Automotive Report: Exit Strategy?

Rod Salvador bought a new Mazda 3 in January, when the car first rolled into San Francisco dealerships. He saw it and loved it. But the 32-year-old high school teacher didn’t see it on TV, a huge part of Mazda’s campaign for the car that launched on New Year’s Eve. “Honestly,” he says, “I never saw the ads on TV. I was at a local coffee house and saw the car on my coffee sleeve. I liked the look of it and had to go see it.” Good news for Mazda, or is it? Consumers like Salvador are worth considering as auto marketers elbow up to the network upfront in May, wallets in hand to peel off upwards of $2.6 billion for prime-time advertising slots this year and next. Salvador, who says he watches at least as much cable as broadcast—and spends as much or more time surfing the Web—is just one customer, but he’s emblematic of what marketers fear about broadcast TV. More viewers,

especially younger ones, are viewing elsewhere, and in a much less predictable manner than in the past, when there were only three networks and shows like M*A*S*H could guarantee a 40 share and a broad demographic base. “It used to be, ‘We’ll put it on network TV and reach 20 million people,'” says Dave Rooney, director of media operations at DaimlerChrysler, Auburn Hills, Mich. “Arguably, there’s no such thing as mass marketing anymore. It’s all targeted marketing now.”

And it’s fragmented marketing, too, as a profusion of new shows and cable networks —more than 100 of the latter—are Balkanizing television, with fewer viewers per program, scattered across more and more channels. Thus, individual ratings per show are down. What makes that fact galling for car marketers, the top advertisers on TV, who spend more than several other categories combined, is that the cost to advertise has not dropped. In fact, last year’s network upfront brought a 15 percent spike in CPM for advertisers.

While media sellers argue that the spike last year followed a recession-driven decline of prices in 2001 and only a modest correction in 2002, car marketers from Kia to General Motors say it’s not just increasing prices, but decreasing value that has them reallocating dollars.

“The bad news is that, from an advertiser’s perspective, it is now more challenging to efficiently speak with your audience,” says Steve Wilhite, vp-Nissan global marketing. “What was once a very large, homogeneous audience is now segmented, smaller, more diverse. It’s good in some ways, but it makes network TV much less efficient; unfortunately, they haven’t recognized that in their pricing.”

While saber rattling by advertisers is part of a seasonal war dance preceding the upfront, this year they are also waving a 2003 study from management firm Cap Gemini Ernst & Young. The study, which surveyed 700 U.S. consumers, asserts that only 18 percent of them said national TV ads prodded them to visit dealerships. That these results were trumpeted by Robert Lutz, GM’s president, who touted it last October at the annual Magazine Publishers of America’s magazine conference, says as much about marketers’ frustration with TV as the study itself.

Like an urban freeway during rush hour, TV is jammed with advertising, both auto and otherwise. In a world where the profusion of marketing messages might have Marshall McLuhan rolling in his grave, marketers have good reason to fear that more and more consumers, like Salvador, just see one long river of sheet metal: seen one car ad, you’ve seen them all. Says Wilhite, “Frankly, I’m not convinced we need to be there, and network TV will take a smaller percentage of the company’s budget going forward than it has historically.”

A wave of new video technology is pressing the point. The traditional 30-second spot requires a passive audience, but with direct video devices like TiVo—in just 2 percent of U.S. households now, but expected to hit 30 percent penetration by 2006 —viewers can watch whatever, whenever. Besides threatening the traditional advertising break, it casts a shadow over the very idea of prime time. Steve Grubbs, Chairman of PHD, DaimlerChrysler’s media-buying firm, says it’s not too soon to be concerned. “TiVo is remarkable technology; it changes the way you watch TV. And, it will take off.”

Both buyers and sellers agree the upfront reflects a free market driven by demand, unlike the auto market itself, which suffers from chronic overcapacity and its own version of rampant fragmentation, making it a buyer’s market. Consider that in 1973, there were 28 marques, comprising around 70 models in four auto segments. In 2003, there were about 43 marques, in more than a dozen vehicle categories and 280 models. It’s not surprising the six broadcast TV networks are tight on supply in the face of demand that promises to be at least as strong this year versus last. “I can tell you that, once again, the upfront will be very aggressive this year for auto advertising because there’s too much demand chasing too little supply,” says Chris Rohrs, president of the Television Bureau of Advertising, a consultancy promoting national and local spot market TV.

Competition means auto marketers won’t likely abandon TV, or the May upfront any time soon. Chrysler last year tested those waters with the launch of its Crossfire coupe, which the company advertised only in print and interactive media. By year’s end Chrysler was sitting on over 300 days of supply for the vehicle (60 is average), and has since put the convertible version on television as part of Chrysler’s recently launched multivehicle effort. “You would walk away from broadcast TV at great peril,” says Rohrs, who points out that in spite of declining ratings, broadcast is still the dominant media with the largest per-program audiences, a critical point for advertisers like Ford Division, which sold 2.85 million vehicles last year, or any non-niche marketer seeking to sustain awareness for new nameplates, or their brands. And television is such a pervasive medium, it’s almost absurd to speak of reach. Still, per research by Veronis Suhler Stevenson, New York, Americans, on average, spend over 1,700 hours a year watching, versus 994 hours spent listening to radio. According to Nielsen Media Research, last year television had 90 percent reach among adults over 18, versus 65.2 percent for newspapers and 72.8 percent for radio.

