Flaw in NSX marketing/pricing

[Silver F16]

I open a new tread sine we were getting off topic from the "What do people want in next NSX"

In response to NSXTAST,

Poor marketing did play a key role in the low NSX sales. Lexus marketing campaign was what captured their sucess. Sure NSX and Lexus are great products, but Marketing lead Lexus to where they are, selling $60K+ sedans and coupes

Honda's mistake was pricing the NSX too high when it was initally introduced. It has no heritage of selling premium sports car. There was too much of a price difference between the NSX and other cars in their line up. When the Lexus LS400 was introduced, it was priced at $35K, which was fairly reasonable. Consumers jumped on it, and began believing in the product. Within a few years, the starting price quickly went up to close to $50K. By pricing it low, you are able to lure consumers to try out a premium car from an non-typical preimum car maker.

You mentioned that there are many NSX owners who were ex-Corvette, Porsche, Ferrari owners. This is great and these consumers are open minded to try the NSX irregardless of the Make. However, there are a great amount of owners of Corvette, Porsche, and Ferrari who will not consider the NSX because they think it is a overpriced glorified wanna be sports car from a company that is known for making Civics.

If Honda was able to hold the cost on the 91 NSX and introduced it at $35k. It may have capture a wider audience because $35K wasn't unreasonable for an Acura. The point is, most consumers need time to embrace an expensive product from a not recognized premium car maker.

If Hyundai launched a sports car as you described for $75K today, how many do you think they will sell?

 

[nicholas421]

acura had no problems selling over 3000 units in 91. in many cases, they sold for over msrp. if anything, i'd say it was underpriced.

if hyundai came out with a car that blew the doors off of the competition, i'd be willing to pay $100,000 for it.

[This message has been edited by nicholas421 (edited 26 March 2003).]

 

[MiamieNeSeX]

I wouldnt want any more NSXs out there anyway, so because they didnt flood the market 11 years ago we have a very exclusive as well as a perfectly engineered street legal race car. So keep it secret

 

[NSX UNITED]

While I do agree with your understanding of marketing stradegy, let me tell you my opinion. I have none, zero complaints to the NSX marketing/pricing. It is definitely not flawed or else it won't make us more exclusive.

Originally posted by Silver F16:
However, there are a great amount of owners of Corvette, Porsche, and Ferrari who will not consider the NSX because they think it is a overpriced glorified wanna be sports car from a company that is known for making Civics.

They obviously didn't have a clue about something called Formula 1 racing. Honda was known for making Civics, how cute!! Only if they knew Honda was the consistent F-1 Champion in the 90s. The NSX was introduced due to their success in F-1 racing and actually designed based on their F-1 car then. The first person to drive it was Ayrton Senna. Ring any bells, Enzo?

Furthur more, if the NSX was priced at 35k when introduced, who on earth would buy one at 89k in 2003?? Wouldn't it make late NSX owners look like complete morons? Now, that's marketing flaw. One last thing, Honda had never meant to make big money with the NSX. It is a symbol of pride.

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'98-T Kaiser Silver/Black

 

[Soichiro]

>>Poor marketing did play a key role in the low NSX sales.

When? Not in the beginning when I had to put a $5,000 deposit down and wait 12 months for delivery. Many people paid over list price to get an early one and Honda sold 3000 in this country alone during the first year (Ferrari was selling about 3000 vehicles TOTAL in 1991). How does this translate to 'low' NSX sales?

 

[nsxtasy]

When it was first introduced, the NSX was "hot", a highly prized car for the automotive enthusiast. Think of how the 360 Modena and 996 Turbo are regarded today as the top of the heap, and that's how the NSX was regarded then.

Unfortunately, sales dropped steeply in 1991-92 due to the severe economic recession (the one that led to the defeat of Bush 41 at the polls) and the imposition of the luxury tax on 1/1/91.

I think that the marketing was responsible for further declines but only later in the decade, with a lack of advertising, lack of visibility (few showrooms had one on the floor), and too great a spread between the MSRP and dealer cost. The marketing faults were combined with product faults such as a lack of substantial enhancement to the performance and styling while competitors were enhancing their products, particularly in sheer horsepower numbers.

