Does Size Matter?
By Dennis DesRosiers
(CHATHAM, ON) – Sometimes it amazes me what some people do with the information we send out. Attached is an article written by Mark Russell who has been in the advertising business for quite some time. He gets all my e-mails. Each month he takes my top 10 list and calculates the SIZE of these vehicles to determine broader trends in the industry. Are Canadians moving to larger or smaller vehicles and thus implications for the world of marketing.
He sent me the attached article which discusses his findings. Quite fascinating.
Despite all the efforts by all the OEMs and with the heavy stick of Government always threatening the market, the average size of vehicles being bought by Canadians over the last 10 years has actually gone UP steadily not down as one would expect. This is yet another example of the power of the consumer. The vehicle companies can make all the effort in the world to downsize, the Government can regulate higher and higher fuel efficiency to force downsizing, marketing types can drive the messaging in the media towards smaller vehicles BUT consumers will buy what best suits their taste. AND there is little anyone can do about it. Every vehicle company have gas misers in their fleet and less fuel efficient vehicles and the consumer gets to choose. NOT the dealer. Since consumers want more ( usually defined in the automotive sector as bigger and more powerful ) this means that to meet these fuel efficiency targets the OEMs will have no choice but to throw technology at the equation. It will not be done with downsizing. And besides our research shows that less than 10 percent of Canadians buy a vehicle bigger than what they perceive they need so there is very little room to move down market anyway.
Read the article it is quite insightful.
Canadian Consumer Vehicle Size Preference – 2002 to 2012: The cars we drive just keep getting bigger!
By Mark Russell
Canadian consumers are buying larger vehicles today than ever in history! After more than three decades and hundreds of billions of dollars spent by the auto manufacturers on ‘downsizing’, and after several decades of government encouragement to purchase smaller, more fuel efficient vehicles, consumers continue to choose larger vehicles every year. Also, the average fuel efficiency of the average vehicle purchased by Canadians has not improved at all during the past 10 years.
In the 1950’s and 60’s, the Detroit auto companies were famous for creating new cars each year that were ‘longer, lower and wider’ than the vehicle that preceded. Consumers eagerly awaited each new car year to see the level of excess that had been achieved, and everyone happily purchased a newer and bigger vehicle. A fuel crisis in the early 1970’s brought this trend to an end. That, along with the growth of the Japanese brands in North America during the 1980’s and 90’s, brought a wide selection of new, innovative, smaller vehicles for consumers to enjoy. But a study of Canadian sales data shows that while manufacturers have created a wide variety of small, efficient vehicles, on average, the vehicles Canadians have been buying have been getting bigger each year NOT smaller. The average vehicle purchased this past year was actually bigger than the average vehicle purchased in the 1970’s!
One way to determine the average vehicle size for each year is to add the weight and length of EVERY vehicle sold during the year, then divide by the total number of vehicles sold. This would give us an accurate average vehicle size. But this is a huge amount of work, so instead we simply tracked the top-10-selling vehicles from each year, which provides a statistically sound sample. The top-10-selling vehicles each year represent 33 percent of total industry sales, and fairly represent what consumers really want.
Our methodology is simple. We take the length and weight for each vehicle on the top-10-selling list and multiply that by sales volume to provide a ‘sales weighted’ average size of vehicle. We can then plot this data year-over-year to see how consumer preference shifts.
Over the past 10 years there have been several significant developments affecting the auto industry: political conflict in the Middle East, substantial increase in the cost of fuel, a punishing recession, and many innovative new technologies brought forward to improve fuel efficiency. Most of these developments should have encouraged consumers to choose smaller, more efficient vehicles. Despite that, there was a steady growth in the size of the average vehicle consumers purchased. Only a temporary and large increase in the price of fuel in 2008 gave consumers reason to pause. Otherwise, the average vehicle just got bigger every year.
While this data may conflict with popular wisdom, or with our own perceptions, there are several simple explanations as to why consumers choose larger vehicles. First, vehicles have changed substantially. The weight of the vehicles we drive today is very much affected by the significant increase in vehicle content – and specifically safety content. Government regulations, combined with consumer expectations have added hundreds of pounds of equipment, particularly safety equipment, to every vehicle on the road. The result is that vehicles today are heavier than they were a generation ago. For example, a 1973 Ford Galaxie, which was a fairly standard family car in 1973, weighed 4,380 lbs., while a 2011 Dodge Caravan, a current average family vehicle classified as a ‘Mini’ van, weighs in at 4,493 lbs. In the mid-size segment vehicles have also grown: a 1973 Chevrolet Chevelle weighed 3,850 pounds, and a modern-day replacement for that mid-size car, a KIA Sorento, for example, weighs in at 4,131 pounds. Even in the Compact segment we see current vehicles much larger than their 1973 equivalent: a 1973 Plymouth Valiant weighed 3,373 pounds, while a 2012 KIA Sportage, a ‘Compact’ SUV and suitable modern-day replacement for the Plymouth Valiant, weighs 3,466 pounds.
