Costs of fuel economy could produce ‘dramatic effect’ on dealers

Automakers and other industry insiders are sounding an alarm over the “dramatic effect” of increasing fuel economy requirements on new-car sales.

One group, the National Auto Dealers Association (NADA), argues that rising standards will hurt consumers along with the industry by raising prices beyond Americans’ ability to pay for new vehicles.

082416 IL Costs of Fuel Economy Could Produce 'Dramatic Effect' on Dealers

The warnings come as the mid-September deadline nears for official comments on a federal government report that 2025 fuel-economy targets are about right as they stand.

The report also said automakers would fall short of the fleet-wide target of 54.5 mpg by up to 4.5 mpg.

“The drastic upswing of the miles-per-gallon compliance curve from now until 2025 is going to have a dramatic effect on vehicle prices – and not just the most fuel-efficient vehicles in the fleet, but up and down the entire lineup,” Wes Lutz, NADA regulatory affairs chairman, said recently.

“Every car, every truck, every SUV could soon be $5,000 more expensive than it is today,” said Lutz, who also is president of Extreme Chrysler/Dodge/Jeep, RAM Inc. in Jackson, MI. “On an average 60-month contract, $5,000 increases the monthly payment approximately $100.”

(The average monthly car payment runs about $500, based on data from Experian Automotive.)

Spending maxed out?

“Americans are maxed out, and can barely afford new cars as is,” Lutz said, citing a recent study by Bankrate.com which shows that even in the most affluent of 50 U.S. cities, San Jose, CA, the median-income household falls about $1,000 short of being able to pay the average price of a light vehicle.

This reality is clearly reflected in current buyer behavior, according to Lutz:

“I’m seeing this every day at my dealership in three major ways: consumers driving their current vehicle longer; buying used vehicles, or buying a vehicle that doesn’t fit their needs.”

Lutz was quoted by the Detroit Free Press as saying that an increase of $5,000 on a new vehicle “would crush my customers … would crush me as a dealer.”

‘Daunting challenge’

Mitch Bainwol, CEO of the Alliance of Automobile Manufacturers, said it will be a “daunting challenge” to meet the 2025 fuel economy standards and that “excessive regulatory costs could impact both consumers and the employees who produce these vehicles.”

He cited a survey conducted by the AAM that showed just 7 percent of consumers would spend $5,000 more for a vehicle, while 70 percent would pay $2,000 or less.

“So the appetite to buy is really, really low,” Bainwol said, according to the newspaper.

However, federal officials believe the auto industry has made more progress than expected since 2012, demonstrating that it can make even more progress by 2025.

Chris Grundler of the Environmental Protection Agency thinks the current plan is working “spectacularly,” contending that “automakers are outperforming these standards while hitting new sales records … So, we think the industry is very well-positioned to meet the customer expectations while reaching significant new levels of environmental performance.”

We only have nine years – and about 150 million vehicles – to see which prediction is correct.

Reduce temptation, employee fraud with these 10 best practices

Most employees are trustworthy.

You know you can run your dealership without worrying about them committing fraud or theft which could cost you thousands of dollars a year.

But … it only takes one to wreak havoc on your business.

“Dealers who become victims of employee fraud tend to place unrestricted trust in those they shouldn’t,” wrote John Buelow, dealerships principal at Clifton Larson Allen consulting firm, in Reducing Risk: Top 10 Best Practices for Preventing Internal Fraud in Dealerships.

 

“In their belief in common decency, they fail to remove all temptation from their financial and operational protocols,” the consultant wrote. “This makes it just a little too easy and all too irresistible for less honest employees to rob them from right under their noses.”

RELATED: The everyday language of building a better business model; Steering a New Course: Watch out for signs of fraud on the road to a better business model

Victims shared four distinct preventive shortcomings, according to Buelow:

  • They were caught off guard.
  • Part-time or absentee owners, especially, often trusted their employees completely.
  • They either did not have internal controls or their controls were not followed consistently.
  • The perpetrator was caught by chance, not through systematic fraud controls.

