This key sector of the market – which accounts for up to two-thirds of retail sales – feels neglected and ignored by both automotive retailers and carmakers, despite having more money to spend than all other consumer groups together. And as the UK population ages, the over-50s market – already 20m strong – will continue to expand.
The research, carried out by AM in association with ad agency Millennium, highlights a clear opportunity for retailers to boost profits by improving their levels of service and care.
It should be such an easy sale. Previous ownership of a particular make of car has a strong influence on future purchases – over- 50s buyers are drawn back to the same models time and again.
They value loyalty and want to establish long-term relationships with retailers, knowing that they will be looking to replace cars every three years when the warranty expires. Security and forward financial planning is extremely important – both are needs that dealers can fulfil. So what goes wrong?
The 'grey' market – people over the age of 50 who have the funds to purchase a new car – is typically split into two sections: retired and those close to retiring (often early). On average they visit three showrooms before making a purchase decision, and choices range from small cars to executive models, sportscars to SUVs depending on financial status and family requirements. But, increasingly, they are arming themselves with background knowledge on prices, model specification and extras before approaching the dealer.
The reason is simple: trust, or lack of it.
Salesmen, worryingly, are not trusted to provide unbiased advice. The negative feeling towards them is intense and has changed little in recent years despite attempts by carmakers to improve customer service through CSI ratings. Buyers describe sales staff as pushy, dishonest and uncaring. “I have no respect for dealers, they lack honesty and so you need to play them at their own game,” says one customer.
The loyalty displayed towards a particular brand does not transfer to the dealer if service is poor. The over-50s are willing to travel to a rival dealer outside their area if they are unhappy with their local retailer. They want to be loyal to one business, but believe retailers see them as “an easy target” and have little interest in their needs.
Consequently the internet, perceived as teenage technology, is used by a surprisingly large number of retired people – nearly half of mature buyers use it. With more time available, they are able to source background information about the cars they are interested in.
Be warned: don't underestimate your older customers; they know more than you think.
Word of mouth is an influence in deciding which dealer to visit. A positive experience can add several sales to the dealer bottom line, while a negative encounter can be costly.
Customers want to change their car every three years when the warranty runs out – especially when they have retired – to ensure peace of mind over future costs. They have a fixed income from their pension and need to plan future expenditure. It's a perfect scenario for retailers to establish loyalty for easy on-going sales.
Hyundai retailers appear well placed to benefit from the five-year warranty launched last year by their manufacturer. The research reveals that customers expect other carmakers to follow suit and extend their warranty programmes – those that do not could lose sales, with one loyal Ford buyer claiming that a five-year warranty will be the prime influence which decides his next car.
It's not just pushy salesmen who are to blame for the negative perception at the showroom, however. Overall impressions of dealerships are unfavourable, with complaints ranging from a shortage of model brochures to insufficient parking space.
The situation is retrievable. Customers that experience a high level of service are extremely loyal, returning to the same business over and over again. They believe that repeat
purchasing gives them more credibility, which means they are less likely to be bullied by a salesmen into an unfavourable deal.
And they report a higher level of service is generally experienced at a franchised dealer compared to a multi-brand car supermarket, which rank extremely poorly. Importers and internet retailers are also currently spurned.
Despite accepting that imports and cars bought online are cheaper, respondents say that dealers offer a level of security – an obvious point of contact if something goes wrong and a clear aftersales service, for example – that is as yet unmatched by other sources. But they don't believe this will be the case in a few years' time.
Customers are watching with keen interest the progress of internet operators and are eager to look at different sources if security can be guaranteed. Positive experiences of other buyers, combined with ongoing low levels of service at dealers, could push them towards internet retailers sooner.
So what can dealers do? Customers want to see clear, competitive on-the-road prices – that means no hidden charges. They want honest, friendly and knowledgeable sales staff – is training required? – who allow them to browse freely without hassle. And they want information about aftersales services.
Some retailers do get it right. A couple of buyers recounted that they had been sent a bouquet of flowers after the purchase. It was a personal touch, making them feel valued and securing loyalty for their next purchase.
Financial planning is critical to the sale. Being able to show the overall cost of ownership will help buyers to plan their future expenditure. Free insurance is a big selling point, so any manufacturer offer should be exploited – and there's quite a few of those around this month.
Price and budget are obviously the key issues in most cases – customers pay by a mix of loans and outright purchase (either savings or the lump sum part of the pension). More than half have negotiated a loan from a bank as it doesn't occur to them to go elsewhere. Dealer offers are largely ignored because they believe it would put them at the mercy of the salesman. Again it comes back to the issue of trust – they trust banks, but not dealers.
A typical response is: “It's a much better negotiating position to go into the showroom with the finance all sorted.”
While retailers are branded untrustworthy, grey purchasers believe manufacturers are neglectful. There's a lot of confusion in the marketplace, blamed on manufacturers' ad campaigns which many over-50s buyers do not understand (see panel below).
RMI franchised dealer director Alan Pulhamsays his retailer members “despair” at the marketing initiatives from manufacturers, which often focus on the young and young families. “There is a great deal of lip service given to the over 50s market,” he says. “The older sector often has two or three cars per family, yet manufacturers tend to get hung up on items like cup holders – how many older drivers care about such things?
“Occasionally messages do reach the grey market when marketing focuses on value, but inclusivity happens by accident rather than design. In the end manufacturers will have to get their act together. Once one targets the mature car buyer, the rest will follow.”
But it's clear that key messages are not getting across. Diesel cars, for example, are perceived by the over-50s as “noisy and smelly” and “not necessary unless you are doing a lot of mileage” when, in reality, they are a perfect fit for someone on a fixed income.
