Auto dealers put pedal to the metal: zero percent financing gooses advertising in weak market

Cable World, Oct 29, 2001 by Christopher Schultz

After Sept. 11, consumers spent more time than usual watching the news. They weren't out shopping for new cars, although ads that would get them onto car lots were not very far down the road.

These ads come courtesy of local auto dealerships, which, in their active, sometimes feverish advertising of 0% financing deals, are providing a rare ray of hope in a cloudy ad market.

To increase foot traffic (and hopefully sales) in car lots, the big-three automakers--which have posted dismal third-quarter earnings announcements--grit their teeth and offered 0%, five-year financing of new automobiles.

Between the happy consumers--who are lining up for the interest-free loans and spinning out of crowded lots in shiny new cars--and the beleaguered manufacturers are the local car vendors, who are across the board steadfastly pushing zero financing and hoping to drive sales momentum.

Kevin Cuddihy, VP-ad sales for Comcast Marketlink, Midwest, says that in Detroit domestic auto dealerships spend nearly $500,000 per month on advertising. Compared to September 2000, ad spending for domestic automakers almost doubled during September 2001 in Cuddihy's 1.1 million-subscriber market.

"Some of the market spending is off, but in general the auto industry's spending has stayed quite strong," Cuddihy says.

Robust spending during a time when ad sales executives might expect advertisers to decrease their expenditures is due in part, Cuddihy says, to the financing offers and to Comcast's recent rollout of targeted advertising to many Midwestern markets during the last year.

Half a continent away, Tony Heaton, GSM of Antietam Cable in Hagerstown, Md., says that local auto dealerships in his market have spent 20% to 30% more on advertising in the last month. For him, it's simply a reflection of corporate assertiveness.

"GM and Ford are getting aggressive, and it's trickling down to local," Heaton says. "What are the choices? You can run and hide, or you can step up your marketing."

At Hoffman Automotive, an advertiser on Antietam Cable, VP and GSM Jim Colombo did some stepping up when he pushed both GM's "Keep America Rolling" 0% financing campaign and DaimlerChrysler's similar deal. Although Colombo didn't increase his cable advertising during the last month, he spent an extra $5,000 on a direct-mail campaign.

Colombo expects "a very good October" and says that since the promotions have started, Hoffman automotive has "been ringing a bell."

Though some markets have not seen an increase in local auto advertisers' spending, cable operators are thankful that advertising is still at normal levels.

Mike Fallon, GSM for Insight Communications in Indianapolis, Ind., says that "Auto dealers, traditionally, if they feel nervous, will pull back or pull out, but it hasn't been like that this time." Fallon doesn't think that spending has increased in Insight's Indianapolis territory, but, he says, "what I see and feel is more confidence [from automotive advertisers] in continuing their schedules.... I was fearful of heavy-duty cancellations."

Those are big fears to be assuaged. According to Fallon, automotive advertising accounts for 20% to 25% of Insight's monthly billings in central Indiana, which total more than $1 million.

Linda Kohlhagen, regional VP-ad sales for Cox Communications' Western division, tempers an admission that she has noticed an increase in individual car dealers' spending in the nine systems she oversees (from Texas to Southern California) with a reminder of the dead end where the broader advertising market is stuck. "If we're feeling an upturn," she says, "it's being offset by the decline overall."

Automakers are convinced that establishing sales momentum is more important than maintaining traditional paths toward making money directly off sales. James Kenyon, senior manager of sales, marketing and PR for DaimlerChrysler in Auburn Hills, Mich., says that zero financing is nothing more than "our attempt to jump-start sales and get people into the showrooms." He went on to say: "Sales have gone up. We're expecting good numbers."

In Hagerstown, Hoffman Automotive's Colombo tells it straight: "We want the momentum. We truly believe that volume begets profits.... You sell a car; you'll get the service. One car can generate a lot of profits."

A true believer indeed, Colombo doesn't plan to send any direct mail in November and, going after more traffic in his showrooms, he will increase Hoffman's cable ad spending. He normally allocates around 10% to 15% of his budget to cable ads.

In the dirgelike tone of one remembering the way things used to be, Cox's Kohlhagen says, "As the auto industry goes, so goes the advertising industry." Perhaps this time that adage might work in reverse.

Send news items about the local ad sales beat to cschultz@inside.com.