Foreign carmakers reaping ad rewards

Sep 10, 2001  •  Post A Comment

Automakers that cut back their ad-spending levels in the first half of the year have seen their sales decrease, while those that held the line or increased spending have benefited by selling more vehicles.
That is the bottom-line data offered by the Television Bureau of Advertising to support the truism about the competitive benefits of increasing ad spending during an economic downturn.
The comparative analysis of recent automotive spending and unit sales figures for more than a dozen domestic and foreign automakers is based on the most recent Competitive Media Reporting data, as analyzed by the TVB, which has seen many of its local-station members’ revenues from the all-important automotive category drop precipitously because of spending cutbacks by the Big 3 auto manufacturers (General Motors, Ford and DaimlerChrysler) in the current economic downturn.
“The pullback by the [Big 3] this year has really been tough for us,” said Christopher Rohrs, president, TVB. “We knew we wouldn’t have political advertising this year, and we knew that we wouldn’t have an Olympics this year, but we did not expect the domestic auto pullback.”
Spot TV ad spending by the Big 3 automakers for January through May 2001, compared with the same period last year, was down a whopping 24.9 percent, according to the CMR data, from $987.5 million in 2000 to just $741.3 million in 2001.
Spot TV ad spending for the same periods by 10 foreign auto manufacturers, among them the big Japanese and German car companies, went from more than $593 million in the first five months of 2000 down to $569.4 million in 2001, a relatively modest 4 percent drop.
When all forms of advertising are factored in, the Big 3 are down 14.2 percent for the period, while “all others,” i.e., the foreign manufacturers, are up 4.6 percent, according to the TVB. The Big 3 have “cut back across the board, including spot,” Mr. Rohrs said.
In terms of the Big 3’s “spending advantage” over their foreign competitors-the amount by which the Big 3 outspent them-that’s down by 40 percent overall (from more than $1.4 billion in the 2000 period to about $861 million in the same period this year) and down by 56 percent for spot (from more than $384.4 million to about $171.8 million).
The result of the Big 3 cutbacks, according to the TVB, is that their unit sales advantage over their aggregate competition is down 21 percent for the period, from more than 3 million more autos sold in January through May 2000 to fewer than 2.5 million more sold for the same period this year.
Meanwhile, the eight foreign manufacturers who held or increased their overall ad spending during the period this year grew market share. They are, according to the TVB, BMW (1 percent to 1.2 percent share of the market), Honda (6.3 percent to 6.9 percent), Hyundai (1.3 percent to 1.9 percent), Isuzu (0.5 percent to 0.6 percent ), Kia (0.8 percent to 1.1. percent), Mazda (1.3 percent to 1.6 percent), Toyota (9.1 percent to 10 percent) and Volkswagen (steady at 2.4 percent).
It was, said Mr. Rohrs, who presented the data to his board of directors last week, “more of an airtight correlation than I expected.”
The Big 3 are “paying an immediate price for giving up their share-of-voice advantage,” Mr. Rohrs said, “but even more unsettling for them would be the down-the-road impact.”
Part of the reason for that pullback is that “all three of the Big 3 have undergone changes in their top-level marketing leadership … in the last six months,” Mr. Rohrs said. “All three of them have gotten a new marketing and advertising leader, and that’s not been great timing for them.”
On the other hand, the Japanese manufacturers in particular “get the competitive opportunity that exists here,” Mr. Rohrs said. “They have a very clear, focused strategic plan … a national branding overlay [combined] with a very powerful market-by-market thrust which is largely led by local TV.”
According to CMR, a Taylor Nelson Sofres company, most of the top 10 national advertisers slashed their overall budgets for the first half of 2001 (measured through June), compared with the first of half of 2000. For example, General Motors, the biggest advertising spender, was down 23.5 percent, from $1.4 billion to $1.1 billion.