Over the weekend my wife and I caught an interview with sisters Joan & Jackie Collins and were surprised how young they looked. Both are in their 70's.
My wife and I are now in our 50's, but we don't feel old, so don't patronize us:
Marketers Discreetly Retool for Aging Boomers
When baby boomers call ADT Security Services Inc. with questions about medical-alert alarms, they get operators specially trained to be sensitive to their needs. Top of the list: Don't remind them that they've aged.
"Boomers are used to being independent, and they get agitated if you're talking too slowly," says Barry Primm, an ADT home-health team manager who trains new operators to speak quickly and get to the point with these callers. "They just want to get it done, fast and business-like."
The generation that sent diaper sales soaring in the 1960s, bought power suits in the 1980s and indulged in luxury cars in the 2000s is getting ready to retire: The oldest boomers turn 65 this year. To accommodate their best customers' needs, American companies are overhauling product lines, changing their marketing and redesigning store layouts.
But there's a catch: Baby boomers, famously demanding and rebellious, don't want anyone suggesting they're old.
"We don't do anything to remind boomers that they are getting older," says Ken Romanzi, North America chief operating officer at Ocean Spray Cranberries Inc., which has targeted the health-conscious generation as its primary consumer base.
Surreptitiously, companies are making typefaces larger, lowering store shelves to make them more accessible and avoiding yellows and blues in packaging -- two colors that don't appear as sharply distinct to older eyes.
Invesco Van Kampen Consulting, an arm of Invesco Ltd., suggests financial advisers offer coffee cups with handles instead of Styrofoam (easier to hold), use lamps instead of overhead lights (less glare), and turn off the television when clients visit (background noise hampers hearing), says Scott West, a managing director.
Euphemisms are flourishing. ADT, owned by Tyco International Ltd., is marketing its medical-alert system to aging consumers as "Companion Services."
Kimberly-Clark Corp.'s Depend brand, widely considered adult diapers in the past, has had a makeover in a new TV ad: "Looks and fits like underwear. Protects like nothing else."
Bathroom-fixture maker Kohler Co. struggled to come up with a more palatable word for "grab bar," which boomers resist. It introduced the "Belay" shower handrail -- named for the rock-climbing technique -- which blends subtly into the wall of a tiled shower. "When you say, 'We've got beautiful grab bars,' (boomers) just say, 'Naw,' because they don't want to identify as needing that," says Diana Schrage, senior interior designer at Kohler's design center.
In the past, most big consumer products companies didn't specifically target senior citizens, since people over 65 traditionally spent less and resisted trying new products. But many marketers believe the baby boom generation -- born between 1946 and 1964 -- will turn that conventional wisdom upside down.
The 76 million boomers already account for an estimated half of total U.S. consumer spending. With longer life expectancy and lower savings rates than previous seniors, they are projected to spend an additional $50 billion over the next decade, according to market-research firm SymphonyIRI. Rather than passing on their wealth to future generations, they're expected to splurge mostly on themselves as they move households and pursue active lifestyles.
"As a generation, they're large enough that they expect to be served uniquely as they age," says Sean Seitzinger, an analyst formerly with SymphonyIRI. "That's very different from the generations before them."
To be sure, companies catering to seniors face drawbacks. The recession whittled down many boomer nest eggs, requiring them to save more and rein in spending. By its very nature, an aging boomer demographic will shrink every year as the oldest members die.
Nevertheless, the generation that drove the growth of hula hoops, bell bottoms and personal computers will continue to be an influential market as it ages.
Companies are currently adjusting their approaches to new demands. Boomers are much more concerned with a product's appearance, for example, not just its utility. Kleenex recently redesigned its boxes to have fewer floral bouquets and more contemporary designs, photos and the latest hues. There is less difference in aesthetic taste between young people and boomers than there is between boomers and their elders, says Christine Mau, a design director at Kimberly-Clark, which owns Kleenex. "If boomers were acting as their predecessors did, we wouldn't be as trend-forward as we are today," says Ms. Mau.
Carol Roberts, 65 years old, is a retired elementary school teacher in Leland, N.C. But that doesn't mean she wants to behave like a "senior citizen," she says. She's using her retirement to travel and volunteer with schools and community groups. She lifts weights and does other frequent workouts to stay in shape.
She also wants to stay fashionable. "I don't want to look like I'm in my teens or 20s, but I want to look current," she says. "To me, it's really important to look your best, and not just say 'I'm over 65, therefore it doesn't matter what I look like.'"
To attract customers like Ms. Roberts, nuance is key.
Kimberly-Clark spent two years overhauling its Depend brand, anticipating boomers would demand changes to the image and design of a line long considered too diaper-like and institutional. By 2020, Kimberly-Clark expects 45 million boomers will need incontinence products, up from 38 million currently.
"Past generations were more accepting that they had a condition, and this was the product that they have to wear," says Mark Cammarota, Depend's brand director. "The boomers don't have that attitude. They demand and expect more."
In an effort to modernize its designs, Depend has introduced gender-specific versions and briefs with fashionable prints that imitate regular underwear. Some Depend packaging is labeled "underwear" and disguised to look like packs of cloth underwear, including transparent windows that show Depend undergarments folded just like regular briefs. The smaller packs hang on hooks instead of stacked on shelves like diapers.
When casting for recent Depend ads, the brand looked for actors who appeared to be in their early 50s, a far cry from the brand's former white-haired spokeswoman, June Allyson, who sometimes portrayed a grandmother.
The new ads -- which launched last month -- feature a fit and flirtatious man in a coffee shop and a fashionable woman strutting down a sidewalk while tossing her hair, not a gray strand in sight.
"We're very subtle in that we don't have to explain the problem and solution in the ads," says Mr. Cammarota. "Boomers like seeing the confidence part of it."
Despite concerns inside the company that the actors were too young to be believable, focus groups of boomers didn't mind a bit, says Mr. Cammarota.
A big driver of boomers' increased spending is the fact that over one-third plan to move to a new home within five years of becoming empty nesters, according to SymphonyIRI. Many more are expected to adapt their homes to better accommodate diminishing mobility, all in hopes of maintaining the independent lifestyles they have embraced since their rebellious teenage years.
"A lot of boomers have been downsizing into new homes, and when you move into a new home, you need to redecorate, which is a very good thing for us," says Ellen Moreau, vice president of marketing for Sherwin-Williams Co.
Sherwin-Williams, mindful of boomers' sensitivity about aging and not wanting to limit its customer base to one demographic, has subtly redesigned its 3,400 stores to make them more comfortable to older browsers. They now have more lighting and seating and serve coffee in most locations. Product displays feature less fine print, hence fewer squinting shoppers. The company believes the subtle changes will be appreciated by all age groups, including younger shoppers.
That's how 63-year-old Lynn Donadio prefers it. "Companies don't have to go to the highest mountain to shout out that something is made for a baby boomer," says Ms. Donadio, a retired real-estate agent in Long Valley, N.J. "They can go to the top of a hill and maybe whisper it."
After noticing older shoppers struggling to read its cat-litter packaging, Arm & Hammer began sharpening the color contrast for the text and gradually increasing the font size, which is now about 20% bigger than it was five years ago.
