TRENDS IN AUTOMOTIVE ADVERTISING Pt. I
Gordon Borrell was recently interviewed by a trade journal about trends in automotive advertising. Over the next several days we are posting excerpts from that interview. Here is the first installment:
Q: Which ad channels are currently making the biggest gains? Getting hit the hardest? And which ad mediums will be the biggest winners and losers over the next 5 years?
The biggest channel gainer in the automotive space is obviously the Internet, with cable not too far behind. Over the next five years the trend changes a bit, with the Internet and cable continuing to do well, but with TV also doing just fine. We're projecting online automotive advertising to grow 86 percent over the next five years, cable to grow 46 percent, and broadcast TV 20 percent. The channels getting hit the hardest are all the ones related to print. That includes direct mail, newspapers, yellow pages and local auto magazines. All face declines in the next five years — yellow pages down 31 percent, newspapers down 25 percent, direct mail down 21 percent and magazines down 7 percent.
Q: Why do you think this is so?
It all relates to the "buying funnel" and auto advertisers trying to entrance and lure car buyers as they pass through that funnel. At the beginning of the process car buyers are dreaming about which car they'll buy next. Television commercials — including cable — can sell the image of a new car better than any other medium. They can also — and this is an interesting phenomenon — deliver Web site traffic better than any other medium, including the Internet. A TV promotion can drive Web traffic like crazy, probably because of the incredible amount of multitasking that people do between the PC and their TV. The manufacturers are plowing money into their Web sites and have a strong incentive to get people to visit there as early as possible in their buying process. At the narrow end of that funnel, when people start looking at availability and pricing, print media is losing out. That's because of the dramatic audience shift toward the Internet that has occurred during the "research" phase of the car-buying process. It's also because of media economics. Newspapers, directories, direct mail and local magazines need to pay for printing presses, paper, ink, and delivery to get their products into the hands of consumers. The Internet has no such cost structure, so the print products have wound up competing with online sites that can deliver ad messages at pretty much any rate they choose.
Q: How would you describe the current franchised dealer advertising landscape/situation? What are the most significant trends/issues you uncovered in your study this year? What ad channels are making the biggest gains with franchised dealers now? Suffering biggest losses? And where do you expect that to go in the future?
The biggest trend with franchise dealers is that they've pulled back on advertising and allowed the manufacturers to take over. While this typically happens when car sales slow down, the way they're adjusting their marketing dials is fascinating. Dealer spending for the past two years has been flat, but they are absolutely moving money around different media channels. A lot of money is chasing lead-generation programs and paid search advertising. Both are the holy grail for any advertiser — the dream of being able to pay only when someone walks in the door or rings the phone. I suspect the dealers will continue to invest in their own Web sites and in any media advertising that will drive traffic to those sites. They will also continue to use traditional media channels, but to a lesser and lesser extent over time. They're finding, I think, that they've overspent on these channels in the past. Now that they've cut them back and have seen no significant difference, they have no strong reason to increase their spending levels.
Q: What about the new-vehicle advertising side?
New-vehicle advertising is continuing to get more creative. Manufacturers are looking for target demographics, not so much for mass audiences, and they want to engage those potential customers as much as possible. If Chrysler airs 100 spots for the Town & Country, they're looking for media channels that can deliver moms, exclusively. Better yet, car-buying moms. If Ford creates a campaign for the F-150 and you're a guy between 30 and 50, you're probably going to get hit 10 different ways — on ESPN, in Hunting & Fishing magazine, on the MLB.com, or via email. Ford will give you a dozen reasons to engage by going to its Web site to enter a contest or watch a gleaming new pickup truck amble over some rocks. Some are finding ways to market their models on interactive online game sites like Second Life or by creating their own space on MySpace. It's not your father's Oldsmobile commercial anymore.
Q: What about the used-vehicle advertising side? How are newspapers and Internet marketing faring with used retailers now? How will these channels fare in future?
This is an oft-neglected and somewhat messy sector of the automotive advertising market. It's a relatively small slice of total auto marketing — $4.2 billion out of a total $30.5 billion ad spend — but one that has been utterly dominated by newspapers and auto magazines. But as I said earlier, the narrow end of the funnel is where the big squeeze is happening for media. For used cars, that end of the funnel pretty much the only part of the buying process that print media has served — to answer the question of "who's got a late-model car, in decent shape, that I can afford?" Cable, radio, and outdoor will do a good job of branding and reminding people of the used-car dealers in town, and online media will do the best at capturing those wallet-ready buyers. We see newspapers and auto magazines losing out the most here.