 

[Teej]

I dont even own an NSX yet, but I have followed it through the years. At $35K a pop in the beginning, there would be more NSX's than Corvettes on the road. I'm not knocking Chevy but everyone seems to agree on one thing. The C5's were very nice when introduced, but as soon as you pulled up to a stop light, looked around, and counted 5 C5's at the same light all going in different directions, the car took on the same ol' meaning.

The only profound inconsistency in the NSX pricing IMO is how they kept bouncing from $80K, down to $60K, and back up to $88K, without really justifying a $28K spike in price. To compare an NSX marketing to say, Lexus, is to compare apples to golf balls. Completely different target audience. I've never seen a Ferrari commercial in the U.S., I see Porsche commercials all the time but rarely a C4T commercial. Keep in mind that Honda/Acura have a major sports car in their lineup, Ferrari and Porsche have a line up of sports cars. Finally, I have seen maybe 1 Viper ad in the last few years, and MAYBE 1 Corvette ad. The car makers have their target audience for the normal automobile, then they have their elite audience for current and or future NSX, Ferrari, Porsche Turbo, and Corvette owners.

Oh yeah, and what NSXTASY said too. But the NSX needs little marketing, it was just hard for people to justify spending $88K on a car that didnt have much to offer performance wise.

[This message has been edited by Teej (edited 26 March 2003).]

 

[nicholas421]

Originally posted by Teej:
it was just hard for people to justify spending $88K on a car that didnt have much to offer performance wise.

you might want to rephrase this before nsxtacy rips you a new hole

 

[want_v8]

'dont see ferrari ads..'
That's the whole point which user F16 wanted
to make, I think. Ferrari doesn't need advertisement, all it needs is highest price
tag its side window can hold. Why? the name Ferrari! If any of you have seen Ferrari broschure it only has two items: series photos of Ferrari pictured in some exotic Italian village and horsepower-chart with pranching horse. NSX deserves $60K or it may even deserve $80k+ in a perfect world filled
with the realistic people like the current owners, But even Honda lovers such as me when I hear the exotic and intoxicating Ferrari Flat-crank V8 engine/exaust note I quicky forget about the $20 sushi dinner at a local sushi bar decorated with $10k Nippon-Doh sword(it's a sword carried by Japanese Samurari)

 

[Ojas]

When it comes to Hondas goals concering NSX sales, I think marketing is irrelevant. I doubt selling a tens of thousands of NSX was anywhere in Hondas plans when it came to the NSX.

The information in the NSX Technical Information and Development History supports this. Specifically: last paragraph on page 5, which continues to page 6, as well as pages 10-11, which describe the goals in designing the NSX.

Actually, if Honda decided to sell NSX for $35K and sold 10000 NSX / yr, they'd probably be unhappy since they would have failed at one of the NSX goals

Finally, to provide the exclusivity a car of this caliber deserves, it was decided that the NSX should be built in low volume in a new production facility dedicated exclusively to its manufacture.

- Page 11

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ojaspatel.com/nsx

[This message has been edited by Ojas (edited 26 March 2003).]

 

[nsxtasy]

Originally posted by Teej:
The only profound inconsistency in the NSX pricing IMO is how they kept bouncing from $80K, down to $60K, and back up to $88K, without really justifying a $28K spike in price.

What are you talking about? It never went down from $80K to $60K. In fact, the MSRP never decreased at all. Never.

When the NSX was first introduced, dealers and individuals were able to sell cars at a premium over MSRP due to demand from those who had to have one right now. This phenomenon happens with the introduction of virtually every "hot" new car, including the Miata, the MINI, the 350Z, and, as you can read in today's AutoWeek, the Mitsu Evolution. And, like those other cars, once supply caught up to demand, the premium over MSRP vanished.