"Our research shows that 60% of boomers who are near 65 claim to feel much younger than their actual age," says David Cohen, vice president of the home-care division of Church & Dwight Co., which owns the Arm & Hammer brand. "So you provide a solution to issues that they may have, but it's not an explicit message," Mr. Cohen says.
Diamond Foods Inc. carefully engineered the packaging of its Emerald snack nut line to accommodate the declining agility of baby boomers' hands. But no such boast appears anywhere on the green plastic canisters.
"We're very careful not to come across as preachy," says Andrew Burke, Diamond Foods' chief marketing officer. "Boomers have a filter that says, 'If you're trying to sell me too hard, then I'm not sure about your intentions.'"
Diamond, which long sold nuts for baking, finalized plans to enter the snack nut category after research found doctors were advising boomers to incorporate nuts into healthy eating plans. To differentiate their product from entrenched competitors, Emerald executives focused on making their packages easy to use.
Indented sides make the canisters comfortable to hold, and grooves make the lids easier to grip. After noticing that arthritic users struggled to twist the cap into place, Emerald shortened the required rotation.
Emerald, introduced in 2004, now has about 6% of the $3 billion U.S. snack nut category, or about $193 million in sales, according to 2009 estimates by market-research firm Euromonitor International Inc.
Like Sherwin-Williams, other retailers have been quietly adapting to aging customers. CVS Caremark Corp. has retrofitted stores with carpeting to reduce slipping. Shelves have been lowered to 60 inches, from 72 inches, and signs no longer have plaster windows, allowing more natural light in stores to improve visibility. Wherever possible, curbs are eliminated from store entrances, and existing curbs are painted yellow to heighten awareness.
In the basement of a nondescript office building in Appleton, Wis., Kimberly-Clark has built a mockup of what it thinks a senior-friendly store aisle might look like in the future. The company believes it's crucial to overhaul these aisles or boomers will resist going into what had been considered an "old person's" section of the store.
The mock store aisles pair incontinence products and other personal-care items not associated solely with senior citizens, such as body washes and razors so boomers don't feel like they are in an age-specific section of the store. "This way it appears that it's all about your hygiene routine," says Deborah Hannah, Kimberly-Clark's integrated marketing planning director.
Over the past two years, Walgreen Co. has been gradually adapting its 7,655 stores to be more friendly to aging boomers.
Subtle changes make it easier to navigate stores. Many stores have positioned magnifying glasses in aisles that carry products like household cleaners, hair color and cold medicine that use lots of fine print. Reading glasses are getting snazzier, too, now that the chain updates styles more frequently. "This customer is focused not just on function but on fashion," says Robert Tompkins, Walgreen's divisional vice president and general merchandise manager.
Walgreen has introduced easier-to-open packages on its private-label painkillers and incontinence products, and expanded its vitamin aisles.
"The boomers are much more focused on enhancing their well-being versus just trying to address being sick, as the prior generation might have been," Mr. Tompkins says.
(Source: The Wall Street Journal, 02/05/11)
Wednesday, March 09, 2011
We're Still Young
Thursday, January 06, 2011
Tech Predictions for 2011
Yesterday I got an email from Drew...
The trend report you don't want to miss
Posted: 05 Jan 2011 04:05 AM PST
Last year I told you about JWT's (J Walter Thompson) Top 12 Trends Report for 2010. It's by far the most comprehensive and helpful of any of the trend pieces we see this time of year.
Here's a quick video peek at their trends for 2011. (e-mail subscribers, click here to view)
Read more by clicking here and reading Drews Blog: Sphere: Related Content
Saturday, December 11, 2010
Company Christmas Parties
Yes, I said Christmas.
Not only is the use of the word Christmas coming back, company Christmas Parties are back too.
Ours is Friday.
Restaurants Offering Deals for Holiday Parties
Despite the economic Grinch threatening to steal corporate party business as it has over the past two holiday seasons, a number of operators say early incentive efforts have been helping them boost sales over last year.
However, even for those operators managing to book parties during the holidays, the season could be merrier.
One survey released in November predicted 2010 would see the worst holiday party slump in 22 years. The poll, conducted by Amrop Battalia Winston, a global executive search firm based in New York, found only 79 percent of businesses were planning a holiday celebration, down from 81 percent in both recessionary 2009 and 2008 -- the previous lows in the survey, which started in 1989.
"Compared to last year the amount of parties seems to be the same," said Ashley Lightfoot, private events manager at the Eddie V's Prime Seafood in Dallas. "They booked later than normal but seemed to be very selective while doing research. I had lots of inquiries early but the bulk of the groups did not confirm until October-November."
And costs remain top of mind, Lightfoot added. "I have noticed the major thing is the wine selection," she said. "For instance, I have a repeat group from last year that chose wine in the $50- to $60-a-bottle range and this year is going with our house (wine) at $28 per bottle."
That is a trend seen throughout the year, Lightfoot said. "I can pretty much say that for the whole year: same amount of parties but spending less."
This season, restaurant operators started offering incentives early to inoculate against the party-blues flu.
The 15-unit Texas de Brazil churruscaria chain had offered gift-card rebates to parties of 15 or more for bookings made before Nov. 30. The deal was to give 10 percent of the holiday party cost at regular dinner menu prices, up to $1,000, in gift cards.
Wolfgang Puck Catering offered early booking discounts for holiday events. And Dave & Buster's offered free room rentals or more than half off game play for those booking before November.
Smith & Wollensky Restaurant Group of Boston offered complimentary butler-passed hors d'oeuvres for events booked prior to Nov. 15. And the eight-unit chain's private-dining managers planned fixed-price dining packages, exclusive pricing on signature items and custom menus.
Nicole Lierheimer, spokeswoman for Smith & Wollensky, said, "The holiday promotions have been helpful in motivating event bookings.
"We are pleased to report that sales for the holiday dining season are up, thanks to the ongoing support of our loyal customers and the communities in which we do business," Lierheimer said.
Coming off the dismal party-spending years of 2008 and 2009, many companies were pleased that some business wallets actually were open this year.
At Ruth's Chris' Steakhouse, holiday party reservations rose 17 percent over last year's depressed numbers. "We are looking forward to our most successful holiday private-dining season since 2007," Mike P. O’Donnell, president and chief executive of parent Ruth's Hospitality, told securities analysts in late October.
Amrop Battalia Winston's 2010 "Annual Survey on Corporate Holiday Celebrations," which polled 103 leading companies, also found that for those companies holding celebrations, just over a quarter, or about 28 percent, said their parties will be more modest. This follows on the heels of the nearly half, or 49 percent, who downsized in 2009.
Amrop chief executive Dale Winston said, "Fundamentally, those having holiday parties this year are much more optimistic about the year-ahead, while those not having parties are more pessimistic."
Among other survey findings:
(Source: Nation's Restaurant News, 12/02/10)
Saturday, December 04, 2010
Stop & Focus
I know, I know... it's one of the busiest times of the year, right between Thanksgiving and Christmas.
But you and I need to do this.
From Marketing Profs:
Protect Profitability: Start Each Day With a Mission Statement
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All too often, they're shuffled out of sight—and out of mind. In Tabaka's experience, many clients can't articulate a mission statement; often, they've simply forgotten what they wrote in the first place.
