Driving home the business

Filed under: Focus |

Buy a Volkswagen this weekend and no more credit card debt. If it snows more than four inches on New Year’s Day, the SUV you purchase this week is free. Come in and buy a Ford truck today, and we’ll send you on a shopping spree.

It’s how they lure the customer through the doors. It’s how they compete. It’s all about the “best deal in town.” Sometimes it’s hokey, but it works and it’s real, said Kirk Oleson, the chief operating officer of Graham Advertising, a Colorado Springs advertising agency that works exclusively with automobile dealerships and auto manufacturers.

Oleson said there are two reasons for the aggressive and colorful campaigns: Auto dealers need to meet daily, weekly and monthly quotas, which is production driven. “They need to get the inventory out of the dealership,” he said. Manufacturers will reimburse the dealers for added inventory for a couple months. After that, Oleson said there is a carrying charge so it moves the dealer to move the inventory. Second, he said the auto industry is incentive driven. “The 0-percent thing has been a big deal across the board, so that’s not the big thing to attract the people,” Oleson said.

And the occasional whacky ads promoting snow-day give-a-ways and a weekend in Las Vegas do attract the people. For example, Oleson said January is a month when many people have overextended financially from the holidays. “That’s where the credit card thing comes in,” he said. “We might promote the auto dealer by saying we’ll pay off the credit cards if you buy a car. And that’s a real deal – the 21 percent interest rate on the credit card is now erased. Seems like a good plan to me.”

Oleson said spring incentive revolve around April 15. Buy a car and the dealer will pay the tax bill. During the summer, an automobile dealer might spring for a customer’s round-trip gas fare for a vacation. “They have to support the current mindset of the individual buyer,” Oleson said. “That’s why it’s important that the dealers know the demographics of their target consumer. The truck consumer is different from the hybrid buyer, and each local dealer has to know what the manufacturer is doing on a national level.”

Local dealers need to know if it is Tiger Woods or Mike Shanahan touting their goods.

Whatever the promo, Oleson said consumers are smart, savvy and aware of any given deal’s value. “There has to be value in what you are offering them,” he said. “The idea of coming up with larger-than-life unrealistic offers is over. An effective dealer understands the customer and comes up with the best value for the individual.”

A certain amount of money is allotted to auto dealers to entice people through the door, Oleson said. “We try to create ways to apply that money,” he said. Buying down an interest rate, extending the terms, lowering monthly payments or the price of the car or creating advertising discounts are all ways dealers can utilize the “free” money. And Oleson said developing profiles of the client is important in knowing how and where to apply the money.

For marketing tools like snow-day buy offs and hole-in-one give-a-ways, there is insurance that covers the dealer. It might cost $10,000 to make a claim to pay off the consumers if it snows more than four inches on New Year’s Day, but it beckons the buyer and introduces the “element of chance,” he said.

Those types of promotions are not enough to motivate a buyer. “It’s a total value proposition, and the urgency is critical for people in the market,” he said. “A high percentage of people are going to buy within two weeks, and you want to grab the highest percent of those people.

“There are two to three dealers on any given customer list,” Oleson said. “Once they are in the market, it’s all about colors, equipment and what is provided.” Advertising clutter and the numerous ads force automobile dealers to stand out. “You need an attention grabber, but you also must have a relative message and a value,” he said.

Oleson knows the industry and marketing. He spent 10 years with Ford Motor Co. in a variety of areas, from distribution to marketing. Last year, the National Automobile Dealers Association selected Graham Advertising as the sole agency responsible for the advertising and marketing workshops at the national convention in Las Vegas. Grace Ohl, the chief executive officer of Graham, and Oleson presented four workshops at the convention. “It was the most popular workshop – standing room only all four days,” Oleson said.

Oleson, Ohl and the staff at Graham work with 100 automobile dealers in American and Canada, he said. “Most of our ads don’t have hidden costs,” he said. “We want to avoid confrontations at the dealership. If there is something fishy about the promotion or the dealer has a poor reputation, it will get around.”

Educating oneself about purchasing a car is the best way to avoid “something fishy.”

According to a Consumers Union of U.S. Inc.’s 2004 online newsletter, ConsumerReports.org, whether it’s a rebate or another type incentive, the deals can be confusing. And because some manufacturers “offset their incentives by hiking car prices, you may be getting a deal that’s just ho-hum.” Sales incentives may discourage people from “haggling,” according the report. But haggling is imperative to getting a good deal. The consumer report listed seven ways to negotiate.

