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Cobalt Dealer News May 2009
NYC Google Automotive Summit 2009
As a leading partner of Google, Cobalt attended the Google Automotive Summit in New York last month. Each year Google’s Automotive Marketing team assembles the digital marketing leaders of OEMs and major automotive agencies to discuss industry trends. Cobalt was the leading representative of the dealer community.
The program has some great speakers from inside and outside the industry. As you might expect, a primary topic was “when will this pain end?” John Casesa, the auto analyst and an advisor to the Auto Task Force, had some great historic analysis identifying that a lot of the intensity of the current slump is the result of several years of “unnaturally” high demand that was propped up by easy money and incentives. In terms of what got the domestics into their current fix, Casesa took the long view and said the root cause dates from the 1930’s when the National Labor Relations Act and State Franchise Laws were passed in reaction to predatory OEM practices.
Unfortunately, these laws shifted the power dynamic in the opposite direction and created a structural rigidity that, over time, lead to bloated labor costs, inflexible rules and excess capacity in the franchise network as market shares declined. This, in turn, led to less product innovation and excess debt as import competition squeezed margins and volume.
His view, most likely shared with the task force, is that radical surgery is required to “fix” both of these issues. He forecast that we may see fewer than 15,000 in the not too distant future but that the remaining dealers will be much healthier and willing to embrace modern marketing practices. Long term he speculated that more radical distribution changes – sales-only mass retailers, internet sales - could be enabled by the growth in volume of simpler electric cars. The good news is that he is forecasting a relatively quick rebound to the 11-12M unit range in 2010 and a slower growth ramp (3-5 year) to a “natural” demand level of about 15M units. As Paul Krugman has observed, at current sales levels consumers will be replacing their cars every 20+ years – not a very likely scenario. The dealers that do weather the current storm and adopt modern sales and marketing practices will do very well over a 5 year horizon.
Google’s chief economist, Hal Varian, mostly focused on macroeconomic trends and supported the general consensus that if we are not already bumping along the bottom of the recession we can see it from here. The vast majority of government stimulus funds have yet to hit and that should help counter balance on-going bad news on the employment front. Google is doing some promising research on "predicting the present" – correlating search volume for auto terms with near future sales volume.
Google and Compete reported preliminary results from new research on online buyer behavior using clickstream data linked to auto registration records. The top level take-away was confirmation that the internet shopper does not follow a linear path from 3rd party site to OEM site to dealer site but visits all these types of properties, in different proportions, at all stages of the purchase funnel. This puts the burden on the dealer to engage shoppers in all of these stages to insure they ultimately return to your store.
Google Automotive team put on a quality, thought-provoking program. It is clear we are still at the start of the digital marketing revolution in automotive; there is much innovation to come, and profits to be made, by surfing the wave.
By Chris Reed,
Cobalt’s CMO and an attendee of the 2009 Google Automotive Summit in NYC. |
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