So how can you regain—and maintain—a laser-sharp focus on your company's raison d'être? Tabaka recommends this three-step process:
Define your true and full vision. Almost everyone starts a business with the purpose of turning a profit, but you might have additional humanitarian or environmental goals. "Certainly this isn't true for everyone," she notes, "but don't negate the importance of your higher purpose if you have one."
Use imagery to communicate the big picture. Sometimes a written statement isn't enough. Tabaka suggests the creation of a poster board that keeps your mission front-and-center with drawings, photos or collages. "Too often the rewards connected to our goals get lost in the passion and dream of carrying out our mission," she notes. "Give yourself permission to include meaningful symbols of the rewards you seek; money, travel, fame, respect, or whatever is important to you."
Make your vision a daily reality. Take a few minutes each morning to ponder your visual mission statement. "Still your mind and gaze at your images, allowing your body and mind to feel and live your success," she advises.
The Po!nt: Focus. To achieve your goals—especially in tumultuous economic times—stay true to your purpose by keeping it at the front of your mind.
Source: Inc.
Sphere: Related ContentSunday, August 15, 2010
Handling Change
Nearly 25 years ago I jumped into the advertising world after working on the air and in the radio programming business.
Lot's has changed over the years in my world and the world of marketing. Here's some tips on handling change from the DLM Blog:
How to Stay Focused When Plans Keep Changing
Posted: 05 Aug 2010 07:22 AM PDT
I’m a planner. I like checklists and itineraries and schedules. Give me a map and I’ll plod along, one foot in front of the other, until we reach our destination. Of course, life isn’t always so easy. In fact, lately it seems like all my finely tuned plans have been turned upside down. Just like the old saying goes: We make plans and God just laughs.
These days, you have to be able to “go with the flow.” You can’t let fluctuating plans throw you into a tizzy. Minor changes (like switching the date of a meeting) and major changes (like company buyouts) happen nearly every day. And sometimes, even a seemingly minor change of plan can have a frustratingly huge impact.
I decided recently that I had to learn, once and for all, how to handle changes in plans with grace and poise, and not let such changes distract me and make me lose focus. Now, when someone throws a wrench my way, I have a calculated strategy with which to approach it. A plan to deal with broken plans, if you will. Yes, I’m a little neurotic.
If you find yourself in a situation where plans are fluid and you’re having a hard time keeping focused, try the following techniques.
Give Yourself Permission to Be Annoyed
Set a time limit. Ten minutes, maybe twenty minutes. During this period of time, complain all you want about how frustrating this change of plan is, how inconsiderate people are, how impossible this change will be to accommodate. Get it all out. But stick to your time limit. When it’s over, it’s over. No more venting; it’s time to get focused again.
Find Wisdom in the New Plan
So, the beautifully calculated plan you created went up in smoke and, in its place, there’s a new plan. It’s probably not fully fleshed out yet but you can see the outline of it. Find a way in which this new plan is better than the old one. Make up a reason if you have to. “I’ve always wanted to see Sheboygan. I’m so glad they moved the location of the conference.”
Recognize the Limits of Your Control
For most of us, the frustration with changed plans is that we feel out of control. But, the reality is, we can’t control everything and everyone. When a decision is out of your control, it doesn’t help matters to let it steal your energy. If you have no control, throw your hands in the air and ride the roller coaster. Acceptance is your only choice.
Embrace the Control You Have
If nothing else, you have control over yourself and your reaction to the change of plans. It might not seem like a lot, but it’s all you need. You can choose to react in a calm, poised and graceful manner or you can choose to freak out. You can choose to find solutions to make the new plan work or you can choose to rail against the change. Make productive choices.
Focus on the Next Step
Don’t try to think of every little thing that this change of plan will impact. Just think of the next step. What is one thing that you can do to feel more comfortable with the situation? Don’t try to re-evaluate the big picture right now. Just take one step and then, focus on the next one. Before long, you’ll be able to step back and look at everything with a level head.
Over the past few years, many people have faced some mighty big wrenches in their plans. Some experienced layoffs just months away from retirement. Others faced losing their homes due to overwhelming debt. Plans are great, but we shouldn’t ever get too comfortable with them. We can’t predict the future. It’s much better to be prepared so we can cope with changes as they happen—with grace and poise—and stay focused on moving forward.
 | Written on 8/05/2010 by Chrissy Scivicque. Chrissy is a writer, nutritionist and career coach. She trains others to manage their career path with a holistic point-of-view. You can find her at EatYourCareer.com, a blog dedicated to helping you create a nourishing professional life. | Photo Credit: eschipul |
Tuesday, August 10, 2010
The New Normal in Car Sales
There's a young man named Brian who works at one of the most recognized car dealerships in Northeast Indiana, as the General Sales Manager.
Over the past 9 months, I've learned a lot from Brian about changes in his business. His dealership has lost inventory, because G.M. scaled back the number of brands they carry.
Gone is Saturn. Gone is Hummer. Gone is Pontiac.
What's left? Cadillac, Buick, and GMC Trucks.
And three empty buildings.
Brian has learned how to manage, though. He was recently promoted to GSM for the used cars along with his other duties.
There's a lesson for all of us. Our old ways of doing business are changing, and often those changes are beyond our control.
How we adapt however, IS in our control.
Check out this story about the auto business and perhaps you'll get some ideas on what you can do in your business:
Life At 11 Million U.S. Transactions
What To Do When You Lose 6 Million Sales? Shake Things Up, Top To Bottom
So how does the car business cope with the loss of nearly 6 million annual sales in the space of three years? It reinvents itself -- top to bottom.
Look around and you see a different auto industry taking shape -- a "transformational moment," says AutoNation Inc. CEO Mike Jackson.
Why are companies that struggled in 16 million sales years doing just fine in a market of 11 million? Because discipline is breaking out all over -- at manufacturers, suppliers and dealerships. A pragmatic, tightly controlled approach has evolved from the recession, and the changes touch almost everything.
Incentives are smaller, simpler and more tactical. No-haggle and limited-negotiation pricing are getting a real tryout across the country. And inventories are lean and balanced.
Here's how that's playing out in the showroom:
Pete DeLongchamps, head of manufacturer relations at retailer Group 1 Automotive, tells of a neighbor who said he planned to stop by his dealership, trade in his 140,000-mile Chevrolet Suburban SUV and drive out in a new one.
DeLongchamps gently explained the new reality: "The factory's working 10-hour shifts," he told his neighbor. "You can't get Suburbans."
So the guy ordered one with exactly the equipment he wanted and drove his old Suburban for eight weeks until delivery.
"Instead of walking the lot, we sit with our customers, talk about their needs, place orders and take deposits," DeLongchamps says.
That anecdote illustrates how the "push" system of building and selling vehicles is fading. Automakers are closely matching production to sales -- a dramatic change for the Detroit 3.
That means U.S. inventories are hovering near record lows -- 2.1 million cars and trucks on July 1, half of the 4.2 million that were in stock on July 1, 2004.
General Motors Co. -- which used to run its factories at any cost, trying to create demand with hefty incentives and high, low-profit fleet sales -- now is underproducing hot models. On July 1, Chevrolet had just a 22-day supply of the Equinox crossover, a 31-day supply of the Traverse crossover and a 37-day supply of the Suburban -- all well below the pre-crisis norm of 60 days.
