CHICAGO/NEW YORK, (Reuters) – When Hyundai Motor Co launched a new U.S. incentive program allowing buyers who lost their jobs to return just-purchased new cars, Rick Case was blown away by the consumer response.
Case, who owns six Hyundai dealerships in Cleveland, Atlanta and Fort Lauderdale, Florida, watched sales spike more than 60 percent in January, even doubling in some locations. While rebates and new products helped, he remains convinced the buyback offer was the big sales driver.
“I’ve been a car dealer for 45 years and I’ve never seen a promotion like this,” Case said. “It caused a buzz and everybody was talking about it.”
Far from downplaying recession worries, Hyundai and other companies such as JetBlue Airways Corp and the National Basketball Association’s New Jersey Nets are tapping directly into consumer concerns about the economy with special offers, giveaways and marketing.
The U.S. Commerce Department said last month that the country’s economy shrank at its fastest pace in nearly 27 years in the fourth quarter. Consumer spending, which accounts for two-thirds of economic activity, fell 3.5 percent.
Meanwhile, spending on durable goods like cars and furniture plunged 22.4 percent in the quarter, the steepest decline since the first quarter of 1987, the agency said.
Already at 7.2 percent, the highest since 1992, the jobless rate is set to soar to 9.1 percent, a level not seen since 1983, before it stabilizes, according to a recent Reuters poll of economists.
For companies that hit the right tone, the payoff can be huge. Hyundai’s U.S. vehicle sales in January rose 14 percent even as the overall market slumped 37 percent.
“This is the toughest economic climate for consumers that any of us in the advertising business have seen in our lifetime,” said Fran Kelly, chief executive of advertising agency Arnold. “In tough times, companies have opportunities to gain share, but they have to approach the market sensitively.
“What you want to do in tough times is mix value with values,” he added. “You don’t just want to roll out the ‘for-sale’ sign, because it’s difficult to roll that back.”
PEACE OF MIND
In addition to Hyundai, companies that have tailored their messages well include Subway, with its $5 foot-long sandwich ad campaign, McDonald’s Corp, Wal-Mart Stores Inc and H&R Block Inc, Kelly said.
JetBlue’s offer — scheduled to end in June — is to refund the cost of an airline ticket if you lose your job.
Fiona Morrisson, JetBlue’s director of brand management and advertising, said the market is “awash in low fares” and the airline wanted to offer something that showed its humanity.
“How can we be cognizant of the situation that they’re going through, but also deliver up something that allows them to continue on with their lives?” she said of consumers.
Hyundai launched its deal in early January and augmented it this month with a feature where the South Korean automaker pays three months of car payments to allow the unemployed owner time to look for a new job before a decision must be made on whether to return the vehicle. It has seen traffic at its corporate website rise more than 25 percent over last year.
“If that’s what’s keeping them away from buying big-ticket items,” said Joel Ewanik, vice president of marketing for Hyundai Motor America, referring to the recession, “we have to give them some peace of mind to mitigate that.
“We have found that 75 percent of Americans believe that they’re going to hold off buying any kind of significant items until the recession ends,” he added. “Well, we can’t wait for that. We have to combat that. We’ve got cars to sell.”
One consumer has taken advantage of the Hyundai program, which runs through the end of the year, to return his car after he unexpectedly lost his job, Ewanik said.
Offering such deals works best on big-ticket items, not discretionary purchases, said Zain Raj, CEO of Euro RSCG Discovery, a unit of French ad company Havas.
“It’s an absolutely brilliant strategy,” he said of Hyundai’s approach. “They are talking openly and honestly to people. They are addressing the biggest single issue inhibiting people’s ability to put down money on a big purchase.
“I don’t see a lot of great advertising that’s insightfully addressing the issue,” Raj added. “The issue isn’t ‘Things are bad so buy me, I’m cheaper.’ The issue is, ‘What can I do to help you at this point in time?’“
The Nets basketball team offered 2,000 free tickets to unemployed fans for four games in November and December, as well as placement of resumes with its 120 corporate sponsors.
The NBA team is looking to offer a similar program again this season, hoping to build goodwill with fans, especially as they start spending more again.
“We weren’t prepared for the onslaught,” said Fred Mangione, the Nets’ senior vice president of ticket sales and marketing. “We got much more press off it and feedback than we ever thought, which tells you how scary the world really is right now.”