Today's young Americans — otherwise know as "millennials" — are less dependent on cars than past generations. The numbers tell the story: In 2008, 46.3% of potential drivers 19 years old and younger had a driver's license. In 1998, 64.4% did, according to the Federal Highway Administration. And drivers aged 21 to 30 drove 12% fewer miles in 2009 than they did in 1995.
According to CNW research, adults between the ages of 21 and 34 buy 27% of all new vehicles sold in America; that's down from a peak of 38% in 1985. What's more, nearly half — 46% — of drivers aged 18 to 24 said they would choose Internet access over owning a car, according to the research firm Gartner.
Despite this, there is also research that suggests millennials aren’t actually skipping out on buying cars, so companies such as General Motors and Ford are updating their business models and products to better attract millennial customers. Here are several lessons that credit unions can learn from what these companies are doing.
Lesson No. 1 — Know Your Limitations
GM filed for bankruptcy several years ago and has now asked itself an appropriate question: What will it do differently going forward? It holds the largest domestic market share of any car manufacturer, but is still has problems. In a survey of 3,000 consumers born from 1981 to 2000, MTV’s millennial ad unit, Scratch, asked which of 31 brands they preferred. Not one car brand ranked in the top 10, according to the New York Times.
GM recognized the need for young customers but didn’t know how to connect with them, so it reached out to Viacom, the parent company of MTV, to see how GM could apply Scratch’s research and programming strategy to Chevrolet, its largest brand, and only global seller, that is responsible for more than 70% of the company’s domestic sales.
Scratch developed a five-year strategic plan to attract younger borrowers. Sample changes include to GM’s marketing and culture as well as its product models. Speaking of which…
Lesson No. 2 — Find The Product
In addition to being GM’s bestselling brand, Chevrolet has historical associations with the “American Spirit” as well as youth culture — a 1958 Chevy Impala plays a central role in 1973’s seminal youth movie, American Graffiti. It was thus the obvious brand choice for Scratch’s initiative.
Inspired by “hip” products such as Beats headphones, Chevy introduced three new colors primarily for its small and fuel-efficient models like the Sonic, Cruze, and Spark. The colors — techno pink, lemonade, and denim — are aimed at “a 23-year-old who shops at H&M and Target and listens to Wale with Beats headphones,” said Rebecca Waldmeir, a color and trim designer for Chevrolet.
The strategy must be working. In 2014, Chevrolet posted its highest sale totals ever, and increased U.S. sales 4% year-over-year, according to GM. In 2013, both Sonic and Cruze turned out record high sales, according to Zacks Investment Research, and Kiplinger’s named Spark one of 10 best cars for young drivers in 2014.
Lesson No. 3 — Enhance What Makes The Product Valuable Or Attractive
Think about your car for a moment: what do you value most about it? Gas-mileage is probably first. Next comes performance, styling, and safety? Do you consider features such as Internet connectivity, infotainment, and autonomy? Think about those before you sign the dotted line on your next car. Those features are becoming mainstream.
“We’re increasingly seeing the car being the biggest consumer electronics device you can have,” said Raj Nair, chief technology officer and vice president for global product development at Ford to Wired.
Ford operates a team of 125 software and user experience engineers, among others, in Silicon Valley. Although it’s not the first auto company to do this, it’s Valley footprint is one of the largest. The car company hopes proximity to the big tech players will help it get out in front of the latest tech trends.
“We’re gonna learn some things not only about potentially how to solve some of these transportation issues, but also, is there a business model in here for us that we can use to grow our business, beyond our traditional business?” asks Ford CEO Mark Fields in Wired.
Lesson No. 4 — Don’t Be Afraid To Play Around
Part of Ford’s strategy in Silicon Valley is to get close to the talented programmers graduating from elite West Coast universities. Another part lies in experimenting with technology and seeing what sticks.
One such experimental technology Ford tested is a system that will allow riders to control their Nest thermometer from their dashboard. A larger project involves remote-controlled cars that use 4G networks. That last is one of a planned 25 “mobility experiments” Ford commissioned to explore ideas that it might use in future car models, according to Wired.
The article shares several applications of the technology, such as with rental car companies and car sharing and valet services.
“This is basically an implementation of connectivity,” said Mike Tinskey, Ford’s director of electrification to Wired. “I wouldn’t say that it’s ready for prime time, but I would say that it’s giving us some encouraging results of using existing infrastructure.”