Automotive Marketing

2009 will forever be remembered as an extremely turbulent year—filled with global automotive industry challenges. Global Light Vehicle sales for 2009 were approximately 61.9 million, down 5.1% from 2008. However, from a purely statistical point of view, the Global Automotive market demand seemed to be far more robust than expected at the beginning of 2009. November '09 sales were up 25% from the year before, and December '09 sales were up by about 22%! All together, fourth quarter sales were up about 17% over the final quarter of 2008, when sales bore the full brunt of the financial crisis.

Looking back we have to realize that demand was inflated by numerous government programs enacted to stimulate the automotive markets and as a result impact sales trends. On the other hand, it is astonishing how different the results were in most of the developed saturated automotive markets (e.g. the U.S.) compared to the upcoming "emerging markets" (e.g. China) which are still characterized by a very low density of vehicles on the road.

Stimulated by energetic government intervention, the global economy has stabilized in recent months so the basic economic outlook for 2010 is clearly better compared to the economic framework in 2009. Will the Global Automotive market follow this positive industry trend?

The latest Polk global light vehicle forecast report is available free for your download. This automotive forecast analyzes 2009 sales, Polk's economic outlook and light vehicle forecast for the year ahead. Take a look and let us know your expectations for 2010.

Global Light Vehicle Sales Forecast

Posted by Uwe Biastoch, Director Global Forecasting, Polk's Europe Operations (01.20.2010)

Last week we recognized winners of Polk's annual Automotive Loyalty Awards. One category that gets a lot of attention by our customers is the overall "Make Loyalty" category which basically recognizes superior customer loyalty to an OEM's brand. Since many of the automakers have multiple divisions (i.e., makes or brands), they like to see how consumers react to these separate entities due to the unique position they try to create in the marketplace. This year, Honda won for the U.S. market. But by how much? And how many more repeat sales would have been needed by other brands to beat this year's winner? The point of these questions is an estimation process can be used by automotive marketing managers to figure out what the sales mix needs to be in order to help them predict how they'll help their companies reach their overall sales targets.

How Close Was Each Brand to Beating Honda's Make Loyalty Rate in 2009?

For the 2009 model year, the average make loyalty rate was 44.53%. Honda's make loyalty rate was 54.86%. Toyota missed beating this rate by 0.15 percentage points and Ford missed it by 0.74 percentage points. If I look at the brands, including Honda, that had an above average industry make loyalty rate, there are a total of 10 of them.

But here's what's intriguing to me: is there an "efficiency thing" going on for some brands? Meaning, what dynamic allows a relatively few more sales from past customers to make some brands "win" while other brands need far more sales from past customers to get the same outcome?

Take Subaru, for instance. They missed beating Honda by 6.03 percentage points. But they only needed another 3,914 sales from past customers to exceed Honda's make loyalty of 54.86%. Now if you're Subaru and you only sell just north of 200,000 units in the U.S., yielding another 3,900 units isn't an easy task. But it's worth noting what sales volume deficits exist in order to possibly reach a loyalty target. Now a brand like Chevrolet needed 27,781 additional past customer sales to make them win, yet Chevrolet's overall gap (5.10 percentage points) from beating Honda was smaller than Subaru's (6.03 percentage points). Cross-town rival, Toyota, missed getting the top spot by 849 sales from past customers. In these examples, we have two large volume OEMs and one relatively small volume OEM. So it's not always a size issue that creates the disparities I'm highlighting.

The point is that when companies set targets for sales, much of this will come from past customers. And if there are specific loyalty targets established, managers can conduct a sensitivity analysis to estimate "what's needed" to hit the number. Awards are something to be proud of, but more importantly, hitting sales targets that are built on a bit of science with the use of consumer research and knowing industry trends can make hitting targets a more plausible effort. Here's to 2010... may the best, and most efficient, brand win.

Posted by Lonnie Miller, Director, Industry Analysis, Polk (01.18.2010)

My major take-away from last night's World Congress presentation was the sharp role reversal between guest speakers Yoshimi Inaba, President and COO of Toyota Motor North America, Inc., and Mark Reuss, President of GM North America.

