Estimation of the number of VolvoNet users

Basis for estimation of the number of VolvoNet users

Volvo is a well-known brand name in Sweden and is widely spread among car consumers, whether they are Internet users or not. Approximately 21 percent of the cars sold in Sweden are Volvos (Motormännens Riksförbund). Although companies such as Autobytel and Bilweb may be known to experienced Internet users they are not by far as well known among other Swedish consumers as Volvo is. When searching for a car brokering service for the first time it should therefore be a higher possibility to find VolvoNet than less established brokering services on the Internet, under the prerequisite that the customer is interested in a Volvo of course.

In the U.S., approximately 75 percent of customers that buy cars over the Internet visit manufacturer sites during their buying process (J.D. Power, 14/09/98). These statistics suggests that manufacturers’ sites are commonly used for information gathering when shopping for a car on the Internet.

A more important implication than the ease at which a well-known brand name can be found on the Internet is the reassuring affect it has upon the customer. As a brand name works as an identifier it reassures the customer if it is already familiar to her. That is, the customer knows what to expect from the brand and thereby from the product or service (Kapferer, 1997). For products, an established brand name also leads to a higher number of repeated
purchases than a new brand (Kapferer, 1997). If the same holds for brokering services, a known brand can be expected to make first time visitors return to the site to a larger extent than less known service brands. It is worth noticing that even though manufacturer sites are widely used for information gathering, it is up to the owner of the site to keep the visitors from proceeding to other competing services.

Reliability

There is of course no single way of estimating the future number of VolvoNet users. We have chosen to make estimates based on Swedish and U.S. statistics available. We have also chosen to divide the users in four different user groups depending on their probability to use the service. The first group represents the high quality customers who actually buy a new Volvo, the second those who actually buy a pre-owned Volvo, the third group are those who consider buying a new Volvo, but also consider other makes. The last group consists of users who represent the remaining car buyers.

When using U.S. statistics, one must keep in mind the Americans longer Internet experience; that they have a higher percentage of users as well as frequency of usage compared to Sweden. Other important aspects are that the USA is the biggest car market in the world and that the car plays a more important role in the Americans’ life than in Swedes’. We still suggest the use of U.S. statistics for a variety of reasons.

Looking back, Sweden has followed in the footsteps of the U.S. so far, when it comes to the Internet. According to a research done by (Öhrlings Cooper & Lybrand), 18 percent of the Internet users in Sweden are shopping capital goods online and 70 percent says they would like to do it in the future. Furthermore, 90 percent wishes to book tickets online in the future. Sweden has the highest rate of online shoppers in Europe compared to the number of Internet users. According to (IT research), Sweden has most computers, and the most modern too, per household in the world. It has also been shown that Sweden does not lag far behind the U.S.A. when it comes to percentage of Internet users. The Americans have now been using the Internet for buying cars for the last two years. Although
there are only a few Swedish car brokering sites in service today, there is a considerable interest in online brokering.

Bilweb for instance, has had more than 180,000 visits since the launch (Ottoson, 30/10/98). We can hence assume that Sweden will follow U.S.A. when it comes to using the Internet for car information and online brokering offers. The Internet usage curve in Sweden can also be expected to continue accelerating as companies are allowed to sell computers cheap to their personnel, made possible by sponsoring by the Swedish state. According to a research done by Volvo Finans, most of the Volvo customers who are using the Internet believe that they will use the Internet
much more in the future compared to today (Öström, 11/1/99). Most of them also believe that they will use the Internet for surfing and buying (Ibid).

Estimating the number of visitors for one year

In 1998 about 53,000 new Volvos were sold (Motormännens Riksförbund). In Sweden about 40 percent of the people in appropriate car buying age group (18-74) are Internet users (Öhrlings Cooper & Lybrand). The typical
Swedish Internet user is a man with an over average income, in his mid 30’s and is married or living with a woman. As this is also a fair picture of the average Volvo customer, we can assume that at least 40 percent of the Volvo customers are Internet users. Also, according to a research made by Volvo Finans, Volvo buyers are not less frequent users than the average Swede (Öström, 11/1/99), thus 18,000 of the new Volvo car buyers each year
are Internet users. Up to 80 percent of those are using the Internet each week (Öhrlings Cooper & Lybrand).

If we do not account for the less frequent users, it would mean that 14.400 of the Volvo buyers each year are frequent Internet users. Assuming that 75 percent of those frequent users will use the Internet in some way before the purchase, leaves us with 10,800 visitors. In the U.S., 75 percent of the car buyers use the Internet to get information before buying a car, visit car manufacturers’ web sites (J.D. Power, 14/09/98). Assuming that the
same conditions prevail in Sweden leaves us with 8,100 high quality visitors. Summarising, we estimate that 18 percent of the first group of users, those who buy a new Volvo, will visit VolvoNet.

We can also estimate this figure another way. In the U.S. 75 percent of the new car buyers use the Internet for information before their purchase (J.D. Power, 14/09/98). For high prestige makes, the figure is even higher. According to SAAB (Engzell-Larsson, 23/02/98), high prestige car makes lie between 35-40 percent. For SAAB in the U.S., it is even higher – 60 percent. Using the 25 percent figure would mean that 11,250 Volvo buyers would make use of the Internet and 75 percent of those would visit the car makers’ web site, i.e. 8,400 high quality visitors.

There are about 53,000 pre-owned Volvos sold in Sweden each year. Assuming the same share of Internet users and interest in the car makers’ brokering services makes another 9,500 quality customers. They make up the second group of users. They might not request an offer on VolvoNet, but they may at least contribute to some of the other utilities.

Finally, assuming from new car registration statistics divided by make, there are about 250,000 new cars sold each year, of which about 43,000 (Motormännens Riksförbund) are cars from Volvo’s main competitors – BMW, Mercedes, SAAB, and Audi – according to Illes (07/12/98).

Assuming that the conditions above are appropriate also for those customers and that 20 percent of those who visit “their” manufacturer web site also makes a visit to VolvoNet gives another 1,370 customers. These are customers who might be persuaded to choosing a Volvo instead of “their” make and constitute the third group of users.

To estimate the fourth, and last, group of users, we can use what we know from car registration statistics. Except for the main competitors’ 43,000 customers above and the 106,000 people buying a Volvo each year, there are about
380,000 other car buyers each year on the market (pre-owned and new). Assuming that one percent of those visits VolvoNet makes about 3,800 additional visitors who may not really be interested in a Volvo but may contribute to an increase in the value of the brand name as well as word-of-mouth.

Potential VolvoNet visitors

There are of course less serious visitors who, although not requesting an offer, nevertheless are contributing to the value of VolvoNet.

According to (SCB)’s population statistics for Sweden, about 6.9 million people are in the age group for car buying (18 or older). About 40 percent of those, i.e. 2.76 million people are Internet users (Öhrlings Cooper & Lybrand). According to (The Industry Standard), 30 percent of the U.S. Internet users shop for autos online. If this also holds
true for Sweden, it means that there are 828,000 potential visitors to VolvoNet (30% × 2,76 million). Volvo has about 21 percent of the car market. Assuming that 21 percent of the 828,000 potential customers pays a visit to VolvoNet gives 174,000 potential VolvoNet visitors that are interested in buying a Volvo.