When it's time to start looking for a car, many young people are choosing car brands that their parents had previously bought. According to a new study to be published in the Journal of Industrial Economics, the choices parents make could help transform the marketing in the auto industry.
Researchers analyzed national survey responses regarding car purchases from over 4,000 children and 2,500 of their parents from 1999 to 2011. The preferences were broken into auto brands such as General Motors, Ford, Chrysler, Toyota and Honda.
"In theory, these findings could change the way automakers price and market their cars," says Soren Anderson, co-author of the study and economist at Michigan State University.
Researchers took into account where people live, income, age, education, gender and family size. This eliminated the possibility that young people are more likely to buy similar cars to their parents because of similar needs.
"Is this really about the cars or could it be other factors, like parents and children tending to be more similar to each other than other people?" Anderson said. "We're pretty sure it has something to do with the cars themselves."
The study found that 39 percent of people are more likely to buy a car brand if their parents owned the same brand.
The findings show that consumers buy cars based on brand loyalty, a strategy that could transform the way the auto industry markets their cars. Car manufactures could sell entry-level vehicles for lower prices to reel in young drivers, while raising prices on higher-end cars that represent the brand. If young people show up to showrooms interested in a specific brand, the manufacturers could also raise the prices of even the entry-level vehicles in a game of classic supply and demand.
