Miller of Synovate believes that in the US “20% of the people are willing to pay up to 10% of the vehicle’s purchase price more (i.e. $2,500 on a car with a base of $25,000) for a vehicle with green technology—all other things being equal.”

[Note: In the first quarter of this year takes rates have been averaging around 8-12% for the Camry, Civic and Escape hybrid versions.]

Neither Miller nor Edwards expect the number of truly green consumers to skyrocket soon. Edwards points out that attitudes like being green arise from values that are usually stable, internalized and emotionally charged and as a result they frequently stay constant over one’s lifetime.

The role of emotion in buying cars. Edwards and Miller both emphasized the importance of a buyer’s emotion in purchasing a vehicle.

Miller of Synovate has just finished research that shows “A car company’s reputation for being socially responsible is among the most important consideration for car buyers when determining from which companies they want to buy...however to be seen as socially responsible companies must do more than offer environmentally friendly vehicles. Other product attributes like reliability and safety, strongly influence consumer perceptions, as do employee enthusiasm and the company’s impact on the economy.”

Miller believes there are five trends defining the consumer experience, three of which apply directly to green technology: People today are over-stimulated with more information than we can possibly absorb. We’re always looking for ways to achieve risk reduction and we’re looking for a meaningful life.

Strategic Vision has a tree metaphor that is similar to Maslow’s hierarchy of needs. You start from the bottom and work your way up:

• Esteem: proud of what you are doing.
• Freedom: The ability to do what you want.
• Security: Safe, trustworthy and dependable.

Edwards believes that while consumers move up the tree into areas like freedom and esteem they always maintain a strong connection to the security foundation. He shared with the audience his roller coaster analogy:

Any person who is interested in riding a roller coaster isn’t looking for the safest roller coaster they can find. They are looking for the most exciting roller coaster they can find. However, if they were to get to a roller coaster and just before they ride it they see the roller coaster fly off the tracks and everyone on it dies, they are not getting on the next car...if their security is threatened they are not going to make that decision.

Most people would agree that catastrophic failures are unacceptable but Edwards’ view of security extends beyond crash testing. He shared research that “People assume a quieter minivan is a safer minivan. How do you make a vehicle more quiet? Quietness is tied to larger engine size. The larger the engine, the quieter the vehicle. A larger engine gives you ‘active safety’, enabling you to accelerate out of problems much easier.”

Where hybrids get it wrong. Security isn’t limited to physical security. It is tied to perceived quality, the customer’s impression that thought and detail went into the product and sacrifices in one area, seemingly unrelated to fuel efficiency can impact the overall perception. Edwards detailed the case of a major OEM who seriously erred when it decided to thrift the interior of hybrid vehicle:

In order to keep the price within $3,000 - $4,000 they had to decontent [remove features and use cheaper materials] the interior. People were effectively paying $4,000 more for a vehicle with a decontented interior and that was coming off horribly with the customers...because of the perceived thoughtlessness that went into the vehicle...people don’t trust you...they wonder why are you doing these things?

In an age of over-stimulation, it doesn’t take much for a consumer to develop a rather daunting list of conscious and sub-conscious concerns about purchasing a hybrid. Miller of Synovate lays out how a consumer might view a hybrid:

We’re going to charge you more for this technology. We can’t tell you what the resale value is going to be. We’re not sure how much maintenance cost you are going to incur and quite frankly you many need to replace the battery pack after 3-4 years and it may cost between $3,000-$5,000. Gasoline may cost between $3-$5 while you own this vehicle. It is not quite as reliable, its not as powerful and it is not as fun to drive. Would you buy this vehicle? Not exactly a value proposition.

Miller points out that “even after [hybrids] being in the marketplace for 10 years, half the number of consumers think hybrids are reliable verses those that think internal combustion engines are reliable.” He’s also found that consumers believe hybrids don’t have as much power as traditional cars. Echoing Edwards, Miller said “Power isn’t as much a ‘fun attribute’ as it is safety, being able to accelerate on the highway.”

Why is the Prius a success? The panel identified three reasons why the Prius was a success:

• First, the Prius makes a strong statement about environmental responsibility. Miller adds “In the US we’ve had customers talk about the Prius ‘badge of honor’, in Europe the strongest reason for buying a Prius was to make a statement about ‘the effort to do something else.’“ This is one of the reason Honda reintroduced the Insight, they wanted the Insight to be a unique body style rather than a powertrain option on a Civic.

• Second, the Prius has a high quality of execution. Edwards of Strategic Vision adds “The Prius...when you get inside of it looks innovative and attractive. The styling is there. You can move from a BMW 3 series into a Prius and be proud. I can show that level of esteem.” The vehicle is perceived as being thoughtful.

• Third, Toyota has always been a top brand in quality performance. People feel confident that Toyota will deliver a quality offering and has a history of standing behind its products. In other vehicles that lack the Prius’ unique selling points, i.e. the Camry hybrid, Toyota has struggled more with sales.

Making all things equal to improve public perception. Both Edwards and Miller believe that for the foreseeable future hybrid powertrains will not dramatically increase their market share until fuel prices remain high for an extended period of time.

Edwards believes that “Gas prices alone are not what will increase hybrid sales. For the US to truly embrace this technology, hybrids must: 1) Have innovative styling (i.e. Prius), 2) Be priced competitively (the Insight is a first step in the right direction, 3) Be capable enough to do the things that customers need their vehicles to do.”

Edwards cautions the automakers from diminishing any interior cues of quality to reduce the price gap since that will only lead to customer distrust.

Miller doesn’t believe the industry has convinced the American public that “all other things are equal” yet with hybrids and the average consumer still believes they are taking a financial risks that extends beyond a purchase price premium when they buy a hybrid. He believes two things need to happen for this to improve.

In the short term, he believes OEMs need to boost their warranty support for hybrids; there needs to be some kind of a floor on resale value and fuel pricing (i.e. fuel tax); and there needs to be assurances regarding OEM viability—all of which may involve government action.

In the long term, Miller challenges the industry to simplify their message and be more unified in how they promote new technologies. He asks:

• There may be legitimate engineering reasons for having six different hybrid technologies but does the overstimulated consumer really have enough bandwidth to absorb and assimilate the differences between each one?

• Are there more important messages, like hybrids are reliable, that the consumers are missing?

Miller believes the auto industry is falling into the trap of the computer software business by starting to promote the next generation of technology too early, thereby hurting the sales of the existing generation.

In the auto industry, such an approach can be even more insidious because people not only are worried about losing the esteem of driving the latest vehicle, but they fear their resale value may be hurt if they have $30,000 invested in a soon-to-be-orphan technology.

“We tracked the media buzz and in December of 2008 there was more buzz about Toyota’s plug in hybrid then there was about the redesigned Prius and other production vehicles...The Volt was a marketing success...but it put people on the sidelines. You are telling consumers just wait, if you want to drive the new technologies,” said Miller.