“I’m not suggesting that you place suspicion on each of your dealership’s employees or categorically regard people as crooks,” Buelow wrote. “But unless you recognize that internal theft is a risk inherent in every business and take measures to keep it from happening, you leave yourself vulnerable.”

Following are Buelow’s 10 best practices to help prevent or uncover employee fraud:

  1. Segregation of all accounting duties, but with shared knowledge of them. One individual should not control all functions in the finance department – accounts payable and receivable, cash and bank reconciliations, receivables write-offs, customer credit card refunds, titling, etc.
  1. Monthly cash reconciliation to the penny. Train multiple people in your finance department to perform this essential duty, and change the individual who performs this task from time to time.
  1. Mandatory controller vacation. Cross-train personnel so they can cover for the controller, then require the controller’s absence on several consecutive days each year so that “other staff have to get their hands and eyes on the controller’s business.”
  1. Mail control. Personally open all invoices and payments that are sent to your business. “These should never be delivered directly to the AR and AP departments still sealed up.”
  1. Annual vendor audit. Pull a list of your vendors and corroborate each corporate name, DBA, address, owner’s name, and phone number, then call to verify the vendor’s authenticity.
  1. Journal entry and general ledger reclassification reviews. Scour the books for “financial acrobatics” and “tricky maneuvers” that might indicate fraud.
  1. CPA spot checks by bringing in “hired guns” on occasion. Engage a CPA to drop in with a day’s notice – or no notice at all – to inspect the books onsite.
  1. Parts department controls. Monitor purchasing, look for excesses and imbalances in vendor patterns, and hire an outside party to manage parts inventories. Lock parts rooms and only permit access in pairs with strict, written checkout protocols.
  1. Used and rental/loaner vehicle controls. Conduct regular spot checks of vehicles and their management protocols to ensure vehicles are physically present.
  1. Welcome and encourage whistleblowers. Assure confidentiality for employees who suspect or witness fraud by taking steps such as establishing a fraud-tip hotline.

“As a trusting business owner, it can be difficult to enforce such wary measures, but the value of these controls can’t be overstated,” Buelow wrote. “When you understand and practice the power of prevention, you may not have to suffer losses, prosecute employees, and incur other costs of fraud.”

These best practices may take you a long way toward that goal.

Jittery election season the time to select a strong running mate

081716 IL Jittery election season the time to select a strong running mate

There’s nothing political about selling cars.

But that doesn’t mean politics won’t intrude on the business in this presidential election year.

Dealer comments collected by the Santander Consumer USA sales team indicate that many dealers believe there is a connection between car-sales volume and elections.

Whatever the impact, there’s good reason to pick a strong running mate such as SC.

“In election years, it seems that customers hold off making vehicle purchases until they know who is going to be elected,” Samm Thomas, business manager of Griffin Ford, Waukesha, WI, told SC Region 6 ASM Jeremy Shaffer. “It seems that in election years like this, where we do not have a sitting president running for re-election, that it is even slower than normal.”

“Many dealers attribute the decrease in car sales this summer to the fact that we are in an election year. During these times dealers tend to work harder to make a deal work,” said Johanna Golding, Region 10 RSM, who suggested that SC products and programs can give dealerships an edge.

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Candidate for success: Santander can help put you over the top

“Many dealers anticipate a slowdown as the election gets closer,” said Aaron Friedman, Region 4 RSM. “So, extra time and effort is being spent on each customer to maximize any potential sale.”

In fact, light-vehicle sales through July are up slightly year over year, based on data from the U.S. Bureau of Economic Analysis (BEA). And a slowdown in sales during the months after Labor Day – September, October and November – is pretty typical over the last 10 years, at least, according to the BEA.

Still, Tom Pasch of Eskridge Chevrolet in Guthrie, OK, identified one area of particular concern.

Election uncertainty?

“The election year seems to have scared lower income, lower credit customers from purchasing vehicles,” Pasch told SC’s Josh Gingrich, Region 5 ASM. “Uncertainty has these customers waiting and saving their money until absolutely necessary to spend it. I’m seeing almost all high near-prime and prime customers that typically don’t need to spend their savings for down payments.”

