Newspapers lose auto ad dollars

Dealers have turned the page on newspapers, at least when it comes to buying advertising in them.

The annual National Automobile Dealers Association's state-of-the-industry report released last week highlights just how much their choice of advertising media has changed in the past decade.

At the typical store, NADA says, newspapers accounted for more than half of total ad spending in 2001. Last year it was just 20 percent. The Internet, in contrast, accounted for 5 percent a decade ago and 25 percent in 2011.

But all that lost newspaper advertising didn't go to the Web. TV and radio spots, as well as direct mail, are up as a percentage of the total compared with 2001.

Domestic Automotive Brands Score Well in Total Value

Volkswagen, Hyundai and Ford are leaders in Strategic Vision's newest Total Value Index study. But for the first time in over a decade, American manufacturers paced the number of Total Value winners in vehicle categories, with 11 segment leaders.

Another big change: four alternative fueled vehicles -- Chevrolet Volt, Honda Civic Hybrid, Nissan Leaf and Lincoln MKZ Hybrid -- led their respective segments. The firm says that in the past, alternative-powertrain vehicles didn't lead because simply offering better fuel economy did not provide enough overall value to make a difference. The Tustin, Calif.-based market research firm says the change implies a watershed moment for acceptance and desirability of hybrids.

"Even though the median price of a Chevy Volt was $43,000, owners believe that for every dollar spent, they got more than did buyers of other vehicles," said Alexander Edwards, president of the company. "Customers had tremendous value appreciation for (the vehicle's) technical innovation, warranty, standard equipment and certainly fuel economy."

In Strategic Vision's study, Volt not only had the highest Total Value score in the Mid-Size Car Segment, but also the highest score of any vehicle in the entire study. Owners may have a predilection to love cutting-edge technology, as they had a median annual income of $133,000, with 37% having post-doctorate degrees, putting them solidly in the early-adopter category. Another alternative-engine vehicle, the all-electric Nissan Leaf, won in its segment for technical innovation and standard equipment.

But Edwards -- giving a nod to the fact that such vehicles still make up only a couple percent of the U.S. auto market -- said cost benefits, not emotions, will be what drives broad acceptance and larger volumes. "A word of caution to manufacturers is to realize potential buyers are smarter and more empowered with information than ever before. A hybrid needs to make sense for larger sales volumes to occur. Hybrid ownership is still primarily 'statement'-driven, but things are changing."

General Motors also had segment winners with Cadillac CTS Sedan and CTS Coupe, Chevrolet Corvette Coupe and the GMC Yukon. Honda had several winners as well, with the Honda Civic Hybrid, Accord Coupe, Odyssey, Ridgeline and Acura TSX Wagon. Hyundai continued its winning streak because of design, features and mileage from models like Tucson. Ford's segment leaders included the Lincoln MKZ Hybrid, Mustang Convertible, Flex, and the F-Series trucks.

Dodge Durango was another winner, and Volvo won because of strong product and comprehensive warranty with several of its vehicles. MINI Cooper won for the seventh year in the Specialty Coupe segment, per the study.

Strategic Vision says the Total Value ranking is a combination of subjective owner statements on 442 attributes combined with what the firm characterizes as immediate and long-term economic factors like warranty, technical innovation, standard equipment, and vehicle mileage ratings. The survey side of the study gets into political party affiliation, personal media habits and hobbies, and any ethnicity they claim.

"The way you become a value leader in this economy is to create an exceptional product that is affordable. Price alone will not determine value," said Darrel Edwards, founder and executive director of Strategic Vision.

(Source: Marketing Daily, 03/16/12)

Leasing Boom? Not So Fast

Dealers looking for a big increase in leasing this year may be disappointed.

Some forecasters see a leasing boom this year and beyond. And one even suggested leases will account for 40 percent of new-vehicle deals by the end of the decade, up from 30 percent in 2007.

But new data from Experian Automotive show lease penetration for new-vehicle volume was flat in the fourth quarter last year -- down slightly, in fact, at 23.1 percent from 23.7 percent the year before -- after two years of growth. And that, the company says, is where it could stay.

"It's starting to look like this is what the market bears for leases," said Melinda Zabritski, director of automotive credit for Experian Automotive.

She isn't alone.

"There are real reasons why those who are optimistic about leasing should be optimistic, but the realities don't seem to be following those reasons," said Paul Cuevas, director of automotive finance for J.D. Power and Associates.

Cuevas cited three interrelated reasons why lease penetration seems to have topped out for now at around 20 percent of new-vehicle retail: Lenders are leery of again being burned by inflated residual values, consumers are keeping their cars longer, and low interest rates favor purchases over leases.

In addition, the downsized Detroit Big 3 have lowered their breakeven points since the recession. They're not as highly motivated to get units out the door by subventing leases as they were before restructuring.

A single quarter of lower lease penetration in the fourth quarter of 2011 doesn't make a trend. But the rate of increase in leasing has been diminishing ever since the third quarter of 2010, Power Information Network data show.

Lease penetration was 19.5 percent in the fourth quarter, down from 20.2 percent a year earlier, PIN said. Lease share of new-vehicle retail sales bottomed out at 10.3 percent in the third quarter of 2009.

Experian Automotive, using a different methodology, said lease penetration was 23.1 percent in the fourth quarter, down from 23.7 percent a year ago. For all of 2011, Experian Automotive said, the average lease penetration was 23.7 percent, up only a fraction from 23.5 percent in 2010.

Zabritski said that leasing is back to around the same level it was before the credit freeze and the recession. Maybe it's too much to expect leasing to keep growing beyond that level, she said.

"This tends to be about where it had been, going back as far as 2006, before we had all these troubles," she said.

Still, there are some reasons for optimism.

The growth in leasing has enjoyed a tailwind in the form of higher used-car prices. Used-car prices have stopped increasing like they did in the past couple of years, but they are still at a high level in historical terms.

Data from ADESA Auctions Inc. show that the average wholesale used-vehicle price at auction was $9,878 in December 2011. That was a 9.5 percent increase from December 2008 but only 0.5 percent increase from December 2010.

Higher used-car prices mean auto lenders are less likely to lose money on lease returns. The used-car shortage that's supporting used-car prices is expected to persist at least through this year.

Leasing also remains high for luxury import captives such as Mercedes-Benz Financial, at 64 percent leasing in the fourth quarter; or BMW Financial Services, at 62 percent leasing, according to Experian.

Finally, several automakers have expressed an interest in higher lease penetration. GM bought the former AmeriCredit in October 2010 in part to get closer to the industry average in leasing. The company said it is unlikely to reach industry average because it sells a high percentage of trucks, an area in which leasing is less popular.

GM reported its U.S. lease penetration was 11.1 percent in the fourth quarter, down from 12.9 percent a year ago. For all of 2011, GM's lease penetration was 13.2 percent, up from 9 percent in 2010, spokesman Jim Cain says.

According to Experian Automotive, captives for the three biggest Japanese brands had above-average lease share in the fourth quarter, with Toyota Financial Services at 30.6 percent, American Honda Finance at 40.8 percent and Nissan-Infiniti Financial Services at 45.8 percent. Those figures include their respective luxury brands.

Taking advantage of improved residual values, Hyundai Capital America, which serves both Hyundai and Kia brands, had a 53 percent lease share in the fourth quarter, according to Experian. VW Credit had a 53.7 percent lease share.

However, leasing has become pretty much the domain of the captive finance companies as banks stay away, J.D. Power's Cuevas said.

The manufacturers want "to shorten trade cycles and length of ownership," he said, adding: "Leasing definitely does that for the manufacturer. There's also a higher propensity for that customer to purchase a similar-make vehicle if they come from a lease."

Leasing is likely to grow more rapidly if and when the manufacturers pour enough incentives into it to make that happen. For the most part, that doesn't seem to be the case, Cuevas said.

He added: "A huge factor in lease vs. purchase is the lease offer itself."

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Why Leasing Growth May Stall

Auto lenders are risk-averse: Lenders got badly burned on inflated residual values in the credit freeze and the recession. In 2008, the domestic captives lost billions when the bottom fell out of resale values for big pickups and SUVs coming off leases. Ford Motor Credit Co. and Ally Financial Inc. have come back in leasing to an extent, but big banks' auto finance units, such as Chase Auto Finance, have largely stayed away.

Customer demand is changing: Customers are keeping their cars longer. The average trade-in is now 6.5 years old, according to the Power Information Network. The average car on the road is close to 11 years old, according to R.L. Polk Co. Customers are less interested in 3- or 4-year leases, J.D. Power's Paul Cuevas said. Not only that, there has been a shift to smaller, more fuel-efficient cars, an area in which lease penetration historically is low, he said.