Mr. Inaba spoke first about Toyota's recent successes and challenges. He calmly and confidently highlighted their current and future products, large R & D investment and employee charitable volunteer activities. The audience was left with an impression of a bright future for Toyota in North America.

Mr. Reuss then took the podium and explained the sense of urgency and renewed customer focus at GM. He noted the irony that the same government once concerned about GM controlling too much of the U.S. automotive market, now controls GM. Mr. Reuss covered current and future product and outlined the recovery steps already in place at GM.

It was interesting that GM, who once enjoyed over 50% of the U.S. market, is now behaving like a new entrant OEM by actions such as encouraging engineers to drive parts to stranded customers and having its president interface with the public via Facebook. Through various reasons such as insular management, quality issues and complacent dealers, GM basically handed their market share dominance to the imports over the years.

I was impressed with the passion and commitment of Mr. Reuss, but can't help but wonder if it's too little, too late for GM. They have some great new products and the new, customer focused attitude is refreshing; but will the North American consumer be drawn from their imports back into Chevy, Buick, Cadillac or GMC vehicles going forward? As you ponder that question, consider the fact that of the 16 Polk Automotive Loyalty Awards presented last night, import OEMs captured 13 categories, Ford 2, Chrysler 1 and General Motors 0.

Posted by James Dimond, Vice President of Global Network Planning, Polk (01.13.2010)

With the market tsunamis of 2008 and 2009, dealers and OEMs who have weathered the storm are viewing their business and markets differently than the earlier "roaring 2000s."

When new vehicle sales shrink from 17 million new units to 10.5 million, the overall cost structure of the retail channel and consumer spending compresses at the same rate. Dealerships, agencies, lead providers and CRM companies must adjust their automotive marketing efforts and budgets to address the new volumes of new and used vehicle sales, parts & service and Finance & Insurance penetration. The pure numbers from a customer traffic and transaction point are stressful, and the resources and data used in the past will not result in the same level of sales renewals and fixed operations retention.

So, how do dealers and marketers acquire new customers at a cost which is acceptable to their P&L requirements? They use Budget Prospecting to acquire new customers from the pool of orphan owners, first-time buyers, non-traditional loyalists and social network influencers.

Having the opportunity to attend conferences like Driving Sales and J.D. Power has provided me with a number of insights into the dynamics of our new retail environment and how to transition to the dynamics of budget prospecting.

Digital marketing, media spread and prospect targeting are now sciences which take constant feeding and balancing for customer retention. The constantly changing population base requires retailing efforts to focus on a combination of targeting points to effectively reach new prospects with pertinent and valuable offers, advice, community support and service to earn, retain and grow a business relationship through social networking.

To survive as one of 15,000 franchised dealers, the discipline of building prospects outside of your DMS name file and CRM marketing database requires significant effort for capturing the consumers at the bottom of the funnel. Also critical are consumers in the "lost zone" of orphan owners, first-time buyers and consumers who can be influenced on where to service their vehicles or purchase their next new or used vehicle.

All of this must be done with a cost per acquisition that meets the financial and ROI requirements of dealers, agencies and OEMs. Those who balance lead acquisition with "budget prospecting" will achieve long term growth strategies for their market and brand(s). They will continue to adapt and adjust to this changing and challenging market by growing sales, profit and market share. All of these "scorecard" evaluation points are keys to the health and ongoing transition and growth of the automotive retail channel.

Posted by Brad Korner, Director - Client Sales & Service, Automotive Retail Solutions, Polk (12.3.2009)

In September, I attended a session at the Interactive Advertising Bureau MIXX Conference entitled "The End of Digital Marketing." In his presentation, Google President Nikesh Arora opined that digital marketing is not a discipline unto itself, but simply a part of marketing in general. The same principle can be applied to online automotive marketing. I propose that the auto market as a whole consists of both online and offline elements, neither of which will do the job alone.

This was the theme of our presentation last week at the Polk Industry Outlook Summit 2009. I was fortunate to be joined at the podium by Julie Enzweiler, Automotive Research Director at the Nielsen Company. Our premise is simple: Automotive marketers must incorporate both online and offline research, targeting and measurement to form an effective overall marketing strategy. The pieces come together to form a complete puzzle, as illustrated below.

