Ford Motor Company hopes to move beyond its image as a discount brand by lowering incentives and increasing prices according to a top executive with the company.
Jim Farley, the company’s group vice president of global marketing, sales and services, said the increases in price for Ford’s future vehicles will be based on their added features and superior fuel efficiency.
In an interview last week Farley said, “Generally, Ford has been a discount brand in the past. So when you look at our average transaction prices on a Corolla vs. a Focus or a Fusion vs. a Camry, we were dramatically different because of the favorability.
Farley went on to say that the Ford brand has traditionally had “high awareness and low favorability” which he said made higher incentives necessary.
Farley said, “What we’ve been able to do over the past two years in North America is transform the top of the purchase funnel with favorable opinion by building a reputation for fuel economy, quality and — frankly, people like the company. More people are shopping the brand, and we can be more selective with who we sell to.”
In part due to Toyota’s recent string of recalls, Ford has closed the favorability gap with its Japanese rival. Farley said Ford has also been able to leverage its pricing to improve profitability. He pointed to the 2010 Fusion sedan, with its improved powertrain and fuel efficiency, as a good example of how Ford is able to compete on a higher level.
He said, “The Fusion showed us if we can change our reputation around fuel economy, we can reduce our incentives more dramatically, and we can resell them and grow the share at the same time. Now our resale value on the Fusion is higher than the Camry.”
Farley said that consumers’ demands for higher-end features is also helping Ford’s bottom line. The subcompact segment used to offer the lowest levels of profitability in the industry, but Farley said that’s changing. For example, he said 20% of buyers in the subcompact segment are adding the leather seating option which tacks about $700 onto the price.
Farley hinted that the redesigned 2011 Focus will have a higher sticker price than the outgoing model because of its improved fuel economy and upgraded features, or “content” as Farley called it.
He said the recent reintroduction of the Fiesta small car in the U.S. showed Ford that “people want the good stuff,” and added, “We’re very optimistic about people valuing the content of the new Focus.”
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