AUTOMOTIVE - INSTALLMENT III
AUTOMOTIVE – INSTALLMENT III
Gordon Borrell was recently interviewed by a trade journal about trends in automotive advertising. We are posting excerpts from that interview over the next several days. Here is the third and final installment:
Q: One key finding from your report: 'The near future looks a lot like an interactive video screen, rather than a text-based search of cars for sale.' Can you say a little more about this intriguing prediction?
The first decade of the Internet was really nothing but interactive text and pictures, so it's no wonder most of the Web sites out there look like the front page of a newspaper with a masthead at the top, an index down the left side, and lots of words in the middle. Now that broadband is at the tipping point — it's almost in 50 percent of all households — video will proliferate. Home pages will start looking a lot more like television screens, and people will come to expect video with everything. That's important for the automotive world, because video really sells cars and, like I said, dealers basically have their own TV stations at their disposal with their Web sites.
Q: Online video advertising is a pretty new concept for franchised dealers…Where do you think local online video advertising for dealers is at now? will go in the future–the next 5 years?
I think the manufacturers have gotten pretty busy developing some terrific video libraries, and I think the dealers should clamor to have that content on their own Web sites. Sites like Vehix are building out their own libraries of automotive programming. Dealers should look at this and find out how to participate in sites that are figuring out how to deliver quality video information to the consumer. Dealers should also look at their Web sites as their own medium and give potential buyers a chance to hear a message from the owner, or hear one of the salespeople discuss how much she cares about finding the right vehicle at the best value for anybody who steps in the door. A lot of this is experimental, of course, with no discernible ROI. So I'd suggest incremental expenditures and a lot of testing. What's in vogue and expensive today might be old hat and cheap in a few years.
Q: Should dealers be considering local online video advertising now? Best ad venues or options for dealers to show commercials or video content ? What formats or venues would you recommend? What kind of cost investment does this entail?
Experimenting with online video is fine, but the audience isn't quite there. For 15-second pre-roll, plenty of TV sites now offer video programming. Newspapers do as well. But those audiences are very small, so they're often sold with packages of banner ads or sponsorship logos on the video player to get the price a bit higher. They don't look like good deals to me unless the CPM (cost per thousand impressions) is reasonable. The local expenditure on video advertising is extremely small, well south of $400 million nationwide this year. So we're not seeing huge amounts of money being demanded or paid for this. The highest rates we've seen is for "on-demand" commercials that typically run about a minute and sit on an automotive section of a newspaper or TV site. The consumer can select to view the commercial. The rates have been in the $250 to $350 per week range on a 13-week campaign. But that's on the high end, and I seriously doubt that the number of actual viewers of those commercials comes anywhere near 100,000 — which is about what you'd need to have a fair CPM.
Q: Dealer search marketing has had a big buzz since last year. Do you have any data on what % of dealers are now using SEM. Do you expect that to grow this year? Over next 5 years?
According to a J.D. Powers study, about one-third of the dealers were using search advertising, and 80 percent of them said it was effective in driving traffic. We don't have any forecasts on this, but we do have forecasts for spending on search advertising in general. And it's huge. Let's face it, we're all a bit lazy when it comes to looking up stuff, and Google has solved that problem for us. Loads of people Google things like "Lexus dealership in Cincinnati" or "hybrid cars for sale in San Diego." I suspect that more and more dealers will understand this phenomenon and participate in this sort of advertising, and I strongly suspect they will view it as better than the yellow pages ads and thus cut back on big directory ads. SEM is a slippery slope. Its a very technical task, and we're finding that these people selling SEM can sometimes be snake oil salesmen. We highly advocate investing money in SEM, but we also advise that it be done with specific goals that can be measured against the dollars spent.
Q: You read about how, as more dealers are getting into search marketing at the big engines like Google, that local auto keyword costs are spiking, and dealers are increasingly duking it out for those geo-specific 'dealer' keywords in their markets. Any words of advice on a wise local search spend? Any advice about what % of franchised dealer ad budgets or online budgets should be devoted to search? Or what they are now typically spending on search?
Again, I'd be careful here. You'll have to find someone you trust, and start with experimental amounts of maybe $250 per month for a small dealership, or $1,000 for a large. I've often advocated that the advertising director at any business set up an account on Google or Yahoo and devote an hour or two per week buying keywords and seeing how the whole program operates. It's a terrific education on the future of advertising, and if you think it's a silly thing, consider the fact that Google will make about $16 billion (that's billion with a B) in revenue this year, making it the largest media company in the world….and it didn't even exist 10 years ago. So there must be something to this search engine advertising stuff. The other thing to consider is Search Engine Optimization (SEO), which is basically hiring someone to ensure that your Web site is recognized by the search engines in the first place and placed near the top of their result pages. If your dealership sells VWs in Albuquerque and you type in "Albuquerque VW dealership" and your site doesn't appear anywhere on the page, you need to find someone who can fix that. SEO experts might charge a few thousand dollars at most to optimize your site. It's worth the investment…but again, make sure you pick a reputable one with references.
Q: Are there any new research/studies Borrell Associates is doing this year that dealers and dealer groups should especially look forward to? That will provide other new insights on their ad strategy and business?
We'll be publishing a report over the summer on promotions spending that will contain a lot of information about automotive. We're finding an overall compression in ad spending due to the fact that retailers are finding that they can reach consumers directly through the Internet. So they put more money into things that don't look like traditional advertising at all. Things like Search Engine Optimization, Web site design, video production, contests, promotions, and programming inserts (Tony Soprano driving up in a Lexus). This is a fascinating trend and one that advertisers should be aware of. Procter & Gamble has reorganized its entire marketing division around the concept of FMOTS — or "First Moment of Truth — which is based on the idea that people make a decision to buy P&G products in six seconds. In those six seconds, a coupon is flashing in front of them, the packaging looks attractive, or an interesting shelf display catches their eye. So P&G is cutting back on traditional commercials because the more important place to be is right there with their message in front of the consumer in the store aisle. We're seeing the same thing with the Internet, which is basically digital shelf space for the automotive category.