Don’t Lose Your Mettle When Moving The Metal In A Down Market

January 2008, Auto Dealer Today - WebXclusive

by Rob Anderson - Also by this author

The housing bubble has burst, oil is over $90 a barrel and car dealers across the country are beginning to reel from declining new and pre-owned sales. In this type of marketplace, don’t retreat. Now is the time to advance your initiatives. It is probably not the greatest time to test new adverting and promotions, but it certainly is a good time to increase anything you are doing currently that is working. Budget more money for third party leads that sell cars for you. Spend on Internet mechanisms that generate sales. Make the most of every source available to you because it’s a guarantee that other dealers will retreat.
Consumers have grown cautious and the economy has slowed, but opportunities still abound for dealers. These opportunities are created by less competition amongst retailers in the marketplace. The first thing most dealers do during a market slowdown is cutback advertising and promotions. In fact, Media General, the publisher of The Tampa Tribune, saw their profits plunge from $20.6 million a year ago to $2.5 million this year. I realize some of this money is moving online, but I have to believe most of it is a result of cutbacks—more specifically, cutbacks by auto dealers and anyone associated with real estate. I think it is also worth mentioning that, as auto dealers, you have a very distinct advantage over the real estate industry. First and foremost, from a purchase standpoint, your product is a “need” product. Second, a vehicle, even though it is considered a big ticket purchase, is considered much more disposable in the consumer’s mind.

Another thing to do is look for better rates during a downturn. I realize most of you have a 12-month contract with the newspaper, but almost all other mediums contract you on 30, 60 and 90 day terms. Use this to your advantage. Know that the pullback in some down markets can be immense. In brand or traditional advertising, there is no measurable response rate. Most dealers say, “I sold a satisfactory number of cars this month, so my advertising must be working. I’ll stick with it”.

When the inevitable economic slow down hits, their knee-jerk reaction is to cut advertising immediately because they think no one is buying cars and nothing will persuade them to act. This is partially true; there are fewer buyers in the market, but there are still buyers and plenty of them are receiving far fewer advertising messages. You will see the lack of advertising demand intensify in the first quarter if the slowdown continues. The fourth quarter is a little artificially inflated because of the frenetic retail and online shopping season. It is a result of anyone with any type of product or service wanting and needing to attack consumer’s wallets when they are most apt to be wide open. This drastically changes in the first quarter.

Conveniently enough, this is normally the best time of year for our dealers with tax season in full swing. For the future, my advice is to prepare and negotiate with all of your advertising mediums before making quick decisions. Use your advertisers to familiarize yourself with the current trends and make the most of this knowledge. Challenge your station rep or newspaper man. Buyers are still out there.  Demand for advertising space and time is down, so you should be in an attack position.

The level of aggressiveness is up to you, but I highly suggest doing something. For those of you who leave everything to an ad agency, let them know you have some questions about the state of the market you advertise and promote in. Most agencies will tell you not to stop advertising for a different reason than I offer. Some will say, “If you stop advertising, people will forget who you are or you’ll lose all of the brand equity you have worked so hard to create.” That is certainly not the case, and the translation of that is, “We, as your ad agency, don’t want to lose your money right now because we’re getting killed by all of our other clients”.

You have to be strategic in all of your advertising and promotional decisions. You must always measure results scientifically and take advantage of times like these. Right now, the market is softer than usual in the fourth quarter and will inevitably soften even more in the first quarter. Take the time now before tax season to position your store with better rates, while heading towards increased market share. Begin to generate more floor traffic with third party providers. There are always opportunities. Sometimes it’s a little harder to find them and there may be more of a perceived risk, but I assure you the return will be great.

Vol 4, Issue 12

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