HANDS up all those who
remember the old Skoda jokes? You
know the one:
Q. “What do you call a Skoda
convertible?
A. “A skip!”
My, how the world has changed! In
2012, the Skoda UK market share rose
to 2.62% and, while you might think
that that’s hardly a dazzling display,
bear in mind that Ford’s share fell
almost a full percentage point, Vauxhall
fell 2.5 percentage points and all the
household brand names of Peugeot,
Citroën, Renault, Fiat, Honda,
Toyota, Mazda, Suzuki, Jeep,
Mitsubishi and Chrysler, to name
just a few, all fell during 2012.
This is not a reflection on the
overall market because new car
sales in the UK were up 5.4%
during the first 11 months of the year.
Instead, it reflects a polarisation of car
buying motivation.
Despite a huge increase in demand
for Jaguar worldwide, the company’s
UK share fell half a point but most
other premium car manufacturers rose
significantly with Audi rising 2.5%,
BMW rising 1% and Mercedes Benz
rising 1% too.
At the other end of the scale,
manufacturers like Skoda, Seat and VW
all increased their market share but Kia
and Hyundai, known as the terrible
twins within the industry, both
increased their share by around 2.5%.
Rapid changes
Changes which might once have taken
a decade to filter through in terms of
market share can now happen within
one or two years as can be seen with
Skoda, Hyundai and Kia, all of which
delivered market growth which even
five years ago would have been
considered unthinkable.
It’s fascinating to see that, in
general terms, the market is becoming
divided between the premium brands
and what we might, until recently, have called budget brands.
Some of this reflects strategic intent; Porsche can sell every car it
makes and more but deliberately limits
the market by restricting production,
following de Beers’ diamond strategy,
whereas Aston Martin has stepped up
investment and production only to see
its sales numbers continue to fall.
Much more importantly, the
distribution of market share reflects a
change in the UK car buyers’ attitude
and recent figures produced by
insurance giant Aviva show that the most important factors considered in
buying a new car have changed
dramatically since 1980.
At that time, the purchase price was
the first consideration, followed by
style (2), performance (3), space (4),
cost to insure (5) and lastly, fuel
efficiency (6).
In 2012, car buyers were still most
focused on cost of purchase but, after
that, they were concerned most about
fuel efficiency (2), style (3), space (4),
costto insure(5)andfinally
performance (6).
Major investment
A new car, whether purchased or
financed through leasing or other
schemes, is a major investment and the
costs don’t stop there as average fuel
costs have risen by almost 30% since
2008 and insurance costs have doubled.
There will always be those with
access to more money than others, as
the sales of many premium cars
indicates, but clearly, for those
individuals and families for whom
money remains an issue, the choice
between decisions guided by heart or
head is becoming unavoidable.
The average
annual earnings of
full-time workers in the
UK rose by 1.4% to
£26,500 in the year to
April 2012, less
than the 3.5%
rise in inflation,
and the average
price of a home
in the UK in
December was
£162,262, based on
Nationwide’s data for mortgages that
have been valued and approved, so
finding close to £20,000 for a new
middle-ranking car represents a
significant challenge for many people
even if the costs are spread over three
or four years.
It’s worth noting that, in 2011, a
Department for Work and Pensions
spokeswoman defined £15,000 as
“quite a good wage” and the after-tax
earnings of the median household were around
£26,000 per annum.
Practicality
considered
It is hardly surprising
then that purchasing
decisions are now being
made with factors such
as style or performance
being considered less
important than running costs and
practicality.
We are watching a major challenge
to companies such as Renault, Vauxhall
and Peugeot whose market offerings
are no longer being seen as belonging
in either camp now that value for
money is being recognised as a major
factor – and there are some fascinating
parallels between this car market and
that of small animal veterinary practice.
There will always be those for
whom cost is immaterial and, if we
have clients like these, we should give
thanks daily as well as making plans to
secure their lifetime commitment!
So, within most practices, we have a
percentage of well-heeled clients and
an income distribution pattern that
includes a significant number for
whom weekly budgeting has become a
real concern.
The distribution of income is now
less of an issue and has become
secondary to a change in the ways in
which people are attempting to
maximise the disposable value of their
income.
It is this changing attitude which
has catapulted Hyundai to overtake the
sales of Renault, Fiat and Honda and we
should expect that it will
be this changing attitude
towards value which will polarise the veterinary practice business over time.
Indeed, the process has already
begun and the rise in popularity of the budget-style practices which offer a full
service and reduced cost to pet owners
is both dramatic and persuasive.
Start a dialogue
We live in an era where market forces
are seen as the arbiters of good business
response and we have
also come to
recognise that those
practices which
maintain an ongoing
dialogue with their
client base are the
ones which respond
fastest and most
effectively to changes in consumer demand.
If ever there were a time for practices to start that dialogue it
would be now. Some of the car
manufacturers are continuing to make
swingeing losses but most have very
deep pockets.
The same cannot be said for most
veterinary practices so avoiding the
mistakes of others should be a critical
part of every practitioner’s business
strategy.
Fiat has now announced that it
will concentrate only on sales of the
Panda and the 500 models as the rest
of its market offering is deemed
unwanted in the UK.
Pet owners have demonstrated
that they were happy to use
vaccination-only practices but always
wanted more which these practices
readily provided at a generally lower
cost. Sales growth in the premium
motoring brands is now being
mirrored by sales growth in the value
brands.
Is there any reason to suppose
that this will be different in veterinary
practice?
There is no market for a
veterinary practice just selling Pandas.
