Can telematics convince Generation Y to buy cars?

Can telematics convince Generation Y to buy cars?

While cars are not actually going to disappear any time soon, the concept of the automobile has already begun to shift, especially in the minds of the Millennial generation, that is, people born in 1980 or later. Research shows that this cohort, sometimes called Generation Y, doesn't see an automobile in the same way earlier generations did. Many of them don't see the need for a car at all.

As these youngest adults move into their prime spending years, the auto industry may get clobbered by a couple of demographic shifts. (For more on Generation Y, see Telematics and Generation Y: Making the car an iPhone on wheels, Will concept cars ignite the telematics market? and Telematics and the car-as-service model.)

Demographic shifts

First, Millennials are driving less and they are less interested in driving.

According to analysis by GfK Automotive, Millennials account for 24 percent of all consumers intending to buy a car in the next year. But a December 2011 survey by Zipcar, a car-sharing service, found that 55 percent of Millennials had made an active effort to drive less, while they also went out less in general and found car ownership too costly.

In a recently released trend report, Ford identified a trend it called "the rise of the intima-city." Noting that, in the United States, people are moving back to urban downtowns, Ford said that people look for some of the small-town values in urban neighborhoods, such as pedestrian town squares and walkable retail and entertainment districts. They're demanding bike lanes, traffic-slowing measures and "people-first" urban design.

Second, traditional automotive attributes of quality are giving way to features more typical of consumer electronics. While a portion of the car market will always swoon over styling, the GfK Automotive study found that today’s youngest car shoppers are more focused on high-tech features and less concerned with gas mileage, especially in the small-car segment.

In GfK's September 2012 survey, Millennials placed higher priority on imagery associated with "Exciting," "Safety," "Technology" and "Success." GfK found that, while both Millennials and Baby Boomers ranked “Dependable” and “Proud to Own” near the tops of their lists, “Exciting” was much more important for the youngsters. As well, “Technologically Advanced Features” ranked #12 for Millennials, compared to #22 for Boomers. The older consumers were a lot more interested in qualities such as "Excellent Ride," a feature that left the youngest cohort cold.

Young car shoppers

To address these changes in consumer values, GfK said that carmakers need to do more to appeal to these young car shoppers.

When it comes to exciting technology, Ford is the leader, according to Lonnie Miller, R.L. Polk's vice president of marketing and industry analysis.

Acknowledging that GM has extended its infotainment services into its basic vehicle portfolio, while other manufacturers including Kia have been rolling out connected car services, Miller says, "Ford promotes the most aggressively and have been at it the longest, with recurring, overt, steady messaging in their marketing strategy." (For more on connected cars, see Industry insight: The connected car.)

It's working, according to Miller. R.L. Polk measures consumer loyalty, and it has found that the Ford brand is consistently among the highest in the industry, ranking consistently in the top two.

Miller also noted that Ford's so-called "democratization of technology," that is, putting Sync into even its entry-level cars, is giving it "bigger bang for the buck in terms of mass market reach. They have more upside because they sell to a wider audience."

Green appeal

In a recent report called "Looking Further with Ford," the automaker quoted surveys by BAV Consulting that found that 86 percent of Americans said they felt good about themselves because they recycled, and 84 percent thought it was their civic duty to recycle. Millennials are even more eco-conscious. They were 117 percent more willing to pay more for products or services from companies committed to improving the environment.

Ford hopes to tie into what it calls the "post-green" trend by emphasizing its eco-friendly materials, including soybean-based foam in some seating and recycled blue jeans used for soundproofing. It has also partnered with Zipcar.

Another important trend influencing young consumer attitudes toward cars is their recognition that their buying decisions have global repercussions. In the BAV survey, 66 percent thought that supporting companies that "do the right thing" was important.

"I'm finding that Millennial consumers do care about purchases, and purchases themselves, from a materialistic point of view, have become less important as symbols," says Americus Reed, Whitney M. Young Jr. professor of marketing at Wharton School of Business. He says his students want to use products and technology to have social impact and leave the world a better place.

Expressive consumption

Reed calls this "expressive consumption." The idea is that buying and consuming says something about one's identity. For Millennials, who emphasize collective action and caring about others, that means that car companies have to move beyond the features-selling that OEMs typically use to differentiate themselves.

Instead of a faster engine, improved steering or smoother handling, Reed says, the messaging should be about how having the car can allow Millennials to accomplish what they want to do and become the people they want to be. "If Ford or anyone who is trying to figure out how to sell more cars can tell their story around how these different features can allow a buyer to actualize that 'make a difference' concept, they can connect with these Millennials more easily," he says.

Reed's research has shown that consumers' sense of identity strongly influence their purchasing decisions. "Identity loyalty is the sweet spot Ford can tap into," he says. By identity loyalty, he means the brand transcending the utilitarian features of what it does and connecting instead with deep personal values. "That's a very powerful way to create loyalty, and it's very difficult to copy that."

Susan Kuchinskas is a regular contributor to TU.

For more on connected cars, see Special report: Telematics and apps.

For the latest on Generation Y and telematics, check out Telematics Detroit 2013 on June 5-6.

For all the latest telematics trends, check out Telematics India and South Asia 2013 on April 17-18 in Bangalore, Insurance Telematics Europe 2013 on May 7-8 in London, Data Business for Connected Vehicles Japan 2013 on May 15-16 in Tokyo, Content & Apps for Automotive Europe 2013 on June 18-19 in Munich, V2V & V2I for Auto Safety USA 2013 on July 9-10 in Novi, MI, Insurance Telematics USA 2013 on September 4-5 in Chicago, Telematics Russia 2013 on September 9-10 in Moscow and Telematics Munich 2013 on November 11-12.

For exclusive telematics business analysis and insight, check out TU’s reports: In-Vehicle Smartphone Integration Report, Human Machine Interface Technologies and Smart Vehicle Technology: The Future of Insurance Telematics.

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