In Q4 2011, Nissan CEO Carlos Ghosn proclaimed that the automaker wants 10% of U.S. sales within three years (i.e., by Q4 2014). An April 2012 Compete analysis showed that Nissan was on its way to meeting the goal, but questioned its sustainability as it was incentive driven (due to Altima sell-down).
Ghosn’s aggressive forecast assumed strong momentum built on multiple launches (e.g., Altima, Sentra, Pathfinder, and JX). In this analysis, Compete assesses Nissan’s progress through March 2013 to reveal successes and shortfalls, as well as opportunities to improve sales. 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). 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.
U.S. Sales Market Share: Mixed Messages: Nissan’s sales share increased from 7.4% in 2009 to 8.2% in 2011, which provided credence to Ghosn’s forecast. However, in 2012 growth had a setback as share dropped to 7.9%. It rebounded in Q1 2013—driven by the Nissan division (see chart below)—but Q1 is typically a strong for Nissan as it’s the last quarter in its fiscal year (e.g., Altima outsold Camry in March).
What Drove the Nissan Division Resurgence? Compete analyzed how the Nissan division was able to convert the decline into a gain (i.e., how it used different combinations of demand and conversion (total sales/demand, similar to a close rate) to drive sales. After increasing from 2009-2011, Nissan demand (measured as the number of in-market shoppers) declined steadily in 2012 and now through 2013 Q1 (see chart below). This is surprising given that Nissan was hoping new launches (typically drivers of demand) would sustain its sales growth.
With lower demand over the past 15 months, Nissan had to grow sales using higher conversion; it did, boosting conversion 4 percentage points, but it was not enough to grow sales share. With actual 2012 demand, Nissan needed average monthly conversion of over 30% to even maintain sales share. Its 29% conversion meant that while sales grew, they grew less than the market overall, so its sales share dropped to 7.1% from 7.4%.
Fast forward to 2013 Q1: Nissan conversion spiked to 36%, which mitigated another drop in the demand. That combination of demand and conversion help drive Nissan sales higher and sales share higher—to 8.7%.
Can Conversion Continue to Drive Sales or does Demand Need to Rebound? While strong conversion has been the catalyst for sales, it begs the question – is it sustainable, and is it cost-effective? Conversion is the more fickle of the two sales drivers as it depends on so many factors: inventory, mix, rival incentive spend, pricing, etc. To provide some insights into that question, we benchmarked Nissan’s average monthly demand and conversion performance vs. rivals during the 1st quarter (see chart below).
The data show that Nissan’s conversion rate of 36% is considerably higher than all but Toyota and above the rival set average of 29%. Such a high conversion rate may be particularly expensive and/or entail a large fleet mix of sales (which come with their own downsides). If indeed it is related to an end-of-FY push, conversion may naturally drop the rest of the year, meaning Nissan will need to drive sales with more demand. For example, compare Nissan to Honda: each brand had similar Q1 sales but Honda’s was substantially more demand-driven.
Looking Ahead: Nissan’s Q1 2013 sales performance put it back on track to reach its 10% sales share goal. However, that required a lopsided reliance on conversion compared to most rivals, which Nissan used to offset lagging demand. For Nissan to continue to grow sales share, it is likely going to need to re-invigorate demand.
Compete recommends the following analyses to measure and understand how to improve Nissan’s marketing effectiveness, maintaining industry context:
- Nissan ad spend efficiency (based on ad spend per shopper) relative to competitors’ to identify opportunities for optimization and support the need for budget alignmen
- Nissan’s lift in activity from specific digital ads, including frequency and saturation
- Nissan conversion efficiency vs. rivals (measured as incentive spend per conversion point)
- Nissan’s ability to generate engagement on Nissanusa.com and Choosenissan.com
- Nissan and rival branded search volume share and search referral effectiveness
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