Interest rates are low: Because interest rates are low -- the prime rate is only 3.25 percent -- it's relatively cheap, and certainly less risky for lenders, to buy down the interest rate on a loan instead of taking a chance on residual values, Cuevas said.

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(Source: Automotive News, 03/07/12)

Big Retailers Say They Won't Neglect Used-Vehicle Sales

Forecasters predict strong sales of new light vehicles this year, possibly as high as 14 million units. But executives representing six major dealership groups -- five of them publicly held and one privately owned -- say they won't neglect their used-vehicle business, regardless of what happens with new cars and trucks.

"To be a good retailer you've got to be a good used-car merchandiser," says Mike Maroone, COO of AutoNation Inc., the nation's largest dealership group. "We've got a big appetite to continue to grow the used-car business."

The executives' commitment to used vehicles is understandable. After all, used vehicles were there when dealers needed them most

• Used cars and trucks kept dealerships afloat when new-vehicle sales tanked during the worst of the recession.
• Certified used vehicles filled gaps in new-car inventories last year when production cutbacks strangled the new-car supply after the earthquake in Japan.
• Old high-mileage used vehicles were a source of profits when dealers started selling the vehicles on their lots instead of at wholesale.

Having strong used-vehicle sales allows dealerships to offer more money on trade-ins, which boosts consumers' ability to purchase a new car and yields more used-vehicle inventory for their dealerships, the executives say. It's a virtuous circle.

"If new goes up and used goes down it's hard to get ahead in the business. You've really got to drive both segments," Maroone says.

'Success story'
Rob Kurnick, president of Penske Automotive Group Inc., the nation's second-largest dealership group, says the retail industry is large enough for his company to increase its new- and used- vehicle business simultaneously.

"Used (sales) has been a great success story for us over the course of the last year," Kurnick says. "We'll be able to continue with used cars as well as absorb new-car demand."

Steve Landers, partner at the privately held RLJ-McLarty-Landers Automotive, says his group opened three CarMax-like used-car stores -- one each in Little Rock, Ark., Shreveport, La., and Huntsville, Ala., -- over the last year or so. He said the group plans to break ground on a similar used-car store in northwest Arkansas within a month. The stores specialize in late-model used vehicles, he says.

"We're just being a good aggressive used-car dealer," Landers says.

But as retailers press for more used-vehicle sales, they concede that finding used vehicles, especially those suitable for certified used-vehicle programs, is more challenging now than it was a few years ago.

That's because of a shortage of off-lease vehicles, normally a major source of vehicles for certified used-vehicle programs. Industrywide off-lease volume fell 17 percent to almost 1.8 million in 2011, data from NADA Used Car Guide show. The guide company predicts that off-lease volume this year will plunge another 22 percent. Off-lease volume has dropped as a direct result of large banks and finance companies abandoning leasing in 2008-09.

Realistic challenge
Lithia Motors Inc., has set a long-term goal of selling 1.5 used vehicles for every new vehicle it sells, up from the almost 1-to-1 ratio it sells now, says CEO Sid DeBoer. Finding enough vehicles to reach that goal is a challenge, but possible, he says.

"It's having a qualified used-car person that knows the market and can find the cars," says the top executive at the nation's ninth-largest dealership group. "It's mining every other dealer in the areas we do business in; it's being at the auctions; it's working with manufacturers on lease returns and finance companies on repossessions.

"It's buying cars directly from the consumer -- that's a bigger piece of how we're finding cars. It's all of the pieces. It won't be a shortage of used cars that keeps us from our goal."

Michael Kearney, COO of Asbury Automotive Group Inc., says his company plans to continue its Asbury 121 (pronounced "1-to-1") program that it started in January 2010. Its goal is to sell an equal number of used and new vehicles.

The program emphasizes selling older, high-mileage vehicles taken as trade-ins. At the end of the third quarter of 2011, Asbury's used-vehicle sales equaled 82 percent of its new-vehicle sales, Kearney says.

"We have a used-car team that is fully dedicated to acquiring inventory and training the store to do trade walks to make sure we don't lose any trades," he says.

Pete DeLongchamps, vice president of manufacturer relations and public affairs of Group 1 Automotive Inc., says the company will certify any used vehicle that meets certification standards and will sell any older, used vehicle if its quality meets Group 1 standards.

He adds: "We'll never slow down our emphasis on used cars."

(Source: Automotive News, 01/30/12)

Consumers See Less Difference Between Car Brands, Survey Finds

A survey by the Consumer Reports National Research Center revealed that the difference perceived by American consumers between the top car brands and the challengers is shrinking.

The 2012 Car-Brand Perception Survey indicated that Toyota, Ford, Honda, and Chevrolet maintained their top positions but have seen the point gap decrease. Additionally, most of the top brands saw double-digit drops in their total scores.

"Dramatic events in the automotive industry seem to be affecting how consumers view auto brands. Erratic gasoline prices and a struggling economy have pushed consumers to prize low operating costs and good reliability," said Jeff Bartlett, Consumer Reports deputy editor for autos online.

The survey's scores reflect how consumers perceive each brand in seven categories: safety, quality, value, performance, environmentally friendly/green, design/style and technology/innovation. Combining those factors yields results in the total brand-perception score. While the scores reflect a brand's image in consumers' minds, they do not reflect the actual qualities of any brand's vehicles or results from Consumer Reports testing, according to the company.

Toyota continues to dominate overall in brand perception despite slipping by 17 points compared to last year's results. Other top brands, Ford, Honda, and BMW, saw their scores drop more than 20 points. The two leading General Motors brands, Cadillac and Chevrolet, did relatively better with only single-digit decreases.

Respondents indicated the most important factor in car buying continues to be safety (65 percent). The leading brands in overall perception in the survey usually excel in multiple categories. Volvo, however, has maintained a top 10 spot for years by virtue of its safety reputation alone, according to Consumer Reports. This year, however, Volvo experienced a 21 percentage point drop in this factor from last year's 70, to 49 percent. If it continues, this trend could drop Volvo out of the overall top 10 in future years and into the second tier.

Consumer Reports' survey found scores edging downward in the quality factor, with Toyota, Honda and Ford sharing a three-way tie for the top spot and the top brands.

"Brand perception can be influenced by many things, from professional road tests to marketing. Word-of-mouth from friends and neighbors can be a slower moving, though influential contributor as ownership transitions from the initial honeymoon phase to the seven-year itch," Bartlett said.

In the performance category, BMW's score dropped significantly from last year's 27 percent to only 19 percent, according to the survey. This drop leaves the German automaker vulnerable to Ford and Chevrolet.

Toyota again led the environmentally friendly/green category, likely driven by the Prius and other hybrids, as well as some creative marketing, according to Consumer Reports. Smart made a surprise showing this year, debuting in the top five despite having no new products or a sizable advertising budget. Honda again claimed the third position while Ford slipped slightly this year despite introducing the new Fiesta and Focus small cars.

After a year of seemingly endless headlines espousing the electrifying virtues of the Chevrolet Volt and Nissan Leaf, those brands didn't spring ahead in this factor. Chevrolet remained consistent with 12 percentage points while Nissan inched up about two percentage points, rounding to eight percent.

The Consumer Reports National Research Center conducted a random, nationwide telephone survey of 2,045 adults from Dec. 1-5, 2011, and collected survey data from 1,702 adults in households that had at least one car.

(Source: F&I Magazine, 01/26/12)

J.D. Power: What Drives Auto Avoidance

Consumer avoidance is as important to automobile manufacturers and marketers as loyalty. If you can figure out why people are running away, you can figure out how to get them back, right? Yes -- especially if avoidance is being fueled by left-brain parameters like experience of ownership, reviews, ratings, features, price and the like.

Unfortunately, it seems a lot of people are running away for a reason that, because it is so insidious, strikes terror in the hearts of auto marketers everywhere: consumer perception based on "conventional wisdom" about vehicle quality and durability.

More than 40% of new-vehicle buyers who avoided a particular model due to quality or reliability concerns say they based their opinions on common knowledge rather than personal experience, reviews, ratings or recommendations, according to the J.D. Power and Associates 2012 Avoider Study. The study is based on responses from approximately 24,045 owners who registered a new vehicle in May last year.

Among buyers who avoid a particular model because of perceived quality and reliability, 43% say their avoidance was because "the brand's vehicles, in general, are known to have poor quality/reliability." Thirty-eight percent based their avoidance on ratings and reviews, while only 14% said they based their decision on prior ownership of the model.

Jon Osborn, research director at J.D. Power and Associates, argues that if you are an automaker who had a quality problem in the past (that created a generation of naysayers), you can't just let your cars do the talking now.

