Kearney surveyed 93 North American car marketing executives and managers by phone or e-mail in March.
The auto marketers say 66.7% of their advertising and marketing budgets are now spent in traditional media (see chart on Page S-2). The executives expect their traditional media spending to drop by nearly 20% to 47.5% of their total ad budgets in 2005. The biggest gainer was the Internet, with ad and marketing expenditures expected to jump to 21.5% of budgets in 2005 from 8.7% now.
According to Competitive Media Reporting figures, total measured media spending by automakers was $8.3 billion in 1999. So it's relatively easy to forecast a shift of billions of dollars from traditional media to nontraditional marketing by 2005.
"If I was an advertising guy at a network or a magazine, I'd be kind of nervous unless I had an Internet outlet," says Jim Mateyka, Kearney VP-automotive practice. "You're going to have to become multimedia or you'll lose business."
The 20% cut in traditional media spending will go farther on the Internet, he says. Plus, marketers can track sales results through Internet marketing better than they can via traditional media.
Jim Schroer, VP-global marketing at Ford Motor Co., predicts the auto industry's spending in Internet advertising, events, direct marketing and owner relationship programs would exceed spending in traditional media in 15 to 20 years.
Ford rocked the magazine world last summer, when it cut several leading publishing houses from its buy list and moved an estimated $110 million into events and the Internet.
"You have to take money away from the old [media] forms because marketing budgets aren't getting bigger," Mr. Schroer says. A reason for the shift into new marketing arenas is the upcoming generation of consumers under the age of 21 who are growing up with beepers, PCs and PalmPilots. They aren't watching as much TV as older Americans, he added.
The dollar shifts may come faster. Lou Schultz, chairman-CEO of Western Initiative Media North America, Hollywood, Calif., predicts traditional media will account for a mere 10% of every car marketer's total ad budget between 2005 and 2007. TV will remain a factor, but ad dollars will move to direct response efforts from general advertising. The shift from traditional advertising is inevitable as marketers move to a results-driven approach, he says.
"Traditional media is on life support," Mr. Schultz says, pointing out the definition of traditional media will change as the Internet evolves.
Still, the auto executives surveyed say they believe 50.5% of new car and truck buyers enter the purchasing process after viewing ads in traditional media (see chart at right). But the survey participants believe that percentage will drop to just 35% in 2005. Those surveyed say they believe carmakers' own Web sites will become more important to the way buyers begin shopping for a car: to 24.9% in 2005 from 16.1% now.
"They're saying the Internet will be almost as important as traditional media five years from now" to start the sales process, Mr. Mateyka says. He views the substantial jump in the use of carmakers' sites as "kind of aggressive" but says it shows marketers intend to keep refining their Web sites to increase traffic and results.
The survey reveals auto executives expect Web sites of third-party car retailers to continue to play a substantial role initiating sales in 2005.
Mr. Mateyka says the most surprising finding was how much better the executives believe they will utilize consumer information in 2005 than they do today (see chart on Page S-6). A list of six questions asked them to rate how well their companies use owner databases, enter owner data, document owner contacts and sell products and services by using the corporatewide information.
The results show the marketers believe that, "We have all this data, but we don't use it," he says. The executives say, "We're not too good, but we're going to get terrific" at maximizing the auto databases.
Mr. Mateyka says independent auto dealers and large public chains, such as AutoNation USA, handle about 95% of new vehicle transactions. But their role will diminish in a decade, with independent dealers handling only 35.2% and the large chains closing 11.6% of the deals, the survey reveals.
Mr. Mateyka says the respondents contend the role of the dealer is going to change, with the car companies "more aggressively involved in selling." Independent dealers "will still be involved, but they may just be handling final delivery."
The dealers also will rely more on used car sales, plus parts and service for profits, continuing a 12-year trend of reduced profit margins from new vehicle sales.
A dealer for General Motors Corp., who asked not to be named, disagrees with the car marketers' prediction of a diminished franchisee role.
"If that was going to happen five or 10 years down the road, little pockets of states [would be] making it easier for dot-coms to get [auto] franchises," he says. "Instead, states are passing tougher laws."
Still, the car marketing executives don't expect to do much direct selling to buyers without any dealer involvement. The survey shows the carmakers will handle only 4.6% of new car and truck sales directly with no dealer involvement 10 years from now.