Much has been written about the death of print media and we’ve witnessed the passing of newspapers and magazines on a monthly basis. It is a “sign of the times” as they say and on some level, it is the economy’s way of weeding out the superfluous media outlets. As avid car enthusiasts, we worry about the future of our favorite sources of fantasy in print: the automotive magazine. So we sat down to brainstorm about ways that car rags could reinvent themselves.

The Advertising Model is Dead. Long Live Advertising

It is time to reinvent the car magazine and advertising isn’t the part of the solution – at least in the way advertising is executed today. As marketing dollars dry up and online properties promise the ability to track a users every move online, advertisers are moving away from glossy, 4-color advertising spreads in magazines to the “new” world of online display advertising. On some level you can’t blame them. When you have to fight for every penny in a budget, it is becoming more important to account for every cent. Print advertising, despite what publishers say, simply can’t be tracked in the same manner.

There is no doubt things in publishing are changing rapidly but instead of simply pointing out the obvious, we selfishly want to come up with a solution. After all, we want our auto magazines (A.K.A. “Car Porn”) for the airplane, the beach and yes, even the bathroom.

Benefits of Membership

Our proposal is that the magazines forgo print advertising altogether. The current business model in print publishing cannot compete with the sexy new media that is cheaper, more flexible and measurable. That doesn’t mean giving up on advertising altogether, rather, we suggest that they re-purpose the relationships between the publication, its subscribers and the advertisers.

Think Costco. People pay a yearly fee to get access to discounts and high quality goods purchased in bulk. For most, the savings realized more than pay for the membership cost. For others, the fee is the cost of entry to the occasional deal on electronics or party supplies. In either case, Costco has a steady income stream that they can utilize to perpetuate the machine. They pass on savings to their members but still make a profit on the items they sell. Why can’t magazines adopt a similar model?

Currently, magazines are in a race for circulation so they can charge for the eyeballs that they claim to get every month. Part of that race is to keep subscription rates ridiculously low to entice people to subscribe. This may have worked in the past but as ad rates fall it is clear that it isn’t sustainable. What about this: raise the subscription price considerably to cover more of the costs and give their subscribers access to “members only” benefits that are useful, tangible and shock(!), measurable.

The idea is simple; the advertisers are now called business partners. The publisher, much like Costco, works with the business partners to offer discounts to its “members”. With the yearly subscription, a reader gets discounts on related products that they use often – think fuel, repair, tires, insurance, after market parts etc. Access to the discounts can be via an online or mobile portal or even an affinity card – all of which is measurable. The business partners pay to be exclusive partners or pay the publisher for every transaction undertaken by the subscriber.

Circulation will certainly go down as subscription rates go up but without the dependence on traditional advertising, fewer magazines are required to meet profitability goals. Of course, people who buy off the rack may pay more as well but even now, they are paying premium to read content that is outnumbered by advertising and littered with those incredibly annoying subscription cards.

In order for this model to work, the content in print must be more in-depth, entertaining and different than what is available online. There also must be clear value to paying a premium for an advertising-free publication.

Consumer Reports is essentially implementing this model to a certain degree but they don’t cater to the true car enthusiast – who, for the record, is more influenced by the content than any print ad that is in current publications. Magazines like Automobile already provide a higher standard of journalism and photography. Why not increase the price of entry, implement ways to add value for the “members” and track the efficacy of those efforts at the same time? And just think, subscribers won’t have to deal with all those subscription cards falling into the toilet the next time they sit down read a review!

by Dan Sherman

I have friends in Atlanta, New York City, Los Angeles, and even Durham, NC who are Zipcar members.  Despite having an eager 2006 Mazdaspeed6 hibernating in my driveway back home on Long Island, my parents insist that I instead use Zipcar at school.  Why is ZipCar so popular?  And is its strategy of infiltrating colleges around the country creating brand loyalists for life?  My network of 20-somethings provided insight.

