecause there were really only mium goods are the stuff three players in the entire of ordinary life to them. I market then. think theres a whole generaKey to Lexuss strategy tion that wants to have those is the ownership experience. things, he says. While a brand like BMW He mentions the two Subfocuses on positioning its Zero refrigerators and the cars as the ultimate drivrestaurant-quality, six-burner ing machines, Lexus puts as stove in his kitchen, for exammuch emphasis on the expeple. To the young Templins, rience of owning its cars as it this is standard, because does the cars themselves. theyve never known anything It seems to be working. else. They dont want the Lexus ranks highest among Sears Kenmore stuff I grew up luxury brands in satisfaction with, Templin says. with the process of buying He casts this desire to a new vehicle, according to buy luxury as being practithe J.D. Power and Associates cal, more so than splurging. 2011 Sales Satisfaction Index In the old days, youd buy Study. Cadillac and Mercedessomething that was less Benz rank second and third, money, but youd have to respectively. buy it more frequently, he Tyler, who hosted the says. Over time, people Mark Templin Lexus dinner in her home, have come to the realization says she had never thought theyd rather have a premium Group Vice President and about the actual experibrand and hold on to it lonGeneral Manager, Lexus USA ence of owning her ruby ger, versus replacing that GE red LS 460 luxury sedan or that Sears Kenmore. that was sitting there sparStill, he does not expect kling, calling my name at sales of luxury cars to go Sheehy Lexus of Annapolis. gangbusters. He projects that But sure enough, she thinks her experience with Lexus luxury could rise from 11% of overall car sales to 13%. has been exceptional. Itll probably not reach 15%, because there is a price facIn fact, Tyler goes to the dealer once or twice a tor, he says. week to have her car washed for free well, you tell a Competition in the luxur y segment is heating up real estate agent car wash, Im thereand sometimes along with demand. Because of this, Templin says, brings a coworker to have lunch at the dealerships cafe, sales will be fragmented among more manufacturers. which makes a killer chicken salad sandwich. So even though Lexus expects its own sales volume If it werent a great experience, if everyone wasnt so to increase, it most likely will have a smaller share of nice, if the place wasnt so clean and bright, I wouldnt go the market.

Everybody wants a piece of this growing market. So even though we will grow, and Mercedes will grow, and BMW will grow, our shares probably wont be as big as they were back in 2007, because there were really only three players in the entire market then.

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to lunch there every week, Tyler says. Id just slam in to get my car washed and leave; or maybe Id go to the normal car wash. But it feels good. The dinner she hosted in her home was no differentfive-star all the way, from setup to service to the food and wine, she says. Tyler was chosen to host the dinner because she participates in a group called the Lexus Advisory Board, which answers online surveys the company conducts periodically. Lexus keeps in regular email contact with about 30,000 customers who participate on the advisory board. When its time to schedule a new dinner, they ask for volunteers and pick based on their location and the layout of their home, among other factors. The dinners operate under what Templin calls a truth serum theme. Im not trying to sell them a carthats not what its about, he says. We want open, candid conversation. Tyler was instructed not to invite a bunch of Lexus owners. They said, Basically, we dont want a Lexus love fest. So only one other person [at the dinner] owns a Lexus car, currently, she says. We had a diehard Cadillac couple. Two people have Mini Cooper convertibles, one couple is both Mercedes. Mercedes uses online communities similar to Lexuss Advisory Board to get feedback directly from consumers on the Web. One is called Mercedes-Benz Advisors and consists of typical Mercedes owners. Another group, called Gen Benzers, is younger. Theyre 20-somethings, theyre Gen Yers, Cannon says. Only about a quarter of them are actual Mercedes-Benz owners, the rest of them arent in our consuming demographic. But they are our Gen Y sounding board. Theres about 500 of them at any given time. It was through their feedback that he discovered that imagery surrounding the companys heritage and historical footage would appeal to that age group. Last year was a tough one for Lexus, in terms of sales. It ended 2011 having sold 13.7% fewer cars in the U.S. than it did in 2010. As was the case with Acura, which saw annual sales decline 8%, the natural disasters that pounded Japan in 2011 had a huge impact on production capacity.

