Detroit’s Disconnect Problem and How to Fix It

The Robin Report - Detroit DisconnectAs goes General Motors, so goes the nation. Uh, Oh! The problems in the mirror are closer than they appear.

The recent Clint Eastwood Super Bowl commercial notwithstanding, the auto industry is still clawing its way back out of the recession.

There’s an estimated 90 million vehicle production capacity worldwide, and stable demand at 60 million vehicles. Many experts still believe there are too many dealers relative to demand, particularly as more foreign brands enter the market. There are now 3 or 4 times as many import brands than there are domestic brands. Volkswagen and other import brands are committed to being more aggressive.

“Government” Motors (aka GM), Ford and Chrysler have been experiencing a disconnect with their dealerships for some time now. The auto dealerships, all privately-owned businesses, are not sophisticated marketers, and for the most part, get little guidance from the corporate types in Detroit when it comes to the retail end of the advertising process. The past few months have seen some positive sales numbers for Ford and Chrysler, but not GM.

The disconnect I’m talking about, having been made more complicated by our friends in Washington, can and should be addressed immediately. Without success at the dealer level, big auto’s attempted comeback may very well fail.

The Disconnect

The chasm between these marketing-challenged dealers and their “brand-fathers” in Detroit is widened by the fact that Detroit spends billions each year on national advertising telling consumers how superior and differentiated their brands are over their competitors, while most of the dealers insist on negating all those wonderful brand promises by advertising bigger discounts over their competition and little else.

If I’m the Ralph Lauren brand advertising my Gatsby-like greatness, and all of the retailers I sell to are advertising price only, I have no choice but to give them the old cowboy boot.

Yet most auto dealers continue to drag their own retail brands down, along with the automobile brands they represent. Look at the advertising from any auto dealership. Cover up the dealer’s name and it’s impossible to tell one from another. It’s all hard sell, all “block buster savings and deals.” Not a word about brand positioning, stellar service, or the comforts of the service waiting area. Nothing about being Like A Rock or Built For The Road Ahead.

Granted, it’s a tough market, and therefore some of the ads should be addressing special deals and discounted prices. However, what’s missing and most critical in this still oversaturated industry in which price alone can’t win is: “Why buy from me,” over and above just the price?

Seems like Marketing 101 to me. Sell the retail dealer as a local brand, offering compelling reasons for the consumer to visit your place first, like better service and more professional sales people, a bigger selection, a tighter connection with the community, etc. This is the stuff that steals a customer away from a competitor, creating repeat customers and “word of mouth” goodwill. These are the ways in which a business can grow in an oversaturated industry.

The disconnect is a two-way street. Dealers and auto makers need to look both ways before they cross.

The Fix

The first priority is to convince dealers that they must establish themselves as a brand, standing for something other than price alone, if they want to survive. Advertising has to be approached as a business discipline, rather than a whim, a need rather than a want. Maybe the CMO with the MBA sitting back in Detroit creating Clint Eastwood commercials could give a little guidance here.

Next, these dealers should be helped with the basics of why, what, how, and how much advertising to do. They need to create advertising budgets, which will force the prioritizing of all aspects of ad decision making. They need to develop strategies for creative content and media based on where (and who) their customers are. Understanding where customers are coming from geographically is crucial for making media decisions.

Another symptom of the dealers’ antiquated thinking is their theory on when to advertise. They tend to use last year’s sales numbers to determine when to advertise this year, as if those buyers had anything to do with the next prospective buyers. More importantly, it’s not when cars are bought that counts…it’s when the decision making process starts: determining which brand, which model, which dealers to consider. And, that cannot be predicted with any accuracy, so a consistent presence and top-of-mind awareness are critical.

On the other end of the disconnect, Detroit’s manufacturing and inventory control leave a lot to be desired, and do not always line up with what’s moving (or not moving) off the dealers’ lots. This leads to Detroit pressing models on the dealer because they happened to make too many. An example of a typical discussion between Detroit and the dealers might be something like: “You want a dozen Silverado pickups? We’ll give you 8, but you have to take 4 Volts too.” This makes for a very awkward supply chain relationship.

Consumers are continuing to see fewer differences among domestic brands and between domestic and imported brands.

Add to this the price check websites such as TrueCar.com, Edmunds, Kelly Blue Book and cars.com, manufacturers’ sites, and the whole issue of dealers selling price instead of brand may be resolved whether the dealers like it or not.

These sites provide price transparency across broad regional market swaths, with some even tracking what others have paid for the same car being shopped. This of course reduces the hassle of the haggling that buyers typically hate.

Is this an opportunity for Detroit auto makers to step in and level the playing field of pricing, with some uniformity and structure for their dealers? Is it time for them to become like Ralph Lauren or McDonalds? It can’t happen soon enough.

Go ahead, auto dealers, make my day. Sell your brand, not your price.

About Russ Schaehrer

Russ Schaerher is President of RKS Associates, an advertising consultancy.