My Emory friends are Zipcar members because Atlanta stinks.  Let me clarify—Atlanta stinks without a car.  Students who can afford a car and all the associated costs (driving/shipping it to Atlanta, insurance, gas, maintenance, and astronomical $654 on campus parking) do so in a heartbeat.  However, car sharing best serves the needs of the stereotypical car-less, cash-strapped college student who wonders, “How am I supposed to get food and alcohol?” With a $50/year charge for membership and around $10/hour car pricing, Zipcar has a low initial cost which entices students who drive sporadically or can’t afford having a car full-time.

So why doesn’t everyone have a Zipcar? For one, car sharing completely destroys the element of spontaneity associated with owning a vehicle.  Daily dialogues between my roommates and me go something like this: “Yo, I’m starving, let’s get some Chipotle for lunch. OH WAIT, the Zipcar’s booked until 8 o’clock.  Guess we’re not eating ‘til dinner!”

Zipcar advertises itself as “green” to no end.  I asked a cadre of Gen Yers whether the environmental aspect makes them more positively inclined toward car sharing.  Their response was that the only “green” factor that moved them had dead Presidents on it.

The appeal of Zipcar will most likely continue after my peers graduate and move to cities like New York City, Chicago and Boston.  Even those that anticipate being able to afford a car of their own will likely stick with Zipcar to reduce the expense and hassle of owning a car in the city.  As an added bonus for those from outside the country, a US state license is not required for Zipcar membership.

So it is cool, convenient, and inexpensive but how will they grow?  Will the Echo Boomers continue to use Zipcar even after they leave the cities and move into suburbia?  Probably not, but as long as it continues to communicate a hip image in college towns and large cities, it should maintain its position as the leader in automotive timeshare.

In March of 2009, we conducted the first comprehensive study of the LGBT Automotive owner in the U.S. We received a total of 4,920 responses to the survey and the database compiled from the responses includes information on social media usage, media consumption and psychographics in addition to vehicle ownership and basic demographics.

Our initial report focused on LGBT new car buyers in the U.S. and gave a broad overview of that sub-segment of the market. This is the second of three Brand Snapshots that focuses on all LGBT vehicle owners in the U.S. (n=3,402)

To view and download the .pdf of the Ford Brand Snapshot, click HERE (a new window will open).

To view and download the .pdf of the Toyota Brand Snapshot, click HERE (a new window will open).

To learn more about the study or inquire about upcoming brand snapshots, email us at info@sorgenfreillc.com

by Dan Sherman

Yo dawg, X to the Z is here to Tweet Your Ride. I heard you like social networking, so we put a Fan app on your Facebook…so we can sell you cars!

Every Echo Boomer I know has, in some way, engaged in social networking. The vast majority of my friends, and their friends, devote tremendous amounts of real-life time to keep up with their cyber-lives. Trend-savvy automakers are jumping into these whirring communities of information, aiming to appeal to an enormous subset of Generation Y. But will a brand’s investment in social media influence my generation to buy their products? I took yet another “informal survey” to get a ground-level view.

The first part of my quest was to explore the world of social networking—what platforms do my peers use, and why? Only three platforms, out of literally thousands, are significant to my generation: MySpace, Facebook, and Twitter.

MySpace is the pioneer of the three; over half of my interviewees have once had a profile, but only about one in ten still keeps up with it. Those who do keep up claim that MySpace is now a music haven; they use it to explore underground artists and genres, and not much else. Those who fled did so because everyone else left. Plus, there were a LOT of viruses going around.

Facebook is by far the most popular of the three among college-age kids. I am on Facebook, approximately 95% of my friends are on Facebook, and about 95% of those friends are basically addicted to it. If there are 50 people in a lecture class and 5 have laptops open, 5 people are surfing Facebook. We love Facebook because that’s where everyone else is! People use it as a tool to socialize, keep up with old friends, and share activities and interests.