“There seems to be more people buying solely out of need rather than want,” Chad Formico, general manager of Russ Darrow Group, told Sheila Fox, SC Senior ASM.

Another dealer, Joe Maenza of Yoemans Ford in Daytona Beach, FL, told SC’s Bloom there “definitely has been a drop in secondary (subprime) business … about 50 percent drop in sales for secondary.”

A BMW finance director who participated in a lender conference call told Nancy Bloom, SC Region 12 RSM, that the company believes dealers “definitely” are seeing the political climate affect business. Regardless of party affiliation, customers capable of putting off a major purchase indeed are refraining because of the “uncertainty and volatility” of the election, Bloom was told.

‘Going to be interesting’

Following is a sampling from other Santander Consumer USA dealers:

  • “Election years are always down compared to non-election years, by volume and/or gross due to consumer confidence,” Aaron Spearman, general manager of Overland Park Mazda, Overland Park, KS, told Diane Owen, Senior ASM in SC’s Region 3. “It seems as though customers are more payment or rate conscious in these years.”
  • “Yes, I feel the elections impact vehicle sales. Depending on who is in the lead, people may be reluctant,” Greg Mostsinsker, finance director of West Kendall Lexus, Miami, FL, told SC’s Bloom.
  • “Elections are hit or miss when it comes to our industry. Re-elections – especially with a popular president – seem to have the least impact on car sales,” Jeff Mattingley, GM of Peak Kia Chapel Hills, Colorado Springs, CO, told Roger Glas, a Region 1 ASM. “However, this election cycle is far different and the next few months are going to be interesting to say the least. … I think it’s going to be a rough few months for many dealers – and we are already starting to see it.”

On the bright side

Alexander Aguiar, finance director at Prado Auto Sales, Coral Terrace, FL, sees it a bit differently.

Asked by Bloom whether he expects the election to impact business, Aguiar said, “No. Cars are a necessity. Sales are not impacted by the elections.”

Whatever your expectations, Santander Consumer USA is ready to help you make the most of your opportunities. Watch for our fall email series, “Vote Santander,” which will steer your campaign in the direction of useful content on our Inside Lane dealer blog, and may help you with some “Unconventional” ideas that will take your fall run “Over the top.”

And think of your ASM as one of the most committed workers on your staff, capable of helping you sell more vehicles to more customers, or contact our sales department for a campaign boost.

There’s nothing political about that.

Candidate for success: Santander can help put you over the top

How rough can it get?

No, we’re not talking about the presidential campaign the next two-and-a-half months, although most people probably have an opinion on that, too.

The question is about the swirling currents that could make it more challenging to sell vehicles as demand levels off, the usually slower fall months arrive and election noise hits a crescendo.

The answer shows all the reasons that dealerships will want a strong running mate this election season.

081516 IL Candidate for success Santander can help put you over the top

Following are issues that will have to be overcome for a successful bid:

  • Some experts have been backing off earlier predictions of another record-setting year, although sales through July are up slightly year over year, based on data from the U.S. Bureau of Economic Analysis (BEA). Expert estimates for this year range from 17.3 million to 17.7 million compared to 17.47 million in 2015.
  • Meanwhile, the months following Labor Day – September, October and November – typically are three of the slowest of the year, along with January and February, according to BEA data over the last 10 years, before kicking back up in December.
  • And this year many Americans are distracted by the presidential election, the uncertainty that creates and the tidal wave of campaign advertising that displaces dealer ads.

“When political campaigns begin to flood local TV markets with commercials, car dealers get squeezed for airtime more than any other advertisers,” The Wall Street Journal reported earlier this year in an article “When Political Ads Come to Town, Car Dealers Feel the Squeeze.”

“Local automotive dealers predominantly buy ads during the local news – the same programming where political campaigns and outside groups concentrate much of their spending.”

(We’ll see what SC dealers expect from the fall sales season in our next post on the Inside Lane blog).

