Detroit automakers have wrestled for decades with a quality gap between their domestic brands and import nameplates. They've narrowed that divide, but now face another—a gap in ad-spending efficiency.
German and Japanese nameplates dominate the Top 10 list of automakers garnering the most shoppers per ad dollars spent, according to a study of shopping behavior by Boston research consultancy Compete Inc. Though several U.S. brands were among the most improved, no Big Three car line made the Top 10 most-efficient list.
Although manufacturers often track consideration—consumers who are thinking of buying—the Compete study zeroes in on people actively shopping for a new car. It combines measured media spending from TNS Media Intelligence with a predictive model that tracks shoppers as they search competing automotive Web sites and make their way to showrooms, to arrive at a cost-per-shopper number used to measure relative efficiency of media spend.
Compete's data do not include factors such as consideration, profit per vehicle, price per vehicle, and the cost of converting demand into sales (i.e., turning shoppers into buyers). But in a marketplace where more than 40 nameplates and 300 models compete, "the mission of every make and model is to be efficient everywhere," said Lincoln Merrihew, Compete managing director, automotive practice. "Ad efficiency is the first step."
And, logically, the mass-market brands, the most competitive part of the industry, are more impacted by efficiency gaps between the origins. Chevrolet, for example, has a $176 cost per shopper, while Toyota's is $119; the industry average is $175.
Merrihew added that various factors play into ad efficiency: timing (for example, whether print preceded TV or followed a competitor's big spend); shifts in media placement; and products themselves, such as prestigious nameplates (Porsche, BMW) that attract shopping on the strength of their image, and brands with only a few models (Isuzu, Mini, Toyota's Scion) that can target narrowly and run fewer ads. Nevertheless, the Compete data show big spending alone isn't always the best way to ensure success in the marketplace.
"Most of the domestics use a launch-and-run strategy," Merrihew said of the Top 10 findings. "They'll light a bonfire, spend a lot of money up front and hope it generates enough heat to keep them warm throughout the winter. In contrast, Honda and Toyota [with four nameplates in the 10 most-efficient spenders list] keep a small campfire going by keeping a log at the ready and keeping awareness up."
The efficiency of embattled General Motors' domestic brands ranged from Pontiac's $136 per shopper to Hummer's $255. While not measured, the study also shows that nontraditional advertising is not just a hedge against DVRs, it can be a factor in how well ad dollars work to lure shoppers to showrooms.
"We find that, ideally, non-traditional should cost the same per shopper as traditional. Automakers who improved their efficiency typically optimized their media mix to get bang for both bucks," Merrihew said.
Pontiac, despite spending relatively little on ads—$160 million in 2004, per Nielsen Monitor-Plus—actively sought alternatives in 2004, most noticeably when it gave away 276 G6s on The Oprah Winfrey Show in a $7.7 million brand entertainment deal. The GM nameplate was the third most improved in ad-spend efficiency from 2003 to 2004, dropping its cost per shopper 27 percent, or by about $50.
"That one-day investment got [the same] awareness levels of 18 weeks of launch advertising in six [weeks]," claimed Pontiac director of marketing Mark-Hans Richter. "Web traffic rose 37 percent. ... We're now the No. 1 shopping Web site in all of automotive. "
BMW's Mini, No. 2 on the Top 10 chart, spent only $25 million in 2004, according to Nielsen Monitor-Plus, but MDC's Crispin Porter + Bogusky's non-traditional ideas compensate by creating awareness. "We can't afford to buy TV for weight and frequency, so we look to differentiate Mini," said Jim Poh, vp of creative content distribution at the Miami shop.
Though Mini's media plan looks outwardly inefficient—some of its unusual outdoor and print stunts carry high production costs—it's not, Poh said. "When people think of efficiency, they're still thinking front end, cost per point for reach, not back end: How many people were moved into the marketplace?"
Even Japanese maker Mazda, ranked ninth in efficiency, feels the strain from brands in its own country. "We've tried to out-Toyota Toyota and out-Honda Honda with our ad dollars," said communications manager Jeremy Barnes. "We've been beaten every time. The key to our current success is selective media purchase."
To boost efficiency, Mazda shifted dollars from national TV spots to alternate marketing, such as Fear Factor sponsorship, added Scott Penniston, media director at the automaker's agency, Doner, in Irvine, Calif. "We've only been doing the multidimensional platform for a year and a half, and it's showing results. The media has gotten more engaged in what [the ongoing tagline] 'Zoom-zoom' is, not simply buying 30-second spots. The most important thing is developing the connections to the consumer."