Auto Marketers Accelerate Shift of Marketing to Internet
September 02, 2008
By Dale Buss
Among the many curveballs being thrown at automakers by this summer's downturn are wrenching decisions about how much to spend on marketing and where to spend it. And car marketers are choosing to take more and more of their swings on the Internet.
In a three-part series beginning today, Edmunds.com's AutoObserver tracks this phenomenon and explains exactly how automakers are creating it.
Online-advertising expenditures are burgeoning - yes, even several years after car companies first embraced the effectiveness of marketing on the Internet. Research firm eMarketer has predicted a 22-percent increase in the industry's online marketing expenditures for the year, which would represent a huge shift in channel patterns for a mature business. And some individual OEMs are boosting Internet-advertising budgets by 30 percent and even 50 percent for 2008 over a year ago.
Most of the extra Internet outlays are coming directly out of traditional advertising-media budgets. And while there have been some short-term cutbacks this summer even in online spending as OEMs have downshifted advertising overall in a stalled market, the long-term trend has become crystal clear: Automakers are piling money and time into the Internet because they're finally getting the results they've been looking for.
"Functionality on the Internet has started to get much better in terms of targeting, and with sight, sound and motion," said Patrick McKenna, manager of marketing communications for BMW North America. "It is too good to pass up."
Hyundai has tripled its digital expenditures in the U.S. market over the last three years, but "it's not all going into display ads," said Chris Perry, director of marketing communications. "The online environment is now an entertainment, information and conversational tool, and we are trying to utilize all the aspects that this realm now gives us."
Even the current downturn is making online spending seem smarter to OEMs compared with outlays in traditional outlets.
"We're accelerating our [Internet] capabilities because of the situation in the marketplace to make sure we're focused on driving revenue today," said Mike Devereux, General Motors' executive director of digital and customer-relationship-management marketing. "Everyone's got to battle for every sale. And digital is so measurable from a return-on-investment perspective that we're accelerating not only our media investment in digital but also our capabilities to deliver more targeted messages and take advantage of the medium."
TV Will Never Be the Same
To be sure, despite a decade of robust double-digit growth, online advertising still amounts to only a fraction of the pitching that is done via TV, radio, print and outdoor. That is especially true for major marketers - including the auto companies - who have built their brands and relationships with consumers the old-fashioned way.
This remains the case despite the fact that the advantages of ad spending online long have been evident. They include extreme targetability, precise measurement of impressions, unmatched capacity for two-way communications with consumers, effectiveness for building customer databases, easy linkage to partners such as dealers, and the internet's ability to accommodate quick changes in messages and emphases.
But the attractiveness of the online milieu has intensified lately because marketers are dramatically enhancing the medium's superiority in each of these characteristics. At the same time, other advertising media are losing much of their appeal, both entirely independent of - yet also because of - the Internet.
Take television, for example. First, the three-month writers' strike last winter completely discombobulated automakers' marketing plans, forcing them to bet too heavily on unscripted TV events such as the Super Bowl and the Academy Awards - and alienating a significant number of viewers.
"The TV strike made a lot of people migrate online for other sources of entertainment," said Julie Mynster, digital and customer-relationship-marketing manager for Pontiac. "After the strike ended, a core group of people who shifted never came back - they value online entertainment more."
That is one reason -- in addition to cost-cutting -- GM stunned TV executives earlier this month by pulling out of its long-time sponsorship of the Academy Awards, leaving ABC without one of its biggest advertisers for Oscars night in February. GM has spent more than $110 million for ad time on the Awards over the last 11 years, according to TNS Media Intelligence. Previously, GM had indicated it would refrain from advertising during this year's Emmy Awards broadcast, on ABC in September.
And just recently, research by Edmunds.com has indicated that GM's Chevrolet division may be getting a disappointing return from its heavy investment as the major automotive sponsor of NBC's U.S. telecast of the Summer Olympics from Beijing. Chevrolet has done some new Internet-based advertising during the same period, but the division has been pouring much bigger resources into TV ads highlighting its new Traverse crossover, its Malibu Hybrid, its Silverado pickup truck and, in general, the fuel-friendliness of Chevy products.
But for the week that ended August 17, even after prolific Chevrolet advertising during eight days of strong ratings for Olympics coverage on TV, Edmunds.com found "no significant lifts for any specific GM vehicle" as measured in visits to Edmunds.com pages for those products, said David Tompkins, executive director of industry solutions for Santa Monica, Calif.-based Edmunds.com.
What Kind of Crowd?
Moreoever, the audience that is left on the broadcast networks now is skewing so old - with a median age of 50 for the first time, last season, according to the Magna Global research firm - that it is rapidly losing its attractiveness to automakers.
When it comes to TV, the Internet's influence cuts both ways. Online offerings are luring younger consumers away from television as never before. Yet cross-pollinating both media with the same marketing message makes it more effective in each.
"There is still great value in consistently communicating your brand or product on TV, in print or radio," said Mark LaNeve, GM's vice president of North America vehicle sales. "But increasingly these media serve to help set up a two-way dialogue online with customers who want to engage in a genuine conversation."
Still, there is no doubt which medium is emergent and which is waning. That was underscored for LaNeve last spring when he attended a focus group of consumers in Washington, D.C., convened by Peter Hart, one of America's top pollsters. All of the participants owned a GM product and an import, and all of them started their vehicle-shopping process online.
Asked if they had seen a TV ad for the all-new Chevrolet Malibu, which GM launched with much fanfare in late 2007, "the vast majority said 'no,'" LaNeve recalled. "We [then] asked them to describe a recent car commercial that they saw on TV," he added. "None of them could do it."
Newspapers in the Balance
Ditto with the fate of newspapers. Circulation has declined dramatically at just about every major newspaper across the country. So have auto-dealer display and classified ads, a business that largely is moving to online sites including eBay as well as those run by dealers.
"The automotive sections of Sunday newspapers are getting lighter and lighter every year," noted Eric Jillard, digital-marketing manager for Mercedes-Benz USA. "So some of the funds we're shifting [online] are coming from print."
And how have newspaper brands been trying to adjust? By shifting their own emphasis to the Internet and away from print, making them part of the massive migration to the online medium as well. "The WSJ.coms [The Wall Street Journal Online] of the world are blowing out their online presence, and that gives us more opportunities to advertise," said Perry, of Hyundai.
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