An Unexpected Dip in Auto Advertising

Media Life Magazine Manufacturers pull back on spending with fewer launches By Toni Fitzgerald July 2, 2013 Following report after report of robust auto sales to start the year, the first-quarter ad spending numbers were a bit of a surprise. Automotive spending, the biggest single advertising category, was down slightly to start the year. It declined 0.5 percent, according to data from Kantar Media, from $3.369 billion in January to March 2012 to $3.352 billion during the same period this year. Generally higher auto sales are tied to higher auto spending. But the reason for the dip, Kantar says, was the lack of new car launches during the first three months of the year. Money to promote those launches is usually spent at the manufacturer level, and manufacturers reduced their spending by 3.3 percent in first quarter. “There were fewer marketing launches in 2013 to provide impetus for higher budget levels,” Kantar notes in its report. Manufacturers account for roughly two-thirds of overall automotive ad dollars, and spending in the category went from $2.037 billion to $1.971 billion. General Motors, the top automotive ad spender, cut back its expenditures by 2.6 percent, to $362.9 million, ranking fifth among all advertisers during first quarter. Ford was the only domestic auto manufacturer to introduce major redesigns, spending heavily to advertise the new Escape and Fusion. It actually increased spending by 12.9 percent, to $280.3 million. At the dealer level, where advertising is tied closer to car sales, ad spending actually rose by 3.7 percent, from $1.331 billion to $1.381 billion. Dealers tend to pump up their ad dollars when sales are strong, in order to better compete for dealership foot traffic. During first quarter, auto sales match pre-recession rates for the first time in five years. Incentive spending has dipped to 10-year lows, according to TrueCar.com, meaning that car dealers are offering fewer rebates to get people to buy. Those rebates eat into their profits, but they were necessary during the recession, when annual car-buying rates dropped by roughly a third. Now, after so many people held off on buying a new car during the recession, many buyers are willing to spend whatever they have to in order to replace their old vehicles. Oft times when the economy recovers from a big dip, station management push their reps to jump on auto advertising which historically makes up much of the station's local ad dollars. Automotive thus becomes the mainstream revenue and even though we warn against such dependency, we get ignored until auto ad dollars begin to dry up causing budget shortfalls throughout the country and crises management. Be forewarned. Philip Jay LeNoble, Ph.D.