1. Consider the vehicle first, the special later.

2. Get pricing information – know exactly what cars cost.

3. Find out through friends and co-workers what other car buyers have negotiated.

4. Know your credit score. Don’t let the dealer make a judgment about your rating for favorable financing.

5. Find out what other lenders charge. Interest rates for car loans are posted on www.bankrate.com.

6. Evaluate the incentives. Figure out the monthly payment under every possible scenario, and multiply by the number of months you will be financing. Compare the incentive with the “deal” and go with what is best for your pocketbook.

7. Keep track of the dollar amounts. Make sure the specifics are stated in the contract.

“One of our biggest mistakes is rolling two or three decisions together because it becomes difficult to negotiate,” said Jack Gillis, the director of public affairs for Consumer Federation of America. “You negotiate down and you decided what to do with that (extra) money. Keep each transaction separate – the price, the trade in and the financing.”

The Internet is a great tool to adhere to a few of these suggestions. The Internet also has created an educated buyer. “The vast majority of people use the Internet for research and investigation & initial price quotes,” Oleson said. “Internet buyers have done their homework, another reason dealers should put their incentive dollars into effective prices and service.”

The Internet is where Neill Erdossy, sales and marketing manager for Winslow BMW, concentrates his advertising efforts. “BMW is very conservative; we don’t do a bunch of promotions – the fun stuff,” he said. “We pretty much stick to the basics – radio, television and print, and now we are going more with online advertising. Seventy percent of our folks are researching dealerships online.”

Erdossy markets the BMW dealership’s cars, especially the used ones, through autotrader.com, cars.com and E-Bay. Although he said E-Bay is the No. 1 automotive search site, he has more luck with autotrader.com.

Price listings are important to BMW buyers. “We are different, too, because we include our lease price in our ads,” Erdossy said. “Our 2005 lease price starts at $349 a month. We use that price meter to bring people in, along with our certifications and warranties.”

Even though BMWs have high price tags, the cars are a good value for the 35-to-60 age group, which is the dealership’s target audience. Included in that value is a four-year, 50,000-mile maintenance plan and a strong resale value. “BMW has the No. 1 overall residual value, the best in the luxury segment,” Erdossy said. “Our products are strong.”

To appeal to the masses, especially
in Colorado, BMW is adding more all-wheel drive cars to its lineup. The BMW 5 Series is going to all-wheel drive this spring, he said. Their marketing plans have been about letting people know there are now nine BMW all-wheel-drive cars.

Direct marketing campaigns have worked well for BMW, too, Erdossy said. “Our target market is just not conducive to a lot of gimmicks,” he said. “For us, it’s all about straightforward marketing.”

And shooting from the hip as well is Chrysler Carlin Dodge. Chrysler has come out nationally with its Business Link Program that benefits small business owners. The program offers the business owner the same purchasing power that he or she would have under a fleet program. “The advantage of a fleet program, which starts with the purchase of five to 10 cars, is buying power,” said Lisa Parlin, the Business Link manager in Colorado Springs. “It means purchasing at lower prices with quantities.”

However, the link program allows the business owner to purchase one vehicle at a fleet-type discount price, which Parlin said is $100 above the invoice price, if he or she purchases from a factory, or $500 above cost, if the car is bought off the lot.

There is no cost to join the program, nor is there an employee minimum. To be eligible, the Business Link member must file taxes as a business. And small business owners can pass on the discount program to employees. “It’s a benefit they can offer that doesn’t cost a thing,” Parlin said.

The business owner who buys a used or new car from Carlin Dodge is rewarded under the link program with a “first right of bay.” In other words, business owners who are link members will have priority status for service related issues, along with a loaner car, she said. Carlin Dodge has two technicians solely dedicated to the Business Link Program. Owners and employees also receive a 10 percent discount on accessories and parts, even if they don’t own a Dodge. And each month, there are promotions for the members, like January’s $15.95 non-diesel oil change. Parlin sends out a monthly e-mail newsletter to members alerting them to the specials and other car deals.

Business Link is geared toward the small business owner who is located in the Springs, but corporate clients and employees can reap similar benefits through a different purchasing program.

Business owners and managers interested in the program need to contact Parlin directly by calling 329-7591.

“I can guarantee the Business Link Program saves people time, money and hassles,” she said. “It’s a direct marketing program that brings in business owners for something tangible. It gives you something upfront even if you don’t purchase. It’s black and white.”

Whether it’s black and white or colorful, automobile advertising is driving home the same message: “It’s the best deal in town.”

- Marylou.Doehrman@csbj.com