Incidentally, the NSX went on sale on September 1, 1990, at an MSRP of $60,600. Adjusting for inflation, that amount is equal in purchasing power to $83,875.59 of today's dollars. So once you adjust for purchasing power, you are getting a much improved car for a few thousand dollars more. If you adjust for actual selling prices, you get a much improved car for much less money.

Originally posted by Teej:
it was just hard for people to justify spending $88K on a car that didnt have much to offer performance wise

except when those people decided instead to look at the facts, which are (a) since 1991, no one who shopped around ever paid $88K for an NSX, and (b) there are still only a handful of production cars that are significantly faster in a straight line, and only one (Z06) that costs less.

Originally posted by Ojas:
I doubt selling a tens of thousands of NSX was anywhere in Hondas plans when it came to the NSX.

That's right, Ojas. It was hand-built in a factory with a capacity of 7,000 NSXs a year, to be sold worldwide. And they turned them out at capacity for the first 12-18 months of sales, with roughly 3,000 per year going to the United States and the same to the Japanese domestic market, and the remainder to the rest of the world.

[This message has been edited by nsxtasy (edited 26 March 2003).]

 

[Jimbo]

Somewhere between 10,000 and 200 units per year...there's a happy medium.

I think Honda should be selling at least 2,000 per year.

-Jim

------------------
1992 NSX Red/Blk 5 spd #0330
1991 NSX Blk/Blk Auto #3070 (Sold)
1974 Vette 454 4 spd Wht/Blk
1976 Honda Accord 5 spd, 3 door Blue/Blue
1977 Honda Accord - Custom - Under Construction
2003 MINI Cooper S - On Order - All Black
1986 Chevy Suburban
http://homepage.mac.com/jimanders/PhotoAlbum1.html

 

[nsxtasy]

Volume, of course, depends on pricing.

One of the tough parts about pricing is the absorption of fixed costs.

Let's say it cost $250,000,000 of fixed costs to bring the NSX to market - including all the design and engineering, tool fabrication, etc. And let's say it costs another $50,000 of variable costs to build each car. How much should Honda charge each dealer to buy a car?

Honda could charge $50,000 and break even on each car sold - but it would lose the entire $250 million investment in development.

Honda could charge $75,000 and get back $25,000 on each car sold to apply towards the development cost - and they would have to sell 10,000 cars before they broke even and started to make a profit on them.

Granted, there is nothing that says that they HAVE to make a profit on this particular model - they may be willing to absorb a certain level of loss for the "halo" (and resulting additional sales) it brings to the Acura brand - but I doubt that they intended from the outset for the NSX to sell at a loss, which I'm sure it has done given the sales volume since its introduction.

If you think about it in economic terms, they probably should never have built the car (and probably wouldn't have, had they known the timing of the bust in high-end sports car sales in the early nineties). And they never should have done the '02-03 refreshment, either. But someone is pushing for the NSX at Honda HQ, beyond simple economic arguments.

 

[Silver F16]

What's this "want v8" guy talking about with $20 Sushi?

In 1991, Honda's goal was to sell approx 5000 units/yr at a price tag of $60k. That goal alone was the flaw!!

In its introduction, the LS400 was successful because it undercut the competition in price and up the ante on a new standard in luxury cars. Everyone knew Toyota were reliable, so the customer's figure, what do I have to lose?

In 1991, NSX was a superior product over Porsches and Corvettes. But it did not undercut them in price. Pricing is key when venturing into new markets. Why do you think Hyundai are growing so rapidly? NSX offered a new standard in sports cars, but that wasn't enough because it was too pricy ($60K) for a company who's 2nd most expensive car on the lineup was a Legend for around $27K. Furthermore, Honda cannot completely justify their heritage in racing. Having a heritage in building engines for F1 isn't the same as having a heritage in building premium sports car.

Sochoir's intent on the NSX was to build a "spare no expense" sports car. And for that, Honda did a great job. Marketing wise, it fell flat a few years after its introduction. If NSX was a different car in 1991, with steel body and more focus on reducing costs, Honda could have priced it at $35K - $40K, which is closer to their $27k Legend, and will undercut the Porsche by quite a margin and make Corvette owners think twice. The key is could they have done this while keeping the similar theme and execution of the current NSX?

