Weaning drivers and dealers from the discounting drug

In a pair of Marketing Daily stories today, one can grasp just how addicted auto manufacturers, dealerships and consumers are to “incentives.” Last month, on average, manufacturers paid out $2,475 in incentives for every vehicle sold. It’s not that number that is dramatic… but that this number represents a drop of 8.5% from the prior month, and a decline of 11.7% when compared to August 2008. (These incentive payments represent manufacturer expenses, and do not include government payments related to the Cash for Clunkers program.) See a more complete story about the Edmunds report: MD’s “Incentives drop in August,” published 9-2-09.

Speaking of incentives, Ford is claiming great success related to the Cash for Clunkers program. Sales were up 21% when comparing August 2009 to the same month in the prior year. Other leading beneficiaries: Toyota, Honda, Hyundai. See the MD story “Ford made out like a bandit,” published yesterday afternoon.

By the way, I realize that I used the word “discounting” in the headline. But whether you’re talking about manufacturer rebates, subsidized financing plans, government incentives or dealership sales events… you’re talking about discounts.

Implications: I’m eager to watch what happens next in automotive marketing. Absent a “Cash for Clunkers” campaign, what might auto manufacturers and dealerships do to lure consumers back into the showroom? An Associated Press story appearing in this morning’s Minneapolis Star Tribune suggests that the summer “Clunkers” party could result in an autumn hangover for the industry.

The re-set that is impacting the automotive industry right now isn’t just about how many vehicles they can sell; it is about how many vehicles they can sell profitably. And for many companies (both manufacturers and dealers), that means developing something new in the menu of products people buy, and the way they buy them.

If discounts and incentives are to be reduced… what might take their place—and have enough relevance and attraction—to keep traffic moving through the showroom? Only the consumer you aspire to serve holds the answer to that question... which makes talking with that consumer more important than ever.

Mike Anderson