As the automotive industry faces flattening new vehicle sales and falling used vehicle prices, now is the time for automakers to think beyond price and find new ways of building value into their vehicles. While this requires a mindset change for some brands, others are already excelling. They consistently exceed expectations in the core areas that drive consumers’ purchase decisions, earning for themselves a strong marketplace advantage and increasing the value of their used vehicles. For more automotive brands to follow suit, they must first identify, and then improve in those key areas.
According to the J.D. Power 2016 U.S. Auto Avoider Study℠, consumers’ key purchase drivers have remained consistent over the past several years. For mainstream brands, the top five purchase drivers include exterior styling, interior styling and comfort, gas mileage, performance, and reliability. The latter is especially important for used vehicles. When asked to name the three top factors influencing which used vehicle to purchase, 63% of consumers said “reliability.” Brands that cultivate a reputation for excellence across these five areas — especially reliability — will be more valuable in the marketplace, and can sell their used vehicles at a higher premium.
Consumer perceptions of a brand’s desirability and quality have a direct impact on the value of its used vehicles. For instance, Porsche’s sterling reputation for design and performance earns it a 23% brand value premium. In other words, a used Porsche will sell for a 23% higher price than the overall market average. Likewise, Toyota’s reputation for quality, reliability and fuel efficiency leads to its 13% brand value premium.
On the other hand, perceived deficiencies in design or durability have the inverse effect. Hyundai and Kia report a -16% and -21% brand value premium, respectively, although both have improved faster than any other industry brand over the past 10 years.
To build deep-seated value into their brands, automakers must first identify consumers’ most important purchase drivers, and then commit to measuring and improving their performance in these areas. Brands that differentiate themselves based on consumers’ top vehicle concerns will emerge as market leaders, enabling them to sell more used vehicles at a higher premium — even in today’s competitive industry.