Copyright 2012 Forbes Insights | 15

The Truth About Affluence


Figure 11: HH Income $100,000+
7%

6%

5%

4%

3%

2%

1%

0% Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11

Audi (Make of Vehicle - First Choice) Linear Trend Line


Source: Monthly Consumer Survey from BIGinsight

So you come roaring into your driveway in an R8 and little Tommy next door comes around and hell go, Thats the car from Iron Man. Bam.
Scott Keogh Chief Marketing Officer, Audi of America

As both Lexus and Mercedes infuse their brands with youthful vibrance, Audi looks to mature. The automaker has been steadily heading upmarket and will continue. Audi was a second-tier luxury brand not 10 years ago. The way it set about changing that has been methodical. One of the first big moves was poaching Scott Keogh from Mercedes to be chief marketing officer. Having worked at Mercedes for more than a decade, he knew about clout and creating what he calls purchase confirmation. The truth about affluence is its all predicated on confirmation, Keogh says. This is why affluent people live in the same zip codes, go to the same country clubs, go to the same restaurants, talk about the same schools. Its all this concept of confirmation. Back when he started at Audi, the company was going for a sort of under-the-radar mystique, looking to do surgical marketing, as Keogh calls it, to target only people in the know. The strategy he and his team have been implementing is different. It hinges on making the brand and its cars memorable to everyone. What I wanted to make sure we did is that when someone purchased an Audi, they got that confirmation, he says. So you come roaring into your driveway in an R8 and little Tommy next door comes around and hell go, Thats the car for me, or Thats the car from Iron Man, or Thats the R8 from Audi. Bam. After some racy Super Bowl spotsremember the R8 commercial that took a pot shot at old-school luxury with a spoof of the Godfather scene with the horse head in the bed?and high-profile product placements in the Iron Man movies, Audi put itself on the pop-culture map. The brand has gone from seventh place on consumers luxury-car shopping lists four years ago to second place today, Keogh says. The company set a record sales year in 2011, with an increase of 15.7% over 2010 for a total of 117,561 units. Tight inventory shows healthy demand, and average transaction prices are up by about $5,000 this year compared with 2010. (The trend line in Figure 11 shows a steady rise in Audis popularity among affluent consumers.) The next step is to move further upmarket by focusing on selling more midsize and large sedans, as opposed to compact models like the A4, on which it has relied heavily in the past.

16 | 2012 Special report: Luxury Automotive Outlook

Whats Next for American Luxury?


Having successfully climbed its way up the luxury-car ladder, Audi has created room for a new challenger: Cadillac. With General Motors bankruptcy fading from memory, Cadillac fills Audis spot as a key contender with top-tier brands and is wasting no time. Cadillac was, for the better part of the last century, the standard of the world, says Don Butler, vice president of marketing at Cadillac. Thats what we were known for. So we aspire to return to that. The company is counting on an all-new large sedan called the XTS, on sale in spring 2012, to help achieve that. It will have a new look, higher levels of craftsmanship and innovative technology. It will be the first model to feature the companys new CUE interface, which takes an iPad approach to stereo, climate and navigation controls. A smaller sedan, the ATS, set to go on sale summer 2012, has the unenviable task of trying to beat BMWs new 3 Series, the leader in its segment. Butler says these new Cadillacs arent for everyone. Im not going for broad acceptance, Im going for that deep meaningful connection with a few customers. And if I get that deep meaningful connection with a few customers, then they will become ambassadors for the brand, and they will find like-minded customers and bring them along, he says. The type of customer Cadillac targets is pretty specific: emotionally engaging, on the extroverted side, swagger without being annoying, and then kind of early in the know, Butler says (see Figure 12). That sort of describes Butler, who carries himself with good-natured exuberance. He was handpicked by GM President Mark Reuss.

