Are Automotive Ad Spending and Corporate Losses Related?

What a week for news. First, Jan Thompson, Nissan’s VP of Marketing for North America sets the trades ablaze with her assertions that manufacturers are over spending per new vehicle retailed and that their timidity in embracing new media is partly to blame.In the same week, the Harbor report, the industry standard for vehicle manufacturing efficiency, announced in its annual report that Nissan is the most efficient vehicle manufacturer, followed by Toyota, Honda, GM, DCX and then Ford. While quality is not part of this report, manufacturer profitability is. While the domestics did well with individual plants (landing 6 of the top 10 spots), the overall picture is what counts. The report goes on to assign corporate losses per vehicle manufactured to each of the these brands. Ford and GM showed significant losses per vehicle manufactured, while the others were profitable.The trades didn’t link these two stories together, but perhaps they should have. Thompson points out that advertising per new vehicle retailed has grown 1378% in the last 20 years while the average sticker price of a new car hasn’t grown nearly at that rate. Certainly competition plays a major role. 20 years ago Toyota and Honda were just gaining respect while Hyundai and Kia non-issues. Lexus, Acura and Infiniti didn’t yet exist either, leaving most of the pie for the domestics. When competition grows significantly in a highly profitable and prestigious industry, a fight is bound to break out. In this instance, it broke out in the form of markeitng spending.So how can the industry get this under control? Surely Ford and GM can’t save their way to a profit, so doesn’t reducing the marketing budget sound counter-productive? Well, that depends on how you’re spending the marketing budget. This is where Thompson hits a home run.Just as things have changed in the auto industry in the last 20 years, the media landscape is equally different. See my first-ever blog (below) about the staggering declines in mass media efficiency and also the growth of more efficient marketing channels and you’ll see that way people think about marketing budgets has to change. TV is great if you need to talk to 75% or more of the U.S. population. But who needs to do that? Cadillac with its less than 2.0% retail share? Acura with less than 2.0% retail share? Even Dodge with its less than 7% retail share? Hardly.The solutions are simple, but-oh-so painful as they require a change in the way we think. First, in planning for 2007, I urge marketers and their agencies to plan their media the way the consumer plans its media consumption. For Buick that may mean starting with the 4pm TV news. For Dodge Caliber, that may mean starting with Podcasting and RSS-fed banners. Then, continue to augment and improve the plan the way to consumer further engages themselves in media. To start a media plan by dropping 200 GRPs into 36 weeks and seeing what’s left is outdated, inefficient, and frankly, doing yourself and your brand a real injustice.Second, know the facts about new media channels. When incremental funding gets approved to bolster a lagging vehicle, the challenge is to get sales up fast. So agencies think to themselves, “To place and produce TV is about a week with existing footage, Newspaper can be bought and trafficked in four days…” etc. The fact is that new media channels can be bought and produced as fast or faster than the traditional channels. Such as:A highly targeted web campaign with flash banners and a microsite can be bought and up in a week.
A full SMS/Mobile text campaign can be placed and ready in less than a week
Mobile ad banners can be produced, bought and served in 4 days
In-video game advertising can be produced, bought and up in a little over a weekThe list goes on. If marketers and agencies think about the most effective way to market their product and the most efficient media with which to do so, they’d find themselves using the channels Goodway 2.0 refers to as “precision marketing” channels far more often than they’d think.