GM wants dealers to operate with much lower inventories and turn their stock faster. But one executive says many are having trouble adjusting to the new paradigm and regularly scream for more inventory. The exceptions, he says, tend to be dealers who also have Toyota franchises and understand how to function with fewer vehicles on the lot.
Dennis Egglefield, owner of Egglefield Bros. Ford in Elizabethtown, N.Y., says he is forced to live with lower inventory.
That means he risks not getting Mustangs in time for his spring-summer season or four-wheel-drives before the snow flies. To compensate, the dealership is encouraging regular customers to order in advance and also is trading vehicles more often with surrounding dealerships.
"Our floorplan is down," he says, "not from necessity but because we can't get the merchandise. We do a lot more dealer swaps than we used to."
For manufacturers, leaner inventories mean lower incentives. Average June incentives were down more than $300 from the industry's peak of $3,165 per vehicle in March 2009, Edmunds.com says.
"There is no faster way to profitability than to cut incentives," says Dave Cole, chairman of the Center for Automotive Research.
Structural change
Carmakers -- and not just Chapter 11 survivors GM and Chrysler Group -- have taken advantage of the crisis to fix structural problems.
Toyota, for example, had too many factories below capacity in 2008. This year it has closed NUMMI in California, consolidated Tundra pickup production in San Antonio and revamped plans at its new Tupelo, Miss., plant. Instead of the Prius hybrid, Toyota will make the high-volume Corolla in Mississippi.
Supplier relationships are changing, too. All three Detroit 3 purchasing bosses -- recognizing the difficulty of getting by without the technology and expertise of key partners -- have vowed to collaborate more closely with suppliers.
For instance, Chrysler this summer began offering more formal protections to suppliers. Previously, says purchasing boss Dan Knott, "I could pull the trigger at the last minute" and drop a supplier because "I didn't like the way you look."
Conversely, some old loyalties are crumbling. Auto advertising was once known for its stability, but a few of the oldest ties between carmakers and agencies -- Campbell-Ewald and Chevrolet, for example -- were severed this year as automakers struggle to re-establish brands and shake off tired stereotypes.
Dealers' new approach
Nowhere is the change more profound than at dealerships. Dealers have slashed costs in every corner of their stores to focus on the bottom line. Because of those cuts, many say they'll be profitable this year no matter what.
The combination of lower sales and shrinking margins has led dealers to experiment with new ways of paying salespeople. The traditional straight commission of 20 percent of gross profit has so squeezed salespeople that dealers fear a wave of departures.
A common switch: Pay a base salary plus commission.
With finance and insurance revenue falling as a result of lower sales, some dealers have cut dedicated F&I staff and let salespeople share some F&I commissions.
Some dealers are pushing their service departments to compete with repair chains such as Jiffy Lube. And they are tinkering with new pricing models, testing variations of no-haggle selling. By the middle of this decade, AutoNation plans to have all of its 200-plus stores using low everyday prices and limited negotiations.
Smarter suppliers
Suppliers that happily used to accept jobs with razor-thin margins just to keep their factories running are concentrating on contracts that are sure winners.
"You can't just launch 10 different car platforms (and have) four of them be winners and six of them losers," says BorgWarner CEO Tim Manganello. "That's a recipe for disaster. You need nine out of 10 winners."
Behr America CEO Heinz Otto says suppliers are chasing margins above 5 percent of sales. In the past they were OK with 2 or 3 percent, he says.
There's a dark side to the new emphasis on the bottom line: Many suppliers are moving engineering jobs out of the United States.
"You always have to look at your engineering structure -- and how possible is it to use engineering resources that are offshore," says James Rosseau, CEO of Magneti Marelli USA. "We offshore certain administration functions to reduce costs. I don't think we'll revert. The support functions, I believe, are gone."
With their lower breakevens, parts makers are poised for strong profits at today's volumes of 11 million to 12 million units annually.
That could be critical. Rebecca Lindland, head of auto research for the Americas at IHS Automotive, says current low sales are not building future demand but instead are working off the excess supply of the past.
"There's very little pent-up demand," she says.
Permanent? Or just a blip?
Are these changes permanent, or will they disappear with the first sign that things are back to "normal"?
It's a crucial question, since analysts say the industry's long-term health rests on continued discipline.
"We have a greater opportunity to make change that's permanent," says Jeff Schuster, head auto forecaster for J.D. Power and Associates.
"But as the sun comes out, it's easy to let go of some things you have learned."
(Source: Automotive News, 08/02/10)
Tuesday, August 03, 2010
Getting Started in this Crazy Business
The radio stations I work for sometimes use interns and this year we hired two of them full-time.
Except two weeks ago we fired one of them. She wasn't cutting it. Her job required her to pay attention to details and she wasn't.
Drew recently wrote a bit of advice for college grads:
College graduates -- stop listening to your parents and professors!
Posted: 14 Jun 2010 08:12 PM PDT
As you might imagine...this is the time of year when we get bombarded with resumes, calls and college graduate drop ins -- all looking for their first job. I remember how frustrating my search was. Everyone wanted someone with experience...which of course, no one would give me!
I've spoken to several college classes and many a recent grad over the past couple months and I can tell you without a doubt that most of them are going about finding a job all wrong.
And sadly, this is due to the tutelage of their well meaning parents and some out of touch professors.
Entry level jobs are not won with marbled resume paper and cover letters that tell employers how much you like people. And...you should not tell me that you're going to call to schedule an appointment. That's sort of my job. If I want to actually meet you. And seriously -- spell check.
I wrote a post outlining what I would do if I were looking for a marketing job today. (click on the link to check it out) Even if you aren't interested in marketing -- most of it still applies.
But bottom line -- you need to get our attention. And the standard resume/cover letter combo isn't going to cut it. You have to do something to stand out, to be noticed and most important -- to be remembered.
The photo above is a little something I got in the mail from job seeker Kurt Henderson. The copy is clever -- he acknowledges that time is money and he'd like a little bit of my time. He did several other things right. But...the bottom line, I've had this orange envelope (and the dollar) on my desk for about a month. I need to start talking to some entry level type folks. Guess who is getting my first call?
And in fairness -- not everything your parents tell you is out of date. Handwritten thank you notes never go out of style. Neither does doing your homework.
Good luck finding that elusive job. I promise, you'll never work as hard to get one as you will this first time out.
P.S. Check out this free e-book aimed at grads!
Sphere: Related ContentSunday, July 18, 2010
Outrage
In Fort Wayne, we recently had a conference designed to create a community growth vision for the next 10 years.
I was unable to attend in person but was able to follow along on Twitter as they used the hash tag #BeOutrageous.
Terms such as Outrage, Outrageous, or even Out-Of-The Box are used to describe things that are not normal.
Harvey Mackay wrote about this a couple days ago:
Mackay's Moral: If you want outrageous results, you need to try outrageous advertising.
Friday, June 25, 2010
Christmas 2010 Predictions
Yep, it's just 6 months away...
2010 Holidays to be Kinder to Retailers
U.S. retailers might get a gift from consumers this year: A boring but steady holiday season with a gentle uptick in sales, according to industry experts at the Reuters Consumer and Retail Summit.
That would come as a relief after the drama of 2008, when holiday sales plummeted during the worst days of the financial crisis, and 2009, when stores from Macy's and Saks to Abercrombie & Fitch Co waited for shoppers to return.
