Wednesday, November 9, 2011 | Edited by Daniel Moores
||Rivals Taking Advantage of Toyota, Honda Supply Problems
October was supposed to be a breakout sales month for Honda and Toyota as they bounced back from months of meager inventory. But it didn't happen -- and the immediate future is looking gloomy for the two Japanese companies.
Not only were supplies still limited by the lingering effect of Japan's March earthquake, but there were signs that some previously loyal customers are now shopping other brands rather than waiting for Honda and Toyota to restock.
And floods in Thailand are forcing new production cutbacks.
"I'm having crow for lunch," said Toyota brand boss Bob Carter, who had predicted a sales turnaround in October and a year-over-year gain for the month.
Toyota and Honda were the only major automakers with lower year-over-year October sales. Overall, U.S. light vehicle sales rose 8 percent, matching February for the year's best seasonally adjusted annual selling rate of 13.3 million.
Sales at American Honda fell 1 percent, and Toyota Motors Sales U.S.A. was off 8 percent.
And as Toyota and Honda struggle to restock barren dealership lots and regain their market footing, the new natural disaster in Thailand threatens to prolong the sales funk. Heavy flooding there halted critical parts output and forced both companies to slash production in North America and elsewhere.
Al Hendrickson Sr., chairman of Al Hendrickson Toyota of Coconut Creek, Fla., says he normally has 500 to 600 new Toyotas in stock. He had just 150 most of October and ended with 200 after getting a surge of Corollas and Camrys in the last few days of the month.
Even though Honda and Toyota reported their smallest percentage year-to-year decline in six months, the continuing decline still stung. For example, Carter noted that with half as many Corollas in stock as there were last October, sales of the high-volume subcompact fell 11 percent.
Toyota and Honda have lost a combined 4.1 percentage points of U.S. market share so far this year. Since March 1, just before the quake, Toyota group inventories plunged 56 percent by Sept. 1. American Honda stocks fell 67 percent by Aug. 1.
Carter did not specifically blame the Thailand flooding for hampering Toyota's efforts to restock. But Toyota added only 10,700 units to inventory last month, after gaining 20,300 during September. Toyota started November with a 39-day supply, unchanged from Oct. 1 but well below the 65 days it had March 1.
"Honda said there will be supply problems until the first of the year," said Steve Landers, partner at RLJ-McLarty-Landers Automotive, a multibrand dealership group.
Landers also owns a Toyota store but says: "Toyota is really pouring units on us now. Honda is struggling more than Toyota on supplies."
Toyota and Honda, putting the best face on the situation, have said many loyal buyers are simply waiting for dealers to restock.
But not all, says the Nashville research firm Dataium, based on samples of 100 Toyota and 100 Honda online shoppers. Dataium studied buyers who had researched only one brand or the other before May 1, when both still had normal supplies, and then tracked their shopping behavior as Toyota and Honda inventories shrank rapidly.
Among the Toyota shoppers, 53 percent still shopped only that brand after May 1, while 16 percent completely abandoned the brand. The other 31 percent widened their search to include other brands or used Toyotas.
But just 24 percent still shopped only new Hondas once supplies tightened, and 29 percent abandoned the brand completely. The other 47 percent widened their search, Dataium said.
"This was a big change from normal," said Dataium researcher Dylan Snyder.
"It's very clear the public was aware of the supply problems."
Snyder said Toyota normally has the lowest "lead-loss rate" of all major manufacturers and Honda is among the lowest.
Dataium says "lead losses" occur when a shopper researches one brand but submits a lead -- a request for dealer contact -- for a different brand.
To stimulate November sales, Toyota began offering financing and leasing incentives on Nov. 1, even before marketing starts for the annual Toyotathon sale later this month. Lexus started its "December to Remember" lease and financing deals Nov. 1, though marketing for the annual event won't start until late November.
Carter said Toyota expects fourth-quarter sales to beat those of the same period of 2010.
Rivals add share
But while Toyota and Honda supplies are tight, rivals are boosting sales without heavy incentives.
In October, Chrysler Group sales jumped 27 percent, and average per-vehicle incentives fell 3 percent from October 2010, to $3,303, said TrueCar.com.