Twitter is the newcomer; although tons of buzz surrounds the blog-meets-Facebook virtual community, my network is reluctant to join. As one person I spoke to said, “As much as I’d love to hear about how hot that girl in Econ 201 is, I’d rather see her in picture form! That’s tougher with Twitter.” The few Twitter users joined not to socialize with friends but to receive communications with other institutions. One of my friends is an EMT, and his fire station exclusively uses Twitter for non-emergency communication.

So can automakers capitalize? Current approaches run the gamut, starting with Chrysler’s simple Facebook page, which allows people to become “fans”. The other end of the spectrum is Ford’s experimental Fiesta Movement, in which Ford gave 100 Fiestas to Echo Boomers for 6 months to spread their experiences through just about every web 2.0 medium.

My interviewees made it very clear that social media is about people, not brands. My peers recognized that a heavy brand presence on Facebook and Twitter is an attempt to target their demographic; however, that targeting effort alone is not enough to sway their purchasing decisions. They also reported indifference to a brand’s absence from social media.

Social media’s greatest effect on buying habits is age-old, time-tested peer pressure…particularly on Facebook, in which one can “Become a Fan” of a brand’s Page. My interviewees report that most Gen Yers don’t actually Fan things. However, the few who do are “Fan-whores,” displaying to friends their activities and interests through the products/brands they prefer (and likely already own). A cutting-edge, 20-year old B-school girl said, “If all of my friends ‘fanned’ a product, I’d probably buy it.”

Facebook should be the platform of choice for any automaker planning to get involved in social networking. Nissan won’t sell me a Cube just by having a Facebook Page, but I may consider it if enough of my friends are Fans. And then my friends might find out what a Cube actually is! The indirect marketing benefits (awareness and targeting) and peer awareness due to a simple Facebook Page and Twitter profile most likely outweigh the low cost of such a campaign. However, I think expensive investments like Ford’s Fiesta Movement may deliver negative ROI. Car brands targeting the youth market would be foolish not to get involved in social media, but should be careful about going too far.

In March of 2009, we conducted the first comprehensive study of the LGBT Automotive owner in the U.S.  We received 4,920 responses to the survey and the database compiled from the responses includes information on social media usage, media consumption and psychographics in addition to vehicle ownership and basic demographics.  Our initial report focused on LGBT new car buyers in the U.S. and gave a broad overview of that sub-segment of the market.  We will be publishing additional briefs sharing more insights focused around the vehicle brands.  The first “Brand Snapshot” will examine LBGT Toyota owners in the U.S.

To view and download the Brand Snapshot, click HERE

To learn more about the study or inquire about upcoming brand snapshots, email us at info@sorgenfreillc.com

I just read a very interesting article on AdAge.com – How To Build Better Car Marketing.  In it Jordan Zimmerman makes some interesting points about how agencies are up for review because marketing automobiles is a unique proposition and in his words “agencies lack a fundamental understanding of how the industry operates.”

I couldn’t agree more but I think that Jordan left out a few key points:

1. In too many instances, the agencies handling the accounts not only lack an understanding of how the industry works, they lack an understanding of the PRODUCT.  Automobiles are different than sneakers, diamonds or food – all of which the average agency grunt can relate to.  Cars and trucks are complex machines that evoke passion in enthusiasts and owners alike.  Driving and interacting with the machine involves every sense and sensation – whether the owner is aware of it or not.  Yet we trust the communication of core brand attributes to people at agencies in cities like New York who often don’t even have drivers licenses!  In order to represent an automotive brand, everyone on the team should have a passion for the product and have the ability to experience the product on a daily basis.
2. Agencies need to stop working for awards and keep the goals of their clients in mind.  In the case of the auto industry, it is a monthly cycle that is focused on moving the metal.  Award-winning ads are great, brand awareness is important but every agency should be tasked with helping sell the product and rewarded or penalized based on their ability to do so.
3. To follow up on the point above, the way agencies are organized it is difficult to measure how effective a national campaign is in terms of sales.  There is a lot of inefficiency in the system with different agencies handling the Tier 1, Tier 2 and Tier 3 advertising.   What about a different model that coordinates the three under one agency and true metrics put in place to measure the efficacy of a campaign?