"For some brands, namely those that have created marked improvements in their quality and reliability in recent years, it's even more vital to tell their improvement story, rather than just waiting for perceptions to change over time," he said, in a statement.

In good news for domestics, the percentage of buyers who avoided import models because of their origin has increased to 14% -- the highest level since the inception of the study in 2003 -- while the percentage of buyers who avoided domestic models due to their origin has declined to 6%, a historical low.

"The decline in avoidance of U.S. models due to their origin reflects a buy-American sentiment that surfaced as the economic recession led to domestic job losses and adversely affected major U.S. institutions such as the Detroit Big Three," said Osborn. "In addition, the quality, dependability and appeal of domestic models have improved during the past several years, as well, and this may also be a cause for declining avoidance."

While perception about quality and reliability is driving avoidance, it is no longer the main driver of purchase. Gas mileage has leapfrogged reliability, the deal and exterior styling, which were the most influential purchase reasons in 2010, the 12-month period covered by the firm's last Avoider study.

While gas mileage and environmental impact certainly are the big drivers for Chevrolet Volt, Nissan Leaf and Toyota Prius, consideration is not uniform across the nameplates. Image is a prominent reason for purchase of Volt, while buyers cite low maintenance costs for the Leaf and reliability for the Prius, per J.D. Power.

Among buyers who avoided the Volt, purchase price was the most-cited reason, while the most prominent avoidance reason for the Leaf and Prius is exterior styling. For the Volt and Leaf, a notable proportion of buyers cited the models' small size as an avoidance reason. For the Prius, performance is a prominent reason for avoidance.

(Source: Marketing Daily, 01/27/12)

Getting on the all-important page 1 of a shopper's search. Here's how to get there -- and stay there

Rick Buffkin is sold on the power of Google to help him sell vehicles.

The four-store Beaman Automotive Group in Nashville sells about 100 vehicles a month from Internet leads in part because online shoppers looking for Toyota, Ford, Chrysler or Buick models can't miss Beaman stores on Google.

Google, the world's dominant search engine, uses a complex and constantly changing set of rules to channel shoppers to dealerships. Dealerships that master the rules win sales.

For instance, Buffkin, Beaman's Internet marketing director, uses low-cost product videos and fresh content on Beaman's own Web sites. The videos and content help Beaman appear high on Google's crucial first page of a search.

"People turn to Google for everything -- they're taking over," said Buffkin, 36.

Beaman Automotive, headed by dealer principal Lee Beaman, sells about 750 new and used vehicles a month at its Toyota-Scion, Ford, Chrysler-Dodge-Jeep-Ram and Buick-GMC stores.

Google is top-of-mind for dealers across the country as they look to shift marketing dollars from traditional media, such as TV, radio and print, to the Internet.

Tony Rhoades, Internet executive director for the seven-franchise Gunn Automotive Group in San Antonio, said: "Google is the dominant player on the Internet, and you have to do everything you can to position yourself on page 1."

Will Perry, director of business intelligence for Dataium Inc., said Google has led the way as car shopping habits have shifted to the Internet over the past decade.

Dataium tracks car-buying habits on more than 5,000 dealership and factory Web sites nationally.

Shopping starts online

The statistics are convincing. More than 90 percent of car buyers today start their research on the Internet, said Brice Englert, marketing manager at Dominion Dealer Solutions, which works with dealership clients on Internet marketing.

They make an average of 18 stops on the Internet along the way, said Brian Pasch, CEO of consulting firm PCG Digital Marketing.

Those online shoppers will make stopovers to comparison shop on sites such as AutoTrader.com, Cars.com and shopautoweek.com; get pricing information at places such as TrueCar.com and Edmunds; and use search engines to navigate the process quickly.

During the process, three of four Internet car shoppers will visit Google at least once, and in most cases multiple times, Dataium's Perry said. Two of every three shoppers who visit a dealership Web site come there directly from Google, he said.

Sean Wolfington, owner of Tier10Marketing.com, an automotive and entertainment marketing company that sells its services to auto dealerships, said, "Google is where people turn at the top of sales funnel, and at the bottom when they are getting ready to buy."

So, said Kevin Frye, e-commerce director for the 11-store Jeff Wyler Automotive Family in Cincinnati, it's critical for dealers to have a strong presence on Google. "It's a matter of fishing where the fish are," he said.

Why Google rules

• 90% of vehicle buyers start their shopping online.
• 65% of visitors to dealership Web sites come directly from a Google search.
• Google is the primary influence in 25% of dealership Web site traffic and 3% of sales leads.
Source: Dataium Inc.

Crucial first page

There are two ways for dealerships to get listed on the crucial first page of a Google search:

1. Buy their way on with advertising, a process known as search engine marketing.
Those paid search results are bought through a pay-per-click auction, in which dealers, the automakers and sometimes third-party Internet lead generators will pay 50 cents to $3.50 every time a Google visitor clicks on the ad to be taken to a dealership Web site. Those ads tend to appear along the top of a Google page in a shaded box and often along the right side of the page.

2. Get Google to list the dealership and videos for free by getting Google to believe the store's Web site is the most relevant to consumers in that market. That's known as an organic search. That means a site with a lot of fresh content and the ability to hold viewers' attention.

Beaman Automotive is definitely in the organic-search camp, Buffkin said. Though Beaman buys no advertising on Google, Beaman's Web site and videos routinely place atop the first page of searches involving dealerships in the Nashville area.

For example, a Google search last week using the words "2012 Toyota Camry Nashville" listed Beaman Toyota in the top two so-called organic positions on the first Google page just below three shaded pay-per-click listings on the page.

Beaman Ford, during the third week of January, won the top five organic positions when the following search phrase was used: "2012 Ford Focus SE Nashville."

Buffkin said Beaman has an aggressive strategy to get top Google listings -- a process known as search engine optimization.

It's working: Of about 50,000 visits to Beaman Automotive's Web sites a month, about 65 percent come there directly after a Google search, Buffkin said. Of those visits, about 1,200 people a month will fill out a lead form asking online to be contacted for more information or to make an appointment, he said.

Understanding Google

Buffkin said staying relevant on Google is part art and part science, with an emphasis on hard work. Google uses secret formulas, called algorithms, to determine which businesses get top play on consumer searches.
And Google frequently changes the way it weighs its criteria. For instance, videos on YouTube tend to score well with Google. YouTube is owned by Google.

That makes Google a moving target. But Buffkin said a couple of tactics are key. The first is to keep Beaman's Web site full of fresh content, including chat, videos and blogs that contain key words or phrases sure to catch Google's attention such as the city, brand, dealership name and even the nearby I-40 freeway.
Buffkin said Google puts a premium on dealership Web sites that keep visitors for long durations. The average visitor to a Beaman Web site spends 10.4 minutes on the site. The group's bounce rate -- the rate at which a visitor comes to the dealership Web site but drills no further into it -- is less than 30 percent vs. an industry average of 60 percent.

"You have to make your site sticky," Buffkin said. "In Google's eyes, content is king."

Videos help

Buffkin also is a big believer in the power of online videos. Of the top five organic positions that Beaman held in the search of "2012 Ford Focus SE Nashville," three were videos that the dealership's Web manager, Dealer.com, shot so Beaman could put them up on YouTube.

Another plus for Google placement are consumer reviews, said Matt Haiken, dealer principal and general manager of Prestige Volvo in East Hanover, N.J., outside New York. Reviews are part of the criteria Google uses for ranking dealership sites.

About nine months ago Google annoyed dealers by saying it would no longer allow reviews not gathered on Google to be shown on Google Places, the maplike business directory that shows up on Google search pages.

Overnight, Prestige Volvo lost 400 consumer reviews garnered on other sites such as Dealerrater.com and Yelp, Haiken said. But rather than sulk, Prestige began rebuilding its review base by identifying all customers with a Gmail account and encouraging them to submit a review. Gmail is a Google product.

Prestige is back up to 48 reviews on its Google Places page, with nearly a top five-star overall rating, Haiken said.

Google is critical to Prestige, since the dealership switched all its marketing dollars five years ago to digital media from traditional media, Haiken said. Prestige is one of the top-selling Volvo dealers in the nation, selling 757 new and 270 used vehicles in 2011.

Haiken said he consistently buys ads on Google to expand his reach. He said he spends about 10 percent of his digital marketing budget on Google. Prestige Volvo's total monthly digital marketing budget exceeds $10,000.

Fighting for business in crowded suburban New York makes ad buying a necessity, Haiken said.
He said: "Face it. If every customer is online these days, then every customer is an Internet customer."