Hyundai-Kia Automotive sales rose 22 percent, and it cut spiffs by 23 percent below October 2010, to $1,300. Nissan North America sales surged 18 percent, though its incentives rose 15 percent, to $2,917.
Ford Motor Co. boosted sales 6 percent. General Motors was up 2 percent.
October's sales pace picked up despite the economy, not because of it, said Jeff Schuster, senior vice president of forecasting for LMC Automotive. "At this point, it's not the economy driving sales; it's pent-up demand...from the recession and from this summer's inventory shortages," he said. "The economy is picking up but it's not contributing to any auto sales momentum."
Executives expect gradual improvement into next year.
Don Johnson, GM's U.S. sales boss, said: "Despite the volatility, we continue to believe that the U.S. economy will continue to grow slowly (and) help release the pent-up demand created by four years of below-trend sales."
Erich Merkle, Ford's chief sales analyst, added: "It appears we will see strength as we finish the year out."
(Source: Automotive News, 11/07/11)
||GfK To Marketers: Enjoy Loyalty While You Can
A recent automotive brand study gave Kia first place in brand loyalty. But another firm, global marketing company GfK Automotive, has its own 10-year examination of brand loyalty, and its results are far different. It's not so much about which auto brand enjoys the most loyal owners as it is about the relevance of brand loyalty generally.
GfK says brand loyalty soon won't matter all that much in the auto sector, and it is not just because the faltering economy is driving auto shoppers to eschew brands for deals. It has more to do with the fact that younger consumers are more brand-conscious of their digital devices, and cars are, well, just a way to get around.
The firm says that while older consumers are still brand loyal, Generation X (born between 1965 and 1980) and Generation Y (1981-1994) are nowhere near as loyal. "Consequently, their ever-increasing presence in the automotive marketplace will continue to pull overall brand loyalty downward, assuming current allegiance levels remain the same," says the study.
GfK Automotive's "Intentions and Purchases Study," based on an online panel of new U.S. vehicle intenders, finds automobile marketers have to reach these shoppers by talking about connectivity technology that consumers consider most important. Companies like Ford, GM and Hyundai have been talking about connectivity around new and recently introduced products like Fiesta, Sonic and Veloster.
Doug Scott, senior vice president at GfK, told Marketing Daily that the technology must be very simple and intuitive, and not about the gadgetry.
"Historically, we have had navigation and infotainment systems that run $2,000 per car. But think about the new iPhone 4S, with voice activation. That replaces everything: the Siri-based iPhone 4S deals with media, search and navigation in one device. You can mount that in your car and, with a buck-ninety-nine app, you could put everything in voice activation mode."
He says until automakers figure out how to bring that level of smooth sophistication to cars, it's not going to roll with Gen Y. "Our argument is that, for example, if a younger person is sitting at breakfast doing media, then shuts it all down to go to the car, they will want to continue where they left off at the breakfast table."
By way of example, he says he helped his daughter buy a vehicle with a loaded audio system with lots of bells and whistles. "I got in the car a couple of weeks later and saw she had reconfigured it. She had basically taken out the stereo." He says that when he asked her why she had done that, she explained that all she needed was the car's speakers and a way to connect her iPhone or iPad.
Scott says Ford might be the automaker that, initially at least, is immune to the bigger trend because while it has had traditionally strong loyalty for pickups, it has also rebalanced its portfolio in cars.
"They have gotten a big uplift in loyalty (among Gen X buyers) because of cars like Fusion, Focus, and Fiesta. We are finding that Ford's loyalty among Gen X is as high as Ford's Boomer loyalty was 10 years ago," he says, adding that the automaker got a big head start in loyalty by not going into bankruptcy.
"When you look at the data, Ford was trailing everyone else, then two things occurred: Ford brings out nice cars and didn't go through bankruptcy."
He says Chevrolet's Cruze will likely help out loyalty, and the much-needed Malibu will give it another boost. The real issue, however, is that automotive telematics and entertainment technology simply isn't as Apple-like as the technology in these consumers' pockets. "When you begin to parse Gen Y to the under-25 people by what products they would rather have in their daily lives, they are saying the home-interconnected TV system, and that's the first break in a generation where other things are more important than cars."