Think this is not possible? Watch out, Honda is about to stun the world again. I believe a next generation NSX is coming and it will share platform and components with the upcoming DNX sports sedan. By sharing platforms, they are able to amortize the cost of tools and development over 2 vehicles. Bottom line, reduce cost and carry over the theme of the original NSX. No, new NSX will not share IMA technology with DNX. Mr. Yoshino, president of Honda has publicly said NSX buyers are not interested in fuel economy, so IMA is highly unlikely. What is likely, in the interest of cost reduction, is a higher tuned version of the same engine, switch to steel body, and revise the chassis. A switch to steel will not require a complete redesign. The NSX Aluminum construction was not monocoque (like the F360 and A8). Rather it was based on a steel design and then adding thicker cross sections and reinforcements to maintain rigidity. Point is, it would not take a huge investment for Honda to take the existing design and revise it for steel construction. With these changes and sharing of parts/development costs, Honda can price a 2005 NSX at $55-$60K, adjusted for inflation, it comes to $35-$40K in 1991.

 

[nsxtasy]

Originally posted by Silver F16:
In 1991, Honda's goal was to sell approx 5000 units/yr at a price tag of $60k. That goal alone was the flaw!!

The goal was to sell 7000 units a year worldwide, and they succeeded. At first.

Originally posted by Silver F16:
In 1991, NSX was a superior product over Porsches and Corvettes. But it did not undercut them in price.

Yes, it did undercut the Porsche 911 significantly (even the normally aspirated one).

Originally posted by Silver F16:
If NSX was a different car in 1991, with steel body and more focus on reducing costs, Honda could have priced it at $35K - $40K

Who says that they could have had NSX levels of performance at that price? Sorry, but at that time, it was not possible.

 

[BostonNSX]

F 16 I dont really know what is your point of starting this topic..

 

[mlambert890]

I agree with nsxtasy here. This hindsight doesn't even make sense since, upon release, the NSX dazzled the world, set precedents, inspired waiting lists and sold thousands. The launch of the NSX is one of the most groundbreaking launches in automotive history and was the first time Japan was taken seriously against the likes of Ferrari. What other car out of Japan has Ferrari even known existed? You think the Supra, Skyline, EVO or WRX has caused Ferrari to readjust a market strategy??? LOL... sure haven't! But the NSX did cause them to scrap the 348 and bring out the brilliant 355!

If Honda is going to be criticized it should be in later years (prob 97 and beyond). The initial release was golden. The only criticism the automotive press could find (desperately in search of a way to protect the status quo) was that the NSX was "too perfect" PUH-LEEEZ!!!

It was widely acknowledged that the NSX represented an incredibly dangerous value proposition against the likes of Porsche and Ferrari since it delivered the same exclusivity, better civility, better performance and better reliability for thousands less. The only threat was the established history of those marques and the value built into their name.

Most of the Corvette owners who would "never consider purchasing an NSX" are the types that would never buy ANY import. Trust me here as I was a Corvette owner back in 2000 and got to know the community well. There are a lot of rabidly "anti-import" Corvette owners who couldn't care less what comes out of Japan.

Right now, the NA 911 and the NSX are effectively at price parity with the 911 generally coming out of the dealer a bit higher. Incidentally, the cars are also at PERFORMANCE parity. Honda's failing has been in allowing the NSX to kind of vanish...

[This message has been edited by spookyp (edited 26 March 2003).]

 

[nsxtasy]

Originally posted by spookyp:
Most of the Corvette owners who would "never consider purchasing an NSX" are the types that would never buy ANY import. Trust me here as I was a Corvette owner back in 2000 and got to know the community well. There are a lot of rabidly "anti-import" Corvette owners who couldn't care less what comes out of Japan.

