As the economy works through the process of returning to a semblance of normalcy, strategic planners in the automotive industry will be expected to better target vehicle content, according to Patrick Min, Senior Director of Global Automotive Consulting at J.D. Power.

“In an effort to maintain sales volumes, the industry has traditionally created hundreds of potential combinations of features and functions to connect with potential buyers. There can be 1,500 configurations associated with any given make and model on the lots of dealerships across the country,” says Min.

While it is true that buyers across the spectrum of mass market and luxury vehicles are demanding a robust array of advanced standard features, the laws of diminishing marginal returns appear to quickly manifest as more content is added to the mix.

“Buyers across the board not only expect vehicles to come with essential features, such as power windows, power mirrors, air conditioning, and backup cameras, but also certain modern amenities, such as keyless remote entry, Bluetooth hookups for phones and even CarPlay or AndroidAuto,” says Min.

Once these basic thresholds of content are met, everything else is a cherry on top. Customers don't seem to need as many levels of configuration above these standard features as they used to. This reality, however, is not stopping automakers from believing that consumers need more choices and options to make their final buying decision. It is a mindset that has contributed significantly to the rising cost of new vehicles over the past decade.

“This is a problem because it is elevating costs for dealerships that are paying interest on their floor plan. It is also increasing costs for consumers, creating a growing affordability gap,” says Min.

Until now, these issues have been papered over by managing finance and purchasing terms. Going into 2020, incentives were at one of the highest points in recent history, with discounts accounting for more than 10% of the average price of a vehicle. More customers are considering lease opportunities or explore extended payment terms for car loans.

While lease payments have historically been more affordable than equivalent loan payments, the dynamic has changed as consumers shift from accepting 60 month-loans to embracing 72- and even 84-month-loans to keep payments in check.

“As Baby Boomers and Gen Xers make way for Millennial and Generation Z customers, it may be time to redefine how content is bundled,” says Min. “This is especially true as younger consumers take advantage of new tools and resources to gather insight into what vehicles are available prior to making a decision. They have a very specific idea of what they want when they show up at a dealership,” he adds.

The same level of transparency about consumer needs and desires has not been available to the industry. What buyers actually want largely remains a mystery to most automakers and dealers. This is about to change.

“The development of Voice of the Vehicle (VoV) technologies will provide insight into actual user behavior, enabling a better understanding of the features customers actually use and enjoy. This technology, however, is still in its early stages. In the meantime, J.D. Power is working with the industry to correlate transactional data with configuration information to build models that provide insight into the features and functions that consumers prefer,” says Min.

By understanding transaction patterns -- such as discounts and incentives -- that have been applied to vehicles over the years and comparing this record to vehicle configuration databases that go back well over 10 years we can determine what moved -- and what did not -- and note the standalone options that have stood out.

“As the industry works to understand the needs and desires of consumers at a more granular level, these analytical methodologies will optimize vehicle content decisions to meet consumer demands in the most cost-effective manner possible,” concludes Min.

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Patrick Min is a Senior Director within the Global Automotive Consulting practice at J.D. Power. He is responsible for leading analysis and projects surrounding the go-to-market strategies for automotive OEMs.