How Ford Plans to Attack the Luxury Segment


Looking at figures today it's hard to imagine that sales of Ford's Lincoln brand were once on top of the U.S. luxury segment 15 years ago. Consider that nine of Ford's vehicles alone outsold the entire Lincoln brand through July. Or consider that Ford's bread and butter F-Series outsold Lincoln nine times over. Ford needs its luxury brand to succeed - it represents purely incremental sales at higher transaction prices and margins. Ford's luxury segment has seen better days but management is determined to restore Lincoln to its past glory. The revival strategy focuses on three aspects: new models and (more importantly) wine and cheese.

New rides
Here's a quick rundown of the new models that Lincoln plans to launch. The MKZ, which accounts for 38% of Lincoln sales through July, was the first redesign and will be the flagship Lincoln car. As you can see below the MKZ stumbled out of the gate months later than expected due to supply issues but has since picked up the slack and looks to finish 2013 strong.

Graph by author. Information source: Automotive News DataCenter.

The next step in Lincoln's revival will be the MKC, a compact luxury crossover that will take on the Acura RDX and Audi Q5 among others. The MKC should launch in the second quarter of 2014 and will have an option for Lincoln's new "Black Label" ultra-premium design package. If the MKC can replicate the success the Escape has had in the standard crossover segment it will be a huge win for Lincoln.

MKC Black Label Chroma Flame exterior concept. Photo credit: Ford Motor.

Lincoln's larger MKS sedan will be redesigned and launched in 2016 and could possibly run on one of Ford's new Nano V-6 engines. Lincoln's midsized crossover, the MKX, which accounts for roughly 30% of Lincoln sales through July, will arrive in the first half of 2015. The Navigator, which was once a mega revenue maker for the brand, will be revived as Lincoln's largest SUV and could come to the market in late 2014.

Assuming that Ford and Lincoln will build these new models in excellent fashion, the next step is to improve selling methods - that's where the wine and cheese will play a role.

Ford is changing its target audience drastically from retirees to a younger, more affluent, Starbucks-drinking type of crowd. To attract a much different audience, Ford is throwing out specific guidelines and renovations for its Lincoln showrooms. According to the AP, Ford is putting pressure on 300 dealerships in the 130 largest metropolitan areas and 70% have agreed to the renovations thus far.

Those that have agreed can expect improvements in the smallest details, including the smell of the showroom. Ford has even taken into consideration that consumers are willing to spend more money when sitting in very luxurious chairs - bring on the thrones! You can also expect an upgrade for the food during special events. No longer will you see hot dogs and hamburgers for the July 4th sale, but rather wine and cheese that are paired together in a more luxurious fashion.

Bottom line
All in all, this will be a huge process to upgrade every aspect of the Lincoln brand - but that's exactly what the doctor ordered. Through the first half of 2013 the luxury segment leader sold over 150,000 vehicles in the U.S. market, while Lincoln couldn't top 40,000. The road ahead will be challenging, but it can't be tougher than the turnaround orchestrated at the Blue Oval when the recession forced rival General Motors and Chrysler into bankruptcy - for that reason I think we can expect a resurgence in Lincoln over the next two or three years. That would provide a nice boost to Ford's top and bottom lines and would help increase the stock price with it.

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Fool contributor Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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