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Automakers focus more on young buyers

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#1 ·
Gen Y makes up 28 percent of U.S. population

By Jean Halliday/Advertising Age
April 28, 2003

Automotive marketers are increasingly adding Generation Y consumers into strategic planning.

Born between 1977 and 1994, these consumers account for about 28 percent of the American population and represent the largest generation in the United States since the baby boomers.

Walter McManus, executive director of global forecasting at J.D. Power and Associates, says nearly 10 percent of households headed by a member of Generation Y bought a new vehicle last year, accounting for about 700,000 units.

He predicts vehicle sales to Gen Y household heads will rise to 3.5 million units by 2010, or 20 percent of total industry sales, and to 5 million new-vehicle sales annually by 2020.

"Our research indicates that Gen Y consumers are style-conscious, less loyal to domestic brands and seek vehicles with fun-to-drive characteristics," McManus says.

Marketers take notice

Every year, 400,000 more of those in Gen Y will get their driver's license, says Jim Farley, vice president of the Scion brand, a unit of Toyota Motor Sales U.S.A. Inc. Scion is Toyota's latest effort to reach the elusive Gen Y market. The brand is aimed at trend-setting members of Gen Y in their early 20s, mostly male.

Toyota Division's entry-level Echo subcompact car, launched in 1999, wasn't a hit. McManus says the Echo's styling didn't appeal to Gen Y. As a result, Toyota Division has lost share in sales to buyers 25 and younger, from 10 percent of its total sales in 1992 to 9 percent in 2002, he says.

The first two Scion models go on sale in June in California, and the brand expands to other markets next year.

Gen Y "wants to discover their own products so our marketing strategy fits into that," Farley says. Half of Scion's launch budget will be in nontraditional media such as the Internet and events.

This year, Toyota let young consumers test drive the Scion through a promotion with California record stores. More than 1,000 consumers participated. "That's what our marketing will be like," Farley says.

Late last year, American Honda Motor Co. Inc. introduced the Honda Element, a boxy SUV, aimed at Gen Y. Ads from Rubin Postaer & Associates in Santa Monica, Calif., show the great outdoors as seen through the vehicle's rear door or wide-swing side doors.

"Honda has always done better (than others) with buyers under 25, so it doesn't need a whole new brand," McManus says.

Honda's new-vehicle sales to people 25 and under were 12 percent of its total last year, compared with 10 percent in 1992.

Top Gen Y brands

McManus, who compiled an extensive Gen Y study last fall, found the group rated Kia as the most attractive vehicle brand, followed by Volkswagen, Saturn, Hyundai and Pontiac.

"The impressions made on these new households by their first vehicles will stick with them for a lifetime," McManus says.

New-vehicle sales to drivers 25 and younger dropped from roughly 20 percent of the industry's annual sales in the 1970s and 1980s to 10 percent in the 1990s, he says. In the past three years, it has bumped back to 12 percent, which McManus attributes to the low-price South Korean imports.

"Prices drive a lot of the youth market," says Wally Anderson, vice president of marketing at Kia Motors America Inc. Nearly 16 percent of all Kia buyers are from Gen Y, mainly due to its entry-level Rio and Spectra cars hitting the target. He says Kia's product mix, 10-year warranty and humorous advertising attract Gen Y. To date, Kia has not used nontraditional marketing.

Saturn opted for nontraditional marketing before introducing its Ion small car last year. Matt Armstrong, the car's marketing director, says Saturn sponsored its first music festival tour last summer to reach both Gen Y and X. A tent at the festival had an Ion driving video game and merchandise giveaways.

"We wanted to take it to events (these age groups) were already at," Armstrong says. In addition to sponsorship-product placement deals on TV shows such as CBS' "Survivor" and "Cram" on the Game Show Network, Saturn is backing the Ion with traditional TV commercials.

Ford Division rules

Ford Motor Co. has used similar tactics for its Ford Focus small-car line, which bowed in 1999. Ford is relaunching its carryover Focus line this year and is expected to spend an estimated $50 million in measured media. The automaker considers the Focus a success because 25 percent of its sales every year are to Gen Y.

