BMW: Consumer Values Evolving - But Luxury Brands Will Survive

BMW: Consumer Values Evolving - But Luxury Brands Will Survive

By Bill Visnic November 11, 2009

With luxury automakers taking a beating from the global recession and the geared-down "new" economy left in its wake, some are writing the epitaph for premium cars.

But in a meeting with the media this week, BMW North America LLC officials said that although the economic meltdown indeed has caused shifts in consumer thinking and "America has been changed by this recession," premium brands will continue to be a force in the U.S. market.

BMWNA president Jim O'Donnell said yesterday at the company's headquarters that "premium automakers will help shape the future of mobility" because high-end brands historically have been the first to develop and introduce new innovations.

And given the pressure for new solutions to the automobile's environmental impact, O'Donnell said, "It is our belief that the premium market - and the BMW Group as the leader of this segment - will continue to fill an important and necessary role of bringing innovation and technology to market to meet customer, social and regulatory needs and providing direction for the entire industry."

Some of the "direction" of which O'Donnell speaks includes BMW's reintroduction of 4-cylinder engines to the U.S., an expanded role for diesel power and the introduction of models using the company's fuel-saving "Efficient Dynamics" components.

Premium brands that can represent social and environmental improvement will be what keeps them desirable for consumers with changing social and economic values, BMW said.

Fundamentally Changed Consumer

In a presentation titled "What consumers are learning from the Great Recession," BMW and Mini executives presented results of a survey conducted DYG Inc., a marketing and applied social-science research firm, indicating luxury brands will not eventually be able to go back to business as usual - "We predict a fundamentally changed consumer," the study said.

DYG this spring conducted a nationwide survey of 6,000 adults over the age of 18 and asked numerous questions on social values; the latest round of occurred in September and October. One of the survey's major findings - surely to the chagrin of BMW and other makers of luxury items - is that the economic crisis taught Americans that "materialism can bite you in the rear."

Another danger signal for luxury brands: "modesty is the new cool."

Moreover, 17 percent more people now have a fear of becoming if not unemployed, then underemployed. This year, 47 percent of respondents said if they lost their job it would be difficult to find an equivalent. In 2006, the number of people who felt that way was just 30 percent. However, luxo brands might take some consolation in the fact that higher-income people were less likely (32 percent versus 43 percent) to feel this way.

This and other factors led the DYG researchers to conclude Americans are undergoing a revolution regarding their values, shifting their ideas about how to live their lives. Conspicuous consumption seems to be resoundingly uncool as reinvigorated positive social values are generating "conscientious consumers."

'Pro-Social' Shoppers

The researchers determined that in 2009, the percentage of people actively shopping for products driven by social, political or environmental reasons was 51 percent - a serious leap from the 32 percent who actively shopped with those motivations in 2006. The effect is even stronger as income rises.

People also are increasingly excited by the possibilities presented by new technologies - a factor that may help new-values consumers (even those with high incomes) justify premium auto brands because of those makers' established reputation for technical leadership.

The DYG survey led to the conclusion there is "an excellent match-up between (new) consumer values and the premium segment."

The survey indicated there will be constraints on the luxury market moving forward: there still is less available credit and high unemployment will continue to weigh on luxury makers.

But it is believed their new values will keep consumers interested in premium auto brands because of more thoughtful spending and less profligate spending. The survey concluded that the rationale for premium-vehicle purchases will shift from being driven by indulgence to being a reward for hard and conscientious work - leading consumers to believe that if a luxury purchase is the reward for being hardworking and responsible, it is a rational purchase even in these trying economic times. - Bill Visnic, senior contributing editor

Photos courtesy BMW North America LLC

1. ActiveHybrid 7, BMW's first hybrid sedan, is the kind of car it hopes speaks to consumers with new social values. It goes on sale in the U.S. next spring.

2. BMW says it will expand diesel penetration and reintroduce 4-cylinder engines to the U.S. market - potentially even for models as large as those in the 5-Series lineup, such as the new Gran Turismo seen here. 

Bill Visnic:  is an AutoObserver Senior Editor. Follow @AutoObserver on Twitter