Allowing market conditions, especially the temporary kinds, to derail well thought out strategies, brings up an interesting concept; you can over-react to market conditions.
The best gamblers understand this well. They know that inevitably they will have to weather storms of bad hands in order to stay in the game for the good ones. They pull back their betting during these times, but they do not stop playing cards.
The automobile dealership has got to look at marketing in much the same light. You may have the correct strategy if it has proven to be so in recent months, you don’t pull the plug on it during poor market conditions, you just do a little less of it so that you are still in the game.
I remember reading about Wrigley gum in an advertising book back in the 1980’s. The story goes that during the depression, the top gum makers stopped most of their advertising. Gum sales were very much down during this period. Wrigley continued to advertise during this period and even expanded their advertisements as they saw that the other players had stopped ‘playing cards’ so to speak. By the early 1940’s Wrigley was by far the largest seller of gum as the market came back stronger than ever before.
There are some things that you can control and some things that you can’t. It’s a wise person who can recognize the difference between the two both consistently and accurately. Swings in the market as pertaining to automobile buying and shopping are a part of life in the business world. But, what of interruptions in supply?
The earthquake and tsunami’s in Japan has created a supply problem particularly for Toyota and Honda. We see Toyota and Honda dealers dealing with this situation in radically different ways. Some Toyota stores have elected to completely stop ‘playing cards’ and have eliminated all marketing and advertising efforts (expect for their websites, of course). The question here is; “How does removing yourself from the game because you will have a shortage of certain new models play out in the mid and long run?”
In the case of Toyota and Honda dealers, these stores all have the ability to sell used cars. They both will have access to certain new models as well. While they pull out all of their advertising and marketing efforts, aren’t they actually opening a door for their competition to secure (perhaps permanently) a good portion of their market share? The answer to this according to a good number of Honda and Toyota dealerships is ‘Yes!’ These are the dealerships that have elected to stay and continue to ‘play cards’, but with a more conservative betting strategy as they weather the storm of bad hands that are out of their control. William Wrigley would agree with this group of dealers.