Volvo dealers: We need better marketing, advertising
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Chip Ott Age: 66 Dealer since: 1976 Dealership: Volvo of Fort Washington, Fort Washington, Pa. Other brands: Volkswagen, Mazda, Fisker Average monthly sales at Volvo dealership in 2012: 30 new, 20 used Quote: "We need to get our act together collectively so that we can increase business. Everybody's sort of floundering right now. We're a very concerned retailer group." |
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With nearly flat sales and sluggish store traffic in 2012, Volvo dealers are worried.
Though freshened XC60 and S60 models are to go on sale in the second half of the year, they alone won't lift Volvo's prospects, dealers say.
The brand needs better marketing and an increased advertising spend, says Chip Ott, who owns a Volvo store in Fort Washington, Pa.
Volvo reported 2012 sales of 68,117 vehicles, up 1 percent from 2011. Industry sales, meanwhile, rose 13 percent.
Staff Reporter Amy Wilson spoke with Ott, outgoing chairman of the Volvo Retail Advisory Board, about what's ahead for Volvo.
How was 2012 for Volvo dealers?
Absolutely flat. Disappointingly flat. Not where we wanted to be flat.
A year ago the brand targeted at least 71,000 new-vehicle sales, and you came in around 68,000. Dealers hoped for closer to 100,000. What happened?
I blame it on our lack of marketing and our lack of advertising money last year. We had good programs. The last month of the year we had our captive financing company come in. But because of budget constraints, we just didn't have enough money to advertise our good programs in a way that brought people in. The cars were good and the programs were good. But we just had no floor traffic.
Last year you said you expected a 20 percent increase in the advertising and marketing budget. Did that happen?
It's really difficult to say if that actually happened or not and where the 20 percent was spent and how it was spent. It's nice to say in the beginning of the year that you're going to see a much bigger advertising budget.
But that only works if you can actually see that advertising in place in mainstream measured media. I can't tell you if we actually got that or not.
So you didn't see it?
No. It may have been up from the year before. But I can't tell you that.
We were scrambling so much the last three months of the year where we were really having our decline. We were going along not great but reasonably good. Then September, October, November were really, really bad. A lot of things happened.
Parts of the country, because of [Hurricane] Sandy, in November did really well. They had a big influx of sales, which helped our national month look pretty good. But other parts of the country: California, not good, and South Florida, very discouraged this year.
It was not an inventory problem?
It was absolutely not an inventory problem. We had plenty of cars.
The year before we had inventory shortages on XC60, and that hurt us in Q4 2011. But that was not the case in 2012.
We were ready for the customers if they came in. Unfortunately, they didn't come in.
Where does that leave you? What are the major issues for Volvo dealers going into the year?
Marketing is going to be one of our big issues. We changed our tactics a little bit this year. Last year we had Safe+Secure, which covered wear and tear on the car along with maintenance for five years/50,000 miles.
Now we got rid of the wear and tear part. All the money they save is going to be put into marketing. We do have an increased marketing plan. It's going to be much more robust than it was last year.
Were dealers OK with dropping wear and tear?
We don't like dropping anything, but realistically that was not a traffic driver.
It was a good closing tool. Now we're going to try to build more traffic generation.
How much money was freed up for the rest of the marketing program?
They don't tell you. All they could do is assure us the money is going to be put into marketing.
Did they give you a percentage increase expected for the year for the marketing budget?
It was like another 20 percent increase, but I don't know if that was over last year or how they figured that. I honestly don't know how much more we're going to be spending.
Is what they plan to do adequate?
No. I don't think it's adequate compared to our competitors. We're still underfunded in the U.S. if you look at our marketing and advertising. We're nowhere near where everybody else is. At the same time, everybody else has new cars, and we're a little handicapped going into '13 with losing a car. We're losing C30, and we lost S40 before. We're going to be losing C70.
Now we're down to selling XC60, S60, XC90 and a few S80s, which is kind of long in the tooth. Our XC90 is 10 years old this year. We have two fresh products: the S60 and the XC60. For the first half of the year, we're really handicapped on what we sell. We have a face-lift coming midyear for the 2014 models. That should give us a boost in sales going into Q3 and Q4.
When are the C30 and C70 out of stores?
C30 is done now, and C70 will probably go through the year but be gone for next year.
We do have our captive finance company in full operation right now. That came in at the very end of 2012, in December.