Figure 12: The December 2011 Survey from BIGinsight reveals that a consumer planning on purchasing a vehicle and considering a Cadillac as a first or second choice:
Planning to Buy/Lease in Next 6 Months, Considering Buying Cadillac (1st or 2nd Choice) 37.6 years 39.6% $75,406 54.6% 63.0% 72.4% 50.5% 46.7% 64.4%

Planning to Buy/Lease Is likely younger Is more likely to be business owner or professional/managerial Tends to have higher HH Income Is more likely to make purchases or influence purchases at their company Is more fashion oriented Is more likely to say they Live for today because tomorrow is so uncertain Is more confident in a strong economy in the next six months Is more likely to be employed full time Is more likely to invest in the stock market (said they probably/definitely would invest)

Total Adults Population 45.3 years 24.2% $55,807 19.7% 19.0% 31.8% 27.0% 33.6% 31.2%

Current Cadillac Drivers 53.0 years 22.5% $65,518 21.8% 26.4% 38.6% 27.4% 24.0% 39.8%

. . . than current Cadillac drivers, and total population.

Copyright 2012 Forbes Insights | 17

The surprise and the shock when they see that we are Butler had left GMs OnStar division at the end of 2009 better than a BMW M5its just kind of like, Whoa, to work at Inrix, a navigation and traffic services provider Butler says. based in Kirkland, Wash. He ran into Reuss, who had just On a broader scale, the company is improving its dealbeen named president that December, at the Detroit Metro erships. Facilities are being airport. A couple phone calls upgraded to a new high-end and a few months later, Butler look, but more importantly, was heading up Cadillac Cadillac has partnered marketing. with Ritz-Carlton to train He was ecstatic. Its the employees on how to create a tip of the spear for GM, five-star experience. Its a lot Butler says. Definitely its of change, but dealers seem been tarnished, but were polto be on board. In the most ishing it up, were making it recent National Automobile brighter. So literally its this Dealers Association annual job that brought me back to ranking of what dealer bodthe company. ies think of manufacturers, Getting to work with Cadillac came in ninth out Reuss was key to persuadof 33, compared with 24th in ing Butler to jump back to 2009. GM after being gone only Theres a huge amount of a few months. The biggest respect for Cadillac, Butler factor was Mark [Reuss] himDon Butler says. But for a lot of people, self, he says, just knowing Vice President of Marketing, Cadillac that respect is analogous to, I him, knowing what he was respect and I love my grandabout, knowing the way he dad, but I dont want to hang approached thingskind of out with him all the time. So no nonsense, no politics, no the challenge that I have is, b.s. how do I take that residual positive sentiment and make it Thanks to Reuss, the corporate culture at Cadillac is relevant for todays buyer? much more streamlined now, Butler says. He has enough Overall sales for the brand were up 3.7% in 2011. autonomy to push through important ideas quickly, like Factor out fleet sales to rental and limo companies, and the featuring the companys high-performance V-series vehisales increase more than triples to 10.5% over the previous cles prominently in advertising for the first time ever. year. The Cadillac SRX crossover was particularly hot in Niche models like the CTS-V were kept out of the mix 2011, with double-digit sales increases. previously because Cadillac sells only about 6,000 a year in North America. Typically, the practice is, dont advertise against them, we dont want to burden them with ad dollars because we sell so few, Butler says. And for me, I was like, Are you kidding me? We build the worlds fastest production sedan? Lets tell people about it. Lets show thatguess whatin this area, we are the standard of the world. Thats how a 30-second television spot titled Bellissimo came about. It shows a bright red Ferrari 458 chasing a Cadillac CTS-V coupe. The upshot is that Ferrari borrowed Magnetic Ride Control suspension technology from the Cadillac. The company is also conducting V Labs at five different racetracks around the country to put people behind the wheel of a CTS-Vparticularly those who drive competing Audi, BMW or Mercedes AMG cars.

