Researchers at Toyota Motor Sales USA's Lexus, in fact, are betting the industry's greatest growth potential in the coming years is near-luxury sport utilities.
Lexus' strategy in the past few years has been to cover the lux car and truck segments with multiple models. In near-lux cars, it has the IS 300 sports sedan and more traditional ES 300. On the truck side, Lexus added the mid-range GX 470 SUV late last year and is launching the RX330, the second generation of its popular RX300 SUV. Next year, Lexus introduces the hybrid-engine version of the RX300, the first lux hybrid ever.
To break through the clutter, high-end marketers are hiking advertising support for their new entry-lux models, says Mike Wells, VP-marketing at the Lexus unit. The total near-luxury market as defined by Automotive News, sibling publication of Advertising Age, attracted $315 million in media advertising for cars in 2002, up 19.9%, according to TNS Media Intelligence/CMR. Near-lux unit sales grew 4.5% compared to a 7.8% decline in luxury units.
Ford Motor Co.'s Lincoln brand changed strategy for its 2003-model LS entry-lux sedan to better hit the segment's sweet spot. A few months into the model year, the marketer reduced the price of its V-6 model by $2,000 from a base of $34,496, says Mike Crowley, marketing plans manager. The majority of sales across the luxury segment are in the $30,000-plus range, he says.
REACHING FOR TWENTYSOMETHINGS
The move was made to attract younger buyers in their late 20s and more women to the six-cylinder LS. Lincoln developed separate TV and print ads for its LS V-6 and LS V-8, which attracts 45-to-55-year-old buyers, most of them men. Mr. Crowley says "a lot of manufacturers moved down-market and are using those models to attract younger buyers." BMW Group, Mercedes-Benz USA and Ford's Jaguar are examples.
Andy Chien, VP of consultancy A.T. Kearney, predicts "some fallout" in the overall luxury market because the competition has grown so intense.