Outlook for
automotive: Hard to say
Study finds big jump in fourth-quarter TV advertising
By Diego Vasquez
Feb 3, 2010
It would be premature to declare TV auto advertising back. But it did see a promising bump at the end of 2009 and into 2010, according to a new analysis from Kantar Media, formerly TNS Media Intelligence, that examined the volume of auto advertising time during the 12 weeks from Oct. 19, 2009, to Jan. 10, 2010, in the top 100 DMAs. It found that national and spot television both saw marked bumps, especially national. National was up 32.3 percent, including a huge 78.8 percent jump from Dec. 28 to Jan. 10. Spot was up a comparatively modest 15.9 percent, with spending by domestic automakers driving both those categories. By comparison, import spending was up very slightly or flat. Whether this means a longer-term gain for the auto category, which has suffered year-to-year spending declines for 17 straight quarters, remains uncertain. Kantar says that much of the advertising was sales event-related, and thus may not be sustained, and it did not examine other media for the study. Jon Swallen, senior vice president of research at Kantar Media, talks to Media Life about General Motors and Ford, why national saw a bigger bump, and what's ahead for the auto industry.
Why did network and cable benefit more from the ad blitz than spot television?
I think because these were national sales event programs rather than local dealers. The dealer groups were kind of piggy-backing on manufacturers’ efforts. It’s akin to a “get out the vote” campaign, this time it’s “get customers to come to the store.”
So it was a national effort not targeted at local markets.
You report your data was from manufacturers and dealer associations. Any data on how much local dealer spending was up or down?
We don’t have information on dollars yet for this period. Everything we had was based on the volume of commercial time. So I don’t know what money those spots fetched for the sellers.
Any sense how other media did, such as newspapers? There were reports that they too saw upticks in auto ad spending in fourth quarter.
I deliberately limited this to television, primarily because we have day-by-day info with TV. And this was a very narrow of time period. So we don’t have any comparable data for radio or newspapers.
But given all these advertisers are running multimedia campaigns, I would expect the other media would have shown a higher level of advertising activity as well.
Your report cites a figure of 6 percent as the forecast for auto sales are expected to increase this year, and presumably ad spending would go up a like amount. Just what impact would that 6 percent increase have on overall auto ad spending? Obviously, 6 percent is an improvement, but it comes after many quarters of declines. Or to put the question another way, what sort of percent increase in auto spending would we have to see for it to have a major impact in terms of lifting the overall ad economy out of its doldrums?
Given that auto advertising is roughly 8 percent of the total ad economy, auto spending would have to go up by 12 percent in order for total advertising to go up 1 percent.
The total ad market will be much more affected by what goes on in the other 92 percent of the market than what goes on with auto’s 8 percent.
In the past, when asked to make projections on auto ad spending, you've declined. With this current report, you also decline to project for later in the year, citing the fact that this bout of spending to sales relates to moving cars off lots. But that aside do you have any insights or data leading you to believe spending might rise above 6 percent?
We don’t know yet.
The key variable here is new vehicle sales, and that will ultimately determine how much spend goes up or down.
To some extent, a recovering ad economy also comes into play, because pricing starts to move higher across the board. So even without a gain in new vehicle sales, it’s possible that spending could go up just because of improving ad economy conditions. But the rate of new vehicle sales will be the most important variable in determining what happens with ad spend.
Why was it chiefly the domestic automakers that ramped up spending? Why not the imports?
If you look at the domestic side, we’ve got three companies: GM, Ford and Chrysler. Only two of those were heavily advertising in November and December, GM and Ford. And I think their higher levels of activity were for related reasons.
In the case of Ford, they had been gaining market share in the past year, so they were perhaps trying to capitalize on that. In the case of GM, which was coming out of bankruptcy and losing market share, the big year-end push there was to try and save what had otherwise been a lousy year.
I think GM needed to do it coming out of bankruptcy and facing loss of market share. In the case of Ford, I think it was more opportunistic, trying to build on market share gains they’d achieved.
With foreign, there’s a larger number of manufacturers as compared to the domestic side. On the foreign side you need more than two manufacturers to move the needle. If you look at the metric of ad dollars per vehicle sold, the imports traditionally have spent less money on advertising than domestics. So the domestic versus import pattern we saw at year-end is a reflection on that larger theme.
You observe that a huge amount of the spending was sales-event related. What is the usual percentage of sales events being advertised on TV?
I don’t know. It varies significantly by time of year. Typically sales promotion periods are Presidents Day, Fourth of July, year-end, etc., but I don’t have one benchmark figure.
But taking a look back at the previous year and at 2007, that’s when we first started segmenting out these sales event ad messages. And we’d never seen anything approaching this 85 percent level of commercial messages being tied to sales events. So it does seem to be an unusually large proportion.
We've come across a number of reports that carmakers were planning to increase their ad spending in the fourth quarter. But this boost in spending would appear unrelated, being sales-event focused. Or was it?
I think the timing here is the key thing, this end of November to December period, which is traditionally heavy with sales events. The increase in activity, the fact that it’s timed to the end of the year, is fairly obvious. But the magnitude of increase year-over-year is a reflection of a different business environment that the automakers found themselves in in 2009 as compared to 2008.
Have you seen any evidence that the big carmakers actually carried through on plans to increases ad spending in the fall?
I don’t know yet. I haven’t looked at spending figures for the full quarter yet, largely because we don’t have December numbers yet.
We’ll do a year-end recap probably around the first of March, and at that time I’ll have more insight on what happened with ad spending in the fourth quarter. Right now there are still a couple of blank holes in the jigsaw puzzle.
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