We build the worlds fastest production sedan? Lets tell people about it. Lets show thatguess whatin this area, we are the standard of the world.

18 | 2012 Special report: Luxury Automotive Outlook

Even More of an Underdog


Another company facing a similar challenge to Cadillac is Lincoln. Most consumers we talk to today in research have warm-to-fond feelings toward the Lincoln brand, and they very much want us to succeed, says C.J. ODonnell, group marketing manager for Lincoln. Theres an openness in the marketplace for us. And the surprise in that is that many of us thought there would be negative feelings or perceptions around the brand, and that hasnt been the case. The problem is that peoples perceptions of the brand arent flattering. Its viewed as antiquated, perhaps a bit stale. The words Town Car and Continental frequently rise up in conversation, ODonnell says. Thats the general perception. Those that have contact with our MK product range take a somewhat different view. They see us as being much more relevant, much more contemporary. Lincoln will launch seven all-new or significantly redesigned products in the next few years. An updated MKS sedan and MKT crossover, on sale in spring 2012, are the first to get new styling that will carry over to the entire lineup. Improving craftsmanship and performance are key points. Eventually, the brand will push beyond its overriding focus on value and seek a more affluent buyer, while still holding onto the current customer base, ODonnell says. He sees the larger sedan and coupe categories becoming obsolete. The important new battleground is in midsize and smaller luxury cars, and the same for crossover utility vehicles. I believe that every manufacturer is focused on this sort of trend toward

Figure 13: The December 2011 Survey from BIGinsight shows that a consumer planning on purchasing a vehicle and considering a Lincoln as a first or second choice:

Planning to Buy/Lease Is likely younger Is more likely to work in sales Is more likely to make purchases or influence purchases at their company Is more fashion oriented Is more likely to say they Live for today because tomorrow is so uncertain Is more confident in a strong economy in the next six months Is more likely to be employed full time Is more likely to invest in the stock market (said they probably/definitely would invest)

Total Adults Population 45.3 years 4.2% 19.7% 19.0% 31.8% 27.0% 33.6% 31.2%

Current Lincoln Drivers 60.4 years 1.0% 10.3% 12.7% 28.1% 20.7% 12.1% 32.4%

Planning to Buy/Lease in Next 6 Months, Considering Buying Lincoln (1st or 2nd Choice) 44.0 years 25.4% 25.6% 55.9% 47.4% 38.3% 39.9% 55.7%

. . . than current Lincoln drivers, and total population.

Copyright 2012 Forbes Insights | 19

The important new battleground is in midsize and smaller luxury cars, and the same for crossover utility vehicles. Every manufacturer is focused on getting their mid- to small-package vehicles seen as true luxury products.
C.J. ODonnell Group Marketing Manager, Lincoln

downsizing and getting their mid- to small-package vehicles in a position where theyre seen as true luxury products, he says. ODonnell is optimistic about the future for the company and is confident of the team that has been built up at Lincoln over the past 20 months. He left Jaguar in May 2010 to join Lincoln. It has been a long, tough slog, he says. Weve put some hard hours in over this past year, and even though weve added to the team, were moving forward faster, but the workload hasnt seemed to decrease. But there is a sense of a higher calling that keeps the team invigorated. The fun part is that theres a group of people here that feel part of something

really special. They joined up because they knew the work would be hard, they knew the payoff would be years out, and they come in every day and give me the energy to push on because theyre just so gassed by the concept of revitalizing Lincoln, ODonnell says. At the dealership level, things are already looking up. Lincoln is the most improved luxury brand in terms of its dealership experience, according to the J.D. Power and Associates 2011 U.S. Sales Satisfaction Index, jumping to sixth place from ninth in 2010. U.S. sales for the brand have been holding steady this yeardown by only 0.7% through November. But ODonnell says Lincoln is up more than 20% in key luxury markets. The top 10 metro areas make up almost half of all the luxury sales in the country, and its in markets like thatlike L.A., New York and Miamiwhere were making some really significant gains.