The role of the advertising agency is changing rapidly and the automotive industry is a primary catalyst to this change.  Even after the economy stabilizes, automotive clients will be running lean and demanding more accountability from their agencies.  Per Mr. Zimmerman, a better understanding of how the industry works is important but I’d argue a understanding of and passion for the product is paramount for success in the future.

by Dan Sherman

Will future automobiles be electric only?  Currently we have hybrid vehicles, like the ubiquitous Prius, that we are told are an intermediate step toward a large-scale movement toward plug-in hybrids, electric vehicles (EVs) and range-extended electric vehicles (REEVs).

Tesla Motors is actually producing electric cars, Fisker promises a sexy REEV, the Chevy Volt REEV is set for a MY2011 launch, and EV startups seem to spawn twice daily.   The question is; will my generation, raised by video games, Google, and Napster, make electric cars mainstream and the Internal Combustion Engine (ICE) obsolete?  Will our familiarity with technology and acceptance of “all things new” make the transition to EVs and REEVs a no-brainer?  I did some grassroots research to find out.

I started with electric vehicles like the Nissan Leaf. The proposed benefits of EVs are lower running costs, near-zero tailpipe pollution, and energy independence.  An Environmental Alliance member here at Emory noted that EVs would be extremely environmentally friendly if more coal powerplants were replaced by nuclear/hydro/wind plants here in the U.S.   Based on that feedback, it seems to me that we are simply displacing the pollution.  I don’t see the U.S. changing from cheap coal anytime soon.

I know that from a performance perspective, EVs will crush the ICE’s beautiful crescendo with a soft whir, and that manual transmissions will be nowhere to be found.  But I digress; I don’t represent the mainstream buying population.  Only one of my car enthusiast friends repeats the old stereotype:  “EVs are slow, right?  I will not drive a slow car.”  In reality, electric motors offer 100% of their torque throughout the rev range, so full-size EVs should be reasonably quick.  The Tesla Roadster has helped change Generation Y’s attitudes toward EVs, showing that this new technology can indeed be fast and flashy.

And yet, not one young soul I polled was open to buying an EV.  It seems that even with all the good intentions and environmental awareness that “we” supposedly have, if a technology isn’t convenient, “we” won’t adopt it.  The biggest obstacles:  range and recharging time.  “We” don’t want limits and 100 miles range and 8-hours to recharge sound like roadblocks to spontaneity.  “There’s a party at UGA? Oh, hold on, I have to wait 8 hours to recharge my car!”

So what about REEVs like the Chevy Volt with a 300+ mile range and a $40K price tag?  “No way!”  If you’re scratching your head, remember how much Gen Y loved Nelly.  Hey, must be the money! Showy 20-somethings would rather spend $40K on a 3-Series/C-Class/A4 than on a Volt.  More environmentalist college-age kids are also reluctant to throw down so much cash for a car that offers little tangible consumer benefits, especially compared to the number of cheap hybrid offerings available.

Given the hypothetical situation of a gasoline-powered car or otherwise-identical REEV, with higher upfront cost for the latter but identical lifecycle costs, Echo Boomers are split about 50/50 between the two choices.  Those reluctant to consider a REEV are concerned with the higher upfront cost and perception that the new technology with be difficult to repair—the same two issues given by those reluctant to early hybrid cars just before hybrids became mainstream.

Improved battery technology and enormous government subsidies will slowly but surely overcome initial resistance.  As long as reputable manufacturers begin producing/servicing EVs/REEVs, they will draw millions of my technology-insatiable peers over the next 5-10 years.  For better or worse, the electrification of the automobile is not a question of if, but of when.

