Opinions & Advice

Are incentives dead? How do we advertise now?

Alex Snyder
Posted onFeb 2, 2009 at 10:43 AM
Updated onUpdated on Feb 8, 2009 at 11:24 AM

We have not had a generation defined by hardship in a long time.  The World War II generation, the generation who survived the Great Depression, the Vietnam generation… For those of us who were born in the 70’s or later, all hard times have been very short.

I’m not saying I want to see us scarred by the current economic predicament, but I do believe it will have a profound affect on how we view the world for the rest of our lives.  That includes what motivates us to spend our money.

I started selling cars 10 years ago; just before CSI became mainstream.  I recall an excellent interest rate being around 8% and the Internet was more of a luxury – nobody was buying anything of significance through it.  Shortly thereafter CSI was enforced by all the major manufacturers and the process of buying a new car instantly became much better for the consumer.  Over time ISP’s lowered their pricing, AOL got huge, and more people were online.  Communicating with customers via email was the new fad!  As sites like Edmunds and CarsDirect surfaced consumers gained the knowledge to negotiate on invoice and a multitude of trade-in values.  Through all this, incentives were high and interest rates were low (due to September 11th).  Consumer confidence was skyrocketing and car sales were never so good!

Then it all came crashing down in 2008.  Banks stopped lending, leasing almost died, floorplans ate dealers alive as unwanted cars piled up, layoffs became motivation, and consumer confidence was wrecked.  As a thrill/speed junky, I wish they made a roller coaster with that kind of drop!

That’s where we were and this is where we are.  The Internet has become as much a part of our existence as the road we drive to work.  The Internet is inexpensive.  It is a place to shop for a deal and a cheap medium to pop an advertisement on.  With traditional medias costing so much more we are all heading online.  However, with consumer confidence low, incentive-based advertising is not working.  Or maybe we all cried wolf so long people stopped listening…

How do we market to consumers today?  How do we define a generation for future marketing?

We all know banner ads are only effective in an incentive-driven world.  There are too many spammy emails to be effective with numerous email blasts.  Google ads will eventually be passed over, by consumers, for more relevant organic results.

Do we make our inventory look so good online that we are basically driving the car out of the monitor and onto their lap?  Do we get on the forums, blogs, FaceBook pages and follow consumers on Twitter?  Do we build relationships instead of being marketers?

What will the next generation respond to?

Alex Snyder
Who knew an argument with Jeff Kershner, in 2005, would lead to Alex becoming a partner with him on DealerRefresh. Where will the next argument take ...
D
I think you hit the nail on the head so to speak. When the banks stopped lending money...my ownership group went into a slight panic mode. However; they realized we still need to do business and drive traffic to our stores. I am the e-commerce director for three of our stores. The general consensus was to advertise more online. It was less expensive and more people were exposed to it than conventional advertising.

However; being in the business for 17 years and starting with the internet when it was in it's infancy, I have seen it grow and have reaped the rewards of being pro active with the internet.

Today though,consumers are more weary. Part of it is I believe they are waiting for that great incentive laden deal. It has been ingrained in them that the auto industry is dying and will do whatever it takes to sell cars in these tough economic times. The internet has made it so easy for us to click around and see who is going to be giving 10k off of there vehicles. Times have changed and changed rather rapidly.

We are all foreign import cars who tend to have a higher percentage who shop on line to begin with. However; we are incorporating more dialog via face book and blogs with our sales people and managers at our locations. As you worded it we are trying to build a relationship with the consumer. The time frame is definitely longer and the rewards are greater as we build relationships with the consumers. It has taken a few months for us to start to see some tangible evidence that it is working for us. Our sales for January were our best month since September. We were over 30% from Decemebr and more than that from Novemeber. A lot of it has been attributed to people saying we were friendly and responsive and open about our products.

As my general manger said it " we are planting a message in their head" Look at our product when you are ready to consider a vehicle. come see us....

