strategy+business is published by PwC Strategy& Inc.
 
or, sign in with:
strategy and business
Published: April 7, 2009

 
 

Convincing Consumers to Spend Again

In a brutal sales environment, retailers and manufacturers, led by the auto industry, are finding that smarter marketing — not better products — may be the best way to a customer’s heart.

Joel Ewanick’s job as vice president of marketing for Hyundai Motor America put him on the front line last year in the effort to determine, in a bleak economic climate, what motivated people to buy cars and what frightened them away. As early as the summer of 2008, he began noticing in focus groups that more and more consumers were putting off vehicle purchases because they were worried about losing their jobs. “We had a consumer insight,” Ewanick recalls. “People were pulling back because of their long-term financial outlooks.”

Around the same time, Ewanick recalled getting unsolicited flyers in the mail from mortgage companies offering consumers relief from their monthly payments if they were to die or lose their jobs. He began to wonder if car companies could do the same thing.

He got the chance to test this possibility in the fall of 2008, as economic difficulties quickly deepened and credit dried up. It became clear “that this was no longer a garden variety recession,” Ewanick says. The industry’s sales plunged from what experts consider a healthy level of about 17 million units a year to a pace of about 9.2 million a year. Hyundai’s sales fell 41 percent in the fourth quarter. Traditional marketing clearly wasn’t enough.

Ewanick found a company called Walkaway USA, a subsidiary of EFG Companies in Irving, Tex., that specializes in helping auto dealers improve their sales. Walkaway was testing the concept of allowing financially troubled buyers in Canada to escape their purchase agreements. It was precisely the kind of innovation that Ewanick was looking for.

Ewanick signed Walkaway to manage a program in the U.S., called Hyundai Assurance, promising buyers that if they lost their jobs within a year, they could return their vehicles with no negative impact on their credit ratings. Walkaway would administer the program, which entails documenting that a customer has really lost his or her job. The program was launched in January 2009 via television commercials that feature an announcer soothing viewers: “These are tough times. We’re all going to get through it together.”

It seems to have worked. Hyundai’s sales in North America were up 4.9 percent in the first two months of 2009, when the overall market declined 39.4 percent from the comparable period in 2008.

Marketers today in all industries are forced to come up with similarly innovative ways to entice consumers to part with their money. Clothing retailers are offering two for the price of one sales, electronics stores are making extended warranties free, and airlines are offering deep fare discounts. But the auto industry has had to be particularly creative. Buying a big-ticket item like a car is a major commitment, and in difficult economic times consumers are more likely to avoid or delay such a purchase unless they can be convinced that they are getting a deal too good to turn down.

To make this case, in March, Ford Motor Company launched a two-month incentive program, the Ford Advantage Plan, that covers auto loan payments for up to a year if a customer loses his or her job. On the same day, the General Motors Corporation announced its Total Confidence plan, which picks up the tab on auto loans for laid-off customers for up to nine months. This program also provides up to US$5,000 to customers buying new GM vehicles to close out existing car loans if the value of the trade-in automobile has fallen below the loan payoff.

And last January, the Chrysler Corporation rolled out a program called Employee Pricing Plus, which expands on a marketing gimmick used before that offers customers the same price available to employees. In this twist, buyers also get cash rebates ranging from $3,500 to $6,000 and zero percent financing. Chrysler was also the first U.S. automaker to offer car buyers fuel cards that guaranteed fixed gasoline prices of no more than $2.99, with its Let’s Refuel America program.

 
 
 
Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store

 

Resources

  1. Pete Batten, “Key Innovations from the World of Auto Marketing,” iMediaConnection.com, May 30, 2008: How dealers are enhancing their dialogue with customers.
  2. Patrick Forsyth and Frances Kay, Tough Tactics for Tough Times: How to Maintain Business Success in Difficult Economic Conditions (Kogan Page, 2009): Fifty practical ways to increase sales effectiveness and maintain marketing initiatives in today’s environment.
  3. Stephan Schiffman, Selling When No One Is Buying: Growing Prospects, Clients, and Sales in Tough Economic Times (Adams Media, forthcoming): Suggestions for how to sell in hard times from an author of multiple books on sales techniques and online marketing.
 
Close