The Future of Automotive Marketing and Distribution. Who will be the winners and losers in the revolution that is radically reshaping the marketing, distribution and selling of automobiles? Will the vehicle manufacturers and their franchised- dealer networks be able to overcome years of inertia and complacency to pioneer and execute new concepts that will strengthen and extend the value of their brands? HotelREZ Hotels & Resorts provides distribution, revenue, sales and marketing services to over 1,000 independent hotels and small hotel groups worldwide. Articles published in strategy+business do not necessarily represent the views of the member firms of the PwC network. Reviews and mentions of publications, products, or services do not constitute endorsement or recommendation. September 2013 3 Distribution and Franchising Committee: ABA Section of Antitrust Law Territorial Restraints and Distribution in the European Union Thomas G. Funke* The following article arose out of the 2013 ABA Antitrust. A Template For Marketing Strategy This part provides a template for developing a marketing strategy for the smaller organization. The format is a workbook style with many forms to help provide a solid guide for executing the. Or will nimbler, more imaginative retailers or software companies get there first? Auto manufacturers have competed fiercely among themselves to drive out cost and meet consumer needs for cheaper and better cars and trucks. Now the survivors face new threats from outside the industry that might thwart their renewed interest in building strong, lasting relationships with their customers. Their stories have been persuasive enough to attract hundreds of millions of dollars in public equity investment and persuade dozens of fiercely independent car dealers to sell out. Internet technology has lowered entry barriers for other entrepreneurs with new ideas about helping customers find, evaluate and buy new vehicles. These patterns are consistent with revolutions in other consumer durables markets that effectively transferred market power from manufacturers to retailers. The manufacturers want to expand their participation in the customer life- cycle value chain to improve profitability and grow in markets that have been largely stagnant. This changes the basis of competition from designing and making good products to providing services and managing consumer purchase and ownership experiences for which the products themselves are only partly responsible. While we are not sure which vehicle manufacturers will survive, we are confident that winning will require a better understanding of the life- cycle value equations of both cars and buyers, and the development of innovative strategies to capture that value. The networks were designed to hold inventory, leverage private capital (without threatening the manufacturers' control) and service and support what was then a less reliable and more maintenance- intensive product. Those networks generally were built around entrepreneurs focused on a defined geographic area, selling one or at most two brands. Historically, dealer networks have become ingrained and protected over time by a web of habits, contracts, regulations and laws. In the United States, state franchise laws limit the manufacturers' ability to act unilaterally to revoke or consolidate franchises. In Europe, strong national distribution laws and other rules help protect the established channel. Even the new dealer networks created by the Saturn division of the General Motors Corporation and the Lexus division of the Toyota Motor Corporation with such fanfare during the past decade or so have accepted the fundamental model. They have achieved their superiority in channel- driven customer service by avoiding mistakes (such as locating too many dealers too close together) and institutionalizing best practices in customer care. High customer acquisition costs motivate dealers to convert store traffic to sales using aggressive tactics that extract differential margins based on customers' willingness to pay. Frequent well- publicized rebates have taught buyers to mistrust sticker prices and negotiate from cost up, rather than sticker down. As a result, dealers often find themselves competing not against another brand, but against a same- make dealer across town. This acute competition has almost bid away dealer profit on the sale of new passenger cars in the United States (with some profits still available on sales of trucks, sport utility vehicles and luxury cars). This strong antipathy is largely responsible for the rapid growth of Internet- based services that offer alternative means of gathering information on cars, soliciting price quotes and, in some cases, conducting transactions. The problem is that a conventional dealership is not necessarily positioned well to conduct all of these businesses because of their different economics, bases of competition and consumer purchasing patterns. Some dealers, for example, have set up dedicated bays to offer no- appointment quick- lube services to compete with independent outfits such as the Pennzoil Company's Jiffy Lube and the Midas International Corporation's muffier shops. However, the optimal retail density and overhead structure for the oil- change business are very different from those for new cars. SURFING THE NET FOR PROFITSObviously the Internet is a major enabler of change in auto distribution. Many of the most important auto industry innovators today are developing Web- based services, leading some to predict that the most important automotive company of the next century will be a software- based company. Republic Industries, for instance, expects