Kia 2012 Targets: Can They Walk The Walk?

Last week, Kia Vice Chairman Hank Lee stated that Kia US sales will surpass 500,000 units in 2012.  Lee’s aggressive forecast is based partly on Kia’s 37% 2011 YTD sales growth, with about 470,000 expected for the full year.  To help facilitate the sales increase, Kia will increase the number of U.S. dealerships from 760 to 800 in addition to replacing poor-performing ones.  Kia will also increase production and inventory, but the incremental sales will require some combination of more shoppers and higher conversion (converting shoppers to buyers).  Compete developed scenarios showing how Kia can reach its 2012 sales goal based on 2009-2011 YTD results.

This analysis leverages Compete’s proprietary in-market automotive shopper metrics, which are based on unique consumers (i.e., no double-counting of consumers doing the same activity more than once in the same month). Those metrics in turn leverage Compete’s patented normalization technology. Shopping behavior is based on lower funnel shopping activity (e.g., request a quote) on key shopping areas for any of the 40+ 3rd Party online automotive sites that Compete tracks.

Baseline Shopper Volume: Since 2009, Kia average monthly demand has more than doubled from an average monthly shopper volume of only 107,499 in 2009 to 213,190 in 2011 YTD (see chart below).  Kia’s demand growth can be attributed to a blitzkrieg of redesigned model launches over the course of the past three years, such as the Optima, Soul, Sorento, and Sportage.  In that same period, the market grew 26%.  As a result of Kia growing faster than the market, Kia’s Share of Market Interest increased from 4.0% to 6.7% during the same time period (not shown).  Share of Market Interest (SMI) is the percentage of all in-market shoppers that considered a particular make.  For comparison, Ford led the market in September with a SMI of 19.7%.

Baseline Conversion: Kia’s average monthly conversion rate (sales/shoppers) in 2011 YTD has been 19.1% and has hovered at approximately 20% over the course of the last three years (see table below).  For comparison, Kia’s 2011 YTD average conversion rate of 19.1% has been less than rival makes; Honda (22.0%) and Nissan (24.4%).  However, Kia was able to achieve its competitive conversion rate with a significantly lower average incentive spend per vehicle1 than Honda and Nissan ($1,648 vs. $2,055 and $2,330 respectively).  That has been facilitated in part by demand outstripping supply.

Kia’s 2011 YTD average monthly shopper volume of 213,190 and conversion rate of 19.1% equates to approximately 489,873 annual unit sales2 (40,823 *12). For Kia to reach its 2012 target of exceeding 500,000 annual unit sales, either Kia’s shopper volume or conversion rate will have to increase. The following sales roadmaps detail the shopper volume and conversion rate increases needed if Kia is to reach sales target scenarios of 500,000, 525,000, or 550,000.

Sales Roadmaps:

Target 500,000 annual sales (41, 667 monthly avg.): If shopper volume remained constant, conversion would have to increase to 19.5% on average. If conversion remained constant, shopper volume would have to increase to an average volume of 217,597.

Target 525,000 retail sales per month (43,750 monthly avg.): If shopper volume remained constant, conversion would have to increase to 20.5% on average. If conversion remained constant, shopper volume would have to increase to an average volume of 228,477.

Target 550,000 retail sales per month (45,833 monthly avg.): If shopper volume remained constant, conversion would have to increase to 21.5% on average. If conversion remained constant, shopper volume would have to increase to an average volume of 239,357.

Looking Ahead:

As Compete continues to track Kia’s performance we’ll be watching for the following:

  • Cost-effective ad spend (based on dollars spent per shopper generated)
  • The ability for Kia to position its models against segment leaders to capture spillover demand from rival models’ shoppers
  • If upcoming model launches, such as the Rio, create incremental Kia shoppers
  • Optimized use of incentives throughout and after vehicle launch periods

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The very best first step for Kia is to create Roadmaps to monitor success in meeting its 2012 sales goal.  Roadmaps set expectations and then allow Kia to quickly develop focused responses if sales are better or worse than expected.

[1] Incentive spend sourced from AutoData Marketing Promotions Report.  September, 2011

[2] Projected 2011 annual sales number doesn’t account for seasonal differences

About Tom Lucido:
Tom Lucido is a Sr. Associate at Compete. At Compete, Tom is responsible for client deliverable management for the automotive team. Before Tom joined the Compete Team he worked at J.D. Power and Associates on the production and delivery of Auto Finance and Banking customer satisfaction studies and advisory projects. Connect with Tom on LinkedIn