Autotrader Research: High Gas Prices Create Interesting Purchasing Behaviors

Posted on April 3rd, 2012 by
   

Rick Wainschel, Vice President of Automotive Insights at Autotrader.com, discusses the impact that high gas prices are having on a potential customer’s purchasing habits.

Full transcript:

Ben Lack: I’d like to get your thoughts on the increasing gas prices. What does AutoTrader.com do as a company to educate itself about these trends and how does the company position itself to be able to take advantage of the findings?
Rick Wainschel: We do a lot to understand what people are thinking about and what they’re doing in response to issues. Not just about gas prices, about a lot of different things. Certainly gas prices are a big topic these days. To give you some context for this, we do a tracking study with new vehicle shoppers every month, and we recently asked a question about whether people are likely to consider a vehicle they wouldn’t normally consider because of gas prices. For the month of February, we saw the highest level of people saying, “I strongly agree that I am more likely to consider a different vehicle.”Twenty seven percent of new vehicle shoppers, according to our tracking study, are saying they strongly agree that they’re looking at vehicles other than what they normally would because of this issue. And overall, fifty eight percent are saying they agree, strongly agree or somewhat agree. That’s one aspect of how we look at this issue. We want to look at the attitude that people are bringing to their shopping process.We also look at the behaviors that they’re exhibiting on our site, what kind of trends we’re seeing in terms of the vehicles they’re looking at, and the segments that they’re interacting with on the site.

We created a whole new group within AutoTrader.com about a year ago to do just that. We look at not just gas prices, but a lot of different factors in trends and pressure points—how people are doing things and why they are doing them. Certainly, gas prices are big one right now because of we were hitting prices that we’ve never seen before. And especially at this point in the year, there’s a lot of speculation that we’re not out of the woods and prices are likely to go even higher.

Ben Lack: Do you agree that it’s a very realistic chance that the consumer market could see five dollar gallon gas at some point in 2012?
Rick Wainschel: I’m not a global oil analyst. I can’t say with that level of certainty that’s going to happen or the probability of that happening. But what I can say is that the beginning of the year tends to have one of the lower priced points that we see during the season in terms of gas prices. We’re not in the heavy driving season. There are a lot of refinery issues during summer where they switch to more environmentally friendly versions in certain states in California.Historically, gas prices have been higher as we enter some of those different periods of the year, especially as we enter the summer. The fact that we’re averaging around $3.60 or $3.65 a gallon at this point in the calendar, is a great indication that prices could go higher.
Ben Lack: I want to ask you a question about trends since this is really your specialty. As you mentioned, gas prices are very high on the customer’s mind. I’m curious to know what other factors are driving the purchasing division and more specifically, what types of findings are you guys getting that surprised you that you weren’t necessarily expecting from the surveys and research you’re conducting with the new car buyers?
Rick Wainschel: Are you talking about in general or are you talking about specifically having to do with gas prices?
Ben Lack: In general.
Rick Wainschel: Before we leave the issue of gas prices, I just want to say one thing that can answer your question as well. A couple of years ago, when gas prices were hitting a certain psychological price range of $3 per gallon, we were seeing a lot of people moving away from certain types of vehicles and moving in to others. What happened is people get acclimated to price points. Now, the psychological price point that everyone is struggling through is $4 a gallon.

I think people sort of forgot a little bit once they reached the point of equilibrium of gas being about $3-3.50 a gallon, and now we’re heading up once again and hitting another one of those psychological barriers. I think that’s why we’re seeing some of those levels that we’re seeing on things like concerns about gas prices or looking to other types of vehicles. It’s kind of cyclical thing that the psychological price range has shifted upwards. It’s kind of an interesting phenomenon.In answer to your question, the general question, I can go to a lot of different ways with that. But I will say that one thing we’ve been looking at quite a bit the whole notion of an economic new normal. This has to do with the fact that we’ve lived in tough economic times for a number of years now.  A lot of consumers are making choices about the vehicles that they are willing to consider that are different than they used to. I’m going to give you a couple of examples.

We did a study with new vehicle shoppers and we asked what percentages of them were considering a Certified Pre-Owned (CPO) vehicle because of economic considerations? The percentage that we got back was sixty. 60% of new vehicle shoppers were open to CPO vehicle because of the economy.

Ben Lack: Wow!
Rick Wainschel: And another question that we asked in the study was what percentage of them was considering that for the first time. The answer we got back was half of that sixty—so nearly thirty out of those sixty points were saying they’re doing that for the first time. That’s a big shift. People who were primarily or even exclusively considering a new vehicle are now open to a lot of other choices. That led us to take a look at how people are interacting at different types of vehicles.