Take, for example, assessing the target audience and competitive set for a new vehicle being launched. We can measure the accuracy of the competitive group by examining online new vehicle shopping activity – who is shopping the vehicle, what are their demographics, and where are they located? Does this align with the intended target?

Further, what vehicles are being cross-shopped online, and does this correlate with offline conquesting & defection behavior? We took a look at the Honda Insight as an example and confirmed that there is, in fact, strong alignment between online and offline behavior.

*Source: Nielsen MegaPanel, Jan-Jul 2009;
**Polk Manufacturer Loyalty Excelerator™, Jan–Jul 2009

So, what does this mean for automotive marketers? Well, for starters, make sure to integrate online and offline intelligence to develop and refine your marketing plans throughout the vehicle lifecycle. There is still a tendency to create organizational silos that treat online and offline marketing as completely separate disciplines; this can severely impede your ability to leverage information across the organization.

In today's complex automotive market, we believe that companies that can break down organizational barriers and integrate information from all available sources, both online and offline, will be most successful.

On a scale of 1-10, with 1 meaning "completely separated, no integration" and 10 meaning "fully integrated, no silos," between the online and offline disciplines, how would you rate your company and why?

Inquiring minds want to know.

P.S. If you would like a copy of the presentation from our customer summit, send your company rating and contact information to me at paula_skier@polk.com.

Posted by Paula Skier, Polk, Director of Digital Product Strategy (11.2.2009)

...An Example of One OEM's Successful Campaign with Future Buyers...

My 12 year old son, Max, is a Transformers Nut! Last weekend he was looking for something to distract him from studying for his math test and found that he could watch the summer blockbuster "Transformers: Revenge of the Fallen" for free on the web, so he spent the better part of the weekend fast forwarding to his favorite parts and watching them over and over. He then decided to surf the web for all things Transformers and came across this short clip from the Chicago Auto Show.

It features GM's Ed Peper talking about Chevy's aspirational branding goal for automotive marketing toward youth. Ed, I just wanted to let you know it's working! Max loves Bumblebee, of course, and talks endlessly about buying his first Camaro. This, by the way, is an excellent opportunity for me to explain to him that he better study hard or his beautiful Camaro will be sitting in the garage because he will be grounded. The Transformers movies have made Chevy a powerhouse brand in Max's eyes. He is so impressed with Jolt the Volt and Sideswipe the Stingray. He talks about how cool Chevy is. Chevy's role in the movies has certainly made a first-time buyer out of my son.
 

Max has always been very vocal about the effect that youth branding has on him. When he was seven he ran into the kitchen to tell me that my next car needed to be a GMC because of the cool placement of the vehicles in a NASCAR race. He has also held up the Ford F150 as the be all, end all, truck because of its placement in one of his favorite video games. I know I should be very afraid of the effects of youth branding on my children since it's not all about cool cars, but for today I just wanted to tell Ed what a great job he's done with Max. Now how about a public service piece on how the Transformers always do their homework before they go off to save the world... or how you have to have a 3.5 grade point average to buy a hot car. Work with me, Ed...

Posted by Cristina Foster, Vice President, Ford Team, Polk (10.29.2009)

I keep getting told that traditional automotive marketing doesn't work anymore, "Paid search is the only thing you need. Without paid search, companies will experience corporate Armageddon and cease to exist."

"Social media! Without social media, your company will be spurned and become an outcast from society!"

"PURLS! You gotta use personal URLs or no one will listen to anything you say and you will be ignored and disowned by your family!"

Wow! Is there any hope?

Look, digital marketing works, but it doesn't guarantee success. And, the traditional methods—direct mail, radio, TV and outdoor— still work too, but there is no guarantee there either. There are so many factors involved: your budget, message, creative, offer, list/audience, demand for your product and service—it all plays a role.

The bottom line is that you need to understand your audience as best you can. Find out what buttons to push and then create a strong integrated campaign utilizing a variety of tactics that fit your need and your budget. But stop telling me that a banner ad will solve all my problems. It has to be the right banner ad, on the right site... if there is a right site for your message.