In the spirit of the election, Santander Consumer USA’s fall email series, “Vote Santander,” will steer your campaign in the direction of useful content on our Inside Lane dealer blog, and may help you with some “Unconventional” ideas that will take your fall run “Over the top.”

And think of your ASM as one of the most committed workers on your staff, capable of helping you sell more vehicles to more customers, or contact our sales department for a campaign boost.

We won’t predict a landslide, but running with SC could be the ticket for a victory party in November.

Some dealerships thinking outside the Box for F&I solutions

The Box is going the way of the dodo.

That’s the impression you could get from headlines such as Plan ahead the Box is dead and The elimination of F&I and Is the F&I manager an endangered species?

At least, the Box is going through an evolution – if not a revolution – some recent articles contend.

“There is no question that an evolution is brewing,” wrote Candice Crane in Dealer Solutions magazine. “Early adopters are examining ways to create a new and efficient buying process. One concept gaining momentum is to eliminate the traditional F&I process.”

080816 IL Some Dealerships Thinking Outside the Box for F&I Solutions

Automotive News Access F&I offers a similar perspective on the subject:

“Although experts are divided over whether finance and insurance managers will become extinct, they agree the F&I process is evolving, pressured by consumers’ preference for an interactive experience.”

Indeed, one industry study indicates that 84 percent of customers “want to spend less time in dealerships and would prefer a more transactional experience online,” another suggests that 71 percent of millennials “would prefer to do F&I research at home before they purchase.”

And yet most dealerships continue to do business using a longstanding model in which sales associates handle customer transactions to a point and then F&I managers finish the deals.

Ready for change?

Change doesn’t always happen easily – or quickly – but that doesn’t mean it won’t happen.

“[F&I managers] are the most profitable employees in the dealership and most expensive,” Crane wrote. “What some public and private groups are realizing is that you can protect the integrity of the F&I process without having the traditional F&I silo. … Technology has allowed for greater access of information replacing the need for experts in banking and finance.”

One retail consulting group told Automotive News that about 40 of 200 dealerships it works with use a model in which the sales team also handles financial products previously in the F&I domain – a practice that “saves the stores money” – with F&I handling the approval process, compliance and paperwork. Another, which introduced the idea of an Experience Guide, reported record sales last year, with new-car market share nearly doubling to 23 percent and F&I profit higher than ever.

Splitting the difference

“A simple solution is to split the sales and administrative function between two individuals, each of which possesses the skill set to master their craft,” wrote Jim De Luca in Dealer Solutions, resulting in customers working with one person throughout the purchase transaction.

And what choice do dealers have but to adapt?

“Our consumers have spoken and as a result are being given more and more choices by upstart companies,” wrote De Luca in Dealer Solutions. “Ultimately, they will choose a better experience and they will pay more for it [because] that’s what they want.”

“The only question is will your dealership or a competitor provide it?”

State franchise laws foster ‘intense competition,’ study contends

Franchised automobile dealers have some powerful ammunition in their fight to retain state franchise laws that have been challenged as unfair by regulators and others.

In the case of consumers, the laws appear to accomplish the opposite of what critics contend.

“Retail prices for new cars are lower for consumers because of state franchise laws,” says a recent economic analysis of the $570 billion new-car business by independent Washington, D.C., think tank, the Phoenix Center for Advanced Legal & Economic Public Policy Studies.

081016 IL State Franchise Laws Foster 'Intense Competition' Study Contends

The study found that “state franchise laws foster intense competition among franchised new-car dealers,” the National Automobile Dealers Association reported, resulting in demonstrably lower prices for consumers and altering the way consumers buy cars and service in a positive way.

“Franchise laws do not limit competition or lead to higher prices,” said Professor T. Randolph Beard, Phoenix Center senior fellow and co-author of the study, State Automobile Franchise Laws: Public or Private Interests? “In fact, all the evidence [gathered for the study] suggests that there is intense competition leading to very low margins on new car sales.”

