It’s not news that Cadillac‘s sales have been weak as of late, as exemplified by the CTS. For August 2014, sales fell 35 percent after tumbling 29 percent in July. With a world-class car in its portfolio, what’s bothering Cadillac? According to Uwe Ellinghaus, Cadillac’s chief marketing officer, Cadillac may have been too ambitious on price.
“There is a tremendous growth in the luxury segment of the world car market and we are currently not capitalizing on this growth to the same degree that we hoped for,” Ellinghaus has said. “The price is definitely an argument…”
But it’s not just price that is plaguing Cadillac. When the CTS was redesigned for 2014, it moved up slightly in size, becoming more of a head-to-head E-Class and 5-Series competitor. To some buyers, the CTS is a bit too ambitious, even though it competes toe-to-toe with the Germans. For other buyers − especially previous CTS owners − they are being faced with a large price premium because the CTS is now in a higher segment.
“While it may have been a terrific car, it may not have been perceived as having earned its stripes for that kind of pricing against the Germans,” Michelle Krebs, senior analyst with Autotrader.com, told Bloomberg.com. “Cadillac has just not earned its way to charge the kind of premium that the Germans can get.”
Added Ellinghaus, “We were maybe a little too ambitious − after the great success last year − for some form of continuation that so far we don’t see for the CTS. While the price increases have been absolutely justified, a returning CTS customer may now be staring at a sticker price that’s $7,500 more than a similarly equipped older model. [This] “amount of money is definitely something where people think twice.”
While sales are down, transaction prices for July are up 26 percent compared with the outgoing CTS a year earlier. One way to maintain transaction prices and help sales is to add options to “broaden [the CTS’s] appeal.” Ellinghaus has hinted that Cadillac may allow certain options to be ordered individually instead of grouped as a package. “These are things that we can do relatively quickly” while still making a “decent profit on the car” without lowering the price − a no-no in the luxury world.
Next year, Cadillac will be preparing four new models including a redesigned SRX and a flagship car.
Comments
No announcement for a powerful diesel engine????????????
Higher prices, while warranted, are definitely a big part of the problem. If the new cars not affordable by a good portion of the existing customers, Cadillac marketing had better be drumming up new business with excellent advertising. I haven’t seen that happening at all.
Beyond that, I think there are also a few other issues at play:
—Larger size (2nd generation was bigger than the first, now this one is even bigger)
—Overly bland styling (reportedly to appeal to more conservative Chinese buyers)
—Poor overall marketing with little swagger
—Lack of marketing explaining the new larger size (and helping existing buyers realize the ATS is an option)
—Ride quality of the ATS vs. the 2nd generation CTS (if a customer wanted a smaller car than the new CTS, the ATS is much stiffer and sportier and doesn’t go far enough in offering the options the CTS has)
—Disappointment with CUE (great concept, but half-baked and doesn’t offer some of the features available in 1st generation CTS like unique audio/station presets for drivers)
—Cheaper keyless entry system (no electric latches; have to push a flimsy feeling button)
Let’s not blame the prices of the cars. The real issue is marketing. The only vehicle in the Cadillac line up that could be seen as overpriced is the ELR, but let’s ignore that for right now.
The ATS and CTS are still cheaper than their competition and are worthy competitors in their classes. Yes, the new CTS is more expensive then its predecessor, but it’s the dealer’s responsibility to inform returning CTS buyers why that is (larger car, better materials and equipment, new class) and then tell them that the car that would be most similar to the old CTS would be the ATS which offers greater features and quality in the same price range they previously paid.
In the end though, it all comes down to marketing. There are no commercials or other marketing attempts in the media right now. The new CTS had marketing at launch, but its now gone. The ATS had marketing during its launch, but now its gone. They need to continue to market not just after launch. They could have great ads about how their cars are better than the competition. I saw a CTS review where the journalist said the CTS was the new ultimate driving machine. That right there is its own ad campaign!!
I hope this gets straightened out fast.
Definitely agree. While I too believe the pricing is a bit ambitious, no doubt they’re justified. It’s really time for Cadillac to start marketing the praise their products have been receiving as of late. It’s crazy how automotive journalists are stating how great Cadillac’s recent products have become; in some cases, even saying they’re better than the Germans and the Japanese. But with Cadillac’s credibility being where it is, the skeptics and critics have a louder voice; and as mentioned before, driving characteristics probably only appeal to enthusiasts. This is where Cadillac needs to start showcasing their powertrain advantages over the competition. But this is where they’re weak, as they don’t have much to showcase in this regard. Everything under the hood of today’s Cadillac is sourced from outside the brand! And this needs to change! Some engine tech they can, and should, share, but others need to have someone variation from the rest of the pack. The twin turbo V6 is a start, but what about an exclusive four cylinder or perhaps a diesel variant? From a marketing standpoint, these things will affirm in customer’s mind that Cadillac is in a league of its own and can offer a stronger approach to advertisement. This is what the competition is doing, and it’s working.