Mastering Google

Tips to keep a dealership on the crucial first page of a Google search
• Use Google's free analytics tool to bid on the most-searched phrases in your market.
• Shoot high-quality video and put it up on YouTube (a Google property) and other sites.
• Make it easy for sales and service customers to write a store review on Google.
• Use videos, chat and blogs on your Web sites to keep visitors longer.

David Barkholz - Automotive News

Today's Youth a Tough Sell for Automakers

Automakers have a problem. The kids of America do not want cars.

At least not as much as they used to.

According to research conducted by General Motors Co., 30 percent of them got their driver's license when they turned 16.

For their parents, a car represented freedom -- the ability to escape from parents and go where they wanted without anyone looking over their shoulder.

Today, young people find that freedom online. GM says more than half of those surveyed said they would actually rather meet up with their friends in cyberspace than face to face.

"There's simply new and better and, frankly, more efficient alternatives to communication and getting that freedom that they used to rely on the auto industry to provide," said John McFarland, senior manager for global marketing at Chevrolet, one of GM's divisions.

Just ask Christopher Elkins, a 22-year-old engineering student at the University of Michigan in Ann Arbor. He has a 2002 Ford Focus. But now that he has a place of his own, going out is less important than it used to be.

Last year, Elkins drove his car to school every day. But he decided it was too much of a hassle. So, this year, he takes the bus. Elkins said he uses his car only about once a week to get groceries.

"I would prefer to bike or walk, especially in Ann Arbor," he said.

But automakers cannot write off a whole generation. According to GM, there are 80 million millennials -- a group it defines as 18- to 24-year-olds -- in the United States. And they already wield a trillion dollars in spending power. Unfortunately for Detroit, they are spending little of that money on cars.

Ever since Toyota Motor Corp. launched its youth-oriented Scion brand in 2002, automakers have been trying to convince kids that cars in general -- and their cars in particular -- are cool. Scion has had some success. The median age of a Scion buyer is 29, the lowest in the industry, according to Toyota. "We don't really think that any brands today are doing it right," McFarland said. "We don't think anyone quite 'gets' this group."

And that includes Chevy.

Talking about life
But McFarland and his team are trying to change that. They started by changing the way they did market research. Instead of getting a group of kids together in a room and asking them to describe their ideal car, GM's designers sat down with them and talked about life -- what they wanted out of it and how they live theirs. GM found that what they really value is their friends and doing things with them. When they did start talking about cars, the designers discovered that, instead of the sporty compacts and cute hatchbacks they thought kids wanted, what they really desire is "a car to do things with."

In other words, they want basic transportation, not performance.

They also found out that these younger consumers are more realistic than they imagined. Sure, their dream car is still a Lamborghini, but what they really want is a car that can take their friends places. They want it to look cool, but they really do not care how fast it is.

So GM began work on a series of Chevy concepts that it hopes will finally strike the right chord with the youth of America -- or at least a significant number of them.

Chevy recently unveiled two of them at the North American International Auto Show, and more are in the works. One is a mini-muscle car; the other looks like a baby exotic. Both are powered by modest motors that promise more fuel economy than speed.

They are "more poseur than doer," said Clay Dean, director of advanced design at GM, who said the company this year will show them and other concepts to young people at auto shows all over the country.

Other automakers also are trying a new approach to attracting younger car buyers. Chrysler Group LLC put some of its youngest designers in charge of the Dodge Dart program in an effort to channel the zeitgeist of Generation Y, according to Ralph Gilles, head of design at the Auburn Hills, Mich. automaker.

"I want you drawing the car you would drive," Gilles told them.

Chrysler CEO Sergio Marchionne said they got it right, adding that the Dart will be "key" to bringing millennials into Dodge showrooms.

"I think the car has all the requisites to get it done," he said, adding that technology is a big attraction for younger car buyers, which is why there is so much of it in the Dart. "There's no car that's this evolved."

'Smartphone on wheels'
Dodge's focus on technology makes sense, at least according to the results of a recent survey by Deloitte and Michigan State University's Broad College of Business. They talked to 1,500 consumers of all ages in the United States, as well as 250 Gen Y consumers in China and 300 Gen Y consumers in Western Europe, and found most 19- to 31-year-olds want "a smartphone on wheels."

Tasnim Rahman, 19, said that while fuel economy and looks are important to her, what the University of Michigan student really wants in a car is "a lot of modern technology because we need it today. We are very tech savvy, so we need a car that's tech savvy, too."

Nearly 60 percent of the young people surveyed by Deloitte said in-dash technology is the most important part of a vehicle's interior, while 73 percent said they wanted touch-screen interfaces. Most also want to be able to use smartphone applications.

Fortunately for Dodge, the new Dart offers all of that. So do many of Ford Motor Co.'s new small cars.

Moray Callum, Ford's director of design for the Americas, says his research has revealed the same thing as GM's.

"Having a car is not the same priority anymore for young people," he said. "Adults are worried about texting being a disturbance while driving. A lot of kids think that driving is a disturbance to texting."

Ford, too, has concluded that image is more important than performance to younger customers.

"They're all about the arrival," Callum said, adding that this is why Ford has focused so much on styling in cars like the Fiesta. "They still think the car says something about them."

(Source: The Detroit News, 01/16/12)

Whether Loyalty or Retention, It's Critical

Polk's Loyalty award is about the automakers that have the highest percentage of loyalists. J.D. Power's offering, the 2012 Customer Retention Study, also focuses on customer loyalty, but the results are slightly different.

The survey-based study by Power puts Hyundai at the top among a field of 33 brands, with Ford in second (the reverse of Polk's top two), and tied with Honda. The study takes a broad view, noting that one in three new-vehicle owners who switched brands did so not because they hated their vehicle but because their previous brand just didn't make the type of vehicle they wanted next.

That said, another driver for auto apostasy was dissatisfaction with the previous vehicle, including such issues as cost of ownership or maintenance, too many problems with the vehicle, and the vehicle didn't retain sufficient resale value.

The study, in its ninth year, is based on responses from 117,001 new-vehicle buyers and lessees, of which 73,733 replaced a vehicle that was previously acquired new. It was fielded during two periods last year.

Raffi Festekjian, director of automotive product research at J.D. Power and Associates, told Marketing Daily that automakers need to do a balancing act by both keeping retention as close to the ideal 100% as possible, while conquesting as many new owners as possible from competitors.

"In general it's important to realize that it's important to have a balanced relationship between retention and conquest. In an ideal world you'd want both numbers to be 100, but achieving that scenario is impossible," he says.

But he adds that Hyundai and Kia have done "a really good job fitting into that relationship between retention and conquest." He says Kia is in the top three in conquest, and Hyundai is in the top five. "So is Fiat, which is a new brand that has just come in (so all of its buyers are conquests), and you have Scion as well."

The industry average for retention improved by one percentage point to 49% in the study. J.D. Power's loyalty leader Hyundai improved its retention rate by four percentage points from 2010 to 64% in 2012, per the study, which says the automaker's retention rate is principally due to loyalty among owners of the Elantra compact sedan and Sonata midsize car.

"Hyundai’s increased retention rate is shaped by its expanding model lineup, as well as the fact that perceptions of the brand's quality and appeal have continued to improve during the past decade," said Festekjian.

Ford and Honda had customer retention rates of 60%. As in Polk's findings, Jeep posts the greatest improvement in customer retention rate from 2010. J.D. Power says the Chrysler, LLC unit improved by 17 percentage points to 51% percent in 2012.

Nineteen of the 33 ranked brands improved their customer retention rates from 2010, while 14 have declined, according to the firm.

Not terribly surprising, the study also finds that women and younger people, those between 23 and 47, are less brand loyal than older consumers and men.

"Women and younger vehicle owners are more likely to experience changes in their life circumstances, including growth in household size or changes in income levels, that would lead them to purchase vehicles that better accommodate their new lifestyle," said Festekjian.

J.D. Power says Honda, siblings Hyundai and Kia, and Mercedes-Benz do particularly well at retaining women. For Gen X and Y, Ford, Kia, Lexus and Mercedes-Benz perform particularly well in customer retention.

(Source: Marketing Daily, 01/12/12)

A Good Year for Automotive? Yeah, But...

All things considered, 2011 was a pretty solid year on the automotive sales front and ended on a positive note. So, hey, happy days are here again, right?

U.S. light-vehicle sales were up 10 percent to 12.8 million in 2011 after a similar rise the year before. Forecasters expect another increase in 2012. It's a healthy market, too, with low incentives, manageable inventories and reasonable profit margins.

But stacked up against 2007, the last full year before the financial crisis, it's a dramatically different market -- a lot smaller and with share much rearranged among the top players.