So go ahead, experiment. Have fun. Just make sure you have the right message for your audience. And if that doesn’t work, try yelling real loud... that will at least get you some attention.

Posted by Jeffrey Stone, Senior Marketing Specialist, Polk (10.21.2009)

About half the size of a Ford F150 pickup truck, minicars get great gas mileage, are reasonably priced and have a distinctive style inside and out. Minicars are on their way to the U.S. in a big way with six OEMs investing in new minicar launches over the next 5 years to compete with the already launched Smart Fortwo. In the soon to launch models, such as the Volkswagen Up! and Scion IQ, you can expect to get upwards of 65 miles per gallon for a price that is light on the wallet, too. With a VW Up! starting at $9K or a premium packaged Fiat 500 starting at $16K, this should be a deal for many.

Although the minicar segment may be relatively new to the U.S. market, it's an established segment in automotive markets across the globe from Western Europe to China and India. In 2008 there was only 1 minicar (Smart Fortwo) available in the U.S., but in Western Europe there were 48 and in China there were 18 models for sale. Polk’s automotive forecast projects the minicar segment in the U.S. to remain below 1% of all light vehicle sales through 2014 despite growing over 500% from 2008 to 2014.

If you want to learn more, we just released a Polk View titled "Will Super Small Cars Generate Super Big Sales?" The Polk View discusses topics relating to the minicar segment’s sales trends in Western Europe, China and the U.S.; how these minicars have redefined small spaces; who are likely buyers for the soon to launch minicar models in the U.S.; and what's the motivation for OEMs introducing mincars to the U.S.

I invite you to read the article and let me know your thoughts about how minicars will be received throughout the globe, who will buy them and would you consider buying one yourself?

Posted by Margaret Zewatsky, Global Market Analyst, Polk (10.08.2009)

Recently, the importance of customer loyalty in automotive marketing has skyrocketed due to the increased proportion of loyalty sales among total industry sales. Beyond measuring customer loyalty, OEMs and dealers need to understand what drives consumers' decisions to repurchase the same brand. Here at Polk, we attempted to uncover some of the drivers of repurchase intentions through a consumer research study we carried out this past spring.

In this study, we asked consumers who bought a new vehicle during the past three years what the likelihood is that they will repurchase a vehicle of the same brand next time they return to market, based on their ownership experience. We also asked them how satisfied they were with a series of factors pertaining to their purchase and ownership experience that we considered as potential influencers behind their repurchase decision.

These influencing factors were grouped into three major categories:

1. Product (brand affinity, product quality, performance, safety, fuel economy, workmanship, drive quality)
2. Customer relations (sales process, customer communications)
3. Monetary (purchase price, sales incentives, financing, cost of ownership)

Our analytical model revealed that product attributes are the most important drivers. Sales process and customer communications also emerged as highly influential, which reinforces the notion that a positive experience during the sales process has the potential to drive loyalty and also highlights the need for constant communication with customers.

Within the product category, fuel economy is a significant attribute that drives repurchase intention, though it is also directly related to the cost of ownership. Purchase price is perhaps less influential than we expected, although there are other monetary aspects that are important such as incentives, cost of ownership and indirectly, fuel economy. A diagram of the derived importance of repurchase drivers is shown below. More detailed study findings are forthcoming in a paper to be published shortly. Stay tuned.

Posted by Dan Zetu, Analytic Consultant, Polk (10.06.09)

Over the last several years, I have spent a considerable amount of time analyzing automotive repair data. Most of these analyses were very specific to reporting dealer performance or optimizing service reminder business rules. However, while conducting these analyses I began to wonder if there was a cause-and-effect relationship between vehicle service events and the likelihood of an owner to return to the dealer for service or ultimately repurchase the brand.

I recently had the opportunity to explore this cause-and-effect relationship, initially seeking to quantify the impact “expensive” repairs have on subsequent service and vehicle repurchase behavior. In conducting the study, my colleague Dan Zetu and I discovered that while "expensive" repairs were statistically significant, other metrics like the days elapsed since an "expensive" repair were more predictive of both service and repurchase customer loyalty. For OEMs and dealers alike, understanding this cause-and-effect relationship can provide the opportunity for targeted incentives for future service visits and an opportunity to re-win the business prior to defection actually taking place.

