A rose is a rose
One way AutoNation plans on improving its chances is by launching this national branding plan. The name change will affect 82% of the vehicles it sold last year for Ford, GM, Toyota Motor Corporation (NYSE:TM), and Nissan. What won’t change are the names of its luxury nameplate dealers, like Mercedes and BMW. Apparently there’s still a lot of cachet left in those cars, as opposed to the more commoditized Fords, GMs, and Toyotas, from which it had to get the OK from before it could proceed.
The problem with the idea is that even though AutoNation is something of a national company, selling cars in 15 states, cars are still sold locally. Penske, for example, is represented in 17 states and maintains its local dealership names, seemingly believing that the name of the car brand is more important than the Penske name, even though Roger Penske’s racing history would be a draw. Thus you have Audi Fairfield in Connecticut, Central Florida Toyota, and Hudson Nissan in Jersey City, N.J.
Conversely, CarMax, Inc (NYSE:KMX) , which is the nation’s largest used car dealer, uses a corporate branding program, but I’d argue that’s a more important distinction for it. Shopping for used cars is fraught with risk — there’s a reason used car salesmen have a reputation — so giving the consumer the confidence that you’re buying from a national brand lowers that risk. Like buying a bottle of soda from Coke or a sneaker from NIKE, Inc. (NYSE:NKE), there is a value that can be placed on a brand and something to be said for the expected quality that comes with it. With new cars, however, it’s arguably the manufacturer and not the dealer where those expectations arise.
Although the branding initiative will cost AutoNation only $18 million, it seems much ado about nothing. Part of the rationale is that it will help in Google Inc (NASDAQ:GOOG) search rankings, as there will be just one name instead of 15 names to hit on. But that’s if “AutoNation” is what people are searching for. If I pop in “Ford dealer” into the search engine, which I believe is how most people search for cars, it returns all the dealers in my vicinity, regardless of what they’re called.
Moreover, as management acknowledges, taking down a dealership name that may have been in business for decades and replacing it with a corporate brand many people have likely never heard of before itself carries great risk. They’ll be spending more advertising money to support the rebranding effort, but in the end I think this amounts to little more than ego massaging and not doing anything that leads to more sales.
The article Will AutoNation Still Come Out Smelling Like a Rose? originally appeared on Fool.com and is written by Rich Duprey.
Fool contributor Rich Duprey owns shares of Nike. The Motley Fool recommends Ford, General Motors, Google, and Nike and owns shares of Ford, Google, and Nike.
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