The sixty percent I just mentioned was in response to a survey. We also looked at the behaviors that they were exhibiting on our site. What we found was a lot of people who looked at new vehicles also looked at near new vehicles and vice versa. There are a lot of tradeoffs that people are making in terms of “should I buy that new non-luxury accord or maybe I should look at near new 3 Series. Should I consider buying a new Corolla or a near new Camry?”

Ben Lack: Are you finding that that’s also happening with all electric vehicles or hybrids?
Rick Wainschel: Hybrids and electric vehicles are an entity unto themselves. There’s a group of people growing but it’s relatively niche. You have folks who are looking at the Volt, looking at the Prius, looking at some other hybrid choices. Certainly the Prius and other models are doing quite well in relation to where they have been. But those are still relatively niche.
Ben Lack: If we could summarize your willingness to look at other alternatives based on our discussion of gas prices, have you done studies to see if the increase in gas prices allows. Because of the increase in gas prices, and because customers are open to other alternatives, are electric vehicles or hybrids becoming considered more? Are they being considered more than the traditional petro vehicles because they’re trying to find ways to avoid higher gas prices?
Rick Wainschel: Yes. I’ll say two things. Yes they are more open to those alternative technologies but it’s still not a mainstream set of actions or considerations that people are going forward with. We saw a lot of upward momentum for just regular fuel-efficient vehicles on our site, both used, CPO and new, too. For example like the Kia Optima, the Chevy Cruze, Ford Focus, Hyundai Elantra and the Volkswagen Eos all moved up in our rankings in terms of the vehicles that people are looking at on the site. That was on our CPO list.

For non-CPO used vehicles, there were some of the same vehicles, the Optima, the Cruze, the Beetle, the Prius and Dodge Caliber. That’s a lot of those fuel efficient alternatives. Prius is one on that used list that’s rising through the range.There are an awful lot of fuel efficient cars that people are gravitating towards. We saw this similarly in the spring. Gas prices headed up in the spring last year. Compact cars in general, we saw a big upward momentum in those vehicles. Even though we did see some movement on things like Volt and Prius and things like that, they were still on the margins.

There are a lot of mainstream and well-considered vehicles like the Civics, like the Cruzes and the Focuses that do well in these times because people appreciate them for what they do, in having fuel efficiency that they are tested and proven technologies that I think people feel comfortable with. While with something like Volt, it’s not to say that they are uncomfortable. I think there’s just some learning that consumers are going or need to do before they truly consider those buyable choices.

Ben Lack: Based on what you’re getting through this research, how does AutoTrader.com apply these findings to the sales pitch to make sure that the offering is consistent with what people are interested in.
Rick Wainschel: There’s a couple of different ways. One thing is that we have cars of every size. We have millions of cars listed on the site. We have millions of people coming in to the site to look at them and pretty much if you’re looking for any kind of car; new, used, big, small, powerful, fuel efficient, whatever it is, AutoTrader.com has very likely a car that suits each individual person’s needs and wants. And so, I think what happens is we are out in a very aggressive way talking about who we are.

People know who we are and what we stand for and that AutoTrader.com is a great place to go to find what you’re looking for. It’s more a matter of how these consumers’ actions are affected. What are the cars they actually looking at and looking for that are affected. So we try to represent all of this in having the widest variety of cars available for people to look at no matter what they want to look at. We have that in great measure because we have so much in inventory on the site and so many people coming and looking at it.

The other thing is that we also use this information to make recommendations based on our industry knowledge as to cars that meet certain needs. I’ll give you an example. We got a report out a couple of months ago, and we found through our research that seventy one percent of car shoppers were buying cars out of need and not out of want. Need driven by things like having accidents or car broke down, had a baby, need a different type of car and so on. We worked with our experts in the company and we put out a list of what we called “Want to buy cars and a need to buy world”. And it was cars that were affordable but still provided some cool features and interesting technology and things of that sort that were a part of the “need to buy package.” So we came up with a list of “want to buy cars in a need to buy world” based on our industry knowledge but also based on the consumer’s sentiments that we were seeing play out in the marketplace.

Ben Lack: Why did you choose to do what you’re doing and why did you spend your time working in that space?
Rick Wainschel: Well, I love two things. I’ve been doing market research, insights, and market intelligence work for twenty five years. I love understanding what consumers are thinking about and doing. To me it’s fascinating, just a human element of how people are going about things and why they do things. I’ve always been fascinated by the psychology of that.The other thing is I love the automotive industry. And so for me, getting to work for a company like AutoTrader.com that’s focused on industry that I find incredibly interesting and dynamic and having access to enormous amounts of information in which to understand those behaviors and attitudes is like a perfect job.

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