Incentives proving a slippery slope

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The auto industry's weapon of choice in 2002 is incentives.

Hefty incentives, mainly from Detroit, have brought buyers into showrooms in droves and sent analysts scrambling to revise their early-2002 forecasts of a down sales year.

Toyota Motor Sales USA's Toyota Division doesn't have any national incentives and only advertises them in regions where they're offered, says Steve Sturm, VP-marketing at the brand. Even then, the deals "are nowhere near" General Motors Corp., Ford Motor Co. or DaimlerChrysler's Chrysler Group. But Detroit's splashy incentive ad pushes, backed heavily on TV, have built showroom traffic industrywide, he says.

Toyota's 2003-model ad campaigns from Publicis Groupe's Saatchi & Saatchi Los Angeles, Torrance, Calif., "are much more synergistic and tie the brand closer together for the first time," he says. Nearly all TV spots for its record-high 18 models use the same ending with the word "Toyota" and the tag "Get the feeling."

Shoppers are putting more brands on their lists in 2002, but Toyota still gets stronger consideration than most other brands, says Art Spinella, VP of consultancy CNW Marketing/-Research. So does American Honda Motor Co.'s Honda brand, whose intenders look at the competition only to reinforce their purchases. Neither has done much incentive advertising.

The Honda brand is in the midst of the biggest new-model push in its history, providing plenty of work for agency Rubin Postaer & Associates, Santa Monica, Calif. Honda is giving the redone 2003-model Accord a $75 million ad blitz and is readying the launch of the all-new, youth-aimed, entry-level Element, a tall, boxy sport-utility vehicle.

While GM has advertised customer incentives, several competitors offer special cash carrots to their dealers that aren't advertised, says Gary Cowger, president of GM North America and the boss of Advertising Age Power Player John Middlebrook, VP-general manager, corporate advertising and vehicle brand marketing. "In August and September, we were all out there, the domestics and the transplants, with the gloves off," Mr. Cowger says.

GM has 20 new or "significantly refreshed" products for the 2003 model year, Mr. Cowger says.

The industry's unusually high number of models may have been the leading reason the TV networks were able to get the rates they sought in this year's upfront market, says Tom Healey, a partner at consultancy J.D. Power & Associates. He says the networks knew the number of new vehicle launches was "very heavy" vs. past years. Mr. Healey says the industry's biggest marketing challenge of 2002 "is to get off the [incentive] dope."


Nissan North America is readying six new models across its Nissan and Infiniti lines in the next 12 months, says Steve Wilhite, VP-marketing. The marketer has significantly decreased its incentive spending in the past few years. In ads that Omnicom Group's TBWA/Chiat/-Day, Playa del Rey, Calif., created for Nissan's recent first sales event of 2002, "we tried to do it without a sense of sounding desperate."

Incentives rose 20% in September to an average of $3,500 per vehicle vs. September 2001, CNW's Mr. Spinella says. His research with August new vehicle buyers showed price was their main driver, with brand image moving down the list a few slots from second. Consumers who bought new models in August told CNW they started shopping in the spring and the summer deals sealed their purchases.

The industry's brisk sales pace in 2002 surprised analysts, many of whom predicted 2002 sales would be down from prior-year annual records in the 17 million-unit range. Most revised their 2002 predictions within the first three months of the year.

Incentive advertising is "very detrimental to brands for the longer term," says Susan Jacobs, president of auto consultancy Jacobs & Associates. But GM is really the key to the industry's sales for the rest of the year, she says. "If GM is going to maintain the very aggressive incentives they've had, others will follow suit and the rest of the industry will benefit."

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