So You Want to Get into the Luxury Market?

Cadenza

Image from: Kia Cadenza / Shutterstock

Over the past 12 months Kia has entered the US luxury market with not one but two new models, the Cadenza launched in June 2013 and the K900 in February.  At $40,000 for the Cadenza and $60,000 for K900, Kia is making a serious commitment to the luxury segment.  To date, sales of Cadenza have been lukewarm while K900 sales just started.  While reaching sales goals is one measure of success, another important one is enhancing Kia’s brand opinion among in-market intenders, which if successful should benefit all Kia models.

Millward Brown Digital used automotive behavioral analytics to evaluate in-market performance of both models using its proprietary demand metric.  Demand is represented by the number of in-market lower-funnel shoppers. It’s a measure based on observed, lower-funnel activity across multiple automotive websites and leverages  patented data-gathering and normalization processes.  A key benefit of this approach is to recognize and leverage the fact that consumers shop on multiple sites,  rarely complete all their automotive research in one session, and few submit leads.  A second benefit is that it avoids false positives by avoiding double-counting.

Kia Demand Trends

Kia demand has trended higher in 2014 and is up 32% vs. a year ago, due largely to the demand strength of the new luxury models at launch.  Cadenza helped drive more Kia demand in summer 2013. The March spike coincided with the K900 launch.  Kia demand reached an 18-month-high in March 2014 with nearly 225,000 in-market shoppers.

However, while K900 and Cadenza have played important roles in driving Kia demand during their launches, it’s yet to be seen if they will have a lasting effect over the long haul.  The period low in December came after Kia demand trended at or above 200,000 shoppers, though December is seasonally typically a low demand month industry-wide. How Kia demand responds in the coming months following the K900 launch will be telling.

Overall Kia In-Market Demand

Kia Luxury Demand

Both Cadenza and K900 got off to strong starts at launch with demand for each model quickly ramping up right out of the gate. Each followed a similar trajectory in their launch month with Cadenza demand continuing to grow in month two. While still early in its launch, K900 demand flattened out in its second month. But while it trailed Cadenza at a similar point in their launch cycles, current K900 demand (March 2014) surpassed Cadenza for the first time.

Luxury Model Demand

The Impact of Cadenza and K900

Demand for both models trails Kia’s big 3 – Optima (63,000 shoppers), Sorento (59,000) and Soul (43,000) – but their impact on the portfolio shouldn’t go unnoticed. Most notably the impact on Optima, which has benefited from demand spilling over to it from Cadenza and K900 (as evidenced by cross-shop results). Optima has typically been the most shopped model by both sets of Kia luxury model prospects, helping to drive and sustain Optima demand momentum.

Natural Cross Shopping

But while Optima has benefited, to date there has been little overlap between Cadenza and K900. Only 3% of K900 shoppers in March also shopped Cadenza and vice versa. The good news is that with little overlap Cadenza and K900 are attracting unique pools of shoppers and are at less of a risk of cannibalizing each others’ sales.

However, while they may not be sharing many shoppers both Cadenza and K900 appear to be attracting some luxury prospects. Among luxury rivals shopped are Cadillac and Lexus models as well as Acura, BMW and Lincoln. While many industry observers think it will be difficult for Kia to be considered a true luxury brand these models appear – early on – to pass muster among at least some luxury prospects.

Summing It All Up

Kia is taking a bold step by expanding its portfolio up market into the luxury sector. Like Hyundai, it’s doing so without the benefit of a separate luxury division and is instead relying on product to carry the Kia name into the highly competitive luxury segment. It will take time and patience to plant and harvest the seeds of success.

In the meantime, both Cadenza and K900 will evolve as will Kia’s position in the market overall. That leads to some questions that will have to be answered along the way such as:

  • Are sales keeping up with expectations?
  • Is there enough demand to meet sales objectives or will Kia have to turn to incentives?
  • How is Kia’s market position evolving with the presence of luxury models to its portfolio
  • o   Are Cadenza and K900 attracting luxury prospects to the Kia brand? If so, are those prospects aligned with Kia’s expected competitive set for each model?
  • o   Or, are they appealing to move-up prospects or non-luxury intenders?
  • Are Cadenza and K900 helping to drive and sustain demand for other Kia models?
  • o   Are they helping sustain Kia demand success?
  • Are Cadenza and K900 changing consumers’ perceptions of the Kia brand overall?
  • o   Are consumers associating K900 and Cadenza’s positive attributes with Kia?

Kia is under pressure to launch and establish K900 and Cadenza.  Its success depends on these new nameplates attracting new prospects to the brand and enhancing Kia’s ability to be seen as a meaningfully different brand overall. Now more than ever Kia needs to understand how it’s performing among in-market prospects and against its key rivals, both luxury as well as non-luxury.

About Dennis Bulgarelli:
Dennis Bulgarelli is a Client Services Director at Compete. At Compete Dennis is responsible for advising auto clients on trends in consumer online shopping behavior. Before Dennis joined the Compete team he did research and planning at most of the large ad agencies. Dennis hopes to one day, drive cross- country on the blue highways. Follow Dennis on Twitter @dennisbul or connect with him on LinkedIn at http://www.linkedin.com/in/dennisbulgarelli.