We have documented our findings in a newly released white paper titled "Mining a 'Hidden Asset' to Increase Brand Loyalty and Sales" that stresses the importance of leveraging data assets, specifically repair order data, to better understand and predict owner behavior and customer loyalty. It is my belief that by incorporating findings like those detailed in the white paper into strategically targeted marketing communications and incentives, automotive marketers will generate a significant lift in their marketing campaigns and much higher return on their marketing investment.

Posted by Brad Smith, Product Manager, Polk (09.01.2009)

It is not a secret by any means that we in Canada live in a very diverse country. This diversity creates the need for automotive marketing targeted at unique groups of people in almost every city. The most unique target market of all is not located in a single city, but within the provincial boundaries of Quebec.

A quick glance at the vehicle segments and brands that are popular in Quebec shows that buying habits in this province are a little bit different than in the rest of the country. This got me thinking: How different are Quebec vehicle buyers verses the other large provinces? I have always known that the demographic make-up of the province was a little different, with the most obvious difference being that French is the primary language in Quebec. But, as we looked deeper into the market, it became apparent that consumers in the province lead a more urban lifestyle and have more of a European mindset, these factors seem to be leading their unique vehicle preferences when compared to the rest of Canada.

For the last several years, the sales trends indicate a strong preference for compact vehicles in Quebec. The Asian automakers have clearly had the more appealing product as viewed by the Quebec consumer. Some automakers have not done well in the province because they didn’t offer the compact vehicles that the Quebec market demanded. Now it has taken a near crippling recession to prompt the mindset of some automakers to shift to more compact-orientated vehicles. To succeed, not only do these automakers need to offer high-quality products in these segments, but for the Quebec market in particular, they will need a specific marketing approach tailored to this very distinct consumer base.

Polk has just put together a Polk View titled "Compacts in Quebec - Small Cars with Big Popularity". This Polk View analyzes the sales trends and buying behaviours of this unique consumer group and discusses the factors driving them. Please download this Polk View and share your thoughts.

Posted by Peter Haefele, Senior Analyst, Polk (08.19.2009)

The much talked about U.S. automotive industry trend towards smaller and cleaner engines is picking up speed this fall. A look at the next three months' product launches shows that customers looking for fuel-efficient vehicles will have a greater choice.

Smaller engines are being introduced in vehicles typically powered by six or eight cylinders. The Audi A5, Buick LaCrosse and Chevrolet Equinox/GMC Terrain will for the first time use 4-cylinder powerplants. Given the current market conditions, those trims should quickly grab a significant share of their respective product mix. So does it mean that the U.S. automotive market is headed towards a more "European-like" engine mix type? It is likely. As of calendar year to-date May 2009, 4 cylinder engines still make up only 41% of the U.S. car and light truck industry. That share is bound to increase.

Much has already been said about Ford’s new 6-cylinder Turbo 'Ecoboost' engine. It is Ford’s way of replacing thirsty V8s without compromising performance. The Ecoboost is now available in the Ford Flex, Lincoln MKS and MKT vehicle lines. Interesting from a technology point of view, the V6 Ecoboost should only account for a small part of those model mixes. Next in line will be Ford’s higher volume 4-cylinder 'Ecoboost'.

One other way for manufacturers to improve on gas mileage is to "de-content". Mazda and Volvo will both launch non-turbo versions of their already-on-sale CX-7 and XC60 compact turbo SUVs. This is a smart and inexpensive way to offer customers a greener and cheaper alternative.

Acura will go a slightly different route to improve on its crossover's fuel efficiency. The RDX, on sale since 2006, will for the first time be available as a two-wheel drive and consequently get an additional two miles per gallon. It should be a success especially in the Sun Belt region where many luxury crossover customers do not need four-wheel drive vehicles.