Echo Booming – Haute Hatches

by Dan Sherman

Fiat 500

According to product planners, car salesmen and sales data Americans hate hate HATE hatchbacks.  If that is the case, why do MINIs, VW GTIs, and Mazda3 hatches seem to fly off dealer lots? There seems to be a dichotomy of data so I decided to ask my peers about the new Fiat 500 in this week’s edition of ECHO BOOMING.

When Fiat announced its purchase/partnership of Chrysler, Italian car enthusiasts rejoiced that affordable products from Italia would be making their return to the U.S.A  First batter up is the diminutive, sporty, chic Fiat 500, resembling the legendary 1957-1975 hatchback of the same name.  Introduced in 2007 in Europe, the Fiat 500 has been an hit with strong sales and even the 2009 Word Car Design of the Year. The question is, does it make sense here as a contender among the few successful, stylish and expensive hatchbacks (Haute Hatches)?  We think that like Eddy Murphy, the Fiat 500’s adjustment may be rough when Coming To America.

While I love hot hatches and impatiently wait for an Abarth, my peers are divided.  Many are deeply concerned about hatchback design and safety issues with such a small car, but flashy Gen-Yers love chic, premium cars that come cheap relative to their dream Bimmers.

Based on my unscientific observations, there is a concentration of students at Emory that purchased MINIs and the like, indicating a strong but small design-driven niche from which Fiat will draw its customers. Most young people I quizzed preferred the design of sedans to hatchbacks if given the generic choice of otherwise-identical models.  Surprisingly, girls seem more turned off to hatchbacks than guys.

On the other hand, only a handful of my peers have heard of the contemporary Fiat 500, and very few our age know of the legendary original.  While the VW New Beetle and MINI Cooper effortlessly piggybacked on the reputation of their foremothers, a Fiat 500 is not retro to American youth—which will present a hurdle for the first year or two after introduction.

Ironically, safety is a top priority of Gen Yers, the same people who feel invincible enough to down 15+ tequila shots in one night and lather/rinse/repeat the very next.  Unlike the crowded cities and small streets of Europe, in which the A-segment flaunts its brilliance, United States driving culture is dominated by the interstate.  Upon being shown a picture of a Fiat 500, one of my friends commented, “I think I’d sh*t my pants trying to merge onto I-85.”

When I was car shopping 6 months ago, my parents [irrationally] forbade me to get a VW GTI because they felt there wouldn’t be sufficient cushioning if I got rear-ended—a 5-door version of a C-segment car!  Even if it were crowned a top safety pick by the IIHS and NHTSA, the 2,300- lb supermini may be blacklisted by parents all across the nation.  On the other hand, some parents put a premium on affordability and fuel mileage, as evidenced by kids who drive the Yaris, Versa, and Accent—I could easily see  the Fiat 500 purchased as a compromise between such parents and their status-conscious kids.

It seems that flashiness-concerned Gen Yers who can get over the perceived safety issues will willingly fork over $16-20K for this car.  The big question, though, is whether this car will be sold as a Fiat or a Chrysler.  As the first product in a Chrysler Euro-invasion, my college peers can’t comprehend the 500 alongside huge American 300s. As a Fiat, though, the 500’s evidently European style meshes with the brand—and 20-year olds have no idea that FIAT stands for “Fix It Again, Tony.”  In the latter case, I predict a niche much like the MINI’s but with fewer sales and little profit.  It will likely build a strong premium brand image for Fiat, allowing the introduction of premium B-, C-, and D-segment cash cows.

Fiat 500 Interior

by Dan Sherman

Welcome to my inaugural post.  The management at Sorgenfrei has asked me to blog a bit about the attitudes of my generation toward the automotive industry.

I am a 20-year-old junior Econ-Math major at Emory University in Atlanta, GA.  I am a certifiable car enthusiast but that is not the reason I’m here. After all, who wants to hear the opinion of another 20-year-old car geek?  Instead, I am going to tap my fellow students and friends who are a more accurate representation of the college-age consumer to give insights and opinions on topics in the auto industry. Let’s call it Guerrilla Ethnography or “Echo Booming”.

