The automotive sector is often a bellwether indicator of the economy to come. The car industry slides into a recession first and will frequently rebound more quickly than other parts of the economy. But the COVID-19 crisis is having a simultaneous and systemic impact across every segment of the economy. What are car dealerships doing? How is the response varying? Is there anything that can be done?
As of 23 March 2020, California and New York are expecting people to “shelter in place” to slow the spread of the novel coronavirus. Locally, Pennsylvania Governor Tom Wolf has ordered non-essential businesses to close their doors, as in the case in both Delaware and New Jersey. New Jersey did not provide an end date, but in Delaware, Governor John Carney has ordered all non-essential businesses to close until May 15, 2020 (or until the public health threat is eliminated), which includes dealerships.
As an ad agency that manages many car dealership clients, we feel like we are in the passenger seat with our clients trying to navigate these truly unique times.
We have noted three responses from clients (and their competitors) so far.
- Cut now!
- Play it by ear.
- Spend! Spend! Spend!
The logic here is painfully apparent. Car dealerships rely on ads to drive sales, which happen in the showroom. And sales revenue is reinvested into subsequent ad spending. If nobody is allowed to shop for a vehicle, ad dollars have to be cut.
Moreover, it is unclear how this shutdown of the economy will impact the supply chain. How much inventory does a car dealer have today, now that the government is ordering their closure? But how many vehicles are enroute? What will inventory look like in 15 days and how will that impact floor plan costs?
The coronavirus is rattling the nation. The impact is beyond unsettling. And so many car dealerships are wondering if they were to advertise, will people even hear the message? And, if they do, will they remember that message in a few weeks?
Car dealers have no idea what will happen tomorrow, let alone in one or two weeks. So there is sound logic behind cutting spending until there is some clarity.
Play it by ear
Some clients have annual plans with monthly commitments. Car dealerships typically advertise the last two weeks of the month and so cutting spending effective Friday 20 March 2020 isn’t really that much of a cut.
But by holding pat, for now, these dealerships will maintain the benefit of their negotiated plans yet maintain flexibility should they need to cut or make other changes.
Dealerships are increasingly online retailers so advertising is going to drive a distraction-hungry audience to their website where they can build their new car, truck or SUV using the tools on a dealership’s website.
Spend! Spend! Spend!
Believe it or not, there are some dealerships dumping money into their ad budgets!
This seems crass. It feels smarmy. But it may pay off.
It is a well established business principle that companies that advertise through adversity come through stronger. This happens for any number of reasons but two stand out. First, they capture market share from the competition that retreated. Second, they take advantage of the vast shift in media dollars. With fewer advertisers spending, media companies are desperate to play let’s make a deal.
For today’s car dealership equipped with a robust website and a solid sales staff, advertising during the Coronavirus Crisis may be a smart move. Media consumption is skyrocketing with major markets reporting an 11% increase in TV consumption while advertisers are bailing. The car dealer who advertises now will have increased share of voice and will benefit from extremely efficiently priced media rates.
Messaging is critical. Some dealerships are using this time to promote:
- Service Hours
- Service offers for healthcare workers and vets
- Concierge delivery
- Online shopping
What Can You Do?
Part of the frustration and disquiet over the past week or two stems from the feeling of helplessness. We’re Americans, afterall. And we like getting stuff done!
As a car dealership, we’ve come across a few insights worth sharing.
- Remember you are a community leader. Likely, your dealership has been around for decades. Your community knows you. They know your team. Keep engaged with social media.
- Don’t disappear. Even if your strategy is to cut for now, encourage your sales team to keep up with customers. Work the email. Follow up with calls.
- Focus on your online experience. People are consuming significantly more media and information than they were just a few days ago. But with this comes the desire to be distracted from the news of the day. If and when people visit your site, they should find the experience easy and fulfilling.
- Be ready to move. The lifting of retail restrictions will likely come as quickly as they were imposed. Be ready to “turn on the lights.” Have a message ready to go. Be ready with a buy in place. Execute quickly. Consumers will be anxious to get out as soon as they can. Make sure they make your store one of the first places they visit.
As partners with our clients, our job is to help navigate this time with objective insight and sound strategy. For some, going dark may make sense. But for others investing for the future may be the path to follow. Let us know how we can help.