Beleaguered U.S. automakers are in for another rough road in 2008, with Detroit worst hit. Unit sales are expected to fall below 16 million, and researchers are predicting ad spending will be flat to down.
DATA: Auto industry ad spending trends 2002-2006.
Advertising researcher Kelsey Group projects that annual ad global spending by automakers, their dealers and auto services such as muffler shops will hold steady at $40 billion through 2011. The report predicted that online global auto ad spending will grow to 13% in 2011 from 5% in 2007, with traditional newspaper classifieds' share shrinking to 10% from 14% and newspaper display ads to 14% from 17% during the same period.
Kelsey Group estimates automakers' 2008 U.S. ad spending will be flat or down slightly. CEO Neal Polachek said carmakers will shift more dollars online and to out-of-home, with declines in TV, magazines, newspapers and direct mail.
Continuing TV decline
That is a continuation of a shift. Automakers, including their local dealers, have increased internet spending fourfold since 2002, according to TNS Media Intelligence -- to $739 million last year from $175 million five years ago -- and that undercounts outlays since search isn't included. TV and cable spending rose too but at a much slower rate, climbing to $10.1 billion last year from $9.1 billion in 2002, according to TNS, and magazines grew marginally.
General Motors Corp., which will allow regional dealer groups to pick their own creative or media agencies April 1, is steering them to the internet. The marketer's data show the net is the first medium chosen by consumers when car shopping, Brent Dewar, VP-field sales, service and parts for GM in North America, told Advertising Age. He said GM is trying to persuade dealer groups "to shift their focus to digital vs. spot TV."
Hyundai Motor America doubled its online ad spending for 2008 vs. 2007, Joel Ewanick, VP-marketing, told Ad Age. The automaker also is pushing for a return to spot TV in a big way. He said a bigger bump in spot TV is for regional dealer ad groups, while Hyundai will have a smaller increase for national TV.
Hyundai, which disbanded those regional-dealer ad groups in 2007, is reforming them and will quadruple its contributions to them next year, urging the groups to go back to TV, Mr. Ewanick said. Nationally, the automaker will also bump up its TV ad spending but not as much, he said, declining to give any specifics. "We have to get noticed," he said.
'Not really that bad'
Bob Schnorbus, chief economist at J.D. Power & Associates, predicted Americans next year will buy between 15.7 million and 15.8 million new vehicles with a continued move to smaller, fuel-efficient models. "We've been averaging 16.9 million units a year over the first part of this decade, so dropping below 16 million is not really that bad a year," he said.
To stem the tide, Susan Jacobs, president of auto consultant Jacobs & Associates, expects automakers to put a lot of their efforts toward keeping their existing buyers. That, she said, will require more product advertising than brand advertising. "In a down market, it's better to channel your marketing efforts on retaining your owners instead of on advertising to conquest new ones," she said. So car companies will focus on customer relationship management and owner-loyalty programs, she added.
What buyers shouldn't expect is better price deals. Jessica Caldwell, an analyst with auto-info site Edmunds.com, predicted the car companies' incentives will stay flat in '08, although the industry average could rise a few hundred dollars from 2007's average of $2,300 a vehicle. "It's not going to be thousands of dollars more."
Not everyone is pessimistic about Detroit's chances next year. Troy Clarke, president of GM in North America, told Ad Age he believes 2008 will start slowly for the auto industry, like 2007 did, but gain momentum as the months pass. He said the auto giant's full distribution of models launched in 2007, including the Cadillac CTS and Chevrolet Malibu sedans, will help boost GM. "I'm optimistic," Mr. Clarke said.
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