20 | 2012 Special report: Luxury Automotive Outlook

A View From the Top


anything to do with the technology of the powertrain, its One company at the opposite end of the spectrum from simply the characteristics of the car itself. Lincoln in terms of brand power is BMW. It scored the He also points out that efficiency and sustainabilhighest in the overall Buzz Index. Part of that is because ity have long been a priority in other markets, where the the company focuses so keenly on conveying that its cars company already offers smaller diesel engines, for examare The Ultimate Driving Machine, and actually backs ple. Plus, focusing on these it up with vehicles that truly attributes is critical if the are fun to drive. brand is to remain relevant to Although 2011 turned Generation Y. out to be BMWs second-best Were moving that way, sales year in the U.S.with Willisch says. Still having in 305,418 vehicles sold, for an mind that BMW will always increase of 14.9% over 2010 stay the ultimate driving it still beat every other luxury machine, but proving pretty automaker. soon that even with electroLudwig Willisch, presmobility, even with hybrid ident and CEO of BMW technology, you will be able North America, took over to provide the ultimate drivBMW NA in October from ing machine. Jim ODonnell, who is retiring. He spent the first several months getting his bearLuDwig Willisch ings. Hes new to the North President and CEO, BMW North America American market, having most recently headed up BMW Groups European sales region. The biggest surprise so far has been finding out exactly how tough the competition is. I have to say frankly, and Ive been around quite a bit, Ive not encountered any market that is as competitive as the U.S. market, he says. Willisch speaks of this not with concern, but with the same unflappable calm he brings to everything he does. Colleagues say it is one of his defining qualities. Another is the fact that he genuinely loves carsso much so that part of him misses being president of BMWs high-performance M division, which he was before becoming head of European sales in 2009. I am a car guy, I really am. So I thought that was really the place to be and to stay, he says. Amid many new products, including the companys most popular models, the 3 Series and 5 Series, next-generation alternative propulsion has become a key priority, as previewed in two concept vehicles, the i3 electric car and i8 hybrid. To play up fuel efficiency this prominently might seem incongruous for a brand so focused on high performance, but Willisch insists its not. Fun-to-drive doesnt have

I have to say frankly, and Ive been around quite a bit, Ive not encountered any market that is as competitive as the U.S. market.