I agree with Ellinghaus’ approach in regards to offering content and options individually. One of the things I loathe about the Germans is how they like to nickel and dime you for every little option. Nevertheless they still manage to move cars off the lot.
This is the price issue I have been speaking out on here.
What they do not say here is are the details.
GM has a policy to make a specific profit on a car, This has been in place for a good while but was not an issue till Cadillac upped the size and content of the present cars. With this said the present car is more expensive to build and hence now cost more. The old you get what you pay for deal. Well if they stick to the GM profit policy it also gives rise to the price of the car to a much higher level.
Now this is where the two warring parties within GM are fighting. One wants to stand their ground on price and let the customers come to them and the other group who wants to lower the profit policy and lower the price to entice people to give Cadillac a chance with their money. Once they earn a reputation with happy buyers they can slowly raise the price back up in a few years.
This argument I expect will be won by the lower the profit and price group as the other group is losing their argument.
The only key not is how to do it and not make it look bad. The Added option deal may be a non starter. I would like to see them offer option packages at a lower price and that way the base price remains but the option packages will give you more content and they can lower the price this way and not look like a retreat. GMC has done this with great results on the Terrain as I saved a lot of money on the V6 and Technology and Chrome package that included the better radio and 19″ wheels for a big discount.
Making Cadillac a better value will not cheapen the image but it will open minds to take a look drive and buy these cars. Lets face it once they have driven one it will change minds about Cadillac.
This will take some time and sacrifice on the part of Cadillac as I have said before BMW did not win their image in a year or two. It took a decade.
Also Cadillac still needs a comprehensive and consistent marketing program that sells the cars and what they offer. Lets face it they have a lot of great content but do they tell you anything in their commercials? We get dancing robots.
Time to advertise the TT V6 and just what it can do. Time to advertise the magnetic suspension and just what it can do that BMW can’t. Time to advertise the world class premium interiors that the new Caddys are getting. Time to advertise the AWD. I could go on but so much of this is lost on the average buyers as they don’t know unless they are reading up on these cars. Many don’t.
They need to sell the hell out of the HUD as it is one of the best on the market.
Sell the details that most have no clue about on these cars.
As for CUE it is getting refined just as I drive did. Also if you read the latest reviews most of them have less issue now that they know how it works. The major issue is the initial use phase as it is not something you look at and instantly know what to do. Once you know it works pretty well. If they can simplify it for that initial use it will change many’s opinion.
What scares buyers about the German makes is their high maintenance and poor resale value out of warranty, once again because of the fear of repair costs.
If Cadillac copied its British cousin Vauxhall with a lifetime warranty up to 100,000 miles and possibly a maintenance program, this would give it an edge over the Germans. Maybe the Japanese will follow the idea but not the Germans.
It also says that “We believe in the reliability of Cadillac whereas the other makes do not and will soak you in repair costs.” or words to that effect.
Generally here if you can afford a $75K car few people worry about maintenance or even resale if it is even an issue. Generally there is some sucker waiting for the car and he buys it used then he is the one who gets screwed as he can’t afford the new car or the repair.
But with that said the 100,000 warranty and free maintenance would be a good idea as a selling point Audi as in the past offered the free maintenance if I recall correctly.
But you are correct that it sends the signal that GM believes in their quality.
I have an 09 CTS. I will not buy a new CTS because of the huge increase in price. Also, have driven a new CTS recently. I did not like the feel of the car, very light and tinny compared to the heavier and solid feel of the 09. Although out of warranty I will keep the 09, it is such a fine driving machine.
This is interesting because I am a CTS owner. I would NOT consider the new CTS because 1. price, 2. lack of a stick. I also cannot fit in an ATS.
One of the things I think really plagues GM as a whole is that they are overly designed-by-committee. Even though they come out with half a million models (exaggeration), they limit themselves to what the “average” person wants. The problem is that there is no average person.
Take the CTS size for example, Did it ever cross anyone at Cadillac’s mind that maybe one of the reasons for the Cadillac’s appeal was that it WAS smaller than a 5 series, but bigger than a 3 series? I had a e90 3 series M-sport, and wanted a bigger car with a little more legroom in the back. I bought a 2010 CTS- it was perfect for me, and I love the car. Now that I just hit 92k miles, I realized its about time to look for a new one. I went to cadillac, sat in an ATS, it was way too small. I looked at the price on the CTS and thought, “For that price I’d rather have the prestige of a 5-series, plus a manual since thats been discontinued”.
