Honda Showers Regional Dealers With Millions of Ad Dollars
Honda Division is reinvigorating its dealer advertising in major metropolitan markets with lavish new funding that could reach as high as $250 million. And dealer groups will still be able to choose their own agencies, creative and media mix.
In the Cleveland area, for instance, Honda dealers are planning to spend $5 million annually on regional, or tier two, advertising, a hike from $600,000 now.
In the New York area, Honda dealers say they expect to receive as much as $50 million in the next 12 months from Honda for the advertising. The dealers just formed a regional group to spend the money.
Honda dealers say for years they have trailed their competitors in regional advertising. Hyundai and Kia have been particularly good at filling the vacuum, one dealer said.
The new program will boost ad spending just as the redesigned Honda Accord midsized sedan and other refreshed vehicles arrive on the market, said Rob Sabbagh, VP of Bay Ridge Honda in New York and president of the newly formed Tri Honda ad group.
"It's really a big step for Honda," Mr. Sabbagh said.
Doing it right
Honda spokesman Chris Martin said the tier two money amounts to 1% of the invoice price of each car sold at wholesale to participating dealers. Honda did not have a funding mechanism, as many automakers do, to channel money to regional dealer associations. Honda dealers have been voluntarily chipping in money for tier two advertising efforts.
"This is extra funding to allow dealers to really do it right," Mr. Martin said. He declined to say how much the program will channel to Honda dealer associations nationally.
To participate in the program, a Honda dealership (of the nearly 1,100 nationwide) must join a regional advertising association, Mr. Martin said. Honda's contribution per vehicle sold will go directly to each association, he said.
Participation in a dealer association is free, but dealerships must adhere to a handful of Honda requirements, such as not advertising any prices below the manufacturer's suggested retail number.
The new Honda program is prompting major association organizing drives in several urban markets, dealers said.
In the Cleveland area, for example, Jay Honda General Manager Mark Lyon has struggled for years to keep alive the Northern Ohio Honda Dealers.
The group had just six dealerships, buying about $600,000 a year in cable TV advertising, Mr. Lyon said.
But the new Honda program has caused 14 other dealerships to join, Mr. Lyon said. Next year's budget, which will likely include TV, radio and digital advertising, is pegged at about $5 million, he said.
Mr. Lyon said 1% of the invoice price for a Honda vehicle sold in the Cleveland area is on average about $246. Honda Division should easily sell more than 1 million vehicles in the United States next year, given that it sold 950,685 vehicles through September.
Thus Honda stands to spend in the neighborhood of $250 million a year on tier two advertising if the Cleveland figures reflect the national picture. Not all dealerships are participating, which will reduce total potential spending.
The 60 Honda dealers in the New York area who recently jointly created the Tri Honda ad group expect their unit to receive $40 million to $50 million from the program over the next 12 months, Mr. Sabbagh said.
Before Honda pledged the support, the Honda dealers in the tristate area that includes metropolitan New York City and parts of New Jersey and Connecticut had allowed their ad association to disappear, he said.
"That $40 million to $50 million gives us a major voice," Mr. Sabbagh said.
One of the appealing aspects to the new funding program is that the dealers can pick their own agencies to create ads and decide the mix of where the money is placed, among traditional and digital media, Mr. Sabbagh said.
Mr. Lyon said Cleveland Honda dealers will now have the advertising muscle to match stronger competing dealer associations in their market, particularly those of Hyundai and Kia, which have advertised heavily in Cleveland and grabbed share with new products.
Hyundai Motor America has 80 dealer associations across the country that advise factory representatives on national ad campaigns and are free to pick their own creative agencies to handle campaigns in their local markets for most of the year, said Steve Shannon, Hyundai VP-marketing.
Only during major campaigns in the spring and summer and the holiday season do the local dealer ad groups use factory creative exclusively, he said. Hyundai deems that autonomy and flexibility critical to the effectiveness of its dealers' tier-two advertising, Mr. Shannon said.
Cleveland's Honda dealers have selected Tier10marketing.com of Key Biscayne, Fla., as their creative agency, Mr. Lyon said.
Tier10marketing.com President Sean Wolfington said the agency plans to build a website for the association, make videos of the new Accord beyond those from the factory and prospect heavily through Google and Facebook.
Said Mr. Lyon: "We'll be competing with other manufacturers now instead of fighting each other."