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Auto advertisers gassed up

With dealers leading the way, the auto industry may exceed last year's $12.2 billion in ad spending 3/24/2002 07:00:00 PM Eastern

Nearly everybody cut ad budgets in 2001. Nearly everybody. Trying to jump-start lagging sales, particularly after Sept. 11, car dealers bucked the trend and wound up increasing their ad spending by 4% in 2001, much to the relief of TV stations where, typically, car dealers are the largest advertisers.

The action really kicked up a notch last fall, when dealers began pushing 0% financing to lure skittish consumers. The incentive worked. October marked an all-time record for vehicle unit sales, at 1.7 million, and helped produce the industry's second-biggest year in total sales.

Buoyed by that success, dealerships are once again expected to increase their ad spending, even knowing they may not sell as many cars.

"Basically, there's business out there," said Jim Doyle, publisher of Auto Revenue Insights,
a newsletter. "So dealers are still advertising."

The dealers may still be spending, but they account for only about half the total auto-advertising buy each year. All eyes are on the manufacturers to see if they will hold up their end. And right now indications are they will.

Last year, the modest increase in dealer spending failed to offset sharp cutbacks by the manufacturers, especially by two of the big-three domestic companies, Daimler-Chrysler and General Motors.

According to the Television Bureau of Advertising's analysis of Competitive Media Reporting data, the auto industry spent just over $12.2 billion on advertising in 2001, down 6.5% from $13 billion in 2000. For example, Chrysler was down 14.6% and GM was down 17.5%. The figures include expenditures by manufacturers and their dealers.

Of all the auto makers, GM, the country's No. 1 advertiser, was the one that most dramatically sliced its ad spending in 2001.When you factor out the dealer money, its spending slid from $2.65 billion in 2000 to $1.92 billion in 2001, a drop of roughly 28%, according to CMR.

But car-market watchers expect that this year, with the economy apparently in recovery mode, ad spending by the major auto makers will, at the very least, be flat compared with 2001. "It will hold its own or be up somewhat, slightly above last year," said CMR Senior Vice President Carl Dickens.

Most media sellers would be happy if they get even a slight overall bump-up from the auto industry, given the fact that sales of cars and trucks are expected to be down.

The National Automobile Dealers Association estimates the industry will sell 15.9 million vehicles this year, not bad, but down 7% from 17.1 million sold in 2001 and 8.6% from the record-setting 17.4 million in 2000.

Last year, ad spending by franchised auto dealerships was up 3.7% over 2000 to $6.62 billion, according to Paul Taylor, NADA's chief economist. That number will rise as much as 5% this year, spurred, in part, by dealers' need to promote varied incentives for this year and to communicate changes in last year's incentives, Taylor says.

Last year, dealers were offering 0% financing for 60 months, he says. Now, the 0% is available only for 36-month loans. "When you change the program," Taylor says, "you have to advertise that."

The projected increases in dealer ad spending are also predicated on the continued improvement of the economy and ad prices staying firm, Taylor says.

According to Taylor, vehicle sales in February "began sluggishly" but picked up in the second week. "They're off to a solid start," Taylor said. "After an extraordinarily strong fourth quarter, that's a good sign."

Dealerships traditionally spend the bulk of their ad money on newspapers. In 2001, the average dealership spent $303,575 on media. Of that, $161,087 went to print and only $43,981 (14.5%) to TV.

But some think this year more of that newspaper money will go to TV, specifically to broadcast stations and local cable. "We will see more dealers questioning the effect of newspaper ads," Doyle said.

Taylor agrees that in a recovering, but still rough, economic environment, dealers will be carefully watching, and questioning, how effective their print ads are versus other media.

Auto makers have already hatched their media plans for this year.

GM officials, who dispute CMR's figures—the large double-digit decrease—say that this year its media spending with be "comparative" to 2001.

GM has several priorities, according to CJ Fraileigh, executive director of advertising and corporate marketing. First, the auto giant will be depending heavily on broadcast network and cable to kick off its new Cadillac division and its GMC Envoy. It will also use those media to continue supporting established brands, such as the Chevy Silverado.

Finally, GM will be making media buys, which will skew toward national spot and print, to drive car sales for a particular month, or week, according to Fraileigh. National spot is the auto industry's TV medium of choice. It gets about a third of all dollars spent.

GM's Saturn unit will be introducing the Ion, a car aimed at youthful buyers, and Fraileigh said, "it will be one of the brands we're focusing on" in terms of advertising this year.

