After more than a decade, American Honda Motor Co. appears to be loosening its ban on advertising by dealer associations—though not entirely on its own.
The apparent about-face by the Torrance, Calif.-based automaker, which in the fall of 1994 forbade advertising by dealer bodies (as opposed to individual dealerships) in favor of a regional program run by Honda's national agency, comes after years of dealer complaints that competitors' dealer-association ads give them an edge.
Some associations have already started advertising. A handful of dealer bodies, albeit relatively small ones such as Cincinnati's, have hired shops to represent their local interests. One Cincinnati dealer said bluntly that he took his cues from a Toyota "$1,000 coupon" program, and AHM doesn't appear to be standing in the way. Honda declined comment.
Now, the automaker is polling its southern California dealers to assess whether they are in favor of collectively hiring an agency to start advertising again, according to sources. Dealers said the offer requires them to unanimously agree in writing to pledge an unspecified amount of money per car to any dealer-body effort. Honda would contribute some, if not match them.
Dealers were players in the local game until 1994, when AHM evp Dick Colliver abruptly announced the dissolving of dealer-body advertising, ordering dealers to defer to the then-new national "tier-two" advertising program run by longtime lead shop, independent Rubin Postaer and Associates (now RPA), Santa Monica, Calif. "Tier-two" ads—such as recent spots featuring an animated pitchman called "Mr. Opportunity"—mean to spur retail business more than elevate brand image.
"Before the regional ad-vertising came in, the local ads were seen as working against the brand," said a source. "We had the best local advertising with Robert Elen [& Associates]," said a dealer, "but there was a lot of disparity across the country with horrible content in ads, horrible creative."
But 12 years later, dealers in southern California, for example, complain that rivals such as Toyota are not just moving forward, but far ahead, in regional advertising. According to Nielsen Monitor-Plus, in the nation's most fertile car-selling grounds—stretching from greater Los Angeles to San Diego—some brands' dealer-body spending in 2005 rivaled the national budgets of brands like Porsche ($19 million) and BMW Mini ($21 million). For example, southern California Ford dealers spent $40 million above and beyond its factory ads, and local Chevrolet dealers spent almost $20 million. Most vexing to Honda dealers, rival southern California Toyota dealers spent $65 million locally in '05 through independent Davis Elen Advertising—which is, ironically, Robert Elen's current firm. Honda's spend in L.A. and San Diego in '05 was $86 million, though its ads were neither created nor targeted locally.
Toyota topped all California car sales in 2005 with 18.3 percent market share, per R.L. Polk, ahead of Ford (12.6 percent), Chevrolet (11 percent) and Honda (9.4 percent).
But the about-face is far from definite, dealers warn. Because it is legally mandatory to put those ad costs on the sticker, dealers worry that would hurt their margins. "Any charge for our advertising or marketing will be seen as an 'intangible' that can be bargained away by customers," a source said. And any agreement requires unanimous consent from all dealers in an association, so some warn the turnaround may never happen. It's unclear when a decision is expected.
RPA acknowledged the movement to bring back dealer-body ads, but says it won't affect the agency's hold on the business. "Anything the dealer bodies do would involve incremental advertising, over and above AHM's tier-two program," said Bill Hagelstein, evp and COO.
Robert Elen, whose long-running tag, "Honda dealers: As dependable as the cars they sell," is still used on the association's Web site, acknowledged Honda's bind: "When you homogenize your advertising and do dealer ads for everyone, you take away the opportunity to do those strong local events that you can't buy on a broad-brush national scale. You have to pick and choose what works for a southern California audience."