Confidence Game: Winning It Is the Only Road to Recovery
January 07, 2009
By Dale Buss
Automakers are trying things they've never tried before -- apologies, thanks, guarantees against job loss -- to get Americans to consider buying cars again. But none of these prods will work very well until the market has reestablished itself on a bedrock of consumer confidence.
"Of all the factors you look at, [confidence] is the No. 1 driver of the new-vehicle business," said Mark LaNeve, vice president of North American sales for General Motors, as the company launched a new zero-percent-financing program a few days ago.
"But I think these things happen gradually," LaNeve added. "On the downside in 2008, you got negative after negative after negative. Hopefully, in 2009, we will get positive after positive after positive that will improve consumer confidence."
There's no doubt that OEMs have been deposited into a deep hole when it comes to the confidence game. "The biggest issue we have seen is the lack of people coming through the door," Toyota executive Jim Lentz said in a conference call on Monday.
The final tally on 2008 car sales, calculated Monday as the worst year for the U.S. industry since 1992, is only the latest indicator of how badly American consumers have been shaken by their own employment status, the global credit crisis, the bailouts by the federal government, and by the highly visible woes of the car business itself.
"Whether they have a job or not will continue to weigh on consumers in the first quarter," said George Pipas, Ford's chief of U.S. sales analysis, on Monday.
Lack of Confidence
Another new quantification of Americans' level of unease came at the end of the year, when the Conference Board announced that its closely watched Consumer Confidence Index in December reached its lowest point since the New York outfit began compiling the index in 1967. The reading of 38 last month fell from a revised 44.7 in November and below the previous low of 38.8 in October. Economists surveyed by Thomson Reuters had expected the index to rise incrementally because of falling gasoline prices.
"Almost everything is down across the board," said Lincoln Merrihew, senior vice president for automotive of TNS, a Boston-based company that gathers the data for the Conference Board index. "That's an important factor, because it's not like consumers are going to buy a washing machine right now instead of a car. They're not going to buy anything."
One data point supporting Merrihew's analysis is that, when questioned last month, about 17 percent fewer Americans expressed the intention to buy a new vehicle in 2009 compared with the proportion who expressed the same intention, a year earlier, for 2008, in a survey by CNW Marketing Research. The Bandon, Oregon, outfit annually asks consumers about their "wish lists" for the coming year. Other big potential losers, should Americans follow through as they've indicated, would be home-electronics purchases and vacation-home acquisitions, according to the CNW survey.
Advertising giant J. Walter Thompson, part of the Team Detroit consortium that handles Ford's advertising, is predicting that this sort of "recessionary living" will mark consumer behavior at least for the rest of this year. "The economy is all-consuming," Ann Mack, director of trend-spotting at the agency's New York headquarters, told the Pittsburgh Post-Gazette. "It's all [consumers] can think about."
Marketing guru John Grace agreed that the environment for automakers and other consumer-goods manufacturers is unprecedented. "Consumers are viewing cost-value differently now, and they're much more educated about it," said the president of Brand Taxi, a Greenwich. Connecticut, consulting firm. "You can't unwind that and go back to the old days."
Touching the Hot Button
Addressing this new world wisely is requiring OEMs to dig deeper into their tool boxes than ever before, and they're finding little by way of precedents that can help them understand the state of mind of American consumers -- or set a path to reach them.
"There are the traditional ways that people go and do research on the overall marketplace -- surveys, on the Internet and by telephone, focus groups," said George Rogers, chairman of Dearborn, Michigan-based Team Detroit.
So Rogers and his peers are banging harder on the levers they have. "We've accelerated" research into what consumers are thinking, he said. "In the old days, we had quarterly and then monthly tracking. Now we're doing it on a much more agile basis than ever before," Rogers explained, "because the world is changing seemingly every minute."
It's also not for nothing that Nissan has finally begun using the word "confidence" in its advertising. After several years of employing other secondary terms in its "Shift" campaign -- as in "Shift_power," Shift_the road," "Shift_the possibilities" and "Shift_reality" -- the company recently landed on "Shift_confidence" as the closing tagline of its TV ads.
And Hyundai has gone a big step further by launching Hyundai Assurance, a new incentive plan that allows buyers to break contracts and return vehicles if they lose their job or income. The program offers to cover up to $7,500 in negative equity on the lease or purchase of one of its cars or trucks.
"From the capital and credit standpoint, Washington has taken all the right actions," said Dave Zuchowski, vice president of sales for Hyundai of America. "But nobody was doing anything to address confidence. It doesn't matter if you're buying a refrigerator or whatever you're buying -- you're not going to do it if you're concerned about your job and your ability to make payments."
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