Why are MG sales up 159% YoY?

By Dan Monheit, originally shared on Carsales.com.au 10.3.21

February 2021 marks a big milestone for the recently relaunched MG brand. In less than five years, the iconic, (formerly) British badge has gone from deep hibernation to top 10 contender, outpacing Subaru, Volkswagen and Mercedes-Benz Cars to take eighth position overall.

The MG3 hatch sold more than twice as many units as it did in the same month last year. MG’s small SUV (the ZS) went one better, more than tripling sales in the same period.

In a category that’s as mature, as highly involved and as ultra-competitive as auto, it’s worth lifting the lid on the sorts of factors that underpin such a meteoric rise. The burgeoning field of behavioural science, which explores the reasons people make the choices they do, offers at least a partial explanation.

At the heart of Behavioural Science is a belief that people are not the rational decisions makers they think they are. Rather than carefully and pragmatically weighing up all of the pros and cons for every choice they need to make, Behavioural Science demonstrates that people rely on biases, or mental shortcuts known as ‘heuristics’, for the vast majority of decisions they make.

One of these heuristics is ‘Anchoring’, which describes our tendency to depend too heavily on the first piece of information we receive when making a decision. Any subsequent information is weighed up against this first piece, which now serves as an ‘anchor’.

Pricing is the textbook place we see anchoring at play. In most categories, there are brands that set high and low anchor points, forcing competitors to take positions relative to theirs. In what has become a well-worn strategy for new entrants to the local market (hello Kia, and Hyundai before that), setting a new category ‘floor’ is a great way to gain interest, especially when the offer includes more than customers would expect.

MG has come in with super aggressive pricing across each of the categories it has entered, including light hatches (from $16,990 drive away), small SUVs (from $21,890 drive away) and even EVs (MG has the cheapest EV in the market at $44,990 drive away). Importantly, these low-price anchors come with a list of inclusions far longer than you might imagine, as well as outstanding safety ratings and consistently glowing reviews.

It’s easy to see why so many people shopping this part of the market have had MG earmarked as ‘the one to beat’, or the ‘anchor’, by which all other offerings are judged.

Of course, aggressive pricing can also have the unintended consequence of leaving customers asking questions about quality; How else can they include so much more for so much less?

This is where the heuristic known as ‘Zero Risk Bias’ comes into play. When we’re making decisions, we tend to respond favourably to any reduction in risk. The complete elimination of risk, however, is disproportionately good, especially when the risk being eliminated aligns with our biggest fear.

MG have found two ways to ‘reverse the risk’, and in doing so, completely eliminate people’s fears around quality. The first is by including a year’s worth of free roadside assist (if the car breaks down, it’s MG’s problem as much as it is mine) and the second is a seven-year, unlimited-kilometre warranty (no chance of unwanted surprises for as long as I’m likely to own the car).

Between these two inclusions, new car buyers can feel good about taking on almost no financial risk beyond the initial purchase. This, combined with outstanding safety ratings and a familiar brand name make for a purchase that’s psychologically very safe.

Whilst a compelling range and prominent promotion (including a well-timed NBL sponsorship) have been important contributors, there’s no question that price anchoring and risk elimination have also been key ingredients for MG’s early success.

For anyone else looking to make 2021 their biggest year yet, it pays to consider how to anchor — or re-anchor — the part of the market you’re in. Price is one obvious way to do this, but inclusions — both standard and unexpected — can help tip the odds in your favour.

When it comes to risk elimination, think about the biggest fears that a new customer is likely to face, and consider ways of taking them off the table. Concerns around resale value and cost to maintain are ever-present and can be offset with guaranteed buy-back schemes and fixed price servicing programs. In the current climate, however, it’s also worth thinking about how to combat things like the fear of job loss, which can cause the warmest of prospects to freeze in their tracks. In the US, Hyundai’s Job Assurance program, which includes up to six months of payments for new owners who lose their jobs and have purchased or leased their vehicles between a certain date range is a shining example.

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