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Dennis Galbraith

Dennis Galbraith Chief Marketing Officer

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Honda Dealer Options on $3,000 per Vehicle Incentive

What is the best way for Honda dealers to capitalize on the new December incentive money offered by Honda?

  1. Cut price and make additional profit through volume
  2. Continue on with business as usual
  3. Increase television and radio advertising to promote a sale
  4. Focus communications on your customer base, particularly where the money can be used to help shoppers get financed
  5. Increase digital marketing

 

Some shoppers are more price sensitive than others, and this translates into some vehicle categories being more price sensitive than others. If the inventory you need to move most is price sensitive, then this may be an option. However, cutting price does no good unless you tell people you did it. Now you have three costs to the campaign: 1) a lower gross on the new business received, 2) a lower gross on the business you would have received anyway 3) the cost of additional advertising to support the promotion. Keep in mind that there is a cap on the program of 20% over last December sales. If you go over 120% of last year’s unit sales, you may be giving a discount you don’t have incentive dollars to support. It is all too easy to sell at or above the targeted number of units without moving the profit needle, or even losing money.

A store that expects to be at or near this level without any change in pricing and promotions might wish to simply pocket the additional incentive. This is the position we strive to keep our Honda dealers in all year. In this position, one needs to keep a close eye on unit sales and competitor behavior. If other Honda dealers are trying to make their number by taking sales from you, then you need to be positioned to strike fast, even in the last week of the month.

This is the hardest time of the year to acquire sufficient TV and radio to achieve frequency, and it is the toughest time of the year to make a message stand out. Special offers seem to be the best attention grabbers, and that puts you right back into the problem of spending more on advertising and decreasing front-end gross per unit at the same time.

A store that really works its CRM will be able to identify deals that could have been made earlier if this money were available to assist customers who are upside down on their trade. However, one needs to be realistic about the ability to get those customers financed now. Some will already be thousands of dollars deeper in credit-card debt. This can be a good strategy for bringing a few additional deals into the incentive, but it probably won’t get a store into the money that was otherwise going to have a December 90% as big as last year. It’s a competitive month.

A digital campaign can instantly target a wide range of shoppers with incentives at a variety of levels. It can be dialed up or dialed down. This is ideal for targeting a small window, like 100% to 120% of last December’s sales. However, the devil is in the details. Getting more aggressive on digital marketing by only raising bid prices can be deadly, especially when others selling the brand are in the same boat. Those buying digital marketing via a custom approach, as opposed to the common automated approaches, have a huge leg up in their ability to add additional opportunities, rather than simply bid more for the same old thing.

The dealers who will gain the most from this incentive are the ones who have grown all year and would have made 120% of last December’s sales even without the additional funds. These programs don’t show up for every brand every year, but the dealers with good, steady, growth tend to be in the best position regardless of what the manufacturer does. I hope every dealer has a great December and enters 2014 ready to position themselves even better. Call if you need help, (518) 703-6109.

Stan Sher
In theory it should be D and E. However, in reality it will be A. That is just how it is.

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