LEADING NATIONAL ADVERTISERS: SUV MARKET SPLINTERS; FULL-SIZE, MINIS EXPAND: DIVERSITY HURTS COMPACT BADGES; RAISES ISSUES OF CANNIBALIZATION, CAPACITY

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Ford motor co. plan-ned to spend $35 million in advertising over four months to launch the full-size Expedition sport utility vehicle last September. Ford took a cue from hotter-than-expected sales to mete out only $11.6 million of the budget.

At the same time, Ford issued a $299-per-month lease deal for its compact Explorer as unit sales of this No. 1 SUV began to show erosion. Such incentives were never needed before to push sales of the Explorer.

This tale of two sport "utes" shows an SUV market in transition. Not only are swank, larger, all-new models hot, but the category is maturing, forcing automakers to address new concerns-greater segmentation, ambitious product schedules, fickle public tastes and product cannibalization.

The market, which hit phenomenal growth of 22.1% in unit sales last year, is beginning to polarize. Buyers are moving from the center, compact-dominated tier, to the extremes-full-size, pricier SUVs increasingly popular with baby boomers and the small or mini-category sporting a price range attractive to Generation Xers.

SUVS GROWING

"The SUV market has peaked in demand, but not from a sales standpoint," says Christopher Cedergren, managing director of Nextrend, an auto marketing consultancy. "Sales volume will still grow over the next couple of years, but it will be pushed by attractive, higher incentives."

SUVs account for 15%, or 2.14 million units, of the 1996 U.S. car and light-truck market. SUV sales should hit 2.3 million this year, and 2.8 million by 2002, predicts Mike DiGiovanni, executive director of General Motors Corp.'s North American market research and forecasting unit.

Automakers accordingly plan SUV production increases-by more than a million units-in the coming year.

"Sales will not grow as fast as the capacity coming onstream," says Bob Schnorbus, director of automotive analysis at J.D. Power & Associates.

NEW PRODUCTS ABOUND

A good part of the new production is new product. There are 34 SUVs on the market today vs. 27 at the beginning of the decade. About 24 new SUV models are expected over the next five years, mostly at the small and full-size ends.

"You'll see more RAV4s-like (Toyota Motor Corp.) and CRV-type (Honda Motor Co.) SUVs that are still relatively low-priced but have a much better ride and more comfort than typically associated with a mini-SUV, like Chevy Tracker or Suzuki Sidekick," says Mr. Schnorbus.

More upcoming luxury models, aimed at baby boomers, will put pressure on prices of all SUVs, he says. "Pricing of existing models is going to be very difficult because of competition."

That is why marketing budgets will increasingly shift more funds into incentives and away from advertising. Media spending behind SUVs in 1996, for example, grew 51.7% over 1995 levels, according to CMR.

CANNIBALIZING BADGES

New entries are cannibalizing sales from the same manufacturer. Nearly 14% of Ford Expedition buyers in '96 surveyed by CNW Marketing/Research switched from Ford Explorer to Expedition, notes Art Spinella, VP of CNW.

He predicts Chrysler Corp.'s upcoming new Dodge Durango will hurt Jeep sales.

Expedition has catapulted to No. 3 on the SUV sales chart in the first half of this year, with sales of 107,781. By contrast, Explorer sales slid to 186,345 from 207,358 in the first half last year.

Defections from SUVs to non-SUVs also have been rising. A sample survey by CNW shows that of new-vehicle buyers in 1995, 18.7% defected from SUVs to non-SUVs;

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