Copyright 2012 Forbes Insights | 21

The New Contender


As if the competition werent fierce enough for BMW and other luxury Were going to take brands, a new contender has eyes on their territory: Hyundai Motor America. It the dealership out of the would seem unlikely that a 47-year-old equation. So if you want Korean manufacturer of budget-priced a test drive, well bring cars could compete with true luxury brands, but as weve already established, you the car; if you want these are strange times. to buy one and get it I think maybe it was being lucky, serviced, well come maybe it was being brilliant, says Steve Shannon, Hyundai Motor Americas and get it for you. vice president of marketing. Hes talking about the companys decision to push into Steve Shannon the premium segment in the U.S. Lucky Vice President of Marketing, in terms of being just when the market Hyundai Motor America kind of took a dip a couple of years ago when the Equus was coming out. The Equus is Hyundais priciest car by far. The full-size sedan is loaded up with a powerful V-8 and every conceivable luxury. It has a suggested starting price of $59,000stratospheric for a company that has built its business on economy cars costing less than $20,000. Most of the 3,193 Equus sedans the company sold in 2011 were bought by people who already owned a Hyundai. In terms of luxury car trade-ins, the Lexus LS was the most frequent among Equus buyers, Shannon says. No surprise, the character of the cars is similar. But whats been exciting to see is a handful of BMW 7 Series, S-Class and Audi A8s, some E-Class being traded for the Equus. The Hyundai Equus was the highest-ranked large premium sedan in J.D. Power and Associates 2011 Automotive Performance, Execution and Layout Study, which surveys owners and asks them to rank their vehicles on design, content and performance. In terms of resale value, Automotive Lease Guides rates the Equus the same three out of five stars as the BMW 5 Series, Lexus LS and Mercedes E-Class. Still, with only 3,193 sales in 2011, Hyundai lags in brand clout. What it lacks in that regard, the company is trying to make up for in other ways. For instance, it offered a free iPad with the Equus sedan when it launched the 2011 Equus in December of 2010. Hyundai gave away 2,842 iPads in total and is no longer offering them. A more lasting strategy falls in line with Acuras focus on time as the ultimate luxury. In the luxury space, there was a kind of arms race to see who could have the best cappuccino machines and the most amount of marble and granite in their dealerships, Shannon says. But for Hyundai, were going to take the dealership even out of the equation. So if you want a test drive, well bring you the car; if you want to buy one and get it serviced, well come and get it for you. So thats kind of a way of saying, Okay, we may not be able to outdo Mercedes and Lexus selling $115,000 cars, so lets come up with some really innovative ideas that help satisfy that luxury customer in a unique way. The further downmarket from the Equus you go, the better the story gets for Hyundai. Sales of its midsize Genesis premium sedanwith a starting price of $34,200saw record sales in 2011, up 13% compared with 2010 for a total of 32,998. Its Elantra compact sedan, redesigned for 2011, won the 2012 North American Car of the Year from an independent panel of 50 automotive journalists. Last and far from least, total sales for the company hit a record high of 645,691 units for 2011, up 20% from the year before. So its clear that Hyundai has positive momentum. The question is: How well can it parlay that into success within the luxury-car market? On the one hand, the time seems right, with even affluent buyers looking to be more sensible and less showy. Theres also the trend toward democratizing luxury, as Lexuss Templin called it, which plays to Hyundais strengths, too. If anything, Hyundais efforts are just another example of how jumbled things are in the luxury marketso much so that even savvy customers like Tyler, the Lexus LS owner who hosted the dinner in her home, are confounded. You know, Im not real sure what a luxury car is anymore when you can buy a $60,000 Hyundai, she says.

22 | 2012 Special report: Luxury Automotive Outlook

Conclusion
Barring some cataclysmic event in the next several months, it seems wise to take consumers at their word as far as their purchase plans. The data is signaling that the first half of 2012 will continue to be quite positive for the auto market overall in the U.S., and especially rosy for the luxury sector.
The percentage of affluent consumers who say they intend to buy or lease a vehicle in the next six months continues to climb. Furthermore, the price range of the vehicle they plan to purchase is also rising on a steady upward trend. As the Japanese automakers recover from their supply problems, they may well win some market share back, especially Lexus, thanks largely to loyal customers. But BMW and Audi now dominate the marketing wars, and Mercedes seems to be on an upswing. The U.S. luxury auto market is volatile and intensely competitive. With American brands busy reinventing themselves, and even newcomers like Hyundai edging into the luxury space, the overall shape of this sector by 2013 can barely be glimpsed through a (tinted) windshield darkly. But overall, through midyear 2012 at least, the good times should continue to roll.

To keep up with the latest consumer automotive trends and data, visit BIGinsights Automotive InsightCenter www.autoinsightcenter.com/autoinfo/