Other manufacturers have unveiled plans to spend more this year. For instance, Mazda, last year's 10th-largest auto spender, buoyed by the success of its "Zoom, Zoom, Zoom" campaign, says it will increase its ad spending 25% this year. Last year, Mazda and its dealers poured $248 million into media.

"We're trying to come out guns a-blazing," said Kristen Simmons, Mazda's vice president of marketing.

Mazda will heavy up its media buys with broadcast TV in prime time, says Simmons. And, he says, it will supplement that with syndication and cable.

Mazda's cross-platform with Disney, to promote its 2002 MPV minivan, has already started. The package includes spots on Disney's 14 ABC TV stations, ads in FamilyFun
magazine and events with RadioDisney involving more than 100 markets.

"We wrapped it all up," Simmons says, "into a wonderful, integrated media partnership."

Infiniti is introducing four new car models and plans to increase its spending 30-35% to help launch them, says Scott Fessenden, director of marketing. He says he will buy some broadcast network time, particularly weekend-morning news, to market its new G35 sport sedan.

But generally, Fessenden says, "It's more efficient for us to be on spot—and back it up with cable networks. That's because we do 70% of our sales in 20% of our markets."

Nissan marketing goals this year are to sustain its existing brands, including its mid-sized Altima and Xterra SUV, as well as launch its 350Z sports coupe and its new crossover SUV, the Murano, says Peter Goodwin, Nissan's corporate manager of marketing and communications.

For the Altima, a high-volume sales car, Nissan wants to reach the broadest audience, so it will use broadcast TV. Nissan's target is to sell 190,000 Altimas this year.

For Xterra, Nissan's media mix will incorporate broadcast networks, spot TV and cable networks to target a narrower audience, Goodwin says. Xterra, priced at $17,000 to $25,000 and billed as "the SUV that has everything you want and nothing you don't," sees its buyers as a young male who earns $50,000 to $60,000 a year.

Auto ad spending
All measured media (000)
Percent share of advertising 2001
Sun. Local Nat Net Spot Synd Cable Net Spot
Manufacturer 2001 2000 % chg. Mags Mags Newsp Newsp Outdr. TV TV TV TV Radio Radio
Note: Figures includes all advertising spending, including that by dealer associations and dealers.
Source: CMR, TVB
Daimler-Chrysler $1,898,309 $2,223,041 (14.6) 13.7 0.5 23.6 2.3 2.1 13.4 35.9 0.2 5.1 0.3 2.9
Ford 2,309,336 2,317,188 (0.3) 13.2 0.1 31.6 3.7 1.6 13.3 29.3 0.5 4.9 0.6 1.3
General Motors 2, 954,357 3,581,318 (17.5) 13.3 0.4 24.6 1.7 1.6 22.5 23.1 2.3 8.5 0.2 1.6
Subtotal Big 3 7,162,004 8,121,548 (11.8)
BMW 148,988 156,709 (4.9) 17.4 0.0 28.4 14.0 1.6 0.5 25.3 0.0 10.9 0.0 1.8
Honda 840,584 821,392 2.3 15.4 0.2 17.9 1.2 0.9 18.9 35.2 2.0 8.0 0.0 0.2
Hyundai 339,071 274,093 23.7 7.9 0.0 23.2 0.6 1.3 10.9 42.7 0.0 8.2 0.0 5.1
Isuzu 94,084 87,888 7.0 12.9 0.0 29.3 1.2 0.6 0.0 36.2 0.0 12.9 0.0 6.8
Kia 259,021 164,967 57.0 7.1 0.0 10.2 0.0 0.5 30.7 32.2 0.0 15.9 0.0 3.3
Mazda 247,788 252,472 (1.9) 2.5 0.0 37.7 0.1 0.2 42.6 4.9 5.5 4.6 0.0 1.9
Mitsubishi 288,873 345,668 (16.4) 2.4 0.0 27.6 0.0 0.8 40.8 11.6 9.1 5.2 0.0 2.6
Nissan 837,490 912,147 (8.2) 14.3 0.3 30.0 2.3 1.8 16.5 27.5 1.3 5.0 0.2 0.8
Toyota 1,445,403 1,448,171 (0.2) 13.9 0.2 31.0 2.8 1.3 13.7 30.6 0.1 5.9 0.1 0.5
Volkswagen 572,821 507, 165 12.9 10.9 0.1 15.5 2.9 0.4 40.0 18.9 0.0 6.3 0.0 5.0
Total 12,236,131 13,092,224 (6.5)
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