Beneficial to consumers

The study was conducted “in response to recent scrutiny of state franchise laws by the Federal Trade Commission (FTC) and others, and the suggestion that these laws are outdated,” said the NADA report. “The study concluded, however, that state franchise laws are indeed still very beneficial to consumers.”

“When selling an automobile-service bundle, our analysis indicates that franchised auto dealers have a better incentive with respect to consumer desires than car manufacturers,” said Dr. George S. Ford, co-author and Phoenix Center chief economist. “As such, it is not unreasonable for state legislatures to choose a market design that best serves their constituents in the form of local auto franchise laws.”

Tesla pushing the issue

Much of the debate about franchise laws was initiated by automaker Tesla, which sells its vehicles from company retail outlets directly to consumers rather than through a middleman. Tesla wants to operate elsewhere as it does in California, but is prohibited by law in some states.

The Phoenix Center dismisses as outdated a 1986 FTC study – using data from 1978, almost 40 years ago – which is most often cited in supporting a change in franchise laws. The age of that FTC study alone “says much about the pertinence of the evidence for modern times.”

Ultimately, the existence of franchised dealerships provides a “persistent intermediary” between buyers and manufacturers, facilitating the bundling of sales and service support at competitive prices, the Phoenix Center contends in its report.

“As such, it is not unreasonable for state legislatures to choose a market design that best serves their constituents.”

Mystery shoppers put a premium on dealership sales behavior

080316 IL Mystery Shoppers Put a Premium on Dealership Sales Behavior

Premium car dealerships provide a premium experience to prospective customers – at least in a new “mystery shopper” study.

Three of the top four automotive brands among the 33 comprising the 2016 Pied Piper Prospect Satisfaction Index (PSI) U.S. Auto Industry Benchmarking Study were premium brands, while four additional premium brands finished within the top 10 in points.

The top-scorers were Nissan’s luxury brand, Infiniti, with 114 points, 11 better than the industry average, followed by Toyota’s luxury brand, Lexus, and Mercedes-Benz, 112 each, and Toyota at 109.

Overall, 16 brands scored at or above the industry average of 103 points, while 17 scored below it.

Fourteen of the above-average brands received higher scores than last year, while 15 of the below-average brands also received higher scores.

Selling more vehicles

The study measures treatment of car shoppers who visited 6,157 dealerships across the United States, according to Pied Piper, with mystery-shopper measurements and scoring related to sales success. Pied Piper, which consults dealers on sales and service programs, reports finding that dealerships in the top quarter of PSI scores sell 16 percent more vehicles than those in the bottom quarter.

Other brands that Pied Piper mystery shoppers scored at or above the industry average this year, along with their PSI points, are: Audi, BMW and Volkswagen, 106 points; Nissan and Porsche, 105; Cadillac, Honda, Hyundai and MINI, 104, and Acura, Chrysler and Kia, 103.

“Eight brands have consistently ranked at or above the industry average for each of the last five years,” said Pied Piper – BMW, Cadillac, Honda, Infiniti, Lexus, Mercedes-Benz, Toyota and Volkswagen.

Improved behaviors

Pied Piper has found that eight out of 10 PSA behaviors have improved over 10 years of studies. Following are examples of sales behaviors that have changed most:

  • Sales associates mentioned the availability of different financing or lease options, which occurred 79 percent of the time in 2016. Highest scoring brands were Infiniti, Lexus and Toyota.
  • Prospective customers were asked about reasons preventing a purchase, which occurred 74 percent of the time in 2016. Highest scoring brands: Toyota, Fiat and Kia.
  • Sales people discussed features unique from the competition, which occurred 63 percent of the time. Highest scoring brands were Tesla, Subaru and Lexus.

“There is no question that the typical dealership sells more effectively today than it did 10 years ago,” said Fran O’Hagan, president and CEO of Pied Piper Management Company. “However, plenty of variability remains. We have watched some brands completely change the way that they sell, while others sell today no differently than they did 10 years ago.”

Still, it appears for some dealerships, at least, the new road to success is becoming less of a mystery.

New in-vehicle tech opens window of opportunity with older customers

Are you plugged into the needs of your older customers?

