Are Dealer Incentives, Rebates Succeeding? Maritz Study Questions Effectiveness
ST. LOUIS - Faced with dealers' 0% financing and rebates, credit unions have had to come up with creative strategies of their own to compete with dealers' incentives - and there are no signs of the dealers' strategies ending any time soon. But there is some good news - results...
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ST. LOUIS – Faced with dealers’ 0% financing and rebates, credit unions have had to come up with creative strategies of their own to compete with dealers’ incentives – and there are no signs of the dealers’ strategies ending any time soon. But there is some good news – results of a recently completed study indicate consumers are increasingly unimpressed by dealers’ cash rebate offers, even though the dollar figure continues to increase. Maritz Automotive Research Group’s New Vehicle Customer Study shows that even though dealers continue to try to entice consumers with more and larger cash incentives, these enticements are not impressing consumers as much as dealers would like. The survey was mailed to owners who purchased their new vehicle in October 2003 through March 2004. There is no doubt that the percentage of vehicle buying customers receiving a rebate or cash incentive has continued to rise – study results show a year-to-year rate of growth of more than 10% for the industry. While the domestic vehicles continue to lead the industry in the use of incentives, the jump in use by the Korean manufacturers shows them catching up. Customers also report the average dollar amount of the rebates and cash incentives continues to increase. The year-over-year rate of growth for the industry is over 10%, and all manufacturer groups are providing larger dollar amounts to drive sales. The upshot is manufacturers are pumping more and more dollars over time into rebates and cash incentives in their efforts to increase market share, the Maritz study states. However, the study points out those rebates may not be influencing customers’ loyalty to a particular manufacturer or model as manufacturers assumes they are. According to the study, “satisfaction with the new vehicle” scores are flat for the three years investigated – 2002-2004 – with scores in all three years of 3.9-4.0 on a 5-point scale with no significant difference between auto buying customers who received incentives and those that didn’t. As a result, manufacturers are getting little long-term benefit from the use of incentives, the study concludes. In fact, the study finds that the influence of an increased incidence of rebates and cash incentives on customer’s choices is declining for all but the Korean manufacturers. Maritz hypothesizes that’s probably because the Koreans had a large increase in the percentage of customers’ receiving incentives and rebates in 2004. Another interesting finding of the Maritz survey has to do with incentives’ effect with bringing customers into the auto buying market earlier. The New Vehicle Customer Study for 2002-2004 shows the number of auto buying customers influenced is still about one in five in 2004, but there is a “substantial” downward trend in this percentage from 2003 for the domestic and Japanese manufacturers. The other findings suggest that if all else remains the same, the positive effect on the purchase/lease timing will diminish with each subsequent year, the study concludes. While manufacturers continue to commit substantial dollars in the form of rebates and cash incentives to attract auto buying customers and increase their market share, results of Maritz’ New Vehicle Customer Study demonstrate the desired effects of these incentives may be decreasing. Customers do not perceive any increased value for the money or satisfaction with their vehicle, which Maritz says is “evidence of minimal long-term impact on customer loyalty.” In addition, after incentives have been in place for awhile, their influence on customers’ choice and purchase/lease timing declines. -
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