||Auto Dealers Jump on the Branding Bandwagon
Selling cars isn't just about price anymore. Building a dealership brand is becoming a key part of the business -- and a cornerstone of long-term profits and consumer loyalty.
"Dealers are asking: 'What are the benefits of doing business with this particular dealership?' says Donald South, a consultant with the National Automobile Dealers Association. "That's their hook for advertising."
Among the strongest brand messages are community involvement, a team of long-term employees, a lengthy business history, convenience and customer service, South says.
For example, DCH Auto Group of South Amboy, N.J., wants the name DCH to be synonymous with excellence in customer service. The group says it has spent $500,000 in the past three years on research and training to refine the sales process and advertising messages at its 27 dealerships.
"We're proud of our reputation and we want to maintain it," says Roy Bavaro, DCH's director of corporate marketing and brand development. "It takes work."
The theory: When you make a sale by undercutting a rival by $200 on price, you make one sale. If you give the customer a reason to think you're special, you win a long-term customer.
Larry Light, a Del Ray Beach, Fla., marketing consultant hired by DCH Auto Group, says brand identity is particularly important when a dealership group sells many brands.
"When you're just a Buick dealer, you say, 'Come buy a Buick," says Light, a former McDonald's marketing executive. "But when you're sitting on 10 to 30 different brands, now your brand becomes important.
"You're indifferent whether people buy a Toyota or Honda -- as long as they buy it from you."
Cheril Hendry, CEO of Brandtailers, an Irvine, Calif., advertising agency that performs marketing services for car dealers, says focusing on price just touches off a race to the bottom. Someone always has a lower price, she says.
Brandtailers surveys every customer who buys a car from its clients. Based on thousands of surveys each month, she says, "The stores with strong brand equity tend to have higher grosses, more repeats and referrals and higher CSI scores."
South and other industry experts say several factors are driving this new push.
Dealership groups are getting larger, and they want a standard look and feel to their operations. The Internet has fostered word-of-mouth advertising, making dealers increasingly concerned about their company reputation.
But perhaps the strongest reason is thinning profit margins, which make it more and more difficult for dealers to differentiate themselves with low prices. Manufacturers have narrowed the spread between dealer cost and sticker price. The Internet, offering detailed pricing for new and used vehicles, has also empowered consumers to whittle down transaction prices.
NADA reports that new-vehicle gross profit as a percentage of the selling price has plunged. In 1991, the average gross profit per new vehicle was 7.1 percent. By the end of 2010 it had dropped to 4.5 percent.
Paul Taylor, NADA's chief economist, attributes the erosion to fierce competition. Over the years, some auto manufacturers also have continued to narrow the spread between dealer cost and sticker price, Taylor notes.
Large retailers such as publicly held Sonic Automotive Inc., of Charlotte, N.C., have created standardized operating processes. Sonic is running tests in several markets to refine the sales process and create a better experience for car buyers.
"We have to offer a consistent customer experience to be a national brand," says Rachel Richards, Sonic's vice president of retailing.
"We're testing elements of the customer experience in different dealerships -- including upfront pricing. We'll roll up those elements into one experience and launch it in the early part of 2012."
Just one of the top 10 dealership groups in the United States -- Larry H. Miller Group -- uses one name for its dealerships. But seven of the top 10 promote a national brand for their corporate Web sites and allow visitors to shop inventory at all their stores.
Two of the top dealer groups -- AutoNation Inc. and Asbury Automotive Group -- promote regional brands.
AutoNation, the nation's largest car dealership group, trumpets the "AutoNation Advantage" on its Web site, offering "an unsurpassed shopping, buying and ownership experience" -- more convenient, faster and transparent.
The company has 20 regional dealership brands -- such as Desert in Las Vegas, Team in Atlanta, Power in Phoenix and Autoway in Tampa, Fla. But this month CEO Mike Jackson told the Automotive News World Congress that AutoNation will not create its own national brand as opposed to its regional brands. The company does not want to compete with the new-vehicle brands it sells, he said.
Light says megadealer Ray Catena, of Edison, N.J., has been successful at building a brand for his 14-store Ray Catena Motor Car Corp. "He knows what he wants to stand for -- he calls it indulgent service. I don't think anyone else has put those two words together in one sentence," Light says. "Other people sell luxury cars, but Ray Catena sells opulent cars and indulgent service."
Big or small
But large operators aren't the only ones who benefit from brand marketing. Entrepreneurs with one or two stores have established a competitive advantage by building a strong brand.
Palm Springs Motors used brand marketing to help in its move from Palm Springs, Calif., to nearby Cathedral City. Sales prospects would assume from its name that it was still in Palm Springs. They might also assume it was a used-car dealership because the Ford, Lincoln and Mazda franchises aren't mentioned in its name.
"We had to brand ourselves, to define where we are and what franchises we have," says Scott Simmers, Palm Springs' general manager.
The store is in Coachella Valley, about 50 miles from Riverside, Calif., and 50 miles from Phoenix. Simmers wanted to keep customers from shopping for cars in a larger city, where the dealers had large inventories and could cut prices.
The store's advertising says the reason for its high volume is reliability. Palm Springs Motors has been around since 1959 and promises to be there to serve future customers.
"Pricing has never been our message," Simmers says. "We're price competitive. But we're not saying it."
The result? Palm Springs says that in many recent years it was among the top 100 volume Ford stores in the country.
(Source: Automotive News, 01/31/11)
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