A Smaller Pie Doesn’t Mean No Pie

Over at the Sales and Marketing Loudmouth Blog, Tim Rohrer has a very interesting take on the role of local marketing. He summarizes his premise this way:

Remember, to advertise effectively at the local level, find out how consumers are behaving and then fashion your message to take advantage of their direction and momentum.

I agree with him as far as that goes. But he loses me when he tackles the car industry. Although he doesn’t come out and say it, this paragraph would lead an auto dealer to conclude that he should stop all advertising until sales improve:

Auto dealers must measure the cost of the advertising against the return they are likely to get right now and not on some future share. The reason is simple: A very small percentage of the public is in the market for a car (maybe 3% under normal circumstances and 2% right now). Consumers only hear the advertising that pertains to them. So, any market share gains made by a local auto dealer are being made with the 2% of people who are “now” buyers of autos. These now buyers will not be in the market again for another three years so the advertising seller is asking the auto dealer to spend money with them to 1) gain market share of an unusually small pie and 2) wait three years to get a payoff on that growth in share.

What this argument neglects is that if, for example, Chrysler’s sales are down 25% (as they were in May), that means that 75% of the normal-year buyers are still buying Chryslers from someone. And there are fewer Chrysler dealers on the radio this year than last.

So the “right now” pie is 25% smaller, but a Chrysler dealer willing to be agressive has a shot at a larger piece of that pie right away. And that dealer’s ads are also talking to a lot of folks who are going to buy from someone later this year. If you’re a Chrysler dealer, the fact that overall sales are down 25% doesn’t mean that you have to be down 25%.

A good, well-thought-out campaign may mean that you’ll stay even while your competitors drop even more. And the difference may very well justify a significant advertising investment even now.

All the standard rules apply — frequency, a strong offer, and good creative — in fact, those things are more important than ever. And yes, dealers are going to have to cut back.

This scenario is playing out in many different industries. Some consumers have changed their behavior, but many are still going to buy from someone. The fact that the pie may be smaller right now doesn’t mean there’s no pie to compete for at all.


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