"It's going to be the most boring holiday season we've had in quite some time," said Janet Hoffman, global managing director for Accenture's retail practice.
"(That's) going to be really good news for many retailers because what they're going to see is incremental lift in sales."
The experts agree that sales over the 2010 holidays will be better than last year's, but still a far cry from 2007 levels.
But with unemployment near 10 percent and concerns about where the economy is heading, shoppers will be cautious through the end of 2010.
"From a spend perspective, the spend is still down," compared with levels two years ago, said Regina Gray, vice president of strategic insights at credit information company Experian.
"Consumers are still going to be very conservative this year," she said. "While confidence is increasing that doesn't mean that spend will increase."
The holiday season, which runs from Thanksgiving in late November into the first week of the New Year, can represent as much as 40 percent of annual sales for some retailers.
Soon after the financial meltdown hit its nadir in the fall of 2008, retail sales collapsed. Holiday sales at stores open at a least year (same store sales) were down 5.6 percent that year compared with a year earlier, according to the International Council of Shopping Centers. Last year, they rose 1.8 percent.
Same-store sales in May this year were up 2.5 percent compared with a year ago, falling just short of expectations.
Better to give up sales than overstock
Still, the economy has stabilized and people with jobs are less fearful of joining the ranks of the unemployed, meaning the holidays will bring some cheer.
"The bar is pretty low and the holidays will be okay. I don't think it's going to be as great as folks are predicting," said Matthew Katz, the global retail practice leader at AlixPartners. A low-single digit percentage gain over last year's holiday sales would be a good performance, all things considered, he said.
Katz said retailers will likely avoid building up inventories, lest they run the risk of slashing prices again to move product should the economy take a turn for the worse.
"I'd rather walk (away from) sales than have inventory," Katz said.
Even if retailers run the risk of losing out on some sales if they run low on merchandise, lower inventory will boost profits, he said.
Nonetheless, the headlines seem to bring a daily reminder of the precarious state of U.S. consumer spending.
Ho-hum sales in May, after bigger sales gains in the first four months of the year, and the return of volatility to the stock market, illustrate how easily any momentum can be reversed.
"In the last month, it's sort of a rocky performance -- one week is good and one week is bad -- and the retailers that I've talked to can't really explain it," said Gilbert Harrison, chairman of boutique investment bank Financo Inc.
"How much of it is psychology, how much of it is because they've spent enough money and they don't have any more, nobody seems to know."
(Source: Reuters, 06/22/10)
Wednesday, June 16, 2010
Social Media vs Word of Mouth
A great piece from the LifeDev.net blog:
Word of Mouth Marketing Will Never Die
Question: What’s better than hyping your own product?
Answer: Having a satisfied customer do it for you.
Give your customers a reason
to evangelize your products.
My friend Heather was previously using an real estate agent that was a tad on the pushy side. The agent did all those things that really cheese potential home buyers off, like suggesting homes way out of Heather’s budget. The agent basically tried to force Heather into buying a home out of her price range so that she could receive a higher commission. (She even suggested Heather borrow money from her parents to do it!)
Instead of helping Heather, the agent was most interested in helping herself.
So, I sent Heather over to my buddy Travis who is also a real estate agent. I’ve known Travis for a while, and he’s quite possibly the most laid-back person I’ve ever met. He did everything he could to make Heather feel comfortable, and went out of his way to help her. Because of his helpfulness and care, Travis eventually sold Heather a home that she loved.
Instead of using the previous agent’s tactics, Travis instead made her feel at ease. He didn’t try to upsell her, but only worked within the parameters that she had previously set. Because, when you buy something as freakin’ expensive as a house, you definitely want to be at ease with your decision. (There’s nothing worse than a few hundred thousand dollars worth of buyers remorse.)
But here’s the real kicker: Heather has since sworn that she’d refer anyone to Travis.
Now that’s Old Skool Word of mouth marketing.
Word of Mouth Marketing is Nothing New
We’re so caught up with social media these days. You have to have a Twitter profile. You have to have a Facebook fan page. LinkedIn, Youtube, and on, and on, and on. Follower counts are pivotal. Retweets are currency, et. al. Sure, these platforms can help you reach new potential customers, but focusing on the platform instead of the people is a sure way to fail.
Twitter, Facebook… it’s all word of mouth marketing: People talking about your product or service and referring it to friends.
On paper, my friend Travis has a stark disadvantage against other, more established agents. They have lots of marketing dollars, with their fake smiles flashed across billboards. Travis doesn’t really advertise, has zero “social media presence”, and only relies on friends and previous clients to spread his brand.
Yet at the end of the day, he’s making the sales. Oh, and at night he sleeps soundly knowing that he’s helping people, not looking out for himself.
Word of Mouth is NOT Social Media
With all the focus on social media these days, it feels like people are forgetting what makes the champions of these technologies so great. Organizations like Zappos have successfully used social media to sell more of their product. But if you look deeper, it’s not because of social media, it’s because they intensely care about their customers.
Story after story, (I love this one), has surfaced about how Zappos has gone the extra mile 20 miles and made sure their customers were happy. Sure, social media has helped, but that’s because it’s an extension of how they care, another way to reach out to customers.
And it keeps people talking about their product.
So stop worrying about Twitter followers. Start thinking about how many people you can help, and how you’re going to do it. Use Twitter and Facebook to help everyone, not to flash authority.
And then people will start talking.
Monday, June 14, 2010
The Lie
There are folks that I know who are always looking for that "one thing" that will change their lives. It's a shortcut, a way to beat the system, to me it looks like a "get rich quick scheme", with the emphasis on "scheme".
Seth Godin wrote about this yesterday:
Hope and the magic lottery
Entrepreneurial hope is essential. It gets us over the hump and through the dip. There's a variety of this hope, though, that's far more damaging than helpful.
This is the hope of the magic lottery ticket.
A fledgling entrepreneur ambushes a venture capitalist who just appeared on a panel. "Excuse me," she says, then launches into a two, then six and eventually twenty minute pitch that will never (sorry, never) lead to the VC saying, "Great, here's a check for $2 million on your terms."
Or the fledgling author, the one who has been turned down by ten agents and then copies his manuscript and fedexes it to twenty large publishing houses--what is he hoping for, exactly? Perhaps he's hoping to win the magic lottery, to be the one piece of slush chosen out of a million (literally a million!) that goes on to be published and revered.
You deserve better than the dashed hopes of a magic lottery.
There's a hard work alternative to the magic lottery, one in which you can incrementally lay the groundwork and integrate into the system you say you want to work with. And yet instead of doing that work, our instinct is to demonize the person that wants to take away our ticket, to confuse the math of the situation (there are very few glass slippers available) with someone trying to slam the door in your faith/face.
You can either work yourself to point where you don't need the transom, or you can play a different game altogether, but throwing your stuff over the transom isn't worthy of the work you've done so far.
Starbucks didn't become Starbucks by getting discovered by Oprah Winfrey or being blessed by Warren Buffet when they only had a few stores. No, they plugged along. They raised bits of money here and there, flirted with disaster, added one store and then another, tweaked and measured and improved and repeated. Day by day, they dripped their way to success. No magic lottery.
What chance is there that Mark Cuban or Carlos Slim is going to agree to be your mentor, to open all doors and give you a shortcut to the top? Better, I think, to avoid wasting a moment of your time hoping for a fairy godmother. You're in a hurry and this is a dead end.