This underscores another aspect that drives the movement to larger vehicles. Consumers like trucks, or at least they like vehicles that resemble trucks. This is evident just by reviewing the vehicles on the Canadian top-10-selling lists from 2002 versus 2012 (see charts below). In 2002 there were 4 trucks on the top-10-selling list, but in 2012 there are 7 trucks on the list.
Another reason the vehicles we are buying continue to grow in size, is that consumers have proven to be resistant to the influence of the cost of fuel on vehicle size preference (or at least they are resilient). In the graph below we see that temporarily high fuel prices in 2008 caused consumers to choose smaller vehicles that year. But when fuel prices stabilized, and consumers became more accustomed to the higher prices, they immediately went back to larger vehicles.
Improvements in fuel efficiency should have some affect on the kinds of vehicles consumers prefer as well, and it does. However, the outcome is that as manufacturers improve fuel efficiency, consumers then ‘spend’ that efficiency improvement on a larger vehicle. The result is that the average fuel consumption of the top-10-selling vehicles has not changed in 10 years. It has reliably stabilized at 10 litres/100km.
Even the price of fuel has little affect on the fuel efficiency of the top-10-selling vehicles. One could think that as the price of fuel increased, consumers would choose more efficient vehicles, thus stabilizing their personal cost of fuel for the driving they undertake. But consumers seem resistant. In the graph below, we see a modest response to the temporarily high fuel prices in 2008, but within a year consumers were back to choosing vehicles that produced about 10 litres/100km fuel efficiency.
In summary, a careful look at the data shows us that consumers like trucks and truck-like vehicles, and they like the biggest vehicle they can ‘get away with’. They are relatively resistant to fuel price increases having an impact on their preferred vehicle choice. And they will ‘spend’ any fuel efficiency improvement provided by the OEMs on a bigger vehicle, thus effectively eliminating the fuel efficiency improvement. It seems that consumers are totally in the driver’s seat on this and have effectively resisted or contradicted all efforts by governments and the auto manufacturers to interest them in smaller vehicles. I suggest several reasons for these phenomena and there may be more:
- Consumers don’t choose cars with ‘logic’ as their main motivator. They choose the vehicle they want, that suits their needs, that fits their budget, and the one that makes them feel good (with the ‘wanting’ and ‘feeling good’ appearing to be the most important parts of that equation).
- Consumers buy cars they can’t afford all the time, but they seldom buy a car they don’t want.
- The cost of fuel is relatively insignificant in terms of the total cost of vehicle ownership, and therefore has less impact on vehicle choice than we might otherwise think. Depreciation, insurance, maintenance and the ‘cost of government’ are all more significant than the price of fuel. So most consumers can rationalize a few extra hundred dollars a year on fuel if they get the vehicle they really want.
- Safety may be a much bigger purchase motivator than we realize – consumers may be resistant to smaller vehicles because they don’t ‘feel’ safe in them.
One could look at all of this information and conclude that the consumer trend toward ever larger vehicles cannot continue unabated. And certainly government influence and vigorous and innovative development by the auto manufacturers has made smaller vehicles more appealing. But there are some concerns.
If a larger portion of the population moves to smaller vehicles, it is possible that safety will become a much more important issue than it is currently. Marketing types should take note.
And it could be an issue with political ramifications. Governments have identified mandatory fuel efficiency targets for the auto companies to reach by 2016 and very aggressive Standards by 2025. To hit these targets, the auto companies may actually have to sell smaller vehicles in larger volumes. But as shown in this analysis, it is not enough to simply design them and offer them for sale … they actually have to SELL them.
The easiest way to accomplish that is to use pricing to motivate consumers. But the price of smaller vehicles is not likely to go down. Instead, the price of larger vehicles will most certainly go up, thus making smaller vehicles a more appealing choice. Effectively, that means the larger vehicles we know consumers prefer will simply be more expensive – a luxury for the wealthy, in other words. This is likely to ‘politicize’ the size of vehicle consumers (read that as voters) drive and create a host of new issues for auto company marketers to deal with.
Mark Russell is an advertising agency veteran who specializes in automotive marketing. He can be reached at: firstname.lastname@example.org
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