Market Watch - Automotive

Learn Why Sales To The Auto Market Are Revving Up

Auto MarketAfter more than 25 years in the business, Michael Stanley knows cars. What's more, he knows car dealers, car manufacturers, and pretty much anything and anyone associated with the auto industry. Still, that didn't prevent him from almost losing it all.

Back in 2006, Stanley, now the owner of Interstate Branding LLC, based in San Antonio, was working for another distributorship, having great success selling promotional products to car dealers. How great? Stanley had grown the distributor's sales from $800,000 in 2006 to more than $3 million a year later.

Then it all ended. Over the next 18 months, the auto industry, according to Stanley, went from "doing really well to zero." He knew things were bad when one day he called a Chevrolet dealer and the response was, "Mike, I don't know if we're going to be a dealer or not" by the end of the year. Sales plummeted so quickly that Stanley lost the business of more than 3,000 dealers in six months. In one case, orders for thousands of Frisbees that one Chevy dealer ordered regularly to hand out at malls simply dried up – almost overnight.

No one's forgotten the fallout – and subsequent bailout – of the country's big automakers, namely General Motors and Chrysler. That the industry plummeted so quickly might cause some distributors to avoid the market entirely today. But, they'd be missing out. These days, dealers and dealerships, not to mention auto parts stores, are stronger than ever, say experts.

"We're prepping for a huge upswing here," says Elgie Bright, chair of the automotive marketing program at Northwood University in Midland, MI.

The Turnaround
Certainly, the automotive industry is enjoying a comeback. Car industry data shows the market rose over 13% last year with Chrysler itself enjoying a sales jump of nearly 70%. All of which is inspiring some distributors to focus once more on automotive clients. For his part, Stanley formed a new company last December, becoming an iPROMOTEu (asi/232119) affiliate, and quickly began selling to the auto industry again.

Not only is he back to selling Frisbees, but he's also making higher-margin sales through items like apparel. "They're still watching the money," Stanley says of dealers, although he insists today's caution will soon give way to a burgeoning marketplace.

The Coming Boom
A big reason for optimism is basic consumer need, consultants say. Right now, "the average age of the car on the highways is higher than it's ever been, even after World War II," says Jeff Bennett, director of automotive technology management at Northwood University. Bennett notes the average age of a car today is 11 years. As the economy improves, he believes, people will take more driving vacations, and older cars that break down more frequently will spur them to buy new ones.

Case StudyA slow economy might have made consumers fearful of big-ticket purchases like cars, but it also created "a pent-up demand" to purchase a new car, particularly now that the average vehicle is being driven five years longer than normal, says Karl Brauer, CEO of Total Car Score, a car comparison and rating website. "There's a dam of desire to buy a new car that's built up and it's waiting to break," Brauer says. "If we get a little ray of hope, we'll see the dam burst and car sales will go through the roof."

That, no doubt, bodes well for distributors, particularly ones targeting local dealers, and those that service them, like auto parts makers and car servicing companies. When it comes to marketing, "it's tough for local dealers because most of them can't afford a Super Bowl ad" or some other attention-getting marketing effort, says Brauer. In that sense, incentives and promotional products can play a huge role.

For some distributors, they already are. Take Patrick Doyle, president of Toronto-based Synergy (asi/490543). In the recession, Doyle lost 30% to 40% of his business, almost instantaneously, when the auto industry declined. "I'm still recuperating from that," he says. But Doyle's also beginning to reap the rewards of a reviving industry, thanks to a new sales strategy and renewed push to move vehicles off the showroom floor.

A New Approach
To do that, dealers and auto makers are changing their messaging – concentrating less on car stats and more on car branding – and their delivery. Yes, Super Bowl ads are still impactful (think Dodge Ram's Paul Harvey pitch), but the daily messages are moving to social media. And contest incentives, along with accompanying promotional products, are moving with them. In fact, an increasing number of car sales are happening online, experts say.

Build-your-own vehicle websites, as well as mobile sites for shoppers on the go, are not only shortening the sales process for dealers, but helping buyers gain more focus before they even step onto a showroom floor. Survey statistics from a digital automotive shopping survey by FordDirect (a joint digital effort between Ford and its dealers) show that 42% of people are looking for coupons or offers on a dealer's Facebook page. Respondents are specifically interested in dealer contests or events, all of which likely involve promotional products.

These days, says Jon Lamb, chief marketing officer for Grant Cardone, a sales consultancy based in Miami Beach, FL, promotional products for auto dealers are more about maintaining clients, rather than drawing them in. That's largely because shoppers are self-directing themselves via Facebook, Twitter and online dealer sites toward the specific cars they want. By the time they reach a showroom floor, many of them already know the exact car they want to buy – down to the seat covers and floor mats – because they've already "built" their vehicle online.

So where does this leave distributors looking to target the auto industry? Experts think the evidence points to a promising stretch ahead. Says Brauer, "Barring anything drastic, I think it's going to be a good year."