Indeed, the contrast between that old normal and what might be the new one is huge when you look at the numbers.

Sales in 2007 were 16.2 million, 3.4 million higher than last year. That's a difference of more than 281,000 units a month on average.

Everyone knows that post-bankruptcy General Motors is on the upswing, with a 13 percent sales gain last year and a larger market share than it had in 2010. But it lost 1.3 million sales from 2007 to 2011 and 4.1 points of share.

"Even with the kind of growth we're projecting, we're still in recession-like industry sizes," said Don Johnson, GM's U.S. sales boss.

He says slow but steady growth would help GM "maintain that discipline" and not overproduce, as the industry often did in the 2000s.

Toyota Motor Sales is down almost 1 million units from 2007. Hammered by quality problems in 2010 and earthquake-related product shortages in 2011, Toyota is down 3.3 share points. A temporary blip? We'll see.

The outlier is Hyundai-Kia Automotive, which made it through the crisis in superb fashion, adding 358,701 sales since 2007 and grabbing 4.1 share points, to 8.9 percent of the market -- ahead of Nissan North America and on the heels of No. 5 American Honda Motor Co.

Some other winners and losers since 2007:

-- Nissan/Infiniti gained 1.6 share points since 2007, the best showing of any Japan-based automaker.

-- Ford Motor Co., which launched an ambitious turnaround strategy before its Detroit rivals and avoided bankruptcy, has added 1.0 points of share.

-- Chrysler Group, even with a 2011 sales surge, is still 2.2 share points lower than in 2007.

-- American Honda lost 0.6 points of share, falling to 9.0 percent.

Sales have become more widely dispersed among carmakers since 2007. Smaller players, those outside the top seven, have increased their slice of U.S. sales to 14.1 percent, from 10.4 percent.

Four manufacturers accounted for most of that 3.7-point gain. Volkswagen Group of America has parlayed investment in marketing and a new Tennessee assembly plant into a 1.5-point gain.

Subaru, Daimler AG and BMW have picked up a combined 1.8 points.

Most executives and analysts say they understand that the "old normal" era -- nine straight years with sales above 16 million from 1996 to 2007 -- is over.

But they aren't sure what the new normal will be.

Analyst Jesse Toprak of TrueCar.com reckons that 14.5 million is a realistic average market size in the new era.

"We're still finding the new normal and we won't approach it until at least 2013," he said.

"But the industry's breakeven point is still 11 million, so this year should be very profitable for most."

IHS Automotive analyst Rebecca Lindland's "new normal" is 15.5 million to 16 million annual sales.

"That's a level that is sustainable without a lot of shenanigans," she said. "The industry can be very profitable at that level and yet flexible enough to contract if necessary."

Virtually all carmakers expect higher 2012 volume as the economy picks up and Toyota and Honda fully restore post-quake inventories.

"Timing is everything," said Toyota Motor Sales U.S.A. President Jim Lentz.

"We are entering a growing market that will grow 1 million units, in an improving economy, with growing interest rates, with 19 new and refreshed models to launch," he said.

GM's Johnson is encouraged by the Toyota and Honda recoveries.

"That brings back some buyers into the market who may have sat on the sidelines," he said. "We will get a shot at them."

Johnson expects to build on GM's 13 percent sales growth, which boosted its 2011 market share by a half point to 19.6 percent. GM is predicting industry sales of 13.5 million to 14.0 million in 2012.

Ellen Hughes-Cromwick, Ford's chief economist, said economic fundamentals are improving and that will help auto sales grow.

"The latest statistics show some very positive momentum," she said.

Toyota sees 13.6 million sales in 2012; Chrysler forecasts 13.8 million, and Volkswagen echoes GM at 13.5 million to 14 million.

Ford expects 13.5 million to 14.5 million, including medium- and heavy-duty trucks, which means about 13.2 million to 14.2 million light vehicles.

Toprak says the midyear sales stumble of 2011 may turn out to have been better for the industry than a rapid acceleration.

"This may be a healthier, more sustainable pace," he said. "It turned out to be a year of stable growth."

Toprak expects 13.8 million sales in 2012, which would be an increase of 8 percent.

Lindland said today's auto market is vastly improved from the 2007 version.

"It's much healthier," Lindland said.

"We got rid of the fast food -- the bad habits and the need to make products because it was cheaper to make them than not make them."

(Automotive News, 01/09/12)

Auto Sales Could Hit 14 million in 2012



Auto sales could hit 14 million in 2012.

Analysts Cite Easier Credit, Aging Fleet

Rising employment, better credit availability, new products and urgency to replace aging vehicles will drive U.S. auto sales higher in 2012, forecasters say.

Sales predictions from 11 independent analysts ranged from 13 million light vehicles (Wells Fargo Securities) to 14 million (Morgan Stanley). The average outlook of 13.6 million would be up 6 or 7 percent from this year's sales, which are likely to finish between 12.7 and 12.8 million units.

That 1 million unit spread in forecasts is narrower than the 1.5 million spread among 2011 forecasts by seven analysts a year ago.

All the analysts expect as much disruptive and unsettling economic news in 2012 as there was this year. But they say American auto buyers don't scare as easily as they did three years ago, when the financial crisis hit.

Crisis-jaded consumers have become less likely to change car-buying behavior based on economic news -- good or bad, says Alec Gutierrez, senior market analyst for Kelley Blue Book.

Gutierrez noticed the change in summer during the congressional debt-ceiling standoff that triggered a cut in the U.S. credit rating.

"The Dow fell 1,500 points -- and car sales stayed smooth and consistent," he said. "The American consumer has seen so much gone wrong. If they have to buy a car, they will."

Economic ups and downs won't greatly alter 2012 auto sales, said Jeff Schuster, top forecaster of the Americas for LMC Automotive, formerly a unit of J.D. Power and Associates. He forecasts sales of 13.8 million.

A sharp European recession would trim 2012 U.S. light-vehicle sales by no more than 300,000, Schuster said, while a U.S. economic surge might add 200,000 units. More important are pent-up demand, larger inventory and growing credit availability.

"So 2012 depends on those positive trends and the will of consumers to replace vehicles," he said.

Jesse Toprak, vice president of TrueCar.com, said: "Consumers are changing their attitude. Many are comfortable buying a car even though there is no clarity on the economy."

Even relative pessimists say U.S. consumers are harder to scare.

"Consumers are feeling insulated from bad news and secure in their own jobs, so pent-up demand has been driving sales," said Mike Jackson, head of North American auto forecasting for IHS Automotive, who sees 2012 sales at 13.3 million. But Jackson worries that if conditions worsen, particularly if Europe's debt crisis affects credit availability in America, "then consumers will once again postpone purchases."

Most forecasters minimize the odds that troubles in Europe will hurt U.S. auto sales. Polk's Germany-based analysts, for example, compare the debt-crisis debate there to the August U.S. debt-ceiling squabble, said Anthony Pratt, Polk's director of research, Americas.

"There will be lots more noise yet, but in the end it'll get done," Pratt said.

Paul Taylor, chief economist for the National Automobile Dealers Association, says that if European sales falter, U.S. shoppers could benefit.

"German automakers will target the U.S. market to sop up excess capacity," Taylor said. For the same reason, he said, Asian automakers would boost shipments to North America, probably triggering higher incentives and sales.

The increase in sales will be mirrored by a rise in North American production. In fact, four forecasters project the same North American light-vehicle production next year: 13.8 million, up from about 13.0 million this year. That's about the same rise as U.S. sales.

The four prognosticators are IHS Automotive, LMC Automotive, NADA, and Polk.

Most forecasters see sales momentum accelerating in the second half of 2012.

Adam Jonas, top global auto analyst for Morgan Stanley and the most optimistic forecaster at 14 million, expects the seasonally adjusted annual sales rate -- which has been slightly above 13 million since September -- to fall back into the high-12 millions in the first quarter and then start to build.

"We expect a slow start" in 2012 once a flurry of Japanese catch-up buyers eases and because of the end of the accelerated-depreciation (business tax rule that has boosted truck sales) on Jan. 1," Jonas said. "Then the SAAR will improve to the 14 million level by May or June and exit the year in the high 14s."

Forecasters said the recovery of auto sales, from a low of 10.4 million in 2009, likely would continue the slow pace into 2012. The economic fundamentals most closely tied to auto sales -- personal income, unemployment rate and housing starts -- are still weak.

But other factors are helping sales, especially the need to replace America's aging vehicle fleet. The average age of vehicles on the road has risen to 10.7 years, up from 8 or 9 years during most of the past decade, said Tom Kontos, executive vice president of customer strategies and analytics for auction house ADESA.

