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(originally published by Booz & Company)


Convincing Consumers to Spend Again

That program was particularly popular when gasoline prices hovered near $4 a gallon. But now that prices have plunged, Pricelock Inc., the company administering the program, is adapting the offer to market it to companies that, for example, own fleets of commercial vehicles, says Robert Fell, Pricelock’s founder and chief executive officer. “In times of high gas prices, consumers are really interested in this product because they want peace of mind,” he explains. “But with lower prices, businesses are most interested because it’s a very effective cost insurance program.” Fell’s company, 20 percent of which is owned by the Goldman Sachs Group Inc., relies on Goldman to use derivatives to lock in gasoline prices.

Auto manufacturers also are being smarter about how they spend their hundreds of millions of marketing and advertising dollars, says Stephen Berkov, senior marketing analyst at the popular automotive Web site, based in Santa Monica, Calif. “When budgets are extremely constrained and the economy is in such dire straits, they are not going to market to people who are not in the market,” says Berkov, who is former head of marketing for Audi of America Inc.

One part of that effort is an attempt to use television advertising to drive potential buyers to Web sites, on the assumption that people who seek out information on the Internet have higher education levels and are more intent on actually purchasing a car, as opposed to merely browsing. Honda Motor Company, for example, is expected to launch an advertising effort in April to drive viewers to, which attracts 12.5 million users per month. The ads will urge customers to look at the “true cost to own,” an Edmunds-trademarked specialty, in considering whether to buy a Honda. The true cost of ownership, as the phrase suggests, adds up all the costs of operating and maintaining a vehicle over its lifetime, and the Edmunds site helps shoppers compare different models.

Companies are also spending more to engage with customers once they reach their Web sites. GM has increased the percentage of its advertising budget going to online outlets to 18 percent of its total, says Berkov, whereas a luxury and performance brand such as Porsche has hit the 50 percent threshold.

Overall, even luxury marques such as Mercedes-Benz USA Inc. and the BMW Group are stressing the value of their cars and financing packages. Some BMW dealerships in the New York metropolitan area are offering to pay the first three months of their customers’ leases. Berkov says it’s smart for the German luxury makers to offer such deals, at the risk of tarnishing their upscale images, because wealthy buyers now also need to validate their decision. “The luxury buyer needs to be able to justify to his friends why he pulled the trigger” and purchased or leased an expensive vehicle, Berkov explains.

Of all the new marketing efforts, the Hyundai Assurance program has attracted the most attention. In fact, the trend is already expanding beyond autos — Jet Blue Airways Corporation and home builders Toll Brothers Inc. and Lennar Corporation are offering similar programs. Hyundai does not require that a customer have a certain credit rating to enroll. If the buyer has a job and finances the purchase of a new Hyundai, whether through a bank or credit union or Hyundai itself, he or she qualifies. (Buyers who pay cash do not.) Until April 30, 2009, the company is also offering Assurance Plus, which covers the first three installment payments.

How long will automakers — and marketers in all industries — have to keep offering special marketing programs and incentives? “We hope we don’t need this forever,” Ewanick says of Hyundai Assurance. “I look forward to the day I can take it off.” Yet industry-wide annual car sales would have to reach the 12 million or 13 million unit-a-year level before marketers could even begin to ease back. From today’s perch, that seems a long way off; marketers are going to have to get used to seeking out solutions that are ever more inventive.

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  1. Pete Batten, “Key Innovations from the World of Auto Marketing,”, 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.
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