I agree. However, it's worth noting that the Corvette (and particularly the Z06) offers a great bang-for-the-buck package, in terms of sheer performance numbers vs cost. It's also worth noting that the same thing was just as true when the NSX was introduced, at twice the price of the standard 'vette. That was also about the same time as the ZR-1 Corvette was introduced, at about the same $60K MSRP as the NSX, and the Viper, for slightly less as I recall. Then as now, there were some people who focused on the greater hp figures of the ZR-1 and Viper while others looked beyond it at the total package. The NSX won the admiration of the automotive press for its overall balance and how well it could do on a racetrack despite a horsepower disadvantage compared with those other two cars. Sound familiar?

 

[BB]

If the goal of the Acura division was to establish "Acura" as a prestige brand, then in my opinion American Honda has failed relative to Toyota's Lexus effort.

I gaurantee you if we surveyed consumers asking them to rank brands, the Lexus brand would on average rank considerably higher than Acura. Most consumers view Lexus as right up there in prestige with Mercedes and BMW. Acura though seems to be thought of as "just a fancy Honda" by many. i.e. "Acura is a Honda", but a "Lexus is a Lexus".

For example, a co-worker at the office recenty said something stupid along the lines of, "I live in a very exclusive neighborhood-- lots of BMWs and Lexus on my street". Another day I steped into an employee training session going on and one of the employees in the room said, "Hey! Barry has an Acura NSX!!" Most in the room didn't seem too impressed. Then someone said, "Isn't that just a souped-up Civic?!?" "No way!", the original guy snapped back, "it's more like a Vette or Ferrari." Everyone in the room had this puzzled look in their face like "what the hell???" It was as if such a combination was impossible to believe. Acura as a brand doesn't rank much higher than Honda in most people's minds. And this unfortuntely hurts the NSX's reputation.

It's really a shame too since Honda was the first Japanese car company to try this strategy in the US. Toyota and Nissan appear to be the copycats.


[This message has been edited by BB (edited 27 March 2003).]

 

[nicholas421]

Originally posted by BB:
If the goal of the Acura division was to establish "Acura" as a prestige brand, then in my opinion American Honda has failed relative to Toyota's Lexus effort.

prestige brand? i agree... but the toyota/lexus analogy isn't the best one when it comes to their marketing strategy. imo,
the acura/honda relationship is closer to that of mercury/ford. lexus/toyota is more like cadillac/gmc.

mercury and acura produce models that compete directly with the ford and honda lineup. these "prestige marques" offer a little more luxury for a little more cash.

cadillac and lexus, for the most part, compete with the big boys... bmw and mercedese. their target is for the all out luxury and name conscious consumer.



[This message has been edited by nicholas421 (edited 27 March 2003).]

 

[Teej]

WHOA WHOA WHOA WHOA WHOA!!!!!

Wait a minute, I dont care how much the car costs, whether $30K or $100K, to me, it will always be worth the price of admission. I was merely stating that there are many people that cant justify spending $60K-$80K on a V6 with under 300hp.

Also, I'd almost swear the NSX pricetag has gone up and down in the earlier years. That includes somewhere around $66K for a year or so, then went way back up to $88K.

[This message has been edited by Teej (edited 27 March 2003).]

 

[nsxtasy]

Originally posted by Teej:
I'd almost swear the NSX pricetag has gone up and down in the earlier years. That includes somewhere around $66K for a year or so, then went way back up to $88K.

Nope, not the MSRP. The MSRP rose steadily over the years and never decreased. I've gone back through some magazines to pull pricing figures (not always easy, since some magazines include luxury tax in the prices they quote and others don't) and found this:

1991: $60,000 plus $600 shipping
1992: $63,000 plus $??? shipping
1993: $68,600 plus $650 shipping
1994: $72,500 plus $700 shipping
1995: $84,500 plus $725 shipping (NSX-T)
1996: $83,500* plus $725 shipping (NSX-T)
1999: $84,000 plus $745 shipping (Coupe and Zanardi)
$88,000 plus $745 shipping (NSX-T)
2002: $89,000 plus $765 shipping (NSX-T)

*I suspect that the apparent $1K decrease in '96 vs '95 was likely due to an error in one of the magazines.

