AutoNation 2003 Annual Report Download - page 8

Table of Contents
Sales and Marketing
We retailed approximately 660,000 new and used vehicles through our stores in 2003. We sell a broad range of well-known vehicle
makes within each of our markets.
Our marketing efforts focus on mass marketing and targeted marketing in our local markets and are designed to build our business with
a broad base of repeat, referral and new customers. We engage in marketing and advertising primarily through newspapers, radio,
television, direct mail and outdoor billboards in our local markets. As we have consolidated our operations in certain of our key markets under
one local retail brand name, we have been able to focus our efforts on building consumer awareness of the selected local retail brand name
rather than on the individual legacy names under which our stores operated prior to their acquisition by us. We also continue to develop
newspaper, television and radio advertising campaigns that we can modify for use in multiple local markets. We expect to continue to realize
cost efficiencies with respect to advertising expenses that are not generally available to smaller retailers, due to our ability to obtain
efficiencies in developing advertising campaigns and due to our ability to gain volume discounts and other concessions as we increase our
presence within our key markets and operate our stores under a single retail brand name in our local markets.
We also have been able to use our significant scale to market our stores and vehicle inventory via the Internet. According to industry
analysts, the majority of new car buyers nationwide consult the Internet for new car information, which is resulting in better-informed
customers and a more efficient sales process. As part of our e-commerce marketing strategy, we are focused on (1) developing websites and
an Internet sales process that appeal to on-line automobile shoppers; (2) obtaining high visibility on the Internet, whether through our own
websites or through strategic partnerships and alliances with other e-commerce companies, including Microsoft’s MSN Autos, America
Online, Edmunds, Kelley Blue Book, Yahoo! Autos, and others; and (3) developing and maintaining a cost structure that permits us to
operate efficiently. In addition, under the terms of our strategic alliances and partnerships with e-commerce companies, we have access to
hundreds of thousands of customer leads, which increases our potential for new and used vehicle sales. We respond to and track such
customer leads and sales with Compass, as well as other tools.
Agreements with Vehicle Manufacturers
We have entered into framework agreements with most major vehicle manufacturers and distributors. These agreements, which are in
addition to the franchise agreements described in the following paragraph, contain provisions relating to our management, operation,
advertising and marketing, and acquisition and ownership structure of automotive stores franchised by such manufacturers. These
agreements contain certain requirements pertaining to our operating performance (with respect to matters such as sales volume, sales
effectiveness and customer satisfaction), which, if we do not satisfy, are likely to adversely impact our ability to make further acquisitions of
such manufacturer’s stores or result in us being compelled to take certain actions, such as divesting a significantly underperforming store,
subject to applicable state franchise laws. Additionally, these agreements set limits on the number of stores that we may acquire of the
particular manufacturer, nationally, regionally and in local markets, and contain certain restrictions on our ability to name and brand our
stores. Some of these framework agreements give the manufacturer or distributor the right to acquire at fair market value, or the right to
compel us to sell, the automotive stores franchised by that manufacturer or distributor under specified circumstances in the event of a change
in control of our company (generally including certain material changes in the composition of our board of directors during a specified time
period, the acquisition of 20% or more of the voting stock of our company by another manufacturer or distributor or the acquisition of 50% or
more of our voting stock by a person, entity or group not affiliated with a vehicle manufacturer or distributor) or other extraordinary corporate
transactions such as a merger or sale of all of our assets.
We operate each of our new vehicle stores under a franchise agreement with a vehicle manufacturer or distributor. The franchise
agreements grant the franchised automotive store a non-exclusive right to sell the manufacturer or distributor’s brand of vehicles and offer
related parts and service within a specified market area. These franchise agreements grant our stores the right to use the manufacturer or
distributor’s trademarks
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