Channel Report: Automotive Aftermarket

Automakers and aftermarket marketers face different challenges and confront significantly different sales forecasts; however, they both market the same in stores -- interacting with customers more often and creating more personal, local ties to their national marketing efforts.Both portions of this market face challenges unlike other consumer-goods categories, marketers say. "It's different looking at durable goods rather than consumer goods," says Kim Ziebell, CMO at Bushwacker Inc., Portland, OR, which makes fenders and body protection for pickups and Jeeps. "Merchandisers that stock products are not effective in auto stores. We have to take a different approach." Certainly, key consumables such as oil and auto wax remain magnets, but other products are becoming more diverse and complex. "The category is getting to be more sophisticated in how it presents itself," Ziebell says.Notes Michelle Erwin, senior manager for marketing communications at Nissan USA in Nashville, TN, "When we look at our P-O-P materials, we have to realize we have two customers -- the dealer, whom we have to interest in the pieces so they'll put them up, and the customer, who needs specific information. We have to figure out how best to leverage that." Erwin says dealers also need two motivators for consumers: Pieces that will explain features and benefits in the showroom, and programs that will bring the consumers to these destination locations in the first place."When we can tie our national advertising, be it print or TV or even Web-related, to a program, the dealers are much more interested," says Erwin. "They are more apt to tie into it themselves and try to leverage those materials."The company produced one of its most popular promotions last fall for its Titan truck, tying into the Heisman Trophy presentation. For the first time, fans' votes counted toward the ultimate selection. Nissan's TV ads drove consumers into the dealerships to vote for their choice. Floor displays showing the TV spot's mascots and the trophy in the back of the truck held ballots that could be mailed in or given to dealers. Stores in areas with touted candidates were especially able to leverage the national attention.Similarly, Big O Tires, Centennial, OH, had success with its national/local program supporting the Alex's Lemonade Stand charity, which raises money to help cure pediatric cancer. "The charity was enthusiastic because they weren't well-known in our key markets in the West and Midwest," says Dave Liggett, communications and public relations specialist. Not only did customers like the connection, but consumers who were interested in the disease sought out the stores as authorities that could funnel contributions to the charity, he adds.The program ran last July and included a variety of P-O-P materials, including a faux lemonade stand, 50 yellow balloons, thank-you tags, brochures, window clings and coupons for free canisters of Country Time Lemonade. "Our dealers are involved in their local communities, through Little League or other programs, but this gave everyone a chance to get involved with a national program," he says. "Franchisees said people were seeking them out because of their support." The program proved so successful that the Franchise Advisory Council earlier this year voted to maintain the program through 2008 to ensure enough planning can go into making the event bigger each time.Aftermarket RiseThe aftermarket category is growing, according to statistics from the Automotive Aftermarket Industry Association, Bethesda, MD. The group's 2007-2008 Factbook forecasts sales increases of 3.9% in 2007, following a growth of 2.8% in 2006. That slowdown was preceded by 4.6% growth in 2004 and 5% in 2005, providing a strong trend for the category.The aftermarket category also is benefiting from high visibility. "Car and truck shows on cable have done for cars what the Food Channel has done for cooking," says Bushwacker's Ziebell. "The onslaught of shows like 'Pimp My Ride' has made everyone want to play with their cars and improve them. People are getting more stylish and want to add personalization, so there's a lot more interest in accessories." At the same time, auto dealers are facing increasing challenges. A weakening single-family housing market and skyrocketing gas prices have put the brakes on auto sales. A May report by the Reuters news service indicated that auto sales reached an 18-month low in April, posting a sales trend even weaker than expected. The report indicated a seasonally adjusted rate of 15.8 million vehicles sold in April, down from last year's 16.6 million. Even Toyota, which replaced GM as the largest automaker earlier this year, was anticipating slow growth.How Does it Feel?Sales statistics aside, P-O-P challenges remain the same for dealerships and auto-aftermarket companies. Explaining the benefits of cars or car accessories can be complicated, as they may be nuanced or hard to show in a picture. As a result, a variety of marketers are creating high-quality displays that include a full-sized product sample. Harley-Davidson