There are many fac tors at work.  One is the poor economy, which has forced some would-be new-vehicle shoppers to buy used.  Since the traditional new-vehicle buyer is more likely to shop online,  the used AIU rate would be pushed up.

Another factor is the increasing Internet penetration among the U.S. population.  As shown below, large increases in overall Internet penetation mirror corresponding changes in the used-vehicle AIU rate.  More people going online = more used shoppers going online.

It’s not just that more people happen to be online – better and more relevant content is also drawing them in.  Inventory will always be king when it comes to used-vehicle shopping and there’s so much more of it available.  It’s no longer just about cars.com vs. Autotrader.  These days, robust inventory tools are available on other third-party sites, OEMs (particularly for CPO) and many dealer siters.  Further, dealer are doing a better job of harnessing SEO/SEM to drive traffic to their dramatically improved sites.

Let’s start with one of my favorite usability rants: hot spots.  They’re quick, which is probably why three OEM iPad apps incorporate them.  They’re also dirty – pretty hyperlinks that force users to repeatedly hunt to find information.

The iPad is a touch pad.  Hot spots don’t create the level of engagement that is possible when users interact directly with the screen; they’re just a porting of a flawed navigation scheme to a new platform.

Interfaces fit more naturally with a touch environment are far more interesting and fun.  The MB Classic app utilizes the familiar iTunes album navigation, which makes it immediately usable.  Selecting a card then leads to high-quality images with technical data and an audio overlay.

BMW’s X3 Catalogue also creates some compelling interactions.  The primary interface is like a magazine, with scrollable thumbnails that leads to high quality imagery, 360s, and video.  There’s also an intuitive quick colorizer.  I especially like the interior X-ray – it’s engaging, feels natural on a touch screen, and fits into the magazine concept.  The only major downside is length – 34 pages feels really long, even to someone interested in all the content.

The Audi A8 experience doesn’t start off well.  It’s a huge download (611MB) and requires you to watch a one-minute video intro.  The start menu is also problematic, as it’s cluttered and not much better than a hot spot interface.

Further in, we get high quality video and imagery.  The 360 spin + colorizer is fun, but the link to the main site to complete the configuration process is awkward.  Other animation such as turning knobs and dials is rather limited.

Least impressive is the Honda CR-Z Experience, which falls short nearly across the board.  Aside from the problematic hot spots, the other primary means of navigation is swiping through screenshots of information.  Swiping is just the cost of entry on smart phones and doesn’t bring anything new to the game.  What’s worse is that the content is uninspiring, comprised almost entirely of dark screenshots accompanied by small, low-contrast text doesn’t draw in the user.

Despite some initial stumbling, these early movers are at least trying to figure out what they can accomplish on touch pads.  There are no Angry Birds-type home runs (granted, that’s a nearly unreachable standard), but I do expect to see some interesting and innovative offerings over the next year.

But consumer sentiment is often divorced from reality.  The domestic brands continue to carry poor reliability perceptions borne out of decades of actual poor performance.  The 2010 Avoider Study, which examines the reasons consumers fail to consider (i.e. avoid) particular new models, shows that Chrysler, Chevrolet, and Ford are all avoided by greater than 20% of vehicle buyers because of reliability concerns.  The latter two have made inroads (carried at least partly by better actual performance) and decreased their reliability avoidance by three and seven percentage points, respectively, over the past six years.  Meanwhile, Chrysler’s reliability avoidance continues to worsen.

The Toyota and Honda corporations have long enjoyed stellar reputations for reliability.  For Acura and Honda, those perceptions have remained remarkably steady for the past six years, never rising above 7% avoidance.  Conversely, the steady drum of recalls and poor PR has negatively impacted Toyota and Lexus, with 15% and 6% of avoiders, respectively, citing reliability concerns.  Interestingly, corporate sibling Scion, which has largely avoided the fallout, actually experienced an improved reliability perception in 2010.

The Toyota saga illustrates how quickly brand reputations – even those which have been painstakingly crafted over years – can turn.  Mercedes-Benz went through a similarly painful period ten years ago, when the Chrysler takeover and new product launches created numerous vehicle reliability issues.  It has taken the company the remaining part of the decade to recover its once sterling image.  Toyota Motor Corporation must continue its redoubled efforts to produce great products and earn back its position as a reliability leader.

According to the J.D. Power and Associates Multimedia Quality and Satisfaction Study, ownership of satellite radio has increased from 39% of new-vehicle buyers in 2007 to 66% in 2010 (these figures are self-reported by the owners). In addition, 57% want satellite radio in their next new vehicle compared to 49% in 2007. However, it is important to note that this study is based on consumers who have only owned their vehicle for three months, so a large number of these consumers may still be in the free period of their trial subscriptions.