It's the responsibility of manufacturers and dealers to educate their older customers about the benefits of diesel. More importantly, it's up to manufacturers and dealers to understand that the older generation is an affluent market that values service, care and respect. They want to spend their money with you; don't give them a reason to look elsewhere.
- Advertising agency Millennium specialises in creating campaigns aimed at the over-50s market. It was established in the mid-1990s, and counts Kellogg's, Norwich Union and Age Concern among its clients.
- Create a good impression – have brochures for each product, clear OTR prices, and ensure sales staff provide friendly advice without being pushy
- Knowledgeable staff – they must be well informed as buyers will have carried out extensive research
- Aftersales care – the over-50s value security if something goes wrong, so promote your services.
- Advertise – many mature buyers use their local newspaper to find out about the latest offers; make sure they immediately associate your business with the offers they read about
- The personal touch – seal long-term loyalty after the first purchase by showing your appreciation, for example send flowers or a courtesy call to check they are happy with the vehicle.
Ford Fiesta / Focus / Ka:What's the appeal? Recognised brand with extensive dealer network that provides security if anything goes wrong; small cars but with good interior space and plenty of options.
Skoda Fabia: What's the appeal? Value for money proposition which comes well equipped; reassurance of quality from Volkswagen ownership; small, practical car with cheap insurance.
Rover 25:What's the appeal? Small car which has been heavily discounted over the past year; British-owned company; traditional purchase – “why change” – familiar styling.
... and the car ads that leave them cold
The over-50s market believes car ads are targeted at younger buyers – too many fast sports cars and people carriers and little in between. TV ads are typically described as “silly”, “irritating” and “annoying”, but despite this, brand recognition is quite good. None of the respondents says a car ad would convince them to go out and make a purchase, although several indicated that a promotion they didn't like could put them off.
They want the facts from ads, not abstract images, so they can be armed with the right information before entering a car showroom. The Renault Va Va Voom campaign is criticised for its “silliness”, although respondents enjoy seeing the car in motion. The MG cabriolet ad and Honda's approach are appealing, while Ford's 'engineering to last' campaign is singled out as being more meaningful.
The Jeep campaign focusing on security in the wilderness hits a nerve with the older generation. To them it says 'security in the urban jungle' – although this appeared to be a by-product, not an aim of, Jeep's strategy.
The buying habits of the over-50s are triggered by value and benefit, not brand and image-based marketing. They see through the message and seek out the benefit in them. They're a difficult audience to address through creative advertising.
The sales pitch
David McCann, MD at HHM, the marketing and communications agency, warns that selling to the over-50s is not easy – because there are so many variables.
The over-50s come from an age when advertising fulfilled a functional role and was informative – they could listen to an ad and gain real product knowledge. Today, however, with the spiralling cost and fragmentation of media, manufacturers can often only afford to develop advertising that builds the marque or model brand, not the specific vehicle functions.
So consumers use the alternative method that has always worked for the retailer – real face to face knowledge. This isn't straight forward, however, as retailers are often more interested in selling finance than cars.
Model fragmentation of lifestyle cars – superminis, MPVs, SUVs – means that the over-50s need more product knowledge to feel able to decide on the right car to purchase. Twenty years ago reliability was a major factor in choosing a car. Today the spectrum of reliability is much smaller and there are many other variables. Consumers want guidance, help and advice. Life statements of the younger generations are less important; older buyers want functionality. They want a car big enough for the dogs or grandchildren, that is at home on the motorway or nipping to the shops.
Two recent examples from our research highlight how the over-50s can be different in their selection criteria. One bought on colour because all the other criteria were met by four makes of car. Each offered four doors, the same engine size and specification (air con, power steering, etc) for a similar price. Finance was offered but not required so what's left? Pure aesthetics and subjective taste. The other was influenced by lifestyle, but purchased on price. The governing factor was the need to tow a boat so it then came down to how inexpensively a 4x4 could be purchased. In this case the real money is spent on the leisure pursuit not the car to get them there.
The over-50s buy for a wide range of reasons – it's up to the retailers to find out what they are.
Why Toyota told its sales staff to back off
Damning customer opinions forced Toyota GB to look at ways to improve the level of service at its dealerships. The company last year took the surprising step of 'banning' sales staff from talking to customers. Instead, hosts greet customers at the door and will introduce them to a member of the sales team if requested. The Toyota Retail Concept has now been launched at around half of the company's 220 dealerships.
The programme was developed in response to feedback from customers which accused salesmen of being “insulting, intimidating and nerve wracking”, with women and older buyers in particular feeling patronised and neglected. Toyota's response was to copy styles from other retail sectors, making showrooms more welcoming for families.
Negotiations are now carried out on-screen in front of the customer, similar to the set-up at holiday booking agents and at high street banks.
But it was the idea of having hosts to meet and greet customers that created most interest. Sales staff stay away from the showroom floor and are only introduced to a potential customer when called for. Following initial resistance they are now said to be responding well to the soft-sell concept.
“As they are only introduced to people who want to talk to them, they have more time to spend with each potential customer,” says a spokesman. “It's a more efficient use of their time, with a better chance of a sale.”
Feedback from customers has been encouraging. They now feel “more comfortable, happier and less pressured” by the hosts, says Toyota. Sales in 2002 are up 8.29 per cent on last year to 95,271 units and retailers are enjoying improved profitability, particularly for aftersales.
“The quality of experience during the new car purchase plays a large part in establishing loyalty – we would reasonably expect it to improve,” adds the spokesman.