The hot topic of the week is Saturn.  As soon as Penske reneged on its agreement to take the brand off GM’s hands, GM announced plans to kill the brand by October 2010.  Roger Smith is probably tossing and turning in his grave.

But do college kids care?  When I was younger, college-age first-car buyers were the Saturn target market.  They bought Saturns in relative droves thanks to the no-haggle buying experience, low prices, and great fuel economy.  Since then, the Saturn brand, college-age buyers, and competitive market have changed drastically.

I did an informal survey on the campus of Emory University and gathered the following observations:

About 90% of my age demographic falls into two categories: 1) those that don’t care; and 2) those that don’t care, but worry about the impact on the US economy.

“Do you mean the planet or the car?  Scientists were, like, wrong about ANOTHER planet?!”  The Saturn brand is already dead to my peers.

College-age consumers care a lot about the cars themselves—we either like cars that are flashy (particularly Emory students), or cheap cars that will last forever.  Those in the former market are offended by the thought of replacing their old Bimmer with a new Saturn.  Those who group themselves in the latter market praise the Camry, RAV4, Civic, Accord, CR-V, and even Cobalt.  But few have even heard of an Astra, Aura, or Vue.  One Emory student expressed that her aunt had a Saturn Aura, and that she considered it a dull, comfortable car for “40-year olds who want something nice but inexpensive.”

Some patriotic political science majors voice complaints that the death of the brand is representative of the US automotive industry’s woes.  However, even that group hypocritically expresses that, unlike older Americans, we couldn’t care less about where our vehicles are made.  In the past five years, a crowd of strong Japanese, Korean, and even German offerings have entered the B, C, and compact CUV segments.  Cheap, fuel efficient offerings are found from just about every manufacturer, and too many offer greater perceived reliability or flashiness than Saturn.

Saturn dealers have historically offered no-haggle pricing and high customer service satisfaction.  This seems to be absolutely worthless to college-age consumers.  Those who bought recent Saturns or Scions, which offers a similar buying experience model, made their purchasing decisions based on the cars and not the buying experience.  If GM defines college-age consumers as a target for any of its other brands, replicating the “different kind of car company” model is not worthwhile.

Only those driving old SLs and SCs will actually mourn the loss of Saturn.  They love their cars’ utility and low cost of ownership, and they like the dent-resistant plastic panels.  None, though, would choose a Saturn if given the chance to buy a new car.  One girl remarked, “My SC is cool and all, but their new cars are just, like, boring.  My parents would rather have me in a Civic or tC than an Astra, and I can’t think of one reason to make me disagree.”

Internet search engines, once a foreign idea, are integral to the daily lives of an increasing number of people the United States. For the consumer, they help manage the massive amounts of information available online and for business owners, they provide a measurable medium to target online consumers. When utilizing search engines, consumers rely not only on the search results displayed but also the sponsored links that surround the organic results. Generally, these ads are directly related to the search performed and can be a more effective means for the consumer to find what they are looking for.

For the business owner, these ads are an opportunity to supplement their Search Engine Optimization (SEO) strategy with Search Engine Marketing (SEM)/paid search advertising. Whereas SEO includes a multitude of factors and page ranking isn’t guaranteed, with paid placement, the message and links are placed based on a bidding system and it affords the business owner more control and the ability to be more granular in their targeting.

When done properly, paid placement ads deliver an active consumer directly to the product or information that they are inquiring about rather than to a generic home page. This “deep‐linking” saves the consumer time and increases the opportunity for the business owner to convert them into a paying customer.

This paper examines which companies are adept at delivering not only quantity but also quality of pay‐per‐click ads around searches for used vehicles in the U.S. We examined ads that were displayed when looking for the top 10 used cars in 10 markets. A total of 87 companies produced 992 ads of varying degrees of relationship to the searches.

To read the rest of the report, download the white paper HERE.