When someone encourages you to avoid the magic lottery, they're not criticizing your idea nor are they trying to shatter your faith or take away your hope. Instead, they're pointing out that shortcuts are rarely dependable (or particularly short) and that instead, perhaps, you should follow the longer, more deliberate, less magical path if you truly want to succeed.
If your business or your music or your art or your project is truly worth your energy and your passion, then don't sell it short by putting its future into a lottery ticket.
Here's another way to think about it: delight the audience you already have, amaze the customers you can already reach, dazzle the small investors who already trust you enough to listen to you. Take the permission you have and work your way up. Leaps look good in the movies, but in fact, success is mostly about finding a path and walking it one step at a time.
Sphere: Related ContentMonday, April 19, 2010
Values Beat Mission Statements
Today I took the day off from my day job as an advertising account executive and manager at a group of radio stations and wore jeans all day.
And I worked, too, including a meeting with a radio client of mine who wanted to hand me a check for a couple thousand dollars. As a matter of fact, that meeting is occurring right now as this post hits the net. We are meeting at a locally owned and operated coffee shop.
I support several of them and with my laptop and their free wifi, it is a good trade off. The two coffee shop owners that I know the best have a values driven system of running their businesses. They are loyal to the city we live in and give in many unmeasureable ways.
Their business plans were never to dominate the world and wipe out all other coffee shops.
Earlier today, I was writing this while sitting in the other coffee shop I am talking about and came across the following story from Inc.
My question to you is what type of business are you running? Has it changed over the years? Do you want it to change now? All is possible if you want it.
How to Build a Values-Driven Business
With so much talk these days about corporate social responsibility, many companies are feeling compelled to jump on the values bandwagon. Because of their agility, small businesses in particular are at the forefront of what is becoming a responsibility revolution. But, what does it really mean to be a mission-driven business? Simply selling green products does not classify a company as values-led, according to Jeffrey Hollender, co-founder of the consumer products company Seventh Generation. So, whether you are thinking about starting a social enterprise, or want to incorporate a social mission into an existing company, here are some tips for succeeding as a social entrepreneur.
Building a Values-Driven Business: Think About What You Can Provide
Being passionate about protecting the environment or providing clean water to kids in Africa is all well and good, but in order to be a social enterprise you also need to have a product or service that provides value to others. Jeffrey Hollender of Seventh Generation recommends going through the following exercise to determine what kind of value proposition your business will have. Hollender says that every entrepreneur should start by trying to answer the following question: What does the world most need that we as a company are uniquely able to provide?
The key point for any social entrepreneur to understand is, "your core values and passion have to align with some demand in the marketplace," says Hollender. In other words, a values-driven business isn't going to succeed if it relies on the owner's passion alone. Deborah Nelson, director of San Francisco-based Social Venture Network, a non-profit organization that supports social entrepreneurs, says there's more than one meaning to "value" when it comes to running a social enterprise – there's your market value and also your defining values (or beliefs). She reminds budding social entrepreneurs that it's important when building your company to "lead with your value, and follow with your values."
Dig Deeper: How to Create a Company Philosophy
Building a Values-Driven Business: Hone Your Mission Statement
Having a visible and known mission statement is crucial to building a values-driven business. It's not uncommon for businesses in general to form without a mission statement, but if you haven't spent a significant amount of time thinking about the goals of your social enterprise, make sure you work on that core building block before going any further. "It's always a good idea to go online and read the mission statements of the 10 companies that you most admire," says Hollender. You'll find that it helps to see the operating principles and values-oriented statements put out by established companies, and then use those as model for your own, he says.
You'll want your mission statement to embody both what you're passionate about and how your business will help you fulfill it. "Your mission statement should be strong enough that it continually drives you to keep focused on your values, and gives insight into your value proposition as a business," says Hollender. Once you've spent some time refining your mission statement, don't just ignore it. Use it as your compass for making decisions, and put it out there whenever you're presenting your company to others.
Dig Deeper: How to Write a Mission Statement
Building a Values-Driven Business: Focus Your Efforts
Focus can be a big challenge for social entrepreneurs, says Ganesh Rengaswamy, a vice president at Unitus, an international non-profit that promotes the growth of microfinance. Most do-gooders have started a social enterprise because they are very passionate about a particular social issue or problem. However, Rengaswamy, who has trained entrepreneurs worldwide on the topic of leadership and social enterprise, says it's common to get distracted by the broader social problems while building a company, and feel compelled to want to "fix it all." In his experience, Rengaswamy has found the entrepreneurs who become most successful are those who stay focused on their founding mission and don't try to do too much at once.
One way Hollender recommends staying focused is to start small. For example, if your mission is to stop hunger, it's better to refine that by being specific about what you can do on a local or more concentrated scale to achieve that mission. You will always be able to expand on that vision later, once you've established yourself as a business. Another danger of trying to do it all is that it often creates confusion for employees, and then they don't know what aspect of your vision they are expected to deliver on, says Hollender. "If your employees or people connected to your company can't tell you how the given mission of your company would affect a decision they have to make, then you are probably not staying focused enough," he says.
Dig Deeper: The Power of Focus
Building a Values-Driven Business: Practice Transparency
Along with the task of staying focused comes the importance of being transparent in the way that you run your business. The easiest way to build trust with consumers and employees is to be clear about what you are and aren't doing, says Hollender. A good way to create that transparency is by putting together a corporate responsibility report. The report doesn't have to be long but it should discuss how exactly you are being socially responsible in your process and methods, says Hollender. It's important to point out the areas where you are striving to do this as well, but may not have the capacity to do so at the time. It's helpful to post the report on your Website for your customers to see, as well as share it with your staff. The more open you are about your process, the easier it will be for your employees to deliver on your mission, says Rengaswamy, and the more invested they will feel in the success of the company.
Dig Deeper: How Transparent is Your Company?
Building a Values-Driven Business: Treat Your Workers Well
While outwardly your business is driven by your social mission, what happens inside your company is an expression of that mission as well. That means also focusing your passionate energy inward to create a fair and beneficial work environment for your employees. In his new book, The Responsibility Revolution, Hollender describes this principle as striving to be authentically good, by building the mission into every part of your business. "Your employees are one of the key stakeholders at a social enterprise, so make sure that your values are reflected internally as well," says Hollender. It's easy to get carried away with developing your product and everything that you have to do to keep consumers happy. But, if the health of the company is suffering internally, the rest doesn't really matter.
Dig Deeper: How to Build a Culture of Employee Appreciation
Building a Values-Driven Business: Build Your Team
According to Rengaswamy, one of the most important aspects of running a social enterprise is the people you hire to work at your company. While smart hiring is crucial to the success of any small business, there are certain things to look for when hiring for a social enterprise, says Rengaswany. It can often be more challenging for social entrepreneurs to attract high-quality people, because you aren't just looking for someone who can do their job well. You also want to bring the people on board who really understand the mission of your company and believe in it. Those who are eager to build upon your vision are the kind of employees that won't just help your company grow, but the ones who will grow with you. Your challenge as their boss is to make sure they remain motivated and excited about the mission.