Obviously, the selling price will vary due to demand and due to incentives; these are sticker prices only.

 

[BB]

Originally posted by nicholas421:
prestige brand? i agree... but the toyota/lexus analogy isn't the best one when it comes to their marketing strategy. imo,
the acura/honda relationship is closer to that of mercury/ford. lexus/toyota is more like cadillac/gmc.

mercury and acura produce models that compete directly with the ford and honda lineup. these "prestige marques" offer a little more luxury for a little more cash.

cadillac and lexus, for the most part, compete with the big boys... bmw and mercedese. their target is for the all out luxury and name conscious consumer.

Nicholas,

Your comments only further prove my point, as you too feel the Acura brand offers only slightly more prestige than Honda. While there's undoubtedly a great deal of truth in that statement, the fact is that Lexus is hardly any different since it too is nothing more than a bunch of more expensive Toyota models rebadged to say "Lexus".

The Acura brand was originally launched because the belief was that image conscience Americans would not buy an expensive Honda. Anyone who remembers the original Acura marketing campaign will recall ads trying to push the Acura Legend to be a superior alternative to expensive European sedans.

The idea that Honda is trying to make Acura into something like as Mercury is to Ford is rediculous. (Although you're spot on target when it comes to public opinon). Here's a price list of base models if you have any doubts:

Lexus
ES3000 $31,625
GS300 $38,725
GS430 $47,825
GX470 $44,925
IS300 $29,435
LS430 $54,925
LX470 $63,125
RX300 $35,125
SC430 $62,025
Average: $44,000

Acura
CL $28,200
MDX $35,700
NSX $89,000
RL $43,255
RSX $19,975
TL $28,980
Average: $40,000

Honda
Accord $15,800
Civic $12,810
CR-V $18,900
Element $16,100
Insight $19,080
Oddysey $24,400
Pilot $26,900
S2000 $32,600
Average: $20,000

Yes, Acura has added a number of models over the years that compete directly with cars like the Honda Accord (such as the CL and TL.) The reason for this is likely because the high-end sell isn't working too well for them. How many new RL's and NSX do you see on the streets? The fact is, their dealer network would crumble if the dealers didn't have these cheaper cars to sell. i.e. the public refuses to pay alot of money for a car that says "Acura". But many will gladly pay up for a top of the line Lexus that's really no better.

And today they are still trying to build the Acura name to be synonomous with "elite" brands. Witness the recent name changes towards using a colleciton of easily forgotten and confused names: NSX, RSX, RL, CL, TL, MDX. Like BMW and Mercedes they want you to identify with the brand rather than the model. Even Toyota got this right the first time when they lanched Lexus.


[This message has been edited by BB (edited 28 March 2003).]

 

[Jimbo]

In the last list I think you need to keep in mind how many cars are sold.

The very high price of the NSX skews the Acura numbers when you consider they only sell 200 per year.

These numbers should be corrected for sales volume.

I do think that Lexus has a higher average typical sale price compared to Acura.

------------------
1992 NSX Red/Blk 5 spd #0330
1991 NSX Blk/Blk Auto #3070 (Sold)
1974 Vette 454 4 spd Wht/Blk
1976 Honda Accord 5 spd, 3 door Blue/Blue
1977 Honda Accord - Custom - Under Construction
2003 MINI Cooper S - On Order - All Black
1986 Chevy Suburban
http://homepage.mac.com/jimanders/PhotoAlbum1.html

 

[BB]

Jimbo,

Your point is well taken.

However, I am trying to point out what I believe Acura has been trying to do vs. what they have become. Had I adjusted the averages to account for sales volume, I would only be proving what they have become-- a point everyone seems to already be in agreement on.

As witnessed by their product line-up, Acura is trying to sell some expensive cars. However, it's not working. Instead all they're selling is mostly the cheaper RSX and the like.

From a marketing perspective the Acura division has not achieved it's original goals stated in the late 80's. That was to provide a Japanese luxury marque.