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Too Much Discount Puts Car Buyers Off
US-based predictive analytics firm Compete, Inc. has released the latest round of its 'Spark!' automotive industry report. The company claims it as 'the first ever study to incorporate vehicle shopper counts and conversion rates in order to quantify incentive effectiveness', and says very large incentives can actually lower conversion rates.
The report, 'Paying More for Less: Conversion Efficiency and Effect of Incentive Spending', says that conversion from shoppers to buyers worsens for vehicles with more than $5,000 in incentives. More generally, incentive cost-effectiveness varies by vehicle type and brand.
The company correlated incentives and the resulting shopper conversion rate for the first three months of 2005, and said that incentive effectiveness peaks between zero and $1,000 and again between $3,000 and $5,000. An analysis of effectiveness by vehicle type and origin gives automakers a simple way to compare the cost-effectiveness of incentives across their portfolios, and to focus incentive spend, according to MD Lincoln Merrihew. He says that this scientific approach 'is being embraced by several automakers to help drive sales and better optimize incentive budgets'.
Among other findings, Compete says incentives on trucks are 22% more efficient in driving conversion than incentives on cars. For the latter, incentive effectiveness peaks in the $3,000 to $4000 range, with no gain in conversion above that level. All of the top ten most cost-effective conversion vehicles were import brands.
A copy of the full report is available by emailing press@compete.com . Compete uses a database of the daily behaviour of more than ten million online consumers to offer predictive analytics for auto manufacturers, financial services companies and wireless carriers. It is online at www.compete.com
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