Insights into Fiat 500′s below Expectation Sales Performance

Throughout the last month, Fiat has experienced its share of tumultuous news. It began with a third quarter financial report that stated how Fiat (excluding Chrysler) lost $285 million in global profit while the brand it rescued, Chrysler, made $451 million and pulled the combined company into the black.  One of the leading culprits of Fiat’s below expectation performance is the Fiat 500 which has fallen behind its North American annual sales goal of 50,000 units after it went on sale in March (For analysis, Compete assumed an approximate 2011 U.S. sales goal of 40,000 units). Through October, the 500 had sold only 21,380 units (15,826 units in the U.S.).

The month culminated with an executive shakeup when Timothy Kuniskis replaced Laura Soave as the head of Fiat North America, the day after spokesperson Jennifer Lopez had trouble unlocking the door of a Fiat 500 during her performance at the American Music Awards. Sales are the result of the number of shoppers and success converting them into buyers. Using these metrics, Compete assessed how 500 missed U.S. sales goals, and developed roadmaps for how 2012 U.S. sales targets could be met.

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 a 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.

2011 U.S. YTD Performance: 500 monthly demand peaked at 40,000 shoppers in August (see chart below). The growth coincided with a blitzkrieg of advertisements (including those that leveraged Jennifer Lopez). Even with declines in September and October, 500 averaged 28,301 shoppers to date. 500’s 28,301 average shoppers trailed Mini Coopers (36,000), but bettered Scion tC (15,000), though those are not launching models.

500 conversion (sales/shoppers) has also trailed those same rivals. Its conversion has averaged 6.6% in the period, vs. 14.8% for Mini Cooper’s and 13.9% for Scion tC’s. However, as a launching model we’d expect 500 conversion to be low, as it often takes a few months for supply, mix, and distribution to be optimized. Furthermore, Fiat has resisted the temptation to boost conversion with incentives. Since August, 500’s average unit incentive was $467, roughly half of Mini’s $986.

Either way, 500 lacked the right blends of shoppers and conversion to reach its U.S. sales goals (assuming 4,000 sales per month to reach 40,000 U.S. sales). To reach goals, it would have needed 14.1% average conversion with actual 28,301 shoppers, or 60,606 average shoppers with actual conversion (see table below).

The following sales roadmaps detail the shopper volume and conversion rate increases needed if 500 is to reach 2012 US sales target scenarios of 50,000 and 75,000.

2012 U.S. Sales Roadmaps:

  • Target 50,000 US annual retail sales (4,167 monthly avg.): If shopper volume remained constant, monthly average conversion would have to increase to 14.7%. If conversion increased marginally to an average of 9.0% monthly, shopper volume would have to increase to an average of 46,300 per month.
  • Target 75,000 US annual retail sales (6,250 monthly avg.): If monthly shopper volume remained constant, conversion would have to increase to 22.1% on average. If conversion increased marginally to 9.0%, shopper volume would have to increase to a monthly average of 69,444.

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To provide perspective on the feasibility of reaching these targets, conversion of 22.1% and shopper volume of 69,444 would significantly outpace Mini Coopers and all other segment rivals.  For an example outside of the segment, the Chevrolet Cruze (one of the most-shopped and best-selling models) averaged 27.8% conversion and 77,522 shoppers during the same timeframe.

Looking Ahead:

500 did not have the right combination of shoppers and conversion to meet its 2011 sales goals. For 500 to reach 2012 goals, logical next steps include:

Understanding what went wrong:

  • Was media spend cost-effective (based on dollars spent per shopper generated), was it competitive with rivals, and did it effectively position the 500 against rivals to capture spillover demand from rival models’ shoppers?
  • To what extent were supply, mix, distribution, and incentives not optimized?

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Determining what’s next:

A great first step is to expand on the above Roadmaps to determine monthly shopper volume and conversion expectations to reach monthly sales goals. By defining monthly expectations, Fiat will be able to quickly develop focused responses (based upon findings from “understanding what went wrong”) to modify shopper volume and conversion dependent on sales performance.

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

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  1. Rich Meyer

    How about the fact that the car is ugly and that FIAT tried to be too cool calling dealers “salons” rather than showrooms. In addition Fiat is not exactly known as a high quality brand

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  2. Luca Zanzi

    While in Italy I had several opportunities to drive this little gem, but there are some market issues in the US:
    1) One term that Italian ads seldom care to show is “mpg”. The same cannot be said for the US market, and FIAT has done a horrible job at advertising the car’s fuel efficiency.
    2) I haven’t seen a single TV ad for it. Showing it off at the AMA red carpet or during NYC Fashion Week is a cute publicity stunt, but not one that sticks into people’s subconscious.
    3) MiniCopper has become synonym with “cute compact car”. While walking down the street two weeks ago I saw my first 500 in the US, and a friend asked “is that a new Mini?”.
    4) They absolutely need to tout the merger of FIAT and Chrysler. Detroit has had its problems, but Chrysler vouching for the partner’s car would still carry weight weight as a “Detroit seal of approval”.(I was hoping they would release it under Chrysler brand).

    Off topic: this story seems similar to what is happening with Windows Phone 7.

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