Here’s why you should be.

Introduction of new vehicle technologies provides dealerships several opportunities to influence customers 55 and older that they may not have as often with younger customers.

And the differences can be significant, reported a Massachusetts Institute of Technology white paper, Autonomous Vehicles, Trust and Driving Alternatives: A survey of consumer preferences, which was based on a survey of 3,034 drivers in seven age groups.

The Smart Dealer Logo 300x300The bottom line for dealerships:

Older customers prefer interacting with dealer staff – either during the sales process and/or at vehicle delivery – using the vehicle owner’s manual or studying other material provided by their vehicle’s manufacturer to figure out new technology. Younger drivers are much more likely to trust a friend or family member, trial and error or just plain luck to learn technology.

Here’s a breakdown based on the MIT survey:

The highest percentage by age group of customers preferring to learn how to use in-vehicle technologies while interacting with the dealer sales staff is 35.1 percent among customers 75-plus years old and 32.6 percent among customers 65-74 years old. Even in the 45-54 and 55-64 age groups, more than a quarter of customers prefer to learn about technology from the sales staff.

Even higher percentages of customers want to learn about in-vehicle technologies when they take delivery of their new vehicles – 46.5 percent for ages 65-74, 39.9 percent for 75-plus and 39.5 percent for the 55-64 age group – which also are far higher than percentages of younger age groups.

But the greatest opportunity may be in ensuring customers get the most out of their owners’ manuals, because at least 60 percent of customers age 55 and older expect to learn about new technology there.  More than a quarter of customers 45 and older want to learn from other manufacturers’ materials.

And your dealership starts from a position of strength with your customers.

Asked how they feel about the technology in the vehicles they currently drive and whether they are happy with how that technology is integrated with vehicle designs:

“Most individuals reported being pleased with the technology already in their vehicle,” with 28 percent of respondents very happy, 42 percent liking most features, and 15 percent liking some vehicle technologies even if they don’t use most of them, reported the white paper. “A smaller number of respondents [6 percent] are very unhappy with the technology.”

The numbers on learning new in-vehicle technology are in your favor – especially with older customers.

Do you speak the language of closers – or dozers – to email shoppers?

Email lead closers have a language all their own.

And it’s not dealer-speak.

“While industry speak is second nature to dealers, unfamiliar shoppers may just be reminded of how unsure they are about the process,” according to a special report from CDK Global Retail Insights.

It turns out that the language of top closers includes words completely different from low closers.

072816 IL Do You Use the Language of Closers - or Dozers - to Email Shoppers

“People are actually pretty bad at predicting what kind of language is engaging,” said Jason Kessler, a CDK data scientist who specializes in computerized analyses that identify whether a written passage – in this case email – expresses positive, negative or neutral evaluations or emotions.

“The common, but naïve, approach is to assume positive sentiment is the most persuasive,” he said.

But that often isn’t true, said the CDK report – The Language of Closers – written by Tess Karesky after the marketing analytics firm took a look at 1,300 stores from one vehicle luxury brand and one volume brand and then identified the top and bottom 10 percent of email lead closers.

Amazingly persuasive?

In analyzing shopper vehicle reviews on third-party research sites, words like “love” and “amazing,” while positive, were not very persuasive in getting other shoppers to take the next step, the report said.

“What did drive shoppers to next steps were specifics about a vehicle, like ‘comfortable’ and ‘quiet.’ A three-star review with these words is actually likely to send a shopper to a dealer site over a five-star review that said ‘I love my amazing car,’” according to the report, written by CDK’s Tess Karesky.

Based on that digital experience, CDK set out to determine how dealers could use more persuasive email language to move shoppers through the steps to purchase and, ultimately, purchase with them, the report said. With a list of high and low closers in hand, CDK mystery shopped the 260 stores, representing 20 percent of the initial group of stores, gathering email lead responses from each one.

