Automakers and retailers brace for another driving drought

Oil prices are climbing rapidly, recalling 2008's spike that drive prices at the pumps sky high. This time, however, marketers and agencies are prepared and have learned from consumer trends what to expect as more people keep their gas-guzzlers parked.

Oil prices are climbing rapidly, recalling 2008’s spike that drive prices at the pumps sky high. This time, however, marketers and agencies are prepared and have learned from consumer trends what to expect as more people keep their gas-guzzlers parked.

“No one can predict what further developments will take place,” said Martin Sorrell, chief executive of ad agency holding giant WPP, in an e-mail. But he said that “further increases in the oil price, say at a level of $140 to 150 [a barrel], may stunt economic growth and impact corporate profits and, hence, spending. My view is that even a lower price increase [of $125 to 130 a barrel] might do that.”

Oil was about $107 a barrel at press time.

With gasoline prices on the rise, shoppers are likely to consolidate trips, shop closer to home and turn to online retailers. Those are all trends that played out three years ago when gas prices surged. Google data show that consumer searches for stores nearby are up 25% over March 2010. Data also show that search volume for online shopping follows the rise and fall of gas prices fairly closely, a Google spokeswoman said.

“Searches on online shoe shopping and online clothes shopping had their first significant, non-holiday-related spike since 2004 in mid-2008, when gas prices were rising rapidly,” she said.

Another concern is a cutback on travel. There have been six domestic airfare increases in the first 75 days of 2011, according to FareCompare.com, with an average increase of 25% in ticket costs. United Continental Holdings said last week that the increase in fuel price will force its two airlines–United and Continental–to drop some unprofitable routes, further inconveniencing some fliers.

So far, the driving market seems not to be affected. “The average driver goes through psychological stages when gas prices rise,” said Sergio Stiberman, CEO and founder of the website Lease Trader. “During the uptick, concerns and complaints heat up when we pass certain price benchmarks, but widespread behavior doesn’t actually change until we reach $4 per gallon.”

The auto market certainly bore the brunt of some of that in 2008 when car buyers shifted preferences to smaller cars with better gas mileage. But Ford CEO Alan Mullally told the Associated Press last week that’s also why his company is better positioned to handle rising gasoline prices compared with three years ago.

“We thought this was going to happen. We didn’t think it was going to happen as fast as it is, but we feel like we’re positioned with the right product line now,” he said. “We’ve got the best smaller and medium-size vehicles we have ever had.”

General Motors’ chief of global marketing Joel Ewanick, too, feels the company has the right mix of product to ride out high gas prices, most notably the Chevy Cruze Eco, a version of the new compact sedan that gets 42 miles per gallon on the highway. He said that Chevy, through both national and dealer ads, is increasingly tagging ads with high MPG ratings. “It’s not new for us, but we are dialing it up because we have the right product at the right time,” he said. The Cruze Eco and soon-to-be-launched Chevy Sonic both top 40 MPG; its Chevy Silverado Heavy Duty pickup has the highest fuel-economy rating in the heavy-duty category.

To read the full article at Advertising Age, click here.

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