New car buyers with satellite radio in their vehicles are more satisfied with their vehicle’s sound system than owners that do not have this feature; in fact it is the audio/entertainment/navigation feature with the highest impact on overall sound system satisfaction.

However, satellite radio is also the multimedia-related feature with lowest loyalty rate, as 25% of owners who have this feature on their vehicle do not want it on their next vehicle. This could be due to owners that lack previous experience with the feature not using it as much as they think they will, or the fact that they will have to pay for the subscription once the free trial runs out. In comparison, every other multimedia feature in the study has at least 81% of consumers that currently have it in their vehicle also wanting it in their next vehicle, with the highest being Steering wheel controls for audio system at 95%.

Satellite radio users enjoy the programming options, lack of commercials, and signal strength, yet cost is the one factor that prohibits many from continuing their trial subscriptions. According to J.D. Power and Associates 2010 U.S. Automotive Emerging Technologies Study, four out of five current satellite radio owners who are still in the free period cite interest in having this feature in a future vehicle.  However, when the market price of $12.95 per month is presented, this interest decreases by 38 percent.

The satellite radio market is facing much competition in the in-vehicle entertainment market between CD players, MP3 players, and HD radio, in addition to traditional AM/FM radio, which still holds the largest percentage of the radio market. Consumers are inundated with a large number of options for listening to music in their vehicles. Smartphone users can also hook up their devices to an auxiliary input and listen to music through internet applications such as Pandora, which offers free, personalized programming options similar to satellite radio

J.D. Power Perspective

With the recent downturn, there was some question about whether Sirius XM, and by extension, satellite radio, would survive. The company appears to have rebounded, as they have recently surpassed the 20 million subscriber mark, and signed Howard Stern to a new 5-year contract. However, competition from technologies providing similar services without a subscription fee will be a real threat. However, as technologies such as HD radio and streaming radio online from a smartphone are a long way from being universally adopted by the general population, satellite radio as an in-vehicle entertainment option is going anywhere anytime in the near future.

Manufacturers want to create repeat, if not life-long, customers but it’s a challenge to bring in younger buyers.  Among full line premium brands, the core car lineup is crafted in part to appeal to buyers of different incomes and ages.  Their entry-level vehicles are generally sportier and more appealing to more youthful (whether in body or spirit or both) buyers.  As shown below, this strategy generally plays out as expected.

Brand loyalty, on the other hand, doesn’t demonstrate a similarly obvious pattern.  The brand retention rate, which is the % of former model owners who purchase within the brand for their next new vehicle, increases with vehicle size for Lexus and Mercedes and fluctuates for Audi and BMW.  Buyer loyalty is far from guaranteed.

Meanwhile, domestic premium brands Lincoln and Cadillac continue to struggle with the younger set.  The Cadillac CTS average owner age is over 60, more than a decade older than many competitive models, while the Lincoln MKZ fares even worse.  What’s worse is that only 12% of CTS buyers and 3% of MKZ buyers are below 45 years of age, compared with roughly one-third of buyers for A4, 3 Series, IS-Series, and C-Class.

Although Lincoln and Cadillac have revamped their product portfolios in recent years and improved their long-term viability, they’re still not drawing younger buyers.  This avoidance is probably more at the brand level – domestic marques often lose the perception battle due to past quality problems and the more recent bailout (excluding Ford brands on the latter issue).  Eventually, perhaps, their sustained efforts can slowly widen that appeal and create new lifelong owners.

Consumers are also making a clear demand that they want these personal electronics accessible in their vehicle. According to the study, nearly one-half of new-vehicle buyers indicate that they would prefer a wireless connectivity system or portable digital music player interface to be standard in their next new vehicle.  When asked about the most important factors in their choice, one-fourth of new-vehicle buyers cite the advanced technology of the vehicle. In addition, 23% agree that they would pay extra for the latest electronics and communication features.

In the wake of the economic downturn, it has become crucial for vehicle manufacturers to use their vehicle contenting to meet the expectations of an increasingly technologically advanced market base, but at a competitive cost. Looking forward, younger [and more connected] consumers are rapidly approaching the new-vehicle market. Acquiring and retaining these tech-savvy new customers will help to secure the future viability of a brand.

Unfortunately, more connectivity can contribute to more unsafe driving. U.S. Transportation Secretary Ray LaHood cites that nearly 6,000 were killed in accidents related to distracted driving in 2008, while approximately 500,000 people were injured.  Putting further pressure on the automotive market, 60% of consumers cite that safety is one of the most important factors in their vehicle choice. It would seem that new-vehicle buyers want to have their proverbial cake and eat it too.