Scott says no automaker is there yet, but Ford's Sync-based MyFord Touch system gets an "A" for heading down the right path and an "F" for usability (Ford is preparing to introduce a new version of MyFord Touch). "We are arguing that younger buyers will ultimately say if the car can't accommodate what I own in my house and put in my pocket, that's not the car for me; it's transparent connectivity and simplicity."
(Source: Marketing Daily, 10/27/11)
||Custom Accessories, Parts are Big Business
Style-conscious car and truck buyers are willing to pay a premium to personalize their vehicles, spending $1,000 to $3,500 a year on accessories after the initial sale.
That's money being left on the table at automobile dealerships.
To maximize profits on every sale, dealers need to find ways to tap into the $28.6 billion-a-year business of custom parts and accessories, a panel of automotive experts said during the recent SEMA (Specialty Equipment Market Association) Show in Las Vegas.
One of the easiest ways to capture that business at the dealership is to display accessorized vehicles in the showroom that consumers cannot resist, said Jon Titman of Prestige Automotive Accessories.
"If you're not involved with accessories, you're missing the boat on revenue," Titman said at SEMA's Dealer Day program. "You're going to have three, four, five times the sales if you have accessories on your lot. If you don't show it, you're not going to sell it."
Accessories influence more than 1 million vehicle sales a year, a market study by the Specialty Equipment Market Association and AutoPacific found.
Consumers who see accessories on display at the dealership are more inclined to purchase a specific model simply because it's been customized, said Dan Hall, vice president of Tustin, Calif.-based AutoPacific.
The type of accessorization varies with vehicle category, age group, income and purpose.
Tire and wheel upgrades top the list, Hall said. Next would be audio, entertainment and telematics. It's getting to be that previous options such as navigation systems are expected as standard equipment, especially if someone is paying $40,000 to $50,000 for a vehicle, he said.
Truck owners will want tow hitches, running boards and bed liners, Hall said.
Why do people modify their cars and trucks?
"Comfort," auto enthusiast Michael Fox of Texas said during a panel discussion on buying decisions. "I bought running boards for my F-150 through the dealer. My wife is short and needs the board to step up into the truck."
Chip Baldwin of New York, who accessorized his SRT8 Jeep Cherokee through the dealer, answered, "Performance. And modifications so people can see it."
Auto dealers are not making much of a gross profit these days on the "front end" of a deal, or when the vehicle is sold, David Boutwell of CODA Automotive said. The margin is less than $800, he said.
But they can make $2,500 to $3,000 on the "back end," in financing and insurance and accessories, Boutwell said.
Dealerships have to buy into the program from the top down, he said. They also have to take a hard look at the products they're offering. If they put something cheap on a vehicle and it fails, they're going to get a bad name.
"The key is if you're going to do it, don't just dabble in it," added Chris Ferren of Bewley Allen Cadillac in Alhambra, Calif. "Be committed and make sure everyone's on board. Part of the assessment is if you're a small dealership, don't try to make it a big dealership through accessories. Start with a slow rollout and grow. You've got to invest manpower and money."
Dealers need to connect with their customers. The Internet is where consumers today are looking first for aftermarket parts and accessories. Some 84 percent of shoppers use the Internet to research and make purchasing decisions, the SEMA-AutoPacific study showed.
Matt Tom of Los Angeles said manufacturers have recognized social media such as Twitter as a platform to launch new products, and dealers might think about following their lead.
"My generation was born with a cellphone in their hand," the 20-something consumer said.
(Source: Las Vegas Review-Journal, 11/02/11)
Daily Sales Tip: The Most Profitable Sale
In any business there is one type of sale that brings the most profit. There is one single sales activity that can make the most difference in the profitability of your company. Not taking advantage of this all-important sales opportunity will cost you thousands of dollars.
That sale is called the "upsell" or "add-on" sale. The reason this type of sale is so profitable is because you have already invested the cost of acquiring and administering your client.
Therefore, anything that is added to the "ticket" is extremely profitable. The marketing cost, the labor cost, the administration cost (i.e., the overhead), has already been realized. This makes the add-on sale the most profitable sale you can make.
Source: Sales trainer/coach Howard Partridge