Words to the wise

Three themes emerged from the results, CDK reported:

  • The importance of guiding a consumer. Phrases such as “give me a call to set a time” or “when are you available to come in for a test drive?” were almost exclusively used by high-closing dealerships. That’s because they give the shopper a clear next step, the report said, noting that “simple and direct questions have simple answers and are easier for shoppers to respond to.”
  • The importance of clear and relevant information. The top word for high closers was “provide,” and it was almost always used in the context of providing the shopper more information. “Vehicle descriptions, details about the buying process and ‘quotes’ (another high-closer word), all help the shopper gain a better understanding so they can feel secure in taking the next step.” Industry jargon such as “body style” and “options” were used most often by low closers.
  • If the shopper chose to make contact via email, there’s probably a reason. The word “give” – often used to suggest the shopper “give me a call so I can assist you” – was the highest predictor of a low closer, according to the study report. Dealers should not use email solely as a means to get shoppers on the phone or into the dealership but, instead, to be helpful.

Compare this list of words and phrases used by high and low closers identified in the study:

IL-BLOG_60707-23 (072816 IL Do You Use the Language of Closers - or Dozers - to Email Shoppers-) IMAGE 2-01

“Effective online communication requires businesses and their employees to use new skills, to carefully balance their own objectives and those of the consumers,” wrote CDK’s Karesky. “It’s important to remember that it isn’t just the words that are persuasive – it’s the context in which they are used. Craft [emails] that are useful and clear, and that guide shoppers toward exactly what to do next.”

For step-by-step help on crafting your dealership’s emails, see The Language of Closers at CDK Global.

And then turn your dozers into closers.

Why your dealership should consider direct mail marketing – studies

Mark Twain.

You wouldn’t think he has anything to do with direct mail.

But a quote attributed to the great American writer – “Reports of my death have been greatly exaggerated” – seems to apply to direct mail in the digital age based on several recent studies.

In a study for the U.S. Postal Service, Temple University’s Fox School of Business found that direct mail performed better at achieving advertising goals than digital in five of nine measured categories and the same in three others. Digital media performed better in one of the nine categories, the study showed.

072516 IL Why Your Dealership Should Consider Direct Mail Marketing - Studies

Direct mail scored better in how long a customer spent with an ad (review time); whether the advertising got an emotional reaction (stimulation); how quickly and confidently participants remembered ad source and content (memory speed and confidence); the subconscious desire for a product or service (desirability), and the value a participant places on the product or service (valuation).

RELATED: Proof of direct-mail program’s impact is in the numbers

“Brain activity indicated greater subconscious value and desire for products or services advertised in a physical format,” the business school said in its report on direct mail marketing.

Direct mail and digital advertising performed equally well in the amount of information the customer processes or absorbs from an ad (engagement); how well the participant remembered the advertising source and content (memory retrieval accuracy), and whether and how much the participant would be willing to pay for a product or service (purchase and willingness to pay).

Digital advertising was found better at attracting a customer’s focused attention for a sustained period of time on key components (attention), the study showed.

“The study indicated that digital ads may provide a cost-effective option for companies that are trying to get consumers’ attention to quickly understand a marketing message,” said the Temple University business school report. “However, companies that want to generate a more accurate memory of an ad, for better recall during a purchase, would be served best by physical ads.

“Additionally, the research showed that physical ads generate brain activity associated with a higher perceived value and desirability of the advertised product or service.”

A study commissioned by the Canadian postal service – Breaking Through the Noise – seemed to back up the Temple University results, showing that direct mail advertising:

  • helps brands stand out because consumers are far more likely to notice, open and read it.
  • is likely to trigger emotional responses because consumers tend to experience it in a mindset that makes them more open to inspiration from brands.
  • tends to generate a lasting effect because consumers often keep it, leave it laying in highly visible areas of the home and share it with others.
  • influences behavior with consumers more likely to act on it than digital advertising.

“In an age where person-to-person communication is being phased out, it is good to know some services still come from the hands of another human being,” said one participant in the Canadian postal study. “Hokey, I know, but I feel it’s getting more and more important.”

Twain, the author of Tom Sawyer and Huckleberry Finn, probably couldn’t have said it better himself.