A large focus in recent safety discussions has been placed on smartphone usage in the vehicle. This technology has placed high-powered, multi-functional computing devices in the palm of our hands, and therefore in the driver’s seat of our vehicles. Our research shows that approximately three-fourths of smartphone owners currently use their device to make or receive calls in their vehicle. The data also reveals that one-third of these owners are send and receive text messages, more than one-fourth check their personal email, and one out of ten even participate in social networking while driving. As of July 2010, thirty states have banned text messaging while driving, but these laws have yet to be consistently enforced.

Consider a possible distracted driver on the freeway. This driver is having a conversation on his cellular phone through a hands-free Bluetooth connection. At the same time, he is attempting to follow directions from his navigation system. In addition, he is manipulating his iPod through a vehicle interface. Finally, during lane change maneuvers, his blind spot detection system is flashing in the corner of his eye, indicating that a vehicle is currently in his intended path of travel. All of these technologies are meant to increase safety, but this situation certainly does not inspire confidence.

J.D. Power’s Perspective: Even if only a small portion of these owners are completing these tasks while the vehicle is in motion, this is still a disturbing trend of distracted driving. In-vehicle technology simply cannot keep up with the integration necessary to facilitate safe usage of these devices. As manufacturers attempt to cater to these drivers’ needs through features like text message dictation, email integration, and the like, they are adding features which create further distractions.

It is becoming apparent that these owners are so engaged with their media, that whether or not a safer alternative exists, they will continue to perform these tasks. Manufacturers must improve their knowledge of where, when, and how drivers are using technology in their vehicles in order to begin addressing this issue. As more features are added to each new generation of vehicles, the risk of compromising driver safety increases dramatically. A harmony must exist between attracting buyers to showrooms and ensuring an appropriate level of stimulation to where these same drivers can operate their vehicles safely. The demand for new in-vehicle technologies will not dissipate, nor will the demand for advanced safety features. As an industry, this balance must be aggressively pursued.

In recent months, NHTSA has also introduced plans to require labeling on tires that rate each tire on safety (wet weather traction), durability, and for the first time, the effect the tire itself has on fuel efficiency. A tire’s effect on the vehicle’s fuel efficiency is measured by rolling resistance, essentially how much resistance the tire creates when the vehicle is in motion. Traditionally, consumers have been aware of the differences in tires with regard to traction and tread wear, but how tires differ in regard to rolling resistance (and therefore fuel efficiency) has been largely unknown to consumers to this point.

Data from the J.D. Power and Associates 2010 Original Equipment Tire Satisfaction StudySM reflects this lack of customer awareness. When asked to indicate impressions of brands they have previously owned, 67% of the time customers indicate the tire brands they have owned have a “Good reputation”, while 57% and 48% also indicate the tire brands they have owned are “Safe” and “Durable”, respectively. However, only 23% of customers note a tire brand “Helps get good gas mileage”, indicating that even among tire brands they have experience with, customers are largely in the dark regarding a tire’s effect on fuel efficiency.

Between economic conditions forcing customers to look into new methods of saving on fuel costs and the NHTSA program mentioned earlier, more and more customers will be considering fuel economy in their tire purchase decisions. While customer awareness of this area of tire performance is not yet widely known, according to data from OE Tires study, customers who do feel that their current tire brand helps improve fuel efficiency are much more likely to state they will purchase the same brand of tires in the future than those who do not, as seen in the figure below.

As a result of this, tire manufacturers are faced with a difficult balancing act, as increasing fuel efficiency by decreasing rolling resistance has a direct effect on the durability, traction and safety of the tire. In its report, NHTSA itself indicates finding “a strong and significant relationship between better rolling resistance and poorer wet slide numbers” during their testing.

J.D. Power Perspective: Recently, tire manufacturers have begun to introduce tires specifically branded towards customers who are searching for improved fuel economy, including the Goodyear Fuel Max line, the Bridgestone Ecopia line, the Michelin Energy Saver A/S, and Continental’s EcoPlus line. The challenge for tire makers going forward is to educate customers on the tradeoffs between fuel mileage, durability, and safety, while offering a portfolio of products that properly appeals to each type of customer.

Our research shows customers clearly have a base level expectation of traction and safety from their tires, which is largely met. However, wear and durability issues that affect a customer’s pocketbook also have a strong negative impact on their satisfaction and purchase behavior. While improving all aspects of performance is the overarching ideal, segmenting the market and assessing the ideal blend of traction, safety, tread wear, and fuel economy for each segment will be key. Some customers will be willing to sacrifice durability and fuel economy to ensure maximum safety in all conditions; other customers will place a high value on tread life and fuel economy, whether it be a result of economic concerns, environmental concerns, or both. As economic conditions and regulations increasingly bring the issue of tires’ fuel economy, as well as the traditional factors of durability and safety, to the public eye, those tire manufacturers that can quickly identify and effectively reach these customers with the proper products and messaging stand to benefit from these changes in the marketplace.