Times are changing and we need to change with them or we will be left out...
G
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    Gerald
  • February 2, 2009
There is no argument these times are tough. Our dealer has been in the business for over 20 years has not seen it like this. But I don't believe for two seconds it is as bad as "everyone" (the media) is making it out to be. Remember when this all started? Mortgage defaults were around 6%! That means 94% of the loans were good, yet this became a nationals, nay, global crisis overnight. Hmmm.

The current hype has prompted many consumers to hold onto their money for now rather than buying.

For weeks we heard "what if your guys go bankrupt?" What if this, what if that. I am seeing an increase in website activity (yay!) but not a rise in leads (so conversion is dropping a little). Not sure why at this point, but the coming weeks and months will determine how severe and how close we are to the end of this financial distress. Banks holding onto assets which were given them by the Fed to loan to the tax payers is not helping the situation. I have seen a recent increase in the desire of our manufacturer to lend money, though their criteria is still pretty stiff, but at least they are now trying.

I think this will be a correction which has been needed and is long overdue. Too many dealers chasing the same customer. Cull the herd; the strong (smart and bold) will survive.
Alex Snyder
Gerald - you're right, but the media fuels the perception. So, how would you market to the current perception?
D
I had been telling the dealership management for a while, that the internet is where its at and where the industry is moving to. The hell with newspapers and radio. Move the money to the internet. They were sluggish in doing it. It wasn't until we were seeing a return from our 3rd parties like Cars.com and when we got our new RWS website, and got on board with VAuto that they it really hit them over the head that we need to get really aggressive and fast. We weren't going to grow and sell more, with that very old school mentality that they had. Luckily I had been saying it for a while and put it nicely to them that "I told them so back 2-3yrs ago". Now they realize whats happening and are more aware of the power of the internet. But I had already been working on SEO and website branding "stuff" that they didn't see the importance of, until now.

My thoughts on the future....
I think it comes down to things that we are already using..lots of thinking outside of the box and using other avenues in order to market to them. All of these 3rd parties definitely help with spreading the name around. But alot of the younger generation as we move along responds to instant gratification more and more (myself included since I'm about to turn 27). Prompt replies to inquiries are huge. It's incredible how many internet dept leads were lost to the non-Internet sales folks here b/c of slow response times to inquiries. Luckily it was a slap to the face of the ISM's and really helped to show the importance of the quick phone call and email response.

I'm also the Scion Champion here and I really get a kick out of Scion's abstract marketing. And that it's not all about "selling a car". It's about an image and it's all about the customer.
J
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    Jeff Kershner
  • February 2, 2009
I just completed reading a book titled Gravitational Marketing. It has it's own spin but like many marketing books of recent, it's focus is getting the customer to "want" to do business with you.

Since the beginning of time we have exercised traditional "push" marketing. Tapping into the effectiveness of "pull" marketing is future of marketing. No matter how you spin it, or reword it..it basically comes down to PR/Public Relations. Building that true relationship with the customer from beginning to NO end.

What is your customer saying?
How do they want to be "sold" to?

The unfortunate part, this is much harder than "push" marketing. It takes effort to build a relationship with each and every one of your customers. Not only does it take effort but it also takes technology! And this technology truly suffers in our industry (as it does in many industries im sure).

Our industry is plagued with antiquated software or software that doesn't and never will speak to each other in the way they we need it to.

Moving past the lack of technology; we need to figure out how to build that relationship using the technology we have. But even before that..how to get you get the opportunity to earn their business first (without the "push" incentive saying we are the LOWEST price in town")?

Any dealer can jump on facebook, or add twitter to their dealer blog and use these mediums effectively (to some point), but again, this is WORK and work that is hard to measure an immediate ROI on (something dealers seem to want), not to mention you need to have the right person on the dealer level that gets it.

Does all this mean that incentive based "push" advertising is dead? NO...I don't think so. It just means that we need to know "when" to push the exact message to the right person at the right time. Again, something that only technology can do on scaled amounts.
D
I’d like to respond to the post by Alex Snyder and the comments by Dan Morgan and Jeff Kershner.