Although the Ford brand was tops with Gen Y last year, accounting for 17 percent of all sales to the group, only 7 percent of Ford Motor Co.'s total sales were to Gen Y, McManus says.

Meanwhile, Chevrolet is trying to get its groove back as experts agree that Chevy's entry-level Cavalier is overdue for a redo.

Chevy was the presenting sponsor last month of Primedia's third annual "Spring Break Tuner Bash" in Daytona Beach, Fla. The event featured Chevrolet's latest tricked-out vehicles, concerts and a Sony PlayStation 2 gaming exhibit.

McManus says there was a surprise in his study: Gen Y uses the Internet less than Gen X for pricing information: Only 25 percent compared with 32 percent for Gen X and 40 percent for baby boomers.

He speculates that Gen Y relies more heavily on help from family and friends.
 
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#2 ·
Ford, Chrysler, GM have plans to tune in
May 1, 2003
BY MICHELLE KREBS
SPECIAL TO THE FREE PRESS

DETROIT'S RESPONSE

In the 1950s and 1960s, Detroit automakers owned the youth market. In the 1950s, they built cars that could be easily converted into hot rods. In the 1960s, they produced muscle cars that kids dreamed of owning if they couldn't actually buy one.

All of that was lost with the oil crises of the 1970s, which invited an onslaught of fuel-sipping vehicles from Japanese automakers and a complete lack of interest in performance cars by anyone.

Japanese automakers gained a stronghold, stretching their gas misers into performance cars or at the least providing young people with hardware that could easily modify the cars to go fast and look cool. Meantime, the Big Three seemed to forsake the small car and youth market.

However, Detroit's automakers no longer are sitting idly by. More than likely, all will send scouts to check out shows like the upcoming Hot Import Nights at Cobo Center on Saturday where, if typical of similar shows held in other cities, 80 percent of the crowd will gearheads under age 25.

Of Detroit's automakers, Ford has been the most successful in creating vehicles that appeal to the tuner market, chief among them being the Focus and its various renditions, including the SVT and Sony versions. It is a success that Ford intends to build upon.

"It is a tough market to break into. The important thing is that the product must prove itself," said John Coletti, Ford Special Vehicle Team director.

DaimlerChrysler's newly launched Dodge SRT-4 has the best shot. The souped-up Neon combines awesome performance -- 215 horsepower and 245 pounds-feet of torque from its 2.4-liter turbocharged intercooled four-cylinder engine -- with bold styling at an affordable price. Chrysler bills the SRT-4 as the quickest production car sold in United States for under $20,000.

"When we show this car, we often get the response 'We didn't think guys in Detroit could do this,' " acknowledged 30-year-old Stephan Zweidler, who as vehicle development engineer acted as project manager for the SRT-4. "We hope this car will turn some heads and dispel the myth that Detroit doesn't get it. That it will change the whole view of Detroit."

General Motors is trying to convince import tuners it is in the game, but a truly competitive car remains some time away. GM's next-generation small cars will be replaced in late 2004 as 2005 models.

But GM's Saturn division will make an attempt with its new Red Line models early next year. The 2004 Vue Red Line is a sporty version of Saturn's compact sport utility equipped with a Honda-built 250-horsepower engine.

While they introduce new models, Detroit's automakers also are beefing up their parts operations to tap into the tuner crowd.

The recently created Ford Performance Group, which combines SVT, Ford Racing Technology and the Vehicle Personalization organization (which develops parts and vehicles sporting those parts), plans to do even more of these featured vehicles.

Chrysler's Performance Vehicle Operations consolidated its engineering of performance vehicles with its motorsports activities to produce vehicles like the Viper and SRT-4. Chrysler's Mopar parts division, legendary for producing performance parts for Chrysler's 1960s muscle cars, plans new parts for the tuner crowd. It also is encouraging its dealers to create a shop within the dealership where tuners can work on their cars and hang out.

GM's relatively new GM Performance Division is developing performance versions of cars and trucks for all GM divisions, the latest being the Cadillac CTS V-Series, as well as parts and accessories.
 
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