Auto-industry forecasters rationally make market predictions, but consumers emotionally buy cars.
“That's why market forecasts can fail us,” says John Wolkonowicz, IHS Global Insight's associate director-North American Automotive Research.
To stem such failures, he touts a research approach called generational dynamics. “It lets us climb into the hearts of auto buyers,” he says. “It's built on the premise that you are what you were.”
The thinking goes like this: “Your core values are formed early from life experiences and remain constant for a lifetime, so we can use them as a predictive tool,” Wolkonowicz says at a conference hosted by IHS and the National Automobile Dealers Assn.
Granted, a new form of humanity does not populate Earth with the arrival of each generation. But consumer behavior is not fixed and can vary by generation.
“Each generation has different life experiences and, therefore, different core values and different behaviors in the marketplace,” Wolkonowicz says.
“The Depression Generation” — people who lived through the hard times of the 1930s — will be completely out of the auto market by 2015, he says.
By then, Generation Z will have undergone a rite of passage from adolescent to auto consumer. “They are becoming old enough just now for us to study,” Wolkonowicz says.
Going down the list of generations, his take and comments on each are as follows:
- The Baby Boomers, born between 1946 and 1964, were indulged by their Depression Generation parents, who wanted a better life for their kids. Consequently, Boomers grew up “selfish and competitive.” Despite their advancing age, they remain a force in the auto market, responsible for up to 45% of new-car purchases. “Boomers will be important in the marketplace for years to come.”
- Born between 1965 and 1977, Generation X members were “the latch-key kids.” Many had divorced parents. They grew up in the 1970s when the U.S. saw some relatively turbulent times, from the Watergate scandal to oil embargoes. “It's a generation that wants to fit in rather than stand out. They are conservative, practical and skeptical. It's a don't-look-at-me generation.”
- Generation Y, born between 1978 and 1984, has garnered much attention lately, “as they should because they are 77 million strong.” These are the Boomers' “pampered and protected kids.” Unlike previous generations, their schooling focused a lot on self-esteem and computer literacy. Their respect for their parents narrows the generation gap. Because of the economy, some Gen Yers struggle in the job market. That affects the level of their auto consumerism.
To illustrate generational differences, Wolkonowicz describes each group in relation to an automotive current event: Toyota's sudden-acceleration recalls.
“Baby Boomers are Toyota loyalists who want this thing to go away,” he says. “One thing about Boomers is that they need to be right, and they want to be considered right in buying a Toyota. That is awfully good news for Toyota.”
Boomers who do defect from Toyota likely will shop for another Japanese car brand, he says.
Citing their skepticism, Gen Xers who own Toyotas “are the ones most likely to feel cheated” by the recall issue. In buying their next cars, “some will feel it is important to buy American, most likely Ford.”
Generation Y sees Toyota as their parents' brand, Wolkonowicz says. “Each generation likes to distinguish itself by the things they like opposed to the things their parents like.”
But because of Generation Y's practical streak, some of them may end buying Toyotas if the auto maker's incentives become irresistible, he says. Otherwise, “Honda and Ford can pick up some Gen Y customers.”
Dealers can use generational dynamics to better understand their customers and adapt selling styles that appeal to different age groups, he says.
For example, dealers should be ready to use the sales step of overcoming objections when dealing with Gen X skeptics. Meanwhile, Gen Yers tend to loathe high-pressure selling more than their predecessors.
“Dealers should climb into the hearts and minds of the customers that walk through their doors,” Wolonowicz says.