Blake Mycoskie, the founder of TOMS Shoes, estimates that he spends about 30 percent of his time on hiring, which has been a crucial role for him especially during the past couple years as the company has experienced rapid growth. The dedication to finding the right people has paid off for Mycoskie. Many of the original interns he hired when he started TOMS four years ago, are still with him to this day, and are now moving into key strategic roles. They have also helped shaped the culture and keep it intact as new people come onboard, Mycoskie says.
Dig Deeper: How to Improve Your Hiring Practices
Building a Values-Driven Business: Educate Yourself
The more involved you are with a community of like-minded social enterprises, the more knowledge you will gain about decisions crucial to your own company. Deborah Nelson of the Social Venture Network recommends finding a group of trusted advisors who can take part in your company in a mentoring capacity. Finding advisors that you admire often comes from joining community networks, especially ones that are geared towards social responsibility in business. You don't necessarily have to find an organization based in your city or state, says Hollender, because many of them, like Vermont Business for Social Responsibility, Social Venture Network, and Social Enterprise Alliance have a wealth of resources on their Websites. It's a good idea to sign up for newsletters from these organizations and keep watch for upcoming networking events. Additionally, Hollender helped start Sustainability Institute, a training portal for social entrepreneurs, which offers a variety of paid online courses geared towards individuals and emerging companies that are getting started with a social enterprise.
Dig Deeper: The Education of an Educated CEO
Building a Values-Driven Business: Market Yourself
This may seem like an obvious piece of advice, but according to Nelson, it's common for social entrepreneurs to get so passionate about their mission that they forget that they also have to be incredibly creative about promoting their products and their business. "You can't rely on social mission to sell your product," she says. "You can have a great product and great business practices, but if you don't promote it, you won't sell anything." If you don't have a dedicated marketing person on your team, there are firms that specialize in doing creative for social enterprises. Some well-known firms to check out are: Metropolitan Group, Free Range Studios, Mission Minded, and BBMG.
Dig Deeper: 30 Memorable Marketing Campaigns
Building a Values-Driven Business: Remember Your Cash Flow
Just as marketing should be integral to your business, turning a profit is just as essential. In order to make a difference through social enterprise, your business has to be financially healthy. According to Nelson, there's a saying in the social entrepreneurship community: "No margin, no mission," and Hollender at Seventh Generation was a case in point. He says the biggest mistake he made when he was first starting out was he focused too much on his mission at the exclusion of profits and, as a result, the company functioned largely as a non-profit for the first 13 years in business. During that time, Hollender was forced to constantly raise additional capital until he was able to balance out the business side with his passion. Keeping your expenses lean and bootstrapping as much as possible at the beginning will help you achieve that crucial balance. You can't afford to be naïve about your numbers, either. Nelson advises entrepreneurs who may not have a knack for the financials to get help from someone who can pay attention to key indicators and report on the trajectory of your profit margins.
Dig Deeper: How to Manage Cash Flow
Building a Values-Driven Business: Consider Becoming a B Corp.
As a social enterprise, you will discover that you are often held to a higher standard by customers, and even by potential investors. "The stakes are much higher now for businesses that are attempting to do good by doing well," says Nelson, so be prepared for your every move and decision to be scrutinized, with your missteps potentially becoming public crises. However, many successful companies – think The Body Shop, Odwalla, Ben & Jerry's – have walked this path before and come out on top. As a result, they have paved the way for a new business classification called the B Corporation, which serves as a distinction for a company's sustainability standards, in addition to its traditional founding legal structure of S Corp, C Corp, or LLC.
The idea for creating a set of sustainability metrics and performance standards by which social enterprises can be recognized and held accountable came out of B Labs, a non-profit formed in 2006 by three friends passionate about the do-good business model. There are currently about 280 companies representing over 60 industries that have been certified as B Corps since mid-2007, according to B Labs co-founder Jay Coen Gilbert. While B Corp is not yet legally recognized as a standalone business classification, companies that have received the distinction are part of a significant group of social enterprises (including Seventh Generation, Method, and White Dog Café) that have chosen to operate according to a higher set of standards.
Any company can become a B Corp through a simple process set forth on the B Labs Website. Businesses must first take a survey that assesses the company's score in relation to their sustainability performance. If they receive a score of at least 80 (out of a possible 200), businesses may then go on to amend their founding documents to provide for stakeholder interests. "Once you have been approved in the assessment, we provide you with the exact wording to incorporate into your governing documents," says Coen Gilbert. "One of the major purposes of the B Corp model is to make it easier for entrepreneurs to change the DNA of their business so they are legally protected when it comes to their mission, but are also required to consider the impact of their decisions on other interested parties," says Coen Gilbert. He describes the B Corp classification as an overlay to the existing corporate structure at a company, which further helps bake their values into the way the business functions. B Labs is currently working towards getting legislation passed in several states that would formally recognize the B Corporation as a distinct legal entity. So far, legislation has already been introduced in Vermont, with Maryland, New York, and Pennsylvania poised to follow.
While there are unique challenges facing social entrepreneurs in the quest to lead successful values-driven businesses, Hollender believes it will get increasingly easy for companies to take on social responsibility. In part, this is due to organizations like B Labs and the American Sustainable Business Council that are helping to mobilize social enterprises to influence policy change. "The good news is that this couldn't be a better time to start a values-oriented business," says Hollender. "There is a greater demand and consumer receptivity to these types of businesses than ever before."
Dig Deeper: The Thinking Behind B Corporations
Building a Values-Driven Business: Additional Resources
Visit these organizations' Websites to find a wealth of information on socially responsible businesses.
Social Venture Network's Tools & Best Practices
SVN.org
B Labs – B Corporation
Bcorporation.net/
American Sustainable Business Council
Ssbcouncil.org/
Business for Social Responsibility
Bsr.org/
BALLE – Business Alliance for Local Living Economies
Livingeconomies.org/
Social Enterprise Alliance
SE-Alliance.org/
Wednesday, February 24, 2010
The New Car Dealership
from my email last week.
What lessons are there that can be applied to your business?
New Retail Model: Slash Your Way to Net Profit
Because he was high-priced talent, Ron Wolff was among the first to go when the Minneapolis-area auto dealer who had employed him for 30 years cut staff last year.
As general manager and 20 percent owner of a Nissan-Hyundai-Subaru store, he was given an ultimatum: Purchase the store or accept a buyout.
Wolff took the buyout, sold his 10 percent stake in another dealership and used the proceeds to buy a small Chevrolet-Buick store nearby. And now he's making cuts of his own -- a prime example of the new lean, hard-nosed philosophy that guides dealership management these days.
"Times change," says the 57-year-old Wolff. "Gross profit is hard to come by. You have to cut expenses to make things work."
Wolff is among the dealers forging a new business model for auto retailing. Gone is the traditional emphasis on gross profits, in which dealerships primarily are concerned about the difference between invoice price and selling price. Instead, more dealers are using a variety of cost-control measures in every corner of their stores to focus on net returns and on the bottom line.
The emerging post-crisis auto industry is "a far more rational business," says Mike Jackson, CEO of AutoNation Inc., the nation's largest dealership group. "I'm convinced this really is a transformational moment for our industry."
Dealers are renegotiating vendor contracts and holding off on new construction or dealership renovations, even as factories push upgrades. The most radical cuts are in advertising and staff.
The result: Many dealers survived the brutal recession and stand to thrive this year even with a modest uptick in vehicle sales.
