AUTO MARKETING: UGLY DUCKLING TELLS ITS STORY IN TWO LANGUAGES: SOUTHWESTERN RETAILER TARGETS HISPANICS AND GENERAL MARKET

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When Ugly Duckling Corp.'s mascot visits athletic meets and community events, it's not about a guy in a duck costume pitching used cars.

Rather, as the company sees it, the friendly Ugly Duckling is trying to change the way people think about the "buy here, pay here" used-car industry.

Ugly Duckling is casting its mascot as the "champion of the used-car customer's needs and desires," says Fernando Moreno, marketing director. TV and radio ads promote an image of integrity, fairness and innovative service.

"Our customers should not be afraid to come into the store," Mr. Moreno says. "We want people who drive out of our lot to feel good. And that's where we can close the gap."

SALES AND FINANCE

Ugly Duckling is a used-car sales and finance company that operates eight stores in Arizona and five in Florida. Four more stores are currently under construction in the Southwest. Champion Financial Services, Ugly Duckling's captive lender, provides subprime financing to company stores and third-party independent used-car retailers. Ugly Duckling reported net income of $5.9 million in 1996, compared with a loss of $4 million for the preceding year, on sales of $75.6 million, an increase of 55% over 1995 sales.

As a subprime lender, the company targets consumers with poor credit. Interest rates for auto loans hover around 29%, reflecting the riskiness of the customer pool.

But Ugly Duckling also makes money from selling used cars. The target consumer is a blue-collar worker between ages 18 and 49 with an income of less than $34,000.

"We look at the entire picture," Mr. Moreno says. "It's easy to sell a car. It's not easy to get the insurance price into this."

HISPANICS KEY

Hispanics are a key market niche, comprising as much as 50% of an Ugly Duckling retailer's sales. Mr. Moreno, working with Dieste & Partners, Dallas, has adopted a two-pronged strategy that targets Hispanics, through Spanish-language media, and the English-speaking general market.

Follow-up studies in the Phoenix market showed strong top-of-mind awareness in the company's target audience. Respondents ranked the effectiveness of Ugly Duckling's advertising, which on TV features live action and the animated Ugly Duckling mascot, up with the area's largest new-car retailers.

Dieste, an Hispanic shop handling this general-market account, has been a key element in this success because all of its people assigned to the Ugly Duckling account have experience with both general market and Hispanic advertising, Mr.

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