‘Counterintuitive’ Acura ILX pricing strategy is paying off

Acura had to do something about its frumpy ILX sedan, which was the last of its core models saddled with the brand’s old styling language and dated interior for the 2018 model year.

Convention would suggest loading it up with incentives until a new generation came along, or perhaps a nip and tuck followed by an aggressive marketing campaign suggesting the changes were more significant.

Instead, Acura executives said they decided to take a chance with the 2019 model, giving it a heavy freshening inside and out, along with a deep price cut. The result was a surprise mostly because the plan worked better than expected.

Through October of this year, ILX sales are up 30 percent while the compact luxury sedan segment shrunk by double digits. But that’s not the surprising part after a $ 2,200 price cut for the ILX on average, which carries over for the 2020 model year at a starting sticker price of $ 26,895, including shipping.

Rather, the best part of lowering the price — and lowering incentives accordingly — was the $ 700 increase in average transaction prices as more consumers opted for higher trims, including an updated A-Spec appearance package with sporty touches throughout the vehicle. The lower price also meant dealers didn’t have to discount as much.

“What makes this ILX story different from virtually every other refresh and redesign — in addition to all of the exterior and interior and technology upgrades — is really the repositioning of the product in the marketplace, which makes it very unique,” said Mamadou Diallo, who was recently promoted to assistant vice president of national sales.

“It was actually counterintuitive, if you look at it from a standpoint of basically lowering ILX pricing over $ 2,000 with the expectation that we would actually see better results, not just higher volume but better price, profit and customer engagement,” Diallo said in an interview.

The sales executive doesn’t think that the lower starting price dilutes Acura’s brand image compared with pricier rivals. “You look at all of these brands, they’re all sort of vying for that sub-$ 30K market, and there are two ways to go about it: You can either be above $ 30K and throw in a whole bunch of incentives that gets you below it, or you can just basically reposition your car and not have to spend the incentives,” he said.

A lot of the strategy was aimed at younger buyers looking to get into their first luxury car. They are looking for fresh styling and lots of tech and safety features, along with an easy monthly payment. While the base model represents only about 10 percent of all buyers, its segment-leading price and features allow room to move up to higher trims.

The ILX with the A-Spec package is chosen by about one-third of buyers, with a starting price of $ 31,145, including shipping. The highest trim comes in at $ 33,045, including shipping, a relative bargain in the luxury segment.

“Suddenly you’re no longer leading just with your lease offering, but you’re leading with a very attractive MSRP that also gets all these non-heavy lease states into play,” said Diallo.

“From a dealership standpoint, the excitement was very, very high when they saw that refreshed product. It got all of our dealers truly reengaged with the vehicle and they are conquesting quite a bit,” he said. “Dealer margins are up based on this pricing structure.”

Based on Acura’s new-car owner survey, ILX conquests from rival luxury brands have risen by 3.5 percentage points and conquests from mainstream competitors are up 2.5 percentage points. The ILX leads Acura in terms of first-time, millennial and multicultural buyers, and half stay with the brand for their next vehicle, Acura said.

The freshening of the compact sedan also improved the vehicle’s image, with buyers citing exterior and interior styling, plus safety and tech features as top reasons for buying the car, according to the brand’s new-owner survey. That’s important for Acura overall as it transitions back to its sporty, performance roots after becoming a bit dull.

“The ILX was truly the last piece of the puzzle when it came to our brand design transformation, and as you take a closer look at these two models, you can see how they differ significantly,” Diallo said of the 2018 model versus the current one. “It’s adopted fully our new design language, giving it much more of a sporty and upscale look and feel.”

While many car reviewers have given the freshened ILX high marks for value and its fresh design, some ding the sedan for its older platform from the last-generation Honda Civic and its funky two-screen infotainment system.

The current generation of the ILX was introduced for the 2013 model year.

The old-school feel of its naturally aspirated engine and dual-clutch transmission — while the Honda has moved to turbo motors and a continuously variable automatic — could be seen as a positive or a negative, depending on taste. For Acura, the redesign and its reception are proof that the new look and older powertrain work well together.

“The last iteration of the styling was a little conservative, frankly,” said Matt Sloustcher, public relations manager at Acura. “This was kind of about making sure that the look matched the character of the car.”

Still, the ILX is not far off from a second-generation remake, as Acura plans profound updates to all of its models, which started with the 2019 RDX compact crossover. As the last to be freshened, a redesigned ILX needs to get in line behind the TLX midsize sedan and the MDX three-row crossover for generational change.

When the ILX does get its turn, Diallo said the brand intends to keep its gateway vehicle competitive on price to attract new buyers. “We haven’t quite crossed that bridge yet, but when we get there, you can be assured that we’ll have the best product in the segment and we’ll be competitive,” he said.

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