Why car brands can’t advertise their way out of this one
There’s something inherently wrong with the two least-trusted professions – car salespeople and adlanders – trying to convince people to make the second biggest purchase decision of their lives, writes Taryn Atkinson.
Atkinson: A radical rethink is required
Competitive and cluttered, the Australian automotive industry is hurtling towards a decade of massive disruption. Ready or not, every player will have to navigate rapid advances in digital and tech as driverless cars, car-sharing, electric vehicles and online purchasing become standard.
But for marketers, another more critical issue needs to be addressed which will determine whether their brand is going to sink or swim in this new environment: trust.
Released last month, Roy Morgan’s annual Image of Professions survey found car salesmen (and women, presumably) have the least trusted profession in Australia. You can’t fault their consistency – they’ve held the bottom spot year-on-year since 1976.
Time for online car sales portals and automated pick up/delivery systems it seems…
Really insightful piece, Taryn.
Dealers make pretty good margins on sales that they will fight hard to protect so I agree, they will be around for a while… and many are now picking up the pace on customer service (though trust will take decades to recover). Most are still way behind the pace on digital integration but that will come. We can buy cars online but we don’t. Around 93% of cross category retail sales still happen in physical stores because we are tactile animals and want to touch the product before we buy… giving the car dealer a different but still important role in securing the sale
Thanks Darren. Totally agree that the physical experience is still a critical part of the purchase journey for most, and it’s in this area that dealers can find new ways to redefine themselves.
This is a good continuation of Tyler’s piece, but I think there are some essential truths missing here.
The main one seems to be a misunderstanding about the relationship between dealer and manufacturer. Manufacturers do not sell cars to the public, they sell to the dealers. What the manufacturer can demand of the dealer is restricted by Australian Competition Law and dealers know this very well. Take for example RRP. A manufacturer cannot set a retail price for a vehicle; that is the purview of the dealer under law hence the ‘recommended’ part of the acronym. This also goes to the methods used to sell the vehicle from the showroom floor.
This current relationship type has been around for a long time and will be very hard to break, primarily because of the vast amounts of money involved. The manufacturer’s ‘cashflows’ are predicated upon bulk sales and credit to dealers rather than the relative trickle from retail sales. Dealerships are appointed on the basis of ‘exclusive’ marketing territories, and finding new spaces means stepping on some other dealer’s toes. This is a systemic issue that may be slowly breaking down but we are not there yet.
Traditionally there have been three entities for automobile marketing; brand (manufacturer), dealer collective (materials provided by manufacturer but paid for by a collective fund from the dealers – EOFY runout TVC offers for example) and dealer individual (traditionally display ads in newspaper liftouts). Lately we have seen a merging of the first two, but this again becomes an issue of ‘recommended’.
The second main point is margin. In contrast to Darren P’s comment above, my experience is that the dealer margin on a new car has become severely constricted – in some cases down to a few hundred dollars. Dealers rely on aftermarket products such as finance and insurance, service and spare parts to make up the true profit on a vehicle. This may not necessarily be the case for the prestige car brand in Taryn’s portfolio – but examples like that are generally the exception to the rule.
Here we must acknowledge the circumstances of the dealer floor salesperson. This is a high-stress environment, with targets (and commission) based on units moved as well as the add-ons being the key KPIs. They know they are unlikely to experience the return customer personally, and therefore see little benefit in working to the multiple touchpoint model.
A prospective comes in and is usually there to negotiate a price. They will have already test driven a model and are now shopping for the best deal, or else they are starting the process with a test drive with no intention of purchase in that first instance. Some of these salespeople will be young and therefore for amenable to more ‘modern’ methods of selling, but they are a product of the highly competitive sales culture first and foremost.
These two points go the third and probably most important. Dealers generally apportion their own marketing spend based on the previous month’s sales. I have worked on quite a few dealer accounts and never once have I come across a dealer who specified a yearly marketing budget and allocated funds accordingly. Only a succession of monthly amounts – traditionally funnelled into the newspapers with the target being a rebate for hitting column-centimeter volume thresholds.