First of all, the question needs to be: “How do we market now? Advertising is just the tip of the iceberg and only a part of the process.

Marketing to today’s generation and future generations must tap into their addiction to instant gratification, as Dan Morgan suggested, but it’s got to be done in a unique and memorable way. Dan is right on target when he says, “I think it comes down to things that we are already using…. lots of thinking outside of the box and using other avenues in order to market them.”

I believe consumers will continue to respond to the familiar incentives, but they need to be PUSHED in a way that feeds their addiction to instant gratification.

How? Start with your lot and connect it to the Internet! Take your incentives and display them so the consumer can use the incentive to get information in a matter of seconds. Bingo! You’ve done it! Make 4000Rebate into 4000Rebate.com and you’ve taken a familiar, secure, visual medium and tied it straight to your inventory in a creative and unique way. Now that’s marketing!

If you’re into statistics, 67% of consumers are already aware of your dealership just from driving by; that’s what Cobalt told us in their 2007 Dealer eBusiness Performance Study. That’s almost double the amount of awareness to your dealership that search engines provide (36%); quoted in the same study. So what are you doing with your lot that is creative? Can you bring consumers to your inventory through a simple, affordable, visual display?

I believe every base has to be covered in order to succeed in today’s economic climate. Combine your incentives, visual displays, and internet advertising to complete your marketing process. Don’t forget why your dealership is located in a prime drive-by location instead some back-alley warehouse. Use every resource you have! The incentive is the PUSH, your dealership is the PULL.
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    Andy
  • February 2, 2009
I might sound like the odd ball here, but, oh well, here goes...

There are too many technology tools.

Let me repeat... There are too many technology tools.

I recently led a sales meeting with the focus on how to improve sales in this "challenged" market. The prompting came from the dealer principal and several of his sales people asking "how can we win the customer of today?"

My response... I had the oldest sales person in the dealership speak. And by old, I mean chronologically and seniority.

What did he focus on?

Process, process, process.

This guy understands the majority of his customers shop on the internet first. He understands the best methods of communicating with his customers. And his tailors his messages for his customers. Those who like text messages, he sends them text messages. Those who like emails, he send them emails. Those who prefer hand written notes and cards, heaven forbidden, he uses his hand, writes the note (or card), places a stamp on an envelope and deposits the note in the mail.

I think we use technology as a crutch in some cases and are looking for the magic pill to attract customers. Paraphrasing one of my mentors, we have become crippled by technology. We look to technology to bring in the customers. All technology should do is aid us in servicing our customers (a big difference). If I want to get a six pack, I cannot take a pill and have a six pack when I wake up in the morning. I have to work at it. Sales is the same way. I need to work. Use all of the tools available, in their proper manner and in your process and the sales will come despite the incentives. Work your customers, maintain a relationship with your customers and they will return.
D
Jeff, Thanks for the Gravitational Marketing nod. I'm checking out the site now and it's a intriguing theory!
A
We just finished January with our best month since opening the dealership in June of last year. One of the major factors behind it (aside from our teams hard work) was we spent 85% of our ad budget online. We had a consistent brand message across sites where in market consumers are looking for vehicles (KBB, Edmunds, Autotrader, Cars.com, etc.) Our strategy was to be in front of consumers that were actively seeking information on vehicles, we didn't try to convince anybody that now is the time to buy a car if you had no intention of buying one. Of course there are some people (to rename nameless in this post) that wanted us to spend more money on TV, more money on direct mail, more money everywhere....but we resisted and got results in both volume and the bottom line of the store.

We have also been aggressively pushing our dealerrater.com reviews to help our online reputation, and we are starting to hear more and more consumers I chose your dealership because of what was said on dealerrater.