sales to reach $1 billion on the World Wide Web by the year 2. Estimates vary, but some studies have shown that with some cars, as many as 4. Internet. A smaller but growing percentage of customers demonstrate what is called shopping behavior, or soliciting price quotations and availability information prior to the actual purchase. Consequently, customers are better equipped to extract what they want from dealerships. One of the pioneers of Internet marketing, Autobytel. Inc., is working to speed response time from its participating dealers because it has learned that a staggeringly high proportion of its customers - - 6. The Internet offers new and better ways to perform many sales and marketing functions and makes it possible for manufacturers to have more and richer two- way communications directly with consumers. It has also provided, for the . DEALERS STILL PART OF EQUATIONNo one is suggesting, though, that auto dealers will disappear. Ironically, changes in cars and trucks themselves are making dealers more important. Consumers have more choices of brands and models than ever before. Improved durability and reliability and faster design cycles have narrowed the differences among competing products in the same category. Brand loyalty increasingly derives not from the product itself but from the total purchase and ownership experience. Numerous studies show that customer satisfaction has become a much more critical competitive differentiator and a greater in. And it is the dealer that controls these levers today. Entrepreneurs with access to public capital have strategic designs to modernize auto distribution. Six dealer groups in the United States went public in 1. Collectively they soared past the $4 billion mark in revenue in 1. Wayne Huizenga, chairman of Republic Industries. How to write business plans, marketing plans, marketing and business strategy, with free templates, samples and examples plus more free materials for management, communications, and organizational development. Types; Category Definition; Intensive distribution: The producer's products are stocked in the majority of outlets. This strategy is common for basic supplies, snack foods, magazines and soft drink beverages. Press release distribution helps you create buzz, increase online visibility and drive website traffic. Huizenga has a proven track record as an innovator who has revolutionized the waste disposal and video rental industries. Republic owns the nation's largest group of franchised automotive dealerships, operates the Auto. Nation USA used- vehicle megastore chain and owns and operates several car rental businesses. Republic is currently on an extraordinary acquisition campaign for new- car business dealerships. Even though Republic has almost single- handedly doubled the market price for dealerships, it does not appear to be slowing down. Another example of a company involved in external channel evolution is G. E. Capital Services, an extremely accomplished innovator. It has purchased Autobytel. In the face of all these changes, manufacturers have not been idle. Most have stepped up their efforts to improve their distribution systems. Almost every manufacturer has made some effort to restructure its network, improve the consumer experience or experiment with new formats. The Ford Motor Company, for instance, has been enlisting dealer support in several metropolitan markets in the United States and Britain to sell out or pool their interests in new ventures that will feature multi- line showrooms; centralized body and repair shops, and distributed quick- service maintenance facilities. Sweden's Volvo AB is taking a more radical approach: It is testing factory- direct sales over the Internet in Belgium. Many are still being pushed or kicked along the path of change. There are real questions whether their late - - and in some cases half- hearted - - responses will be enough to protect the traditional position of the vehicle manufacturer as the caller of shots in the auto industry. VISION FOR THE FUTURENow that we see serious cracks in the walls protecting the traditional automotive distribution model, what will the future bring? Both the underlying drivers of change in automotive retailing and the trends already under way help answer that question. In addition, it is helpful to compare the automobile industry with other industries that have experienced distribution- channel evolution and look at the lessons they learned. Each one has unique circumstances, but we can see three relatively common, distinct stages in these channel restructurings. Stage One: This is marked by major improvements in value delivered, mostly reductions in cost. Usually the cost reductions stem from consolidation and rationalization in the channel as better concepts or bigger players drive out marginal or small players. The bigger players use their cost advantage to reduce prices and often to improve service, variety and convenience. Channel functions are unbundled and restructured into more efficient or more appealing formats for defined groups of customers. Customer value is further enhanced through lower prices, better service or greater variety. Full- service leasing (. Multiple channels and formats will coexist to satisfy different market segments. Channels are distinct paths between a manufacturer and a customer through similar economic entities (in new car sales, for example, traditional dealers vs. Formats are distinct combinations of points of sale, service offerings and business processes within a general channel definition (for example, the Lexus format versus the Chevrolet format).
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