Inc., Milwaukee, focuses on permanent displays that feature the accessory being promoted. "Customers need to see it and touch it to want to buy it, and we've been emphasizing that to our dealers," says Lynn Knutson, manager of visual merchandising programs.The company has produced about 10 permanent displays that use a sample shipped on a display. "We use them for parts and accessories that are harder to visualize on a vehicle," she says. "The displays help explain how they work and where they go." ARB 4x4 Accessories in Renton, WA, which sells differentials, bumpers and other products for four-wheel drive vehicles, also focuses on displays with actual products attached -- and that creates challenges for large products, says Lisa Wood, ARB's marketing manager. "Customers want to see the real thing, and it can be problematic for securing the real estate." The company's bumper for the Ford F250, for instance, is 7 feet long. "It's really big, but it's effective to show people what they're getting. Our bumpers are highly engineered and have to be explained as a high-ticket item. We have to show them so those benefits are obvious. Showing a picture doesn't do it," says Wood.Even auto dealerships' accessories departments, which combine the challenges of car sales with aftermarket purchases, are taking this approach, as seen in a display created by BMW of North America, Woodcliff Lake, NJ, for the portable navigation device on its Mini Cooper. "The P-O-P that is working the best for us allows the customer to interact with the products," says Grant Paullo, manager of aftermarket sales marketing for BMW.The display, introduced in April, features an actual device mounted to a molded-plastic countertop display. "It allows customers to learn about its features and experience it rather than the standard approach, which is for the dealer to show it in a catalog and talk about it," Paullo explains. "With this approach, it stays on the showroom floor and customers can interact with it and make a judgment."This is the first such interactive display the company has done for what are essentially aftermarket accessories, he notes. "We looked at the product landscape and the best practices used at electronics stores, which is our competition. It's tougher for a customer to understand why this product is better than what they offer unless he can experience it." Paullo says a similar product for the traditional BMW line is forthcoming.Displays with samples -- especially 7-foot-long samples -- create a new level of assembly challenge. Deciding whether to ship a sample or make the dealer take one from inventory can cause friction. ARB, for one, has dealers use its stock because the shipping costs for the big, heavy samples would be prohibitive.Marketers with smaller products sometimes send samples, even if they are exactly like the stocked items. Harley-Davidson used to send a display that required dealers to attach their own stock, such as hand grips and mirrors. "They don't like doing that," reports Knutson. "They know they won't be able to sell that piece or will have to discount it." Educating consumers -- and dealers -- without using samples is still critical. Nissan, for instance, sends dealers DVDs of looped-video presentations that include TV commercials and more. "The TV part is fairly standard, but we've also added features that we created for our online presentations that explain our more complicated features in a conversational way," explains Nissan's Erwin. Options such as Bluetooth technology and intelligent-key locking systems are presented in videos that outline the benefits. "These features are more technological and harder to understand, so customers can see how they work in the little vignettes." The 20-minute clips are well received, she says, because they can be used as training tools for salespeople as well as for customers. "Dealers are asking for more hands-on pieces that better explain features. It becomes a challenge to send materials to so many dealers."BMW also is expanding its educational displays for aftermarket accessories. The company has released various graphics boards that outline key options such as short-shift kits and cold-air intake systems, which often include the actual parts. The graphics panels explain the systems' benefits and how they fit onto the car. "They can't really experience these in the car, so this approach allows them to see what they're getting," Paullo says.Because these are essentially aftermarket pieces that aren't factory installed, they compete with different retail outlets than a dealership's typical promotional pieces.Account-Specific GrowsBecause each channel and store has its own sales stars and product mix, as well as logistical requirements for displays, more marketers are doing account-specific pieces. At Turtle Wax Inc., Willowbrook, IL, "account-specific programs are very big," says Michele Johannes, brand manager for specialty packs and displays. "We are customizing all the time, especially for their shapes and sizes as well as the best product mix."Different stores, especially varying by channel, stock different product