Headlight: The Digital Automotive Blog» cmo http://www.headlightblog.com Digital Automotive Trends and Insights from Razorfish Tue, 24 Aug 2010 22:30:59 +0000 en hourly 1 http://wordpress.org/?v=3.0.1 CMO strategy in a downturn http://www.headlightblog.com/2008/10/cmo-strategy-in-a-downturn/ http://www.headlightblog.com/2008/10/cmo-strategy-in-a-downturn/#comments Tue, 21 Oct 2008 02:30:01 +0000 admin http://www.headlightblog.com/?p=71 Detroit, we have a problem. Falling marketing budgets and deteriorating purchase volume in the global market put incredible pressure on the automotive CMO. Even without the financial crisis and the beginning of a recession, global share gains for search and interactive media were likely. Faced with significant uncertainty, marketing strategy shouldn’t be limited to optimizing the media mix.

GM has announced cuts across all media for 2009, refusing to exempt digital spend from its cuts, and Ford, for the first five months of this year, had cut spending by 35 percent compared to the same period in 2007.  Automotive dollars are running from the Super Bowl, the Emmys and the Academy Awards. With falling sales and rising financing costs, there may simply be no other choice but to cut budgets — including digital. Yet the growing share of digital in marketing efforts suggests an increase in the share of the total pie — even a shrinking one — with a decline among sponsorships and classifieds, and a marked increase in spend on search and digital video.

Auto marketers should consider three elements beyond the marketing mix: enhancing online ROI-based marketing optimization, digitally supporting dealers and embracing owners.

Augmenting existing ROI models for 2009
In the next year we can expect ROI-driven programs, such as search marketing, to continue.  As media prognosticator Jack Myers suggests, “marketers sense that less than 30 percent of their advertising works, and they are increasingly intent on identifying and eliminating the wasteful 70 percent.” While speaking last month at Interactive Advertising Bureau’s Mixx conference in New York, Chrysler CMO Deborah Meyer said that “Every dollar has to work 10 times as hard as it used to.”
While ROI models vary from firm to firm and their respective marketers will make their own judgments about the value of leads, there is no doubt the sales downturn will lengthen the time consumers will take to make a purchase decision. Deferring their new-car purchases will mean an increased need for parts and service to keep existing vehicles running longer.  Some ROI factors to watch and strategies to try:

  • Identify strategic goals during the downturn that will put you out front of a recovery, such as increasing favorable opinions of product quality, bringing attention to new fuel-efficiency enhancements or determining a metric for “after the downturn” purchase intent
  • Pay greater attention to parts and service, lease-end and CPO ad spend and monetization — find out what marketing efforts move the needle
  • Metrics and weighting based on historical correlations — as pocketbooks tighten and, especially as credit dries up, review success measures and growth estimates so they remain workable as the economy sours.

Shrinking dealership network needs OEM support and expertise
Car dealership signsThe retail presence of major auto chains is experiencing a major contraction as a result of declining sales and the credit squeeze.  An estimated 3,800 dealerships will close this year, a pace quicker than originally forecast, according to Grant Thornton LLP. While domestic automakers probably benefit from some retail consolidation from a business perspective, the marketing problems are complex: loss of exposure from the tall sign next to the highway , loss of longstanding customer service and community relationships, and general loss of confidence in individual storefronts.

Automaker CMOs can help franchised retailers develop an integrated approach that applies search and video -– both paid and organic -– expertise to enhance dealership-marketing efforts and ensure the OEM’s presence as a steadfast partner in the local auto market. By aligning both the manufacturer and retailer online strategy, OEMs aren’t competing against their dealerships when it comes to bidding for keyword search terms, for example.  We can expect increased investment in search marketing to continue at the local level, where search spend, as a share of total marketing expenses, rose to nearly 17 percent in 2007, from less than 10 percent in 2006. The keys to dealership success in these efforts lie in digital targeting by location and some enhanced lead-capture techniques, such as those employed by Chrysler to improve retailer websites and the quality of Internet leads. As for video, a June 2008 eMarketer report revealed that 60 percent of dealers indicated they would be adding online video to their marketing efforts in the next year.

Better advice for an aging vehicle population
The median age of all cars on U.S. roads last year was 9.2 years old and 41.3 percent were 11 years or older, according to R. L. Polk. The average age of trade-ins in Q3 2008 rose to 5.9 years and has increased every quarter since Q3 2007.  With J. D. power predicting that new-vehicle sales will drop in 2009, the vehicle population is guaranteed to age further.  No one really knows the full extent of the impact the credit crunch will have on sales in the next few periods and even the effects of the $25 billion automotive industry bailout will be complex. However, an increase in the age of vehicles on the road is a virtual certainty.

Some of the first effects:  in the third quarter of 2008, down payments rose to the highest share of total deal value since the end of 2006 at 19 percent. Existing loan delinquencies are up, as is the share of loans made to borrowers with credit scores above 740.  Budgets are already tightening, consumer spending will likely be depressed well into 2009 and credit markets are a mess.

As consumers try to do more with less, coupons alone may not be sufficient incentive to convince budget-conscious drivers to perform needed maintenance. Education efforts may be needed to let customers know that preventative maintenance is the key to vehicle longevity. Further, dealers and OEMS would be wise to step up their efforts to match visitors interested in vehicle service with dealership service bays that are still open — and hanging on to those customers.  This gives owners a better chance of finding a complete service offering, but it’s also good for the bottom line.  According to Ronald A.J. Fortt, vice president of dealer development for OneCommand, “a five percent increase in service customer retention will increase the profitability of a dealership by 25 percent.”

Consumers will need enhanced maintenance advice to keep ever-older vehicles running longer. They’ll need instructions for how to make the car more efficient and how to find the best garages, whether branded or not. They’ll be energized by an innovation marketplace where the best ideas for tuning car performance, cleaning emissions and increasing vehicle mileage can be collaboratively delivered by your engineers, vehicle enthusiasts and tinkerers.   Become each owner’s best ally, and be the first out of the gate during the recovery to capture their new car dollars.

Given that cars will be on the road longer, the digital component of the ownership experience will have to respond — consumers will need more from the company that sold them their vehicle.  We’re coming to an Apollo-13 moment in automotive engineering — you won’t be going to the moon with this one, but everyone wants to keep the astronauts alive and get them back safely.

Steer the conversation to what you’re doing to help
Top of mind for every consumer right now, even during these last few weeks before the U.S. presidential election, is the economy. Every company, including the OEMs, will have the opportunity during this downturn to invest wisely in the opportunities of tomorrow, and to craft a story about their substantive response to the downturn. Marketing programs that embrace owners and make their experience better will be the key to retention for the eventual recovery.

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Image credit
Car dealerships image appears courtesy of Oakland Business Review

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