Jumpstart Automotive Group

Is There A Silver Lining in Sight? Finding Opportunity in Bankruptcy.

When Chrysler LLC filed for bankruptcy on April 30th, 2009, President Barack Obama heralded the move as a critical step in the quest to save 30,000 jobs at Chrysler and hundreds of thousands more jobs at the company’s affiliated suppliers and dealers. Immediately following the announcement, the focus seemed to rapidly shift to the “new” Chrysler, and to the potential success of its partnership with Fiat S.p.A. This is just one of many jumbled messages in these troubled times.

A clear message was sent a few weeks later when nearly 800 Chrysler dealerships were given notice by the court to liquidate their inventory within 30 days. Sadly, some of these dealerships had been selling Chrysler products as far back as the 1930’s. The brand was part of the family fabric for many of these dealerships, and receiving this type of termination letter had to be a difficult thing. Loyalty versus economics blurred the lines again.

Chrysler’s Agency of Record, BBDO, is notably Chrysler’s second largest unsecured creditor, with over $58 million in outstanding payments due. Chrysler’s advertising budget for the next nine weeks, which was originally set at $134 million, was recently cut in half. For companies like BBDO, this slowdown in advertising only adds to the downward pressure on their businesses. So how do suppliers like BBDO and others find a silver lining in these clouded, economically challenging times?

With smaller budgets and a shrinking automotive customer base, advertising will be more competitive than ever. In any downturn, there is increased pressure on marketing dollars to do more with less. Every dollar spent will need to clearly demonstrate a positive impact on driving sales.

Many of the OEMs have reduced their overall marketing budgets and have pulled back the reins on advertising. However, consumers will still spend money on cars provided there is a reasonable return on investment. The question is: How can those customers who are in-market for a new car or truck be reached?

Messages to consumers must be more tightly crafted and focused on an in-market audience to be effective. This is what will drive consumer behavior. For companies that are able to find a way to outmaneuver the competition in reaching these consumers during this recession, the rewards will be even greater when the economy does rebound.

Shrinking demand for new cars with an oversupply of inventory makes the in-market audience that much more desirable to the OEM’s. With a smaller percentage of the overall population in the market to purchase a car, the use of scattershot advertising makes less sense.

In 2008, there was a noticeable shift at GM when the company announced that it would devote half of its expected $3 billion advertising budget over the next three years to online advertising. This announcement signaled that the old mix of media, which was heavily weighted in television, was not working. GM clearly believed it could reach more in-market consumers through online media than through its traditional avenues. Hyundai has also seen success in making this type of change in their ad spending. The company doubled its online budget during the one-year span of 2007 to 2008, thereby generating greater awareness at the in-market level.

There is also evidence that consumers are researching large purchases more carefully. They are shopping for longer periods of time and going to online sources more often than even a year ago. This new group of car buyers is in the automotive market out of necessity more than in prior years when discretionary dollars were flowing more freely and car shopping was a luxury. As a consumer in the thick of a recession, making the correct purchasing decision is more important than ever. Delivering the right message to the right consumer when they are in the decision period is the only way for marketers to be successful.

In the end, opportunities are created in tough times, primarily for those OEMs that craft smarter and better-targeted messages. Already, carmakers like Kia and VW have begun to capture lost market share as the big three OEMs have fallen. This market shifting will change advertising perceptions to focus even more on what delivers in-market buyers. A recent study conducted by Jumpstart found that small car producer Scion saw significantly improved results when its campaigns were adjusted with this focus in mind.

Perhaps we will never get back to the sales volume levels of more than 16 million annual units sold domestically. However, car buyers will re-enter the market and those marketers who were able to change with the times will benefit. Finding the way to consumers during difficult times provides the silver lining for those advertisers who choose to see it.