I’m sure the story is different for everyone, but that may actually be the problem. If you pin yourself as simply a 5 series alternative, your actually the “poor man’s 5 series”. Who wants to drive the poor man’s 5 series?
I’m considering a Chevy SS, But don’t like the fuel economy or 4 month order lead time, and frankly I don’t feel like driving a Chevy fits my professional image needs. BMW 5 series is a possibility, or a Hyundai Genesis. Besides the lack of a manual on the genesis, if I’m going to drive a “poor man’s 5 series”, I might as well step below the CTS into something like that. In marketing they call that “the deadly middle”- If your not the cheapest, and your not the best (perception is what matters here), your nothing.
I think everyone hit it on the head- its a combination of a lot of things…. but what they all seem to be is that even if on paper they are better than the competition, they AREN’T the competition, and they lost a lot of their points of differentiation- Size, unique appeal, features, price (while still being very profitable).
Lastly on the manual. its not the most important thing I’m hitting on, but, its more important than some people think. Even if you don’t sell a lot of them, its the people who buy them who are the “salesman” for your brand. They tend to be the enthusiasts and the ones who shift opinions.
WHERE IS THE REASONABLE V8 AND SOME SEMBLANCE OF ELEGANCE?????????
You buy a luxury car for the perceived status. A brand which declared bankruptcy just 5 years ago needs to rebuild itself and it’s image. That will cost a manufacturer significant effort and will take time. A 25% discount is required until this brand is perceived as an equal to the German brands. Until then, suck it up Cadillac!
I lease a 2013 ATS. The CUE system works just fine after a short learning curve if you have worked with an iPad or any other tablet. If Cadillac wants to sell cars they need to cut their profit margin and undercut the competition with price until there are as many Caddys on the road as Bimmers. I live in New York and Cadillacs do not have the status that BMWs do. Until that changes and more people experience the quality of Cadillac, GM can not charge the same prices. There are a dozen late model BMWs on my block and one Cadillac. People will pay a premium for status and Cadillac in this regard has a ways to go no matter how great their product might be.
This is a deal GM still has to sort out some issues but they are on the right path. BMW and Benz both are watching as they for once are concerned. If anything I can see how it may have spurred them to work a little harder already. If you do not think they are paying attention check out their statements about the coming V series cars.
Right now Cadillac has more tapped potential as they have only started and with the GM resources they can go as far as anyone. Right now they need to find a place to grow and where they are at price wise they can grow but at a much slower rate.
They will have to offer cars with better option packages an bring more value to the lines and they should help increase sales this way. Also they need to market the models much better. when was the last time you saw them feature their advanced AWD system or even the TT V6? Sure they tell you about the jiggle lane drift seats but what else?
They need to market these cars for what they are about an what they will do for you image wise as this is the ego segment.
Little things like a Manual should be in this car but they will effect sales so very little. But at this price they can afford to do it.
As for tinny and elegance that is only your interpretations. Cadillac is right there with the best in class quality and offerings so while you may not agree the reality is they are were they need to be.
And stop blaming China for the softer look. The truth is the styling with the many hard edges was polarizing at best. As much as I loved the CTS coupe it was far from a run away hit due to styling and ergonomics. The best I class is softer and easier to see out of and it has not hurt their sales.
Also going forward the Cadillac will leave some customers behind as they are not what Cadillac was all about. The fact is Cadillac should not be a car that just anyone can own. You should be of means and power to build the image of the car. It makes growing the brand a lot harder than selling to a bunch of grandmothers at the trailer park bingo game at the rec hall but it will pay off in image and higher asking prices.
Tell the truth how many people have you seen driving Cadillac and Lincolns that did not advance the image of the brand. I am not trying to be a snob but image is important to the brand and to the people who buy them. The car tells others of their means and power and if you are selling to the people that are not of means then you are not earning the image.
We all see someone in very expensive Benz AMG sedan and think I wonder what he does for a living. Did he invest well or own what company. Hell he may just be the meth dealer down the street but he is sending a signal of image and power.
You want to see where Cadillac’s image is recovering from just watch the Seinfeld episode where Jerry buys his dad a Fleetwood sedan and takes it to the Bocca Vista retirement community. That is what we are running from. Jerry Keep the Pen. Even if you don’t agree and live in Bocca Vista it is a very funny episode.