Finally, a European manufacturer (a first!) is entering the hybrid vehicle market. Mercedes-Benz is adding new electric-gasoline powertrains to its S and M luxury vehicle lines. The ML450 will compete head-to-head with Lexus' new RX450h. If properly priced, and if the RX is any indication, we can expect the ML hybrid rate to quickly reach 20%. As for the S400 hybrid, it will be a unique proposition for customers looking for an environmental Über-Sedan; getting close to 30 mpg in a full-size luxury car is a first in the U.S.

As manufacturers venture into new niches, as more diversified powertrains become available and as customers ask for more trims, model launch frequency will keep rising. Who's next to the party?

Posted by Francois Gravigny, Senior PolkInsight Advisor, Polk (08.06.2009)

I recently received an amusing email that contained a personalized service reminder to a Model T owner that dated back to 1928. It made me laugh at first, but then I thought, if personalized communication has been a part of automotive marketing for such a long time, why do we continue to struggle with it to this day?

Well, for starters, there are over 235 million vehicles in operation in the U.S. today. Keeping track of who owns what and where is daunting enough. Establishing a personal relationship with each of those drivers, based on their personal driving habits is infinitely more complex and challenging. That said, the power of a personal relationship is arguably more important than it’s ever been. To prove the point, an OEM using Polk’s Predictive Marketing service reminder program recently ran a test to judge the effectiveness of its communication strategy, which incorporates targeted marketing based on individual driving patterns and other factors. In the test, they withheld 10% of all scheduled mailers that were due to go out during the test period. Using DMS transactional data, Polk then tracked the conversion rates of those customers who received the communication versus the control group. The results were startling. During the test period, 20.3% of customers who were contacted had the recommended service performed (without financial incentive). In contrast only 10.6% of the control cell group acted on the reminder. That represents a 93.5% improvement in overall response rate for the group that received targeted communication!

The program has driven not only a significant increase in parts and labor sales but has improved overall service retention by 4.2% on average across the OEM's brands.

Our forefathers understood the power of personal communication. Our challenge is to improve on the lessons they’ve taught us.

I was on a web panel last week that addressed how dealers can market to customers and leverage the U.S. "Cash for Clunker" program starting later this month. It's amazing how many questions surfaced about the implementation of this program and the questions that remain in the minds of dealers about what to expect once customers start calling them. The folks at NHTSA (National Highway Traffic Safety Administration) have no small chore to get everyone running a dealership up to speed on this program.

From an automotive marketing view, here are some things dealers can do to prepare and capitalize on the showroom traffic the Cash for Clunkers program will hopefully create:

1. Check in on your past customer base. The $3,500 - $4,500 incentives tied to the Cash for Clunkers program give dealers a perfect reason to reconnect with their past clientele in hopes of building further customer loyalty.
2. Look at the vehicle mix in your local market. Find out what the dominant vehicle age and vehicle segments (e.g., minivan, SUV, small car) are that define your trade area.  And be highly conscious of the domestic and import brand mix in your area. A lot of the qualifying vehicles will be domestic nameplates. 
3. Buy outside marketing lists. At my company, we provide analytically-based targeting tools that help marketers (dealers, OEMs, ad agencies) spend less money on targeting campaigns by using information that's refined to hit the audience they wish to reach. This week, we just launched a targeting model to help find households likely to own a "clunker." 
4. Don't use the word "scrappage" when describing this program to the public in your advertising. The phrase "cash for clunkers" is more common and will result in better web hits from prospective customers. "Scrappage" has been used widely in Europe to describe similar programs, but it doesn't seem to be descriptive enough for the U.S.
5. Make sure you have inventory in stock to enable someone to buy the type of car that fits this Cash for Clunker program. And if you're a dealer who doesn't want to order new units right now (due to inventory and carrying cost concerns), start looking for relevant dealer trades with other stores.
6. Dealers should talk to the OEM marketing reps. I'm aware of several national programs that the automakers are working on to help drive traffic to their dealer network. Find out what is coming, if anything. 
   
7. Don't forget to integrate deals from other incentives/promotions with the Cash for Clunker incentive. 
8. Lastly, use what's fundamentally worked in the past to draw in people who are likely to buy a new vehicle. Remember, this is still about selling a new car or truck, so some of the proven marketing messages and techniques should still be considered when getting the attention of the "clunker" audience.