Fine-tune your message in down market

January 21, 2002

BY MICHAEL KRAUSS

Declining marketplaces are pretty confusing. Marketers don't know whether to trim advertising budgets, initiate promotional pricing or change communications strategies, or hone their marketing messages.

I spoke with Mitch Golub, general manager of Cars.com, recently. Chicago-based Cars.com is the online automotive information site that lists 288 different models, and Golub knows something about changing circumstances in an industry: The auto industry moved quickly last autumn to offer 0% financing and kept sales moving, if not profits.

I asked Golub about how his pitch was changing, whether he was adjusting his marketing message and other ways that his marketing approach was changing. And it turns out that Golub isn't changing much. He doesn't think his marketing needs an overhaul, just a tune-up. He's still focused on building his brand and recently retained advertising gaint DDB to help him become the predominant online automotive information source for consumers in every local market he serves.

After all, Golub says, 65% of all consumers are "going online to information sites like Cars.com before they purchase a vehicle. Next year, that's expected to grow to 70%." And Golub wants to be the market leader.

He's well on his way. In 146 markets -- 90 of the top 100 markets in the United States -- Cars.com has a site cobranded with the local affiliate newspaper. That is, Cars.com provides an online advertising and direct marketing package that the local affiliate newspaper resells to local auto dealerships. In return, the local newspaper pays Cars.com a fee and promotes the Cars.com site, providing Golub with what he estimates is $ 25 million in free promotional advertising. It sounds pretty complex, but it works.

"What we're able to do is take the two biggest expenses -- marketing and sales -- and (use) the local newspaper to leverage us," Golub explains.

All in all, Golub's approach is pretty practical, especially compared with the cash-burning approaches of two years ago.

"Two years ago in the online world everyone was spending money like they were going out of business," Golub says. "Guess what? They did go out of business. They were just throwing money at problems."

Throwing money at problems isn't Golub's approach. He's pragmatic and consistent and takes incremental steps. He speaks logically and practically without the bombast or hyperbole of yesterday's dot-com chief executives.

"There's no market leader yet in the automotive online space," Golub says. "Because of Cars.com's relationship with local market newspapers, I'm in a great position. I'm the local online leader in a business (the car business) . . . (that) is a local business."

Golub doesn't speak esoterically or in concepts. He's not a business revolutionary. Where others preached that the Internet would eliminate the middleman and the offline world should shudder, Golub preaches prudence.

"I don't disintermediate the automobile dealer. I wed buyers and sellers," he says. "I get paid through the affiliate newspaper. The dealer is on my Web site because he's bought a package through my affiliate. As I get more traffic through the dealers, I'm going to raise rates."

Golub explains: Car dealers pay between $ 1,000 to $ 2,000 per month for Cars.com's services. In return, they get detailed feedback on the number of leads they've received by e-mail, phone and in person in the showroom. Cars.com also provides an ROI Calculator that reports to the dealer the return on the Cars.com investment. "Our average ROI is 900%," says Golub, "Our product is underpriced."

Still, even this practical steward has marketing challenges.

"Consumers come to my Web site. They do their research. They pick their car. They print out their materials. They go into the dealer. They buy the car," he says. "There's just one problem: They don't always tell the dealer they used Cars.com or the dealer doesn't record the referral when they do." That means the ROI Calculator can't count these sales.

Starting this winter, Cars.com users will be able to configure a car exactly to their own specifications on the site. Then the user can print out the specs in a car window sticker format on their home printer. Take the window sticker to the dealer and it becomes a shopping aid for the customer and informs the dealer of the source of the lead -- that is, Cars.com.

It might work. Golub knows a cash incentive to the customer or the dealer probably would stimulate better reporting, and he's thinking about these options. But it's a first, incremental, pragmatic step.

"When you have a solid business model and are playing for the long-term, the best time to invest in your business is in a downturn," Golub says. "That's when you can most take advantage of your competition."

Sounds like a plan for coping with a declining marketplace.

Michael Krauss is a partner with Chicago-based DiamondCluster International. He can be reached at michael.krauss@diamondcluster.com or news@ama.org.