"Americans have gone without for a very long time," he said. "'I need a car' is the biggest reason for optimism."

Morgan Stanley's Jonas cited higher leasing rates, new model launches and better credit availability.

It's no longer difficult to finance new-car buyers at Egglefield Ford in Elizabethtown, N.Y., said owner Dennis Egglefield.

"A buyer with a 620 credit score can get a loan in the 4 percent range," he said. "Lenders are actually trying to do some business."

------------------------------
(Source: Automotive News, 12/26/11)

GM’s Chevy Eyes One Of 35 Indie Films As A Super Bowl XLVI Commercial

General Motors division Chevrolet has for the past few months been soliciting from filmmakers worldwide submissions for an ad that could potentially run on NBC during Super Bowl XLVI.
Chevy has closed the competition but opened another: People can visit a dedicated Web site to vote for their favorite.

In addition to getting a sneak peek at at a possible Super Bowl spot, visitors to the site have the opportunity to win up to $10,000, which is part of a larger $15,000 purse being offered by the automaker for watching and sharing the entries. (Full details here.)

GM is planning to have five 30-second spots on Feb. 5, one of which will go to the winner of this competition. Ad time has been selling for upward of $3.5 million for a 30-second space, per analysts, but companies with multiple spots usually pay a lower bundle rate.

The Chevy Super Bowl event, under a “Chevrolet Route 66” umbrella, is running now through Jan. 26, 2012. After that, Chevy execs will look at the films that have received the most views to help make their final selection.

Chevrolet has been working with Microsoft on the project.

The company said it received nearly 200 submissions from 32 countries, including Brazil, Canada, China, France, Germany, India, Mexico, the United Kingdom and United States. Chevy said that growing percentage of its sales are coming from international car buyers and is using this promotion, in part, to strengthen those bonds.

Among the 35:
• “Happy Grad”: Parents are giving their son a mini-refrigerator as a high school graduation present for his college dorm. He and his friends mistakenly think he’s getting a 2012 Camero. “Best gift ever!” they all yell as a neighbor, who actually owns the Camero, drives away.

• “Miss Van Der Volt”: A woman lets her friend sit inside her new Chevy Volt. Once inside, the friend envisions herself as a super heroine – Miss Van Der Volt. After she gets out of the car, the Volt owner’s other friends fight for their turn behind the wheel.

• “Dogs And Horses”: In a similar vein, a dog eyeballs a new black Camero, but not for the tires. He pictures himself behind the wheel, head out the window, speeding down an open highway. The dream ends when the car’s owner catches the pooch behind the wheel. Turns out this is not the first time. “George,” yells out the car owner, “you dog’s sitting in my car again!”

• “Cindy, I Love You”: A young man is seemingly seeking to cross items off of his bucket list. Next up: Telling a former girlfriend that he loves her. He drives to her wedding ceremony in his Chevy, bursts through the chapel door and yells, “Cindy, I love you!” The woman, in her wedding dress, replies, “My name is Candy.” The awkward moment becomes sentimental when it turns out the guy was completing a list for his deceased friend. “You had the worst handwriting ever,” the guy says about his friend as he moves on to the next task.

• “School’s Out”: A grade school teacher has the rapt attention of his class, even after the bell rings and the weekend arrives. The kids even follow him out of the classroom and to the parking lot. Turns out that he has a new Camaro. When he gets in and revs the engine, all of the kids go “Oooooh.” Then one of the students says to the other, “When I grow up I want to be a teacher.”

BigLeadSports : Business, NFL, Super Bowl Ads, Super Bowl XLVI Barry Janoff

U.S. Auto Sales on Road to Recovery

The leader of the largest U.S. auto dealership group, AutoNation Inc., predicts U.S. automobile sales will accelerate the last three months of 2011 and rise in each of the next two years.

AutoNation CEO Mike Jackson said last week he expects U.S. sales of cars and light trucks to reach a 13 million vehicle annual rate by the end of the year.

"The auto recovery is going to resume probably in October," Jackson said in an interview with Reuters. "We're on a journey back to 16 million, 17 million. I can't tell you exactly when we're gong to get there, but we are going to get there."

Jackson spoke on the sidelines of a meeting of AutoNation dealers and employees from Colorado in downtown Denver led by the CEO, as well as AutoNation President Mike Maroone that was part business and part rally.

Jackson said it was too early to project U.S. auto sales for 2012. He said he wants to wait to see the trajectory of the recovery near the end of the year.

However, a slide Jackson showed in a presentation to the roughly 200 employees last week projected U.S. auto sales at about 14.2 million vehicles in 2012 and 15.9 million in 2013.

Research firm J.D. Power and Associates expects U.S. auto sales of about 12.6 million vehicles in 2011, about a 9 percent increase over 2010. J.D. Power expects U.S. auto sales to reach 14.1 million in 2012.

Jackson said much of the U.S. auto industry will have recovered by October from the March earthquake and tsunami in Japan that limited inventory for Toyota Motor Corp., Honda Motor Co., and, to a lesser degree, Nissan Motor Co.

Jackson, 62, said he is "convinced" U.S. new auto sales will return to more than 16 million per year in part because consumer auto loans have become available after the 2008-2009 recession quicker than home loans.

"We have reasonably good financing available for our customers; not what we had in 2005, 2006, 2007, but we may never have that again," Jackson said, adding that there is pent-up demand to drive sales.

No price wars
Maroone and Jackson said they do not expect a "price war" among automakers and dealers as they try to appeal to consumers in the fourth quarter.

"The whole business is much more disciplined, rational; much more focused on the long-term," Jackson said.

He pointed to the discipline on incentives by the Detroit automakers during the inventory woes of Toyota and Honda.

"Incentives are going to be better than they have been for the last six months," Jackson said, adding that they would not approach a level that would trigger a price war.

(Source: Automotive News, 09/23/11)

Making Brands Relevant

Top Marketers Move Beyond Heritage

Chevrolet and Volkswagen are each blessed with a rich brand heritage, but making that tradition fresh and forward looking -- well, that's a challenge for their marketing chiefs.

At Volkswagen of America, for instance, new marketing boss Tim Mahoney plans to use the phrase "That's the power of German engineering" in advertising.

That pitch sounds familiar, so you might be steeling yourself for another round of VW commercials that tout advanced technology and driving performance.

But Mahoney says he can move beyond "cold sheet metal" and tell emotional stories about, say, the performance of VW's vehicles, environmental topics or VW's new plant in Chattanooga, Tenn.

"It's about the human feeling that people have" for the brand, he says. Mahoney joined VW in May from Subaru of America Inc.

Recently, Mahoney and six other leading auto marketers shared their ideas with reporters and editors of Automotive News about brand identity, product advertising, social media and other topics.

At Chevrolet, brand strategists will move beyond the current heritage campaign, "Chevy Runs Deep," with advertising that stresses the brand's technology and products, such as the Volt plug-in hybrid.

"We have a new (Volt) campaign coming out soon that will explain the car well, which people say we haven't done," says Jeff Goodby, co-chairman of Goodby, Silverstein & Partners. "It will bring to the forefront what Chevy is doing, as the bellwether of what the brand can be. But a lot of the power of this car comes from knowing what it does, not from zingy commercials."

Jim Farley, Ford Motor Co.'s marketing chief, is devising new ideas to sell a luxury brand, Lincoln, as the company strives to improve the brand's vehicles.

He plans marketing that emphasizes "elegance and design excellence and excitement of driving."

Another upscale brand, Buick, needs a fresh brand identity. Joel Ewanick, General Motors' global marketing chief, says Cadillac and Buick will play to different luxury customers.

Cadillac is "very distinctive, high-powered, has lots of energy," he said. Buick, on the other hand, is "this very approachable, very human kind of luxury, understated luxury."

Engage consumers
Marketing today is not just a matter of having the right message. That message also needs to be delivered in new ways, reaching consumers where they gather in ways that are appropriate. The marketing chiefs are using social media, such as Facebook and Twitter, as a tool to engage consumers in ways that are more personal than traditional advertising.

For instance, Toyota Motor Sales U.S.A. Inc. asked consumers to vote for a charity that most deserves a free car.

"There are ways to get them engaged in products and the brand so that it's genuine and they want to participate, as opposed to forcing it on people," says Bill Fay, Toyota's group vice president of marketing.

At Ford, Farley likes to start social media campaigns early, well before the car goes on sale. And his spending on social media and other digital marketing is growing.

"Now social media and our investments are right up there with search and other digital banner advertising," he says.

Some of Ford Motor's ideas on using social media arose from what Satish Korde, CEO of Team Detroit, Ford's ad agency, saw in China. Because state TV is managed, bloggers in China are very important, he says.

