Guest Posting by Chris Reed
NYC Google Automotive Summit 2009
Google has been holding a series of briefings for OEMs and agencies across the country. The NY program has some great speakers from inside and outside the industry. As you might expect, a primary topic was “when will this pain end?”.
John Casesa, the auto analyst and an advisor to the Auto Task Force, had some great historic analysis identifying that a lot of the intensity of the current slump is the result of several years of “unnaturally” high demand that was propped up by easy money and incentives. In terms of what got the domestics into their current fix, Casesa took the long view and said the root cause dates from the 1930’s when the National Labor Relations Act and State Franchise Laws were passed in reaction to predatory OEM practices. Unfortunately, these laws shifted the power dynamic in the opposite direction and created a structural rigidity that, over time, lead to bloated labor costs, inflexible rules and excess capacity in the franchise network as market shares declined. This, in turn, led to less product innovation and excess debt as import competition squeezed margins and volume.
His views, most likely shared with the task force, is that radical surgery is required to “fix” both of these issues. His take was that a GM bankruptcy was now “probable”. On the dealer networks he forecast the end state may be closer to 10,000 rooftops than 15,000 if the dealers are going to have sufficient financial strength to return to profitability. He even speculated that more radical distribution changes – sales only mass retailers, internet sales – could be enabled by the growth in volume of simpler electronic cars. The good news is that he is forecasting a relatively quick rebound to the 11-12M unit range in 2010 and a slower growth ramp (3-5 year) to a “natural” demand level of about 16M units. The dealers that do weather the current storm and adopt modern sales and marketing practices will do very well over a 5 year horizon.
Google’s chief economist, Hal Varian, mostly focused on macroeconomic trends and supported the general consensus that if we are not already bumping along the bottom of the recession we can see it from here. The vast majority of government stimulus funds have yet to hit and that should help counter balance on-going bad news on the employment front. Google is doing some promising research on “predicting the present” – correlating search volume for auto terms with near future sales volume.
Google and Compete reported preliminary results from new research on online buyer behavior using clickstream data linked to auto registration records. The top level take-away was confirmation that the internet shopper does not follow a linear path from 3rd party site to OEM site to dealer site but visits all these types of properties, in different proportions, at all stages of the purchase funnel. This puts the burden on the dealer to engage shopper as all of these stages to insure they ultimately return to your store.
The program was capped off with a commentary by David Bell, former Chairman and CEO of Interpublic (one of the world’s largest advertising agency groups) and now Google advisor giving an amusing perspective on why traditional agencies have been so slow to embrace digital marketing. It appears they need reinvention as much as the OEMs do. More nimble digital marketing specialists are still leading the way and are having increasing presence at the figurative table where marketing campaigns are planned by OEMs and their primary advertising agency. We will see better integration of Digital into OEM execution and better message coordination with regional and dealer sites to turn the marketing funnel into a “pipe” to the dealership – a consistent consumer experience with minimum leakage.
Bonita Stewart and the Google Automotive team put on a quality, thought-provoking program. It is clear we are still at the start of the digital marketing revolution in automotive, there is much innovation to come and profits to be made by surfing the wave.
About the Author: Chris Reed is the Chief Marketing Officer for the Automotive Marketing Services for Cobalt