Copyright 2012 Forbes Insights | 23

APPENDIX: LUXURY CAR BUZZ INDEX METHODOLOGY


The data used to calculate the Forbes Insights Luxury Car Buzz Index derives from some 150,000 consumer interviews conducted in 2011 by BIGinsight. BIGinsights monthly Consumer Survey, which has a 10-year history, includes a total monthly sample of more than 8,500 respondents. The Media Behaviors & Influence Study polls some 25,000 respondents and is conducted twice a year, in June and December. The numbers from the monthly survey used to determine the Buzz Index are year-to-date through December 2011. The data extracted from the Media Behaviors & Influence Study is from June and December 2011. U.S. Census data is used to statistically weight the surveys. A proprietary mathematical formula is then employed to further weight and balance the samples to the consumers within the database. This weighting and balancing creates a highly reliable forecast with great predictive power, even for relatively small subsamples within the surveys. The Buzz Index comprises five factorsBrand Satisfaction, Brand Momentum, Personal Promotion, Digital Media and Traditional Mediaused to rank 10 leading luxury car brands: Acura, Audi, BMW, Cadillac, Infiniti, Jaguar, Lexus, Lincoln, Mercedes-Benz and Volvo. Certain brands, such as Porsche, Land Rover and Ferrari, constituted too small a sample within the surveys to include in this report. Brand Satisfaction is derived from the monthly survey. It examines those consumers who already drive one of the 10 luxury brands in questionsay, Acura, for the sake of illustrationand who say they intend to buy a car/truck in the next six months. The percentage of that group who say Acura is their first choice for their next car, plus the percentage of that group who say Acura is their second choice (accorded a lower weighting) equals the Brand Satisfaction score for that month. The 12 months of 2011 have been averaged to yield the overall 2011 Brand Satisfaction score. Brand Momentum is simply the 2011 average of monthly share point gains and losses in the monthly survey. Positive values mean more vehicle purchasers are considering the vehicle compared with the number of those who currently own the vehicle. Negative values mean fewer people are considering the vehicle compared with the number of those who currently own the vehicle. Personal Promotion is a hybrid factor derived from both the monthly and Media Behaviors & Influence surveys. The monthly survey provides the Net Promoter Score (NPS): Respondents were asked to rate, on a scale from 0 (not at all likely) to 10 (extremely likely), the probability they would recommend the make/model of the vehicle they currently drive to a friend or colleague. Ten and 9 responses indicate Promoters, 8 and 7 responses are Passives, and 0 through 6 are Detractors. NPS is calculated by subtracting the percentage of Detractors from the percentage of Promoters. In the Media Behaviors & Influence data, the Personal Promotion factor looks at those within the target demographic (household income of $100,000 or more) who are in the market for a vehicle to determine the percentage among them who say word of mouth is a significant influence on their car-buying decision. NPS multiplied by this percentage yields the Personal Promotion score. Again, scores for the 12 months of 2011 were averaged to reach an overall Personal Promotion score for each brand. Both Digital and Traditional Media are derived from the Media Behaviors & Influence data. The Digital Media term comprises four subfactors: Blogs, Social Media, Mobile Devices and Internet Ads. Each of these subfactors looks at prospective vehicle purchasersplanning to buy within the next six monthswith $100,000 or more in household income. Then, for example, the Blogs subfactor focuses on those among that group who say blogs are a significant influence on their car-buying decision. In the case of Acura, for instance, the formula takes the percentage of that group who are considering the car (as either first or second choice) and subtracts the percentage of that same blog-influenced group who already drive an Acura. (This is to differentiate those drawn to the car by marketingor digital word of mouth from those whose opinion of the car is based on their personal experience with it.) Each of the four subfactors is calculated the same way. Results from the June and December surveys are averaged together, and the four subfactors are averaged to yield a Digital Media score for each brand. Traditional Media includes six subfactors: Reading an Article (about the car), Magazines, Newspapers, Broadcast TV, Cable TV and Radio. Each of these subfactors is calculated the same way as the subfactors for Digital Media, then averaged together. The Traditional Media term is weighted versus Digital Media to account for traditional medias greater reach, as reported by the survey respondents themselves. The sum of the five main factors equals the overall Luxury Car Buzz Index score for each brand.

24 | 2012 Special report: Luxury Automotive Outlook

About Forbes Insights


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