Farley also is trying to make greater use of smartphones. But finesse is required, he says, because the smartphone is a "personal device," on which advertising can be annoying.

"You have to add value to people's life if you're going to market on there," Farley says. "People want something that's very practical such as "I'm in your showroom. I have a smartphone. I don't want to go home and watch a video on how the inflatable seat belt airbag on the Explorer works. I want to find out right now. I have a smart device, so make it easy for me.'"

Relinquishing control
With social media, marketers should be willing to relinquish some control of the message. Doing so, they say, can boost the credibility of the message.

For example, for the 2011 Buick Regal, consumer comments about the car -- good, bad and otherwise -- were compiled and posted for all to see "in a very open, transparent and honest way," says Rich Stoddart, president of Leo Burnett North America, which handles Buick and GMC.

"It became a way to get the word out about what was happening and let the consumer control it. We got a whole lot of positive response to that in terms of buzz."

Toyota's Fay believes social media can reach young people, who are watching less TV. "We're looking for where they are spending their entertainment time," he says. "Largely, that's on the Internet, through different gaming and Sci-Fi and comics."

At VW, Mahoney will use social media for the Beetle. For the U.S.-made Passat, though, he plans a significant increase in TV advertising.

He says: "If you don't see our advertising this fall, you must be out of the country."

(Source: Automotive News, 09/12/11)

Three Years After Crash, Pipe for Used Cars Slams Shut

When Lehman Brothers collapsed three years ago this week, new-car sales did, too.

So, starting this week, the shortage of late-model used cars -- already causing used-vehicle prices to soar -- will worsen dramatically because so few three-year lease cars are returning.

Only 90,000 leased BMWs are returning this year, for example, compared with 146,000 in 2008.

Dealers are having trouble getting enough used cars. And the short supply means used-car prices are bumping up against some new-car prices. For example, kbb.com lists a used 2008 Chevrolet Malibu LTZ with 23,000 miles at $19,950 -- and a new 2012 Hyundai Sonata GLS at $22,450.

And things will stay that way because three years of far-below-trend new-car sales mean tight supplies of used cars until 2014 or later if the economy doesn't pick up. Jonathan Banks, an analyst at NADA Guide, said returns of three-year leases will be especially low starting in the fourth quarter.

The short used-vehicle supply is a problem for dealers because they depend more than ever on used-vehicle volume to make up for low new-vehicle sales.

Compounding the problem: The high values of cars coming off lease now mean more customers will buy their vehicles at the end of the lease term because the purchase price is significantly lower than that of a comparable replacement.

Keeping lease cars
At Mercedes-Benz of South Orlando in Orlando, dealer Dorian Boyland says owners are buying 30 percent of their Mercedes vehicles at the end of leases -- a higher percentage than in the past.

Boyland said he keeps most trade-ins and lease returns for his used lot, but he must also buy at auctions to stock his certified used-vehicle program.

"You cannot live on your lease returns...to be in the certified pre-owned business," says Boyland, owner of the 13-store Boyland Auto Group. "There is not enough off-lease inventory to do that."

Factories once subsidized low-cost lease deals mainly to boost new-vehicle volume. Now they are setting leasing strategies with an eye on eventually feeding dealers and the automakers' own certified used-vehicle programs, said Eric Lyman, director of residual value solutions for ALG, which forecasts future used-vehicle prices and supplies.

"Leasing can be a sales channel for used-vehicle stock that a manufacturer controls," he said.

That has increased significance since automakers ceded control of rental-car returns. Back when automakers, especially the Detroit 3, sold hundreds of thousands of "program cars" to rental companies and bought them back at a loss, dealers got lots of same-make used cars. Today, rental fleets buy fewer vehicles, keep them longer and take the risk of reselling them. So automakers can't funnel them to their dealers.

Shaun Bugbee, vice president of sales and marketing for BMW Group Financial Services, said a strong supply of late-model used vehicles for BMW dealers is key to setting a leasing strategy.

"It's extremely important that our dealers have a good supply of used vehicles," he said.

Limited availability is forcing dealers to sell older, high-mileage vehicles. Publicly held Penske Automotive Group is among dealership groups now selling vehicles that they used to sell at wholesale.

For example, penskecars.com recently listed a 1995 Nissan Pathfinder with 197,292 miles for $1,588 and a 2003 Ford Taurus with 164,945 miles for $2,988.

NADA Guide says used-vehicle supplies will fall 5 percent this year and another 4 percent in 2012. ALG says supplies will hit rock bottom in 2012 and 2013 and won't return to 2008 levels until 2017.

Counting only 3-year-old used, kbb.com sees the bottom 12 to 18 months out.

"We won't bottom out until late 2013," said Greg Russell, national risk manager for Toyota Financial Services, counting up to 5-year-old vehicles. "It may be a decade until we return to the supply of used vehicles we once had."

Less auction action
With dealers keeping almost every used vehicle traded-in, auctions are being hit hard. And dealers also are more willing to buy used vehicles online and outside of the traditional auction channel.

Auction operators are consolidating sites and buying competitors. In June, privately held Manheim, the nation's largest auto auction company, closed half a dozen auctions. It now has 73 North American auction sites.

In August, Jim Hallett, CEO of KAR Auction Services Inc., parent company of No. 2 auction house ADESA Inc., said forecasting future conditions is difficult. ADESA recently agreed to buy online auction competitor Openlane Inc.

In the second quarter, ADESA's vehicle volume fell 14 percent. Nationally, auction volume fell 11 percent in the second quarter, the National Auto Auction Association said.

Larry Dixon of NADA Guide said: "We're very bullish on the used-car market," although he doesn't see prices continuing to rise.

"On the flip side, we don't expect prices to drop off dramatically either," he said.

ALG's Lyman forecasts prices for used vehicles will peak in January and then slowly ease.

"As a recovery starts, the first buyers to come back are focused on used cars, the rational, safe buy," he said. "But as the recovery gets stronger, buyers shift their attention to new cars."

Projected residuals on 3-year-old off-lease vehicles at mainstream brands are 48 percent of retail value so far this year, up from 45 percent in the first eight months of 2008, Lyman said.

But the residual forecasts set by ALG and others are not high enough to suit some carmakers. Eric Ibara, director of residual value consulting at Kelley Blue Book's kbb.com, expects captive finance companies to increase their projected residual values on leased vehicles, thus cutting the payments for consumers.

Essentially, automakers would be betting that those cars will be worth more three years from now than kbb.com thinks they will.

Said Ibara: "As long as they reserve for the difference between their enhanced residual and the more realistic residual, they should be OK."

(Source: Automotive News, 09/12/11)

Auto Price War Looms as Japanese Restock Showrooms

Here comes an auto-incentive war, says Kelley Blue Book's kbb.com.

As Japanese automakers refill their inventory pipelines, they will be offering big incentives to get shoppers back into their showrooms and keep them away from a basketful of credible rivals.

That will trigger incentives by rivals hoping to hang on to gains they've made since the March earthquake and tsunami in Japan wrecked production of cars and components.

Also figuring into the kbb.com forecast: New models from the Japanese brands. Among them: An updated Toyota Camry that will offer a lower-price, higher-power, better-mileage, gas-electric hybrid version; a freshened Honda CR-V, which is the second-best-selling SUV in America, behind only the Ford Escape, according to tallymasters at Autodata.

KBB.com "anticipates strong incentives late in the year in the form of cash and attractive lease offerings. As the Japanese replenish inventory and begin to throw cash on the hood, expect to see the domestics follow suit, setting off an incentive battle."

Bad news for automakers' bottom lines. Great news for auto buyers. Here's more from the kbb.com report:

"Prior to the earthquake, Japanese brands were consistently capturing close to 40% of all United States sales, but since April they have seen their monthly share of sales dwindle to nearly 30%. As Japanese production facilities return to full capacity in the near future, expect to see strong incentive support from these manufacturers as they aggressively try to recapture lost market share.

"While (South Korean brands) Hyundai and Kia sales are strong, neither currently has high-enough inventory levels to support incentive programs big enough to compete with the Japanese brands. Neither of the Korean brands have the production capacity to satisfy current demand for their products as evidenced by their ultra-lean 19-day supply of vehicles currently available to consumers.

"Under those conditions, consumers in the market for a new vehicle will likely find plenty of attractive deals in the latter part of the fourth quarter."

"While the earthquake in Japan halted sales recovery earlier this year, the anticipated push by the Japanese to recapture market share will likely help sales later this year," said Alec Gutierrez, manager of vehicle valuation for Kelley Blue Book. "Since May, Japanese brands have given up considerable market share to both domestic and Korean manufacturers."