I remember pitching for an account for a group of five dealers majority controlled by one individual. We proposed a campaign based on the multiple touchpoints model as discussed by Tyler and Taryn, and we won. When it came down to implementation, we were handed a booklet of guidelines written by the primary individual that specified how many wagons, hatchbacks etc. each display ad was to carry. Our campaign – which required budget allocation to be heavily front-loaded – was ignored (we were told we won on our ‘enthusiasm’) and our proposal was replaced with a formula. We could not argue against this formula as the primary individual had become a multi-millionaire selling cars, and we were just salaried plebs.
The landscape is changing – our manufacturers are becoming importers which means a flatter internal hierarchy making it easier to move the multiple touchpoint model upstream. But the relationship between importer and dealer will still be defined by competition law. Hopefully this model can become the new norm, but I suspect it will be so at the expense of dealer or salesperson autonomy.
There are also some headwinds. Tesla hopes to sell cars exclusively online which will theoretically remove the middleman – the dealer. Scale prevents this model from happening too soon. I just can’t see the business model of our larger car companies shifting to accommodate an income stream derived from sales of individual units.
Self-driving cars will probably shift consumption to a rental model with no outright purchase or even lease likely. But that is still a few years away yet. And under these models dealers will just evaporate.
I appreciate Neonormal’s efforts here to sustain the conversation over multiple Mumbrella pieces and I agree with their sentiments on principle. Thank you Taryn.
Appreciate your insightful commentary Antony. There certainly is a complex ecosystem at play, and there isn’t going to be a simple one-size-fits-all approach to achieving future success as either an advertiser, automotive brand or dealership. I’m keen to continue exploring the influencing factors though and having robust dialogue about our roles, as I believe that by the various parties working together we can all come out on top.
Thanks for responding Taryn. I think your business is in a box seat for being able to persuade car companies and dealers to think outside conventional protocols and deliver on what you have written here. Best of luck and hoping to see a case study sometime in the future.
Good insights. But this one: “Distrust in cars salespeople and advertising industry execs stems, at least in part, to both being motivated by an unspoken agenda (commission, sales targets, bonuses)…” is incomplete analysis.
Gen Y consumers have had significant, heavy-handed indoctrination imposed upon them in the public education system, through environmental studies driven by Leftist bureaucrat educators, to train them to perceive cars as always bad, public transport as always good. That’s garnished by a carbon-fuels neurosis, and the poor kids enter adult life thinking motor vehicles and everyone associated with them are a font of evil. Sometimes that’s right but not always. Especially when you need emergency services. It’s important to also consider the environments in which opinions are formed, or coerced by those with a political agenda.
This is a really interesting perspective, Mike. Although, from my understanding (as a marketer and a part of Gen Y), Gen Y’s perceived values don’t always match up to their purchasing behaviour. For example, the number of millennials in the market to purchase new cars has increased 49% in the last 10 years. Which I believe actually creates an opportunity for both advertisers and sales people – we just need to be clever about how we sell, and ensure that we appeal to their values through the process, emphasising the things that matter to them.
Australian competition law is irrelevant when the margins on cars are so small ; distributors keep dealers on a very tight leash to keep them from cutting each others throats and damaging the brand. Sometimes incentives are offered to shift slower selling models but these are limited in size and geography.
>>”The traditional ‘build it and they will come’ approach does nothing to demonstrate to consumers a brand has considered their needs or wants.”<<
The company undertakes a survey to determine consumers needs and wants and then releases models with extra features. The job of the salesman is to bridge the gap between what the customer wants and what the manufacturer wants to sell to them.
The margins in new cars is on-existent. Dealers often lose money on a sale at the front end and wait for the quarterly bonus to pay for all the bad deals.
Additionally, people won’t buy cars online. Various manufacturers have tried it in Australia and all of them have failed. Who does the test drive, how do you handle a trade in? Finance? Negotiation? Who is going to show you how to use the car?
The dealership is very much here to stay.