mixes based on their own sales, says Tom Healy, vice president of sales at Turtle Wax. Some also rotate products based on the season. "We typically start with a baseline of products in a display and then customize it to the retailer's preferences."Bushwacker has used its capability for customization to gain more leverage in some stores. A key element has been customized endcaps for larger stores that incorporate the chain's logo as well as Bushwacker's branding. "It gives us an end-of-aisle space because they buy into the partnership approach," says Ziebell. The program started with a test in about 55 stores with one chain, receiving strong feedback from that chain but also retailers who have seen and requested it. In fact, other manufacturers also have asked about its creation. "We're getting a lot of square footage for products that usually don't get much," Ziebell says.The company is willing to work with retailers of any size on programs, he notes. "We want to please our customers, so we'll work with them after examining the sales volume and exposure level." But strong sales are not the only key to creating a program. "We are also strong on the brand value we can achieve. If we can gain a high-visibility spot in a store -- one we might not typically get into so visibly -- we see it as giving us more exposure, even if the sales aren't dramatic."Indeed, different categories bring out different approaches. "Auto stores certainly have a larger and deeper assortment, whereas the mass merchants are focused on the leading brands," says Turtle Wax's Johannes. "There are different consumers in those stores looking for different things. But in both cases, even though the product mix may be different, our P-O-P uses the same approach: clear and concise with a few key benefits noted. That plays to both markets." Bushwacker wants to aggressively market to stores of all types and in all channels, says Ziebell. The goal is to target each store's customers in the best way possible. "We do a base piece, but then we customize it for smaller runs for different types of stores. We look closely at the demographics of that particular store location, and we modify our displays accordingly."The company also is looking to expand into other categories with its displays, especially sporting-goods stores. "If someone is in the store looking at jackets, but they see our display, we've made an impression," he explains. "Maybe they'll start to think about their car and realize they need some pieces to help with their sports choices, like attaching their kayak on top. It helps us expand out of our core market and exposes us to a demographic we haven't reached before." Quality Boosts PerceptionThe quality of the displays impacts this type of impression, Ziebell adds. The company has moved away from corrugated merchandisers to feature molded plastic and other high-quality materials. "Some of our products are relatively expensive as an add-on or bolt-on for performance and power, so we have to reflect that quality in an upgraded format. The display materials are a direct reflection of the quality of the product. Presentation is everything." The higher-grade countertop displays the company favors now "instill quality in the approach. They look expensive, although they aren't, relatively, but they create a high-perceived value." That value also aids in the unit's longevity, he notes. "The stores get the pieces and like them and want to keep them up because they enhance the store. This approach gets us better and longer placement." As a result, the company is in the process of upgrading all of its displays to molded plastic, aiming to complete next season.Recyclable materials also are in higher demand, notes Turtle Wax's Healy. "Environmental design has always been important to us, but it's received more press recently," he says. That responsibility extends to the company's packaging, where it has focused on creating concentrated formulas that allow for smaller sizes and using recyclable plastics. "Recycling has become a huge initiative for major retailers," says Healy's colleague, Johannes. "We're constantly looking at different materials to see if they will fall within our sustainability needs. We're always evaluating options as more materials arrive."Another way to save material and be environmentally friendly is to simply create smaller displays, which plays to retailers' driving need to conserve real estate. "Retailers all want smaller displays," Johannes says. "There is big growth potential for us in quarter-pallet displays stocking products that sell well." One space-saving solution is creating displays for multiple products, too, she notes. Multiple products also means fewer of each item, Healy says. "The displays meet more shopping needs, so they sell through faster, which retailers like. They want clean, organized floor space, not massive displays that take two or three months to sell through. Retailers are really receptive to these programs when we can achieve their key criteria with them."

Channel Report: Automotive Aftermarket

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