Mr. Marketing: Be patient, the next sale is coming

By Rob Weinberg

Please explain car promotions.  — Joe Korda, Poway

U.S. car sales are booming since December. Projected 2012 domestic unit sales are 14.5 million. From Audi to Volkswagen, good times are returning. Now car promotions are coming back.

Rob Weinberg

Some companies use newspaper ads or Web-based videos. Others combine promotional budgets from multiple dealerships and jointly invite their mailing lists for a day of fun.

And let’s not forget discounted prices and lower interest rates. Think of them as cents-off coupons, only for automobiles.

Say you’re debating between buying a Chevy Cruze and Toyota Corolla, both costing $20,000. Toyota, recovering from 2011’s poor sales, offers a $3,000 sales incentive.

You benefit by buying your car for $3,000 under MSRP (manufacturer’s suggested retail price), and Toyota sales increase. In three months Corollas are again fully priced as the promotion ends.

With sales plummeting, Chevy offers a zero percent car loan. Their sales perk up at Toyota’s expense, and Toyota fights back, again offering a known winner: $3,000 rebates.

An endless cycle begins, with consumers unmotivated to buy until their preferred company offers a money-saving promotion. The value of both franchises is diminished as consumers lose any incentive to pay full price. “If I wait a month or so” the thinking goes “the car I want will be cheaper.”

The economic turmoil just ending had successfully broken this cycle, and the car companies may still wean customers from this costly habit. However, with Toyota already giving money off the Corolla and Cruze sales down 30 percent in April, pricing retaliation from GM is probably only a matter of time.

Interestingly, cars like Rolls Royce, Corvette and Mercedes don’t run such promotions, feeling it would cheapen the brand in consumers’ eyes. These firms let product quality, reputation, image, and word-of-mouth sell for them.

Which suggests long-term business improvement means building a reputation for quality and service. Use sales promotions sparingly, when sales need a boost, but as part of an overall strategy of growth.

Becoming too reliant on sales promotions, without plans for building your overall image as a premium brand, is a guaranteed race to the bottom where price alone determines whether or not you make the sale.

With that said, I wish you a week of profitable marketing.

Mr. Marketing is a 30-year marketing veteran with experience in every type of marketing tool. Get his personalized advice at www.askmrmarketing.com.

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Posted by Staff on May 16 2012. Filed under Business, Mr. Marketing. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry