Beware, TV representatives and third-party, lead-generating Web sites: The auto industry is sick and tired, and it's not going to take it anymore.
When the auto industry's four top marketers met in January at the Automotive News World Congress, one thing was on their minds: cost pressure. As Wall Street demands profitability and the economy heads for a downturn, the marketing chiefs for the top-selling U.S. automakers warned they will be watching their marketing costs and media buys more closely.
That means holding the line on media prices, eliminating incentives on hot new products and developing their own Internet leads for dealers. At the same time, they will be pushing their media partners and agencies to develop better creative strategies to reinforce brands.
Here are excerpts from the discussion of a panel that included auto representatives Jim Schroer, global marketing vice president at Ford Motor Co.; Bud Liebler, senior vice president of global brand marketing at DaimlerChrysler; John Middlebrook, vice president and general manager, vehicle brand marketing and corporate advertising at GM; and Jim Press, COO of Toyota Motor Sales U.S.A. Inc.
'I don't think we can pay price increases for TV anymore. The price-value equation doesn't keep going up. We kind of got ourselves into a conventional wisdom that said `Oh yeah, there are price increases every year, and there are media increases every year.' The shareholders and consumers are holding up a big stop sign saying, `No.' '
Jim Schroer, Ford Motor Co.
'Even though they are squeezing more commercial minutes into every hour, every day and squeezing 30 second (spots) into 27 seconds, there's a finite amount of time available on television. And in the last couple of years, you've had dot-coms, pharmaceuticals and financial services, and, oh, by the way, each one of these companies (represented on the panel) has 18 models to sell that they didn't have before. Network television could charge these premiums. Sometime that may change, and that may be now. We are not going to be able - forget able - willing to pay those increases. We have other alternatives. Print prices haven't gone down either, but our print partners have come to the party this year. I have proposed (cutting television budgets) internally. We came close (to walking away) during our up-front negotiations with one of the TV networks, but we didn't do it.'
Bud Liebler, DaimlerChrysler
'No one wants to give up market share. You've got to go with either sales or profits, and you go with your winner. We're pretty excited about the launch of six new products in the next few months that will reduce the reliance on incentives. There are certain parts of the market and certain products that are going to be incentivized.'
John Middlebrook, General Motors
'I think we all got greedy and saw the market going up. We love seeing the market going up and our factories working overtime and time-and-a-half. And as one guy put in an extra $100, the next guy put in an extra $100. We have got to get back to selling product. I feel so frustrated in having to sell programs and incentives.'
'When you introduce a new name or a new category, you better think about it because it's going to be expensive. You've got to spend some pretty good bucks to get awareness and consideration up for a brand that doesn't exist. So in order to stretch dollars in other areas, we are thinking hard about how we take brand image and get more out of it. So you see Yukon XL rather than Suburban for GMC. You'll see more of that kind of brand extension. For instance, we're doing an Escalade, then an Escalade EXT, rather than coming up with a new brand name. We just can't afford to keep coming up with new names.'
'We don't advertise all of our products. There are different marketing tools that you use throughout the life cycle of the product.'
Jim Press, Toyota
'We have had a tendency to launch 'em and leave 'em. And what we've tried to do is develop a strong advertising partnership with our dealers. It's our responsibility to launch the vehicle, and we go for a certain period and work with them up front. And then they take over after the launch.'
'Customers don't want to make a coldhearted single purchase and not connect emotionally. How do you define a brand when we're all basically selling the same products? We're making each other's products. It's the equity of the brand, and that's created through a relationship. Consumers want to embrace you and want you to embrace them.'
'I think that we've been able to see the efficiency of (event marketing). Once you build a relationship and know about that person, then you don't do inefficient things. If they're not ready to buy, then you are not out there giving your deal. You are just building the relationship until they are (ready to buy).'
THIRD-PARTY WEB SITES
'Customers want data from an objective third party that they know they can trust. So a Kelley (Blue Book) or Edmund's actually facilitate. There are some third-party Web sites that are basically brokering vehicles and not adding value to the transaction. That is not really in the customer's best interest. It costs the lead generator more money to generate the lead than the dealer can pay for the lead to make it a good business decision. A dealer can sell the car for less money because they don't have the additional markup. The way you cap that is that you create the Internet network within your own organization that makes those (third-party, lead-generator sites) perhaps not as necessary. '
'Inherently, a lead-generating site or brokering site is inefficient because they're going to have to tack something on there that can be done between the bricks and clicks between the factory and the dealer. There is value in an all-model portal for its ability to get consumers who wouldn't just go into your site. You've got to find a way to make that efficient and funnel it back to your dealers.'
'We like to go to and through our dealers. And anything that gets in the way of that relationship, we're not too excited about.'
'We're going to be on the same number of sites in '01 that we were in '00. Our spending will be up a little but not the quantum growth that we had early on, still a low number. We've learned a lot in the last year about how to be more efficient on the Internet.'
'I think it's going to help the factory and the dealer, as a forcing function, to come together to delight the customer like no other advance we've ever seen. It's a much more effective media in executing all the processes. Television still has its place in reinforcing the emotions. That's difficult to do on the Web.'