Another thing that worked for us was market based pricing on both new and used vehicles across all advertising mediums. Let me say this, our front end grosses were not huge, but we put 86 very satisfied units into operation and spent less than 20k in advertising. With a reduced marketing budget and bonus structure for salespeople, the business was able to be profitable at this reduced per unit average.

New vehicles have been very difficult to push, as the consumer is really seeing the value in like new pre-owned vehicles (2008's with low miles) I highly suggest reading Dale Pollak's book Velocity for more information on market based pricing in the pre-owned vehicle market.
R
Email HAS HAS HAS to improve.

As a former ISM from the San Francisco bay area, I can tell you that I've seen a lot of dealerships ignore the wealth of opportunity that the internet provides.

Andrew and his dealership have the right idea spending most of their ad budget online.

What I was most intrigued about was Alex's reference to "spammy email."

Have any of your gone online and acted like an online shopper would? By that, I mean you go to one of the 3rd party sites to configure a car and contact dealers thru email?

I have - and boy, what a nightmare!

Try getting quotes from about 4-6 dealers and your email box is quickly filled to the brim with every gimmicky and poorly executed marketing pitch there is.

Dealers respond to often and 90% of the time, I didn't even get a hard price quote.

My opinion is to market to customers where they spend most of their time: social networks.

I know I'm in this market and am not pimping our biz, but this topic was too tempting.

By the way, Jeff, did you go to NADA 09? I've been here everyday looking for your review!
R
I worked for a dealer in San Antonio who cut all sources of advertising off,liners,radio,display,tv,autotrader,cdm,etc...I had to put our used cars on the internet myself,then i had 10 salespeople who posted 15 cars each on 28 different free websites,we sold twice as many cars without zero dollars spent on advertising. So now I sit at home and put other dealerships new and used cars on those same websites for a consulting fee.I had a dealer in Greer,SC sell 14 cars in two days off one simple posting.
B
Fishing where the fish are...

If 80%+ of your consumers are online, how do you attract them to you?

With what message?

Where do you place it?

If they respond to it, what do you engage them with? Your home page? An email where they can "Send an email?"

Would that be what you wanted if you were an online car shopper?

These are just suggestions, but how about using a message of "A 100% online car shopping experience for your next ?"

Where would you place that?

Where would you land them if they clicked on the banner ad?

Could you devise a blogging strategy, search engine marketing campaigns and video channels with a similar call to action?

By all means, let them send you an email any time they want.

Consider letting them shop your vehicles online (price, credit, interest rates, taxes, payments) in such a way that they have to tell you who they are in order to do so.

The Internet is a new medium. What is your message?

Internet consumers don't have to do anything. How do you devise your messages and site interactivity so that they want to do what you want them to do?

If 98% of your visitors leave without engaging with you / telling you who they are, then the experience you have run them through has not met their needs and they've left rather than having to deal with you.

This isn't a rant and it isn't a commercial... just sharing some insight into the psychology behind the thinking that went in to the shopping cart and conversations we have with dealers about using it effectively. The shopping cart is only a tool in the greater context of how dealers advertise and then how consumers shop and buy from you.

To me one of the great game-changers beginning to happen to automotive is the shift away from physical premise to the virtual. Away from digital inquiries (leads) to being able to really shop online. From a hostage-taking approach over info such as price, credit, payments, to letting consumers realize for themselves that they want to speak to dealership staff (can you confirm my credit, firm up my trade valuation, do a bit better on interest rate, etc.)

What do you think?
S
Incentives are great because everyone wants a deal all of the time. The problems with too many incentives is that it implants the craze into the customer's head. These rebates and special rates incentives have become ridiculous to the point that if Honda does not have special leasing or special financing, sales drop. Incentives are the reason why we are moving metal. This is wrong, it makes it hard for us to actually build value and sell the car. People do not lay down for us anymore. We need to get the public respecting car dealerships and start taking away from their minds that they need an incentive to make a purchase or a lease. At the end of the day, why should I pay you to buy my car? Incentives are great but should be use properly. I blame the incentive craze for making problems for the big three.
S