The iPad sites for both Buick and Cadillac are more expansive versions of their mobile brethren: the layouts take advantage of the additional screen real estate while the actual content is nearly identical.  Both are dramatically stripped down from the desktop site.

Meanwhile, cars.com and kbb offer iPhone applications in addition their mobile sites.  The mobile sites have a greater reach and don’t require an additional download, while the applications tend to run faster and have compact and visually more appealing navigation.

Some non-automotive brands have made an impressive commitment to be accessible via almost any possible means.  Let’s start with Amazon, which gives iPhone consumers the choice between mobile site and mobile application.  The mobile site works as expected, while the iPhone application takes advantage of the device’s native capabilities with the “Amazon Remembers” feature, which allows the user to take a photo of something they want.  The picture is then uploaded to the consumer’s account and Amazon will try to find the object among their inventory.  My simple test failed miserably, but it’s certainly intriguing.

Amazon’s iPad application features a clean, uncluttered layout that inherently encourages users to swipe through the recommendation list.  This design principle carries through to the product description page, whose interface looks like a stack of cards rather than a long virtual page or a tabbed layout.  This real-world metaphor can draw visitors into an interaction that’s not possible via keyboard/mouse.

ESPN has long had some of the best content available on the iPhone, with a fully-functional mobile site that also delivers video, and its Scorecenter application.  With the iPad, Scorecenter has now grown into a more robust application that deftly incorporates news, analysis, and video.

My favorite part of the ESPN iPad experience starts at the very first click, which allows me to choose my path:

• The familiar desktop site, with the video delivered via HTML5 instead of Flash
• The less robust mobile site
• Scorecenter XL

As a final example, Nike demonstrates that consumer product companies can also deliver across multiple platforms: in this case, I’ve grabbed the running landing pages for desktop, iPad, and iPhone.  The initial experience for each platform is completely different – different layout, interaction, imagery, etc.  They look and feel like completely different sites!

Diving deeper in, there’s overlapping content in the form of product descriptions and images, news, and links to other Nike content.

It’s not a prerequisite to create a whole new presence for each new type of device – in fact, in most cases it probably doesn’t make economic sense.  In many cases, the primary site will function just fine on a tablet device and there’s no need for yet another version (which needs to be supported and updated).  As a consumer, however, it can certainly be fun.

They’re a little bit younger (57% below 50 years old, vs. 49% for all new-vehicle buyers) and more educated (67% with at least a college degree vs. 57%).  The latter factor drives an RFQ rate that’s much higher import brands and slightly higher for premium brands.

Most submitters want pricing information, but across all categories more than half are also interested in product availability.  Notably, buyers of premium brands are slightly less interested in vehicle price (85%) and much more interested in vehicle availability (70%) compared to the entire market.

Are RFQ submitters shopping the quote?  Of course they are!  In fact, 54% say they chose their dealer because of the deal/price vs. 34% for non-submitters.  But quote requestors also chose their dealer based on vehicle availability (40% vs. 30%) and care equally about dealer treatment.

Granted, it’s not a shocking revelation that shoppers care about price and availability.  On the other hand, while RFQ has become synonymous with “gimme your lowest price,” matching the shopper to the right vehicle for him/her continues to be a critical part of the entire shopping process.

OEMs with mobile sites have a choice in where they send iPad users.  Roughly half redirect to the mobile version (which is stripped down, but guaranteed to be functional) while the other half put iPad users through to the desktop site.  While OEM sites have been reducing their reliance on Flash, some sections won’t function on Apple devices.  As a site visitor, it can be frustrating to not know which content will and won’t work.  For instance, the acura.com interactive showroom won’t load on the iPad, but site visitors don’t know that until they try it.

Ideally the Flash content would not be accessible on non-Flash platforms, i.e. hide the links or deliver video via HTML5.  Another option is to redirect visitors to the mobile site and provide a link (e.g. “View full site”) to the desktop site.

Several OEMs have made the leap to tablet sites.  Porsche’s iPad site is essentially a set of glossy brochures that can physically held.

In the case of Cadillac, I prefer the iPad site to the desktop site:  the less robust functionality reduces clutter and makes it easier to navigate.  The iPad site also eliminates the completely unnecessary and distracting loading animation.

Cadillac vehicle information is displayed on one long page, which works for me since scrolling is less aggravating on a tablet.  The experience is a bit like a brochure, but the poor choice of grey text against a black background makes it a barely readable one.

One of the truly potentially transformative aspects of the iPad is its multi-touch screen, which lets users interact directly with content.  These early automotive iPad entries don’t take advantage of these advanced capabilities: for instance, I wish I could manually manipulate Cadillac’s 360 vehicle spin.  But we’ll get there soon enough and I can’t wait to interact with a vehicle online.