(Source: USA Today, 09/12/11)

Senior Customers Require Balancing Act

TrueCar.com's review of the purchasing behavior of more than 200,000 car buyers from 2009 and 2010 shows that seniors (people 65 years of age and over) choose vehicles from brands they grew up with. Topping the list of brands purchased by seniors in that period, by percentage of buyers, were Buick, Lincoln and Cadillac.

"It's sort of a good-news, bad-news scenario for automakers," says TrueCar head of industry analysis Jesse Toprak. "It's good news because of the high loyalty and admiration for the brands among these older consumers. It's bad news because, well, they won't be alive forever.

"So it's a balancing act, really. I talk to these guys and it's a challenge they live. It's something they think about every morning when they get up: how do we not alienate our loyalists while trying to bring younger buyers into the brand?"

If the relative percentages of older buyers among brands were low, it wouldn't be such a nightmare for marketers. But the numbers say it all: 57.5% of Buick owners in 2009 and 2010 were over 65, per TrueCar stats. For Lincoln, it's 47.7%. Cadillac sold 44% of its cars during that time to seniors. After that comes Chrysler at 36.1%. General Motors sees a more youthful balance with GMC, at 32.4% over-65 buyers, and Chevrolet, which is just above Porsche, at 31.2%. After Porsche (29.5%) come Lexus, Jaguar and Hyundai, a quarter of whose buyers are 65 or older.

Toprak says the key to appealing to all consumers is to have (and market) tech-forward cool vehicles that younger buyers like, and trim levels that older consumers may also respond to. "It all comes down to the product. In spite of image, you can still sell to a younger and hipper audience with the right vehicle." Case in point from some years back before Buick had begun revamping its lineup with vehicles like the Enclave: the Buick Rendezvous, introduced in 2001 and built on the same platform as the (much mocked) Pontiac Aztek had waiting lists in California, notes Toprak, who said those buyers were 40-somethings. Same drill for the Enclave.

Another pattern emerges with a quick glance at the specific models with the highest percentage of older buyers: about 90% of buyers of the Lincoln Town Car are 65 or over. Next is the Buick Lucerne full-size luxury sedan, 86.6% of whose buyers are seniors. After that comes the big Cadillac DTS, the CTS Wagon, STS large car, the Hyundai Azera full-size sedan, and Chevy's largest car, the Impala. The list also includes the Toyota Avalon full-sized sedan. The only mid-sized cars on the list are Buick LaCrosse and Lincoln MKZ, 58.9% and 53.8% of whose buyers were 65 or older in the past two years. For the most part, big cars mean older buyers.

"That's the general issue; large cars don't appeal to younger people; it's really a category problem," says Toprak, who notes that luxury brands like BMW and Mercedes-Benz have smaller vehicles in market or in the pipeline to appeal to younger buyers: BMW launched the 1-Series in 2004 and Mercedes-Benz plans a small car for the U.S., perhaps based on its Europe-market A-Class platform. These are "leapfrog" cars that a 20-something can buy and then move up from as they get older and hopefully more affluent, notes Toprak.

"It's not just image -- it's practicality, he says. "If they offer vehicles with very attractive lease payments that younger buyers with better cash flow can get into, you get a much higher chance of succeeding."

(Source: Marketing Daily, 07/29/11)

The Coming Year-End Automotive Share War

As Stock Rebuilds from Japan's Disaster, Dealers Expect Scads of Ads and Big Incentives

As supplies of Japanese-brand vehicles start to return to normal, U.S. car dealers expect automakers to spend hundreds of millions more on incentives and advertising in an attempt to salvage 2011.

Spending should soar in the fourth quarter, about the time vehicle inventories return to normal, said leaders at some of the nation's largest dealership groups. Add important fall vehicle launches -- notably the redesigned Toyota Camry -- and look for a drive to grab market share and a year-end surge in vehicle sales.

Summer remains a problem. Inventories have grown in recent weeks, but some retailers say they still have only half their normal supplies of Japanese-brand cars and trucks because of the catastrophic March earthquake.

"You will see one hell of a manufacturers' price war for final 2011 market share" if vehicle inventories and the supply pipeline reach pre-earthquake levels before Dec. 1, predicts David Wilson, president of the big David Wilson Automotive Group in Orange, Calif.

Other retailers avoid the term "price war," saying manufacturers will try to hang on to some of the additional margin provided by the shortages. The vehicle shortage has allowed factories to reduce incentives and dealers to increase gross profits.

But some falloff in dealers' new-car grosses is inevitable as supplies grow, retailers say.

Executives at top dealership groups AutoNation Inc., Penske Automotive Group, Group 1 Automotive Inc., Asbury Automotive Inc. and Hendrick Automotive Group all expect incentives to rise when supplies fully recover.

Shifting shares
Largely because of Japanese vehicle shortages, market shares have changed dramatically this year.

From the first quarter of 2011 to the second, postquake quarter, Japanese automakers lost 6.7 share points, to 32.1 percent of the U.S. market. Toyota alone lost 2.6 points, to 11.6 percent.

Major gainers from the first quarter to the second were Hyundai-Kia, up 1.7 points; Ford and Chrysler Group, each up 1.4 points; and General Motors, up 1.1 points, according to the Automotive News Data Center.

Asbury executives expect big incentives during the final three months of the year as Japanese brands fight to regain that lost share.

"We are very much looking forward to the fourth quarter," Asbury CEO Craig Monaghan said. "If you're a manufacturer who lost share, you're going to be aggressive. If you're a manufacturer who has gained share, you're going to fight hard to keep what you have."

Group 1 CEO Earl Hesterberg said Toyota and Honda have made it clear they will compete hard to win back share.

Dusting off the ad budgets
AutoNation CEO Mike Jackson said manufacturers that cut marketing during the vehicle shortage now are under budget and will want to spend the budgeted money to hit year-end sales targets.

"And we have thousands of customers who have told us they're waiting for both the specific vehicle they want and/or different incentives," Jackson said. "So I think they all come back into the market."

For December, he predicts an annual selling rate close to 14 million units. May and June, reflecting the earthquake's impact, had a disappointing annual rate under 12 million.

Bob Carter, general manager of Toyota Division, noted that Toyota has stayed in the "incentive game." But he says Toyota and Honda are at the low end of automakers' incentives.

"You will see us stay aggressive and keep our cars competitive," Carter said. Except for the Tundra pickup, which requires cash rebates of at least $2,500, large cash offers are not part of the strategy, he said. Toyota will choose discounted leasing and low finance rates.

Toyota already has increased incentives, some retailers said. According to industry researcher TrueCar.com, Toyota's per-vehicle incentive spending soared 36 percent from May to June, to $1,900. That put the automaker back near the incentive spending it carried during the first few months of the year.

The industry average in July was $2,418 per vehicle, down 15 percent from a year ago, TrueCar.com said.

Ford CFO Lewis Booth said last week that the company is bracing for runups in industry incentives as vehicle inventories are replenished in the second half. TrueCar estimates Ford is spending $2,747 per vehicle.

Will Perry, an analyst with Dataium LLC in Nashville, predicts fourth-quarter promotions will be pitched as year-end clearance offers.

Dataium tracks online automotive shopping activity, such as Web site traffic, vehicle searches and generated leads, to predict sales. Current online activity suggests sales will rise this fall, Perry said.

Shopping intensity for Japanese brands diminished after the earthquake, he said.

Dataium's July report showed shopping intensity up 15 percent from May to June for the Japanese brands as a group. In June, Web sites of Honda and Toyota dealerships generated 21 percent more leads than they did in May.

Q3 challenge
Before enjoying a year-end surge, manufacturers and retailers must get through the third quarter.

U.S. inventories were at a 54-day supply at the beginning of July, pulled down in part by a slim 45-day supply for Toyota Motor Sales and a 35-day supply for American Honda Motor Co.

"The next 30 days are still going to be difficult with regard to availability," said Tony Schnurr, president of the auto division at Larry H. Miller Group of Cos., a large dealership group in Salt Lake City.

Supplies will be tight for the next couple of months, particularly for Honda. Nissan and Toyota are further ahead, even back to normal supply on several vehicle lines, they said.

Lithia Motors Inc. projects that Japanese inventories won't return to normal until the first quarter of 2012.

At Sonic Automotive, Jeff Dyke, executive vice president of operations, said his group should have normal Toyota stock in August and normal Honda stock by September: "We're going to get a lot of inventory."

But as of last week Sonic had only a 10-day supply of Hondas and a 30-day supply of Toyotas.

Even when supplies return and competition heats up, Dyke thinks manufacturers will be smart about incentives: "Why should you pump up incentives when you have demand?"

(Source: Automotive News, 08/01/11)