The National Automobile Dealers Association reports that in the first nine months of 2009, the average dealership's net pretax profit was 1.7 percent of sales, up from 1.3 percent in the comparable period of 2008.
Ford Motor Co. also noted "a striking turnaround" in its dealer network, says Jim Farley, Ford group vice president of global marketing. In 2008, about half of its domestic-brand dealerships lost money. But in 2009, fewer than 20 percent were unprofitable.
Farley attributed the gains to "Herculean" efforts to cut expenses, as well as lower vehicle inventories.
Rethinking expenses
"Most dealers come from a sales background," says Steve Emery, a consultant with NADA. "They were oriented toward volume and gross profit -- that's how they were raised. Then they started bleeding cash."
Auto retailers are rethinking everything -- from office supplies to inventory to the vendors who tend the potted plants. When they buy equipment, they demand to know the payback period.
"Every vendor in the industry is spending 50 percent of their time renegotiating contracts with dealers," says dealer consultant Mark Johnson of Seattle.
"In many cases dealers simply canceled the agreement, even though the time period to cancel had not arrived. Many vendors have chosen to simply accept the cancellation, hoping to trade it for goodwill with a dealer in the future."
At his new store, Mora Chevrolet-Buick in Mora, Minn., Wolff requires the general manager to open all mail and sign off on all purchase orders. Wolff reviews purchases on a weekly basis. "You don't want employees to feel they have a free hand buying things," he says.
Loren Sheffer, of Fort Myers, Fla., says he has had to learn the difference between luxury and necessity. "We used to have a plant service that just put greenery around the store. We also had a balloon service supply us with balloons for events," he says. "All that's out the window."
In the past, dealers were reluctant to switch computer vendors. But especially in the first half of last year, dealers "panicked" and shifted to the lowest-cost providers, says Adam Gillrie, a Tampa, Fla., dealer consultant who specializes in technology.
'A lot of upheaval'
"There's a lot of upheaval right now," says Gillrie, although the activity has slowed somewhat since the beginning of this year.
Dealers want to be sure their new systems can handle their Internet marketing needs, he says.
"We are big on the Internet and do zero advertising in print," says Jim O'Neill, president of Del Ray Acura and Del Ray Hyundai in Del Ray Beach, Fla. "We don't see a return from newspaper advertising."
The shift reduced his advertising cost per car to $125, down from $300, and saved $30,000 to $40,000 per month, he says.
Wolff also eliminated newspaper advertising. "We don't feel it's effective. Most customers at least look at our cars online, and we are working hard to get electronic media going with regard to e-mail blasts," he says.
Though some dealers pulled the plug last year, many have been shifting away from print for the last decade. NADA figures show that from 1998 to 2008, the Internet overtook Radio and direct mail as a dealer advertising medium and is slightly behind TV.
At the same time, newspaper's share of dealerships' ad budgets sank to 23 percent in 2008, falling from 52 percent in 1998.
Last year the average dealership slashed its overall advertising budget 18 percent, NADA says.
Fort Myers dealer Sheffer slapped a strict limit on all advertising expenditures. "I joined 'advertisers anonymous,'" he jokes. "You can't advertise your way out of a bad market."
Jason Kuhn, who owns two Volkswagen stores and one Honda dealership in Tampa, Fla., slashed his 2009 advertising expenses 40 percent -- the single biggest cost cut at his dealerships. He reduced Radio and TV advertising and switched from network TV to cheaper cable. Print ads were dropped three years ago.
Instead, Kuhn's stores have bolstered online and e-mail campaigns, concentrating on existing customer lists. A customer referral bonus was raised from $100 to $400, and referrals are through the roof.
With tighter used-car supplies and higher auction prices, Kuhn also sent mailers to existing customers inviting them to sell their vehicles back to his dealerships if they needed cash -- no strings attached.
"For the first time, it wasn't a campaign to sell cars; it was a campaign to buy cars," Kuhn said. "I do see that continuing."
Paying on net profit
Dealership department managers historically earned a percentage of gross profit. But now dealers typically pay them a percentage of the net profit for their department or for the store, NADA's Emery says.
More service writers also are being made accountable for expenses. Some dealers are factoring rental-car expenses and repairs that had to be redone into service advisers' pay.
"They're often the ones who generated the expense," Emery says.
O'Neill says he ties managers' bonuses at the two Del Ray stores to net profit. All managers earn a healthy salary up front and a year-end bonus based on the store's overall net profit.
In 2009, his net pretax profits were 4 percent of revenues, almost double his typical return on sales. He says his sales rose 14 percent year over year.
Kuhn, the Tampa dealer, last year revamped compensation for salespeople. Instead of paying them 20 to 30 percent of gross profit, Kuhn now pays on a sliding scale from $200 to $400 per car. The amount goes up with volume.
"Our salespeople were taking a big hit because the gross profit per car sold has dropped dramatically," Kuhn said. "And we really wanted to incentivize our sales force to think in a volume basis."
Lean and mean
Many dealers trimmed staff, cross-trained many employees and combined positions.
John Buelow, a Minneapolis dealer consultant, says dealers also are subcontracting some functions, such as used-vehicle buying, human resources, information technology and warranty administration.
"We have even seen some dealership groups start looking at part-time salespeople who work flex schedules but have no benefits," Buelow says.
Burke O'Mally, a Saturn, Chevrolet, Subaru and Mazda dealer based in Sterling, Va., eliminated cashiers in the service department, giving that role to the service advisers.
"They don't like it, but it's actually better for the customer," O'Mally says. "Instead of handing off the customer to the cashier, the customer stays with one person on their car. When the customer has questions, the cashier can't answer questions. The customer wants an answer."
He also has just one service manager for Saturn and Chevrolet. He is one of a few Saturn dealers in the Washington, D.C., area still servicing Saturn vehicles.
"Cutting people is the quickest way to get your cost down," O'Mally says.
Sheffer, of Fort Myers, cut his staff 15 percent. He has a part-time parts manager who also handles warranty administration.
"He works out of his house. He keeps inventory current and only works a few hours per week," Sheffer says.
Instead of a full-time receptionist, Sheffer has a part-time receptionist during peak hours. And he no longer employs a greeter to welcome customers.
"I'm not a big believer in specialists," he says.
Neither is Wolff, who runs his shop with three people -- a parts manager, a service manager and a service writer who acts as a floater to back up the other two.
Wolff's new-car sales manager doubles as a salesman. His office staff is on a four-day week and also is trained to handle other responsibilities such as answering phones and handling warranty administration and title work.
And he laid off a staff member who washed cars, giving that responsibility to two porters.
As Wolff says he knows all too well: In this economy, sometimes heads have to roll to make the numbers work.
------------------------------
Better this year
193 dealers participated in a nonscientific Automotive News survey on their outlook for 2010. Here are some highlights.
• Nearly three-quarters said they were profitable in 2009.
• More than three-quarters said they expect to be profitable in 2010.
• 2 out of 5 said they are making a profit on new-vehicle sales after commissions.
• 4 out of 5 said they are making a profit on used-vehicle sales.
• 3 out of 10 said their marketing budget would rise in 2010.
• Nearly two-thirds said they cut employment in 2009.
• Nearly one-third said they plan to hire in 2010.
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(Source: Automotive News, 02/15/10)
