Not Your Father's Auto Industry? Aging, the Automobile, and the Drive for Product Innovation

By Coughlin, Joseph F. | Generations, Winter 2004 | Go to article overview
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Not Your Father's Auto Industry? Aging, the Automobile, and the Drive for Product Innovation

Coughlin, Joseph F., Generations

A distinctly American business, the automobile industry produces a product that is more than transportation-it is a lifestyle. It is a lifestyle defined by fashion, speed, mobility, comfort, and, above all, individual choice. The car became a physical extension of how the vast majority of Americans, regardless of age, have chosen to live. Similar to other business sectors, the automobile industry grew dramatically after World War Π. Young GIs coming home to begin new families in new suburbs became the growth platform for car companies. The resulting baby boom not only picked up where the now-aging World War II generation left off, it perpetuated and cultivated a youth culture around the car for nearly sixty years (Flink, 1975). Our fathers' auto industry catered to a seemingly endless market of young (mostly male) buyers far more numerous than their parents to build the nation's largest industry.


Today, the youngest of the baby boomers are age 40-plus, and the bumper crop of youth in the United States, Europe, and Japan is young no more. Not only has the bumper crop aged, but the sheer number of new buyers-young people of driving age with the incomes necessary to buy a new car-has declined. J.D. Power and Associates forecasts the market for new cars and trucks will grow less than 1 percent annually over the next decade. In sharp contrast, the number of consumers who are no longer considered 'Young" has exploded. A new generation of older consumers, at the peak of their economic power, are now the single largest market for luxury automobiles-car models that most often provide the highest profit margins to manufacturers. The boomers alone are nearly 40 percent of the large luxury-car market.

Most older adults continue to rely on the car for transportation (Collia, Sharp, and Giesbrecht, 2003). Nearly 90 percent of people age 65-plus use the automobile compared to other options. Although older adults may not drive as many miles or make as many trips as younger people, the notion that retirement is a period of relaxing at home in one's favorite recliner is a myth. A real decline in trip-making by car from the lifetime peak travel years of 35-54 is not really seen until age 75-plus, when the number of trips drops from nearly 4.5 trips per day to fewer than 3 trips per day (Bureau of Transportation Statistics, 2003). Moreover, forecasts indicate that as the boomers age, they are more likely to drive and make more trips, and they add an entirely new generation of older women drivers who, unlike their mothers, have commanded the steering wheel, not the passenger seat (Bush, 2005).

At 50 years old, most people have half of their adult years still ahead of them, and this segment of the population controls over half of the nation's purchasing power. For the auto industry, this statistic translates into future purchases of four or five new vehicles (many in the higher-end or luxury category) as well as influence on the buying decisions of a spouse or child. Nissan's chief product specialist, Shinjiro Yukawa, noted the coming shift of market share, predicting that the "over 50$ will be the core Volume' generation in the future" (NYSE Magazine, 2002).

The disruptive demographics of today's aging marketplace are challenging the most basic assumptions of product development and innovation. After six decades of success focusing on the younger consumer, how does the auto industry retool itself to develop innovative product strategies that excite and delight both the younger consumer and the new generation of older car buyers?

Product innovation can be described in three dimensions. The first dimension is how a business defines its market. In short, who is the company's customer and what does their customer value? This definition affects far more than advertising. It also affects the types of products a firm believes will appeal to and satisfy the market, through what channels they will be delivered, and at what standards and costs.

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Not Your Father's Auto Industry? Aging, the Automobile, and the Drive for Product Innovation


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