They've done a really good job of working with us. We have different term leases. We had a lot of things we were really handicapped with before.
How big of a problem is it not to have a small car for the entry-level consumer?
It certainly isn't going to help us as a brand going forward. It gives you one less car to market. If we look at our competitors -- BMW, Mercedes-Benz and Audi -- they have a whole bunch of different models they can sell people from entry level all the way up to very expensive cars.
We're basically in the S60 and XC60 business. They're our two mainstays, with an aging XC90. We need to dominate those segments, not just be reasonably good, because we don't have enough segments we participate in.
What other products do you need?
We are anxiously and patiently waiting for our XC90 replacement. That's a critical car for us, a seven-passenger people mover. A small entry-level car would be a good thing to have. We've got a V60 in Europe that's a neat-looking sport station wagon. They also have a V40, which is more of a sport hatchback. Both of those would fit well in our market.
Has Volvo committed to bring those to the United States?
No. We have a verbal "We're going to really try with the V60." And I don't think we'll see the V40 at this point.
Volvo has gone through some changes this year with [former CEO] Stefan [Jacoby] gone and a new fellow coming in, Hakan Samuelsson. I had the opportunity to talk to him at the Detroit auto show.
Look at the path we've taken from [the early 2000s] to now. We went from 140,000 cars to a low of 53,000 cars and now back up to 68,000. If you compare that to our competitors, they all dropped in 2008-09, but they've all had rapid increases from then and rode the wave of the car boom in the U.S. We didn't.
How confident are dealers in the brand and its management and that appropriate investment is being made going forward?
We're a concerned group of dealers. We have -- and I hate to use this word -- hope things are going to move in a different direction. But in the last couple of years, we haven't seen it. We've been flat.
We need to get our act together collectively so that we can increase business. Everybody's sort of floundering right now. We're a very concerned retailer group.
Are some dealers shedding the brand?
No. We probably have the most dedicated dealer body. We're still steady at 315 dealers. We are the most passionate, the most loyal, the most dedicated group of dealers around. But we're concerned right now.
If dealers don't see increased marketing and more product investment, will they drop Volvo?
Those things are in place. I've been to Sweden a few times and I've seen what's coming. When Ford decided to sell the brands, they put us in a holding pattern so nothing was being invested in future product.
Then Geely bought the brand, and Stefan had great ideas of what to do. We do have a good direction. We have good product on the drawing board and going into production. But we're going through this waiting period until we actually get there. The waiting part is really difficult right now.
What is the product cadence?
Model year '14 we have the face-lifted cars. Model year '15 those cars will have new engines and more fuel efficiency. Model year '16 we'll have our new XC90, which will come in hopefully the early part of '15. It's the full redesign. S80 will follow after that. Then we have new products to replace aging products in a regular cadence after that.
Which models are getting the face-lift this year?
The face-lift, for the first time, is a meaningful face-lift. The cars do look different. XC60 and S60 are the two [getting that]. S80 is getting a face-lift; it's not as meaningful as the other ones.
Volvo's new CEO has said he'd like to bring the station wagon back and he's interested in a crossover smaller than the XC60. What do you think of those products?
Any cars we bring into this country to sell, we need to support the product. We need to advertise it. The problem we've had with the last couple of cars, like the C30, is we had a stealth launch. We didn't advertise it. We didn't market it. We didn't tell anybody about it. We just had the car and had to figure out how to sell it ourselves.
But if we do it correctly, yeah. We have a great product lineup. We have great cars in Europe. We need to bring some of these future design characteristics into this country. One of the things that needs to be changed that we've harped on for a long time: Make sure we build global cars and not just European cars.
Is Volvo still committed to its target of getting U.S. sales back to 120,000 by 2020?
I want to say absolutely. [Samuelsson] believes we need to be back there. I'm more optimistic. I think Volvo needs to be a 1 percent [market share] franchise. So if we're looking at a 14 million SAAR, we need to sell 140,000 cars. We need to be around there to be a viable franchise.
How far away is that in the United States?
I'd like to say it's '13-'14, but I think realistically it's probably '16-'17.
Has management given a sales target for 2013?
No.
What do you realistically think the brand can do this year?
The brand can do 75,000 cars based on what we did last year. We should do more than that. Nothing happens in our business until we sell cars. We can't service them or do anything until we sell the car.
Service typically helps dealers through slower times.
Absolutely. But our service business is still in decline from the declining sales we had the previous three or four years. c