Says Todd Turner, an analyst at Car Concepts, Thousand Oaks, Calif.: “Automakers could pull a billion dollars out of the upfront if push comes to shove, but no marketer wants to turn on the TV set on a Monday night for American Idol and see its competitor. When you do a 30-second commercial on TV, as expensive as it is, five million people are still watching it.”

Jon Nesvig, president of sales, Fox Broadcasting, points out that sentiment, asserting that a media plan with the same number of GRPs (gross ratings points) in broadcast versus the top 10 cable networks produces nearly double the reach for network in week one and a 20 percent to 35 percent advantage up to 12 weeks out. “That’s the maximum length of many campaigns, so this ability to generate fast reach is critical to advertisers introducing new products or announcing sales,” he says.

So, where are the off-ramps for marketers looking to sustain share of voice, but escape the clutter and cost of network? They are beginning to find several, including altering their media mix to heavy-up on spot buys in “footprint” markets where specific models succeed, an increased flow of money to cable TV, a broader mix of daypart buys beyond prime time, and integrated sponsorships with supercharged product placement. The latter offer value-added sponsorship packages, with integration of product, where, ideally, the brand doesn’t look surgically attached to the show, and most importantly, where viewers can’t zap the product pitch without zapping the show, too.

Cable, which now reaches more than 80 percent of households and is gaining parity with broadcast in an overall audience based on aggregated numbers, is where car advertisers are spending more, both because it’s less expensive and because cable networks make up in audience definition what they lose in audience size.

“We have been shifting money to cable to follow the audience,” says PHD’s Grubbs. He adds that the lower CPM for cable brings down the overall media-price inflation rate as well. “You are paying 10 to 15 percent cost increases on network alone, but when you slide more money from network into cable your year-to-year TV plan may only suffer a 5 to 6 percent increase, and people tend to ignore that,” he says. And the highly defined audiences suit certain brands. “If you look at outdoor lifestyle, you have something out there, not a very large network, called Outdoor Life Network, but the folks watching that are your prime prospects for Jeep, so another way to look at cable is there’s less waste.”

But the vast number of cable channels means fractional reach at best for even the top 10. “The problem is, it takes 60 cable networks to make six broadcast networks, and each cable program is a tiny sliver of share,” says Rohrs. “When you look at the equation with relation to program audience, the numbers don’t hold up.” Last year, for example, only ESPN’s coverage of NFL football, ranked No. 81, was among the top 100 programs, according to Nielsen Media Research.

Mitsubishi vp-marketing Ian Beavis dismisses that, suggesting that the efficiency of cable, its targeted audience and lower cost offsets the fractional reach. “I think it’s great. If you understand who your buyers are and you understand the program environment, you can really start to target pretty accurately. I consider cable, within the TV universe, to be like a guided weapon.”

Mitsubishi, until late last year, focused on national broadcast TV to construct a defined brand image: youthful, hip and avant garde, with its agency, Deutsch, Los Angeles, doing the kind of emotion-driven creative for which network TV is best suited. But while Mitsubishi got the reach and brand awareness it wanted, it didn’t get the sales. Now, says Beavis, the Cypress, Calif.-based company is doing more cable and Internet marketing, less network TV, and more product-focused advertising. “First of all, consumers in the age groups and with the mindsets we are dealing with graze across all media, so we can’t afford to have a TV-centric approach. We did that, which is why our awareness is as high as it is and our natural demand as low. We’ll fish where the fish are,” he says.

For Beavis, that means a paradoxical media buy including both cable and big network events like the Super Bowl because, he says, the latter delivers the same sort of dedicated audience many smaller cable networks offer. But the Super Bowl, unlike cable networks, is tremendously expensive at $2.3 million for one 30-second spot, a seven-fold increase from $324,300 in 1982. Beavis wouldn’t divulge what Mitsubishi spent to put its new “See what happens” ad for the Galant on the Super Bowl, “but it wasn’t that.” What he will say is he grabbed the Super Bowl for the Galant not because it’s the world’s most efficient buy, but because it’s one of the few programs garnering an involved viewer who also watches for the ads.

And Beavis says cable, in spite of its fractional audience, offers that same kind of committed viewer. “It almost follows the Internet model,” he says. “Even very small cable networks deliver dedicated viewers: [people who] are watching the program, not rushing out of the room.”

Mitsubishi’s Super Bowl spot was, in fact, a cliffhanger requiring viewers to view the ad’s finale at (see page 38 for a discussion of the creation of that ad), a tactic that more marketers are seizing upon as they attempt to activate TV, a passive medium.

The Big Three have pursued that strategy as well, via cross-platform sponsorship of cable and network TV reality and scripted shows, movies and sports series, hoping to make their brands part of the program and attract the kind of dedicated, young, male viewers Beavis says lurk in cable.

Ford’s efforts include being the sole advertiser for the past two season premieres of Fox’s 24. Ford also has branded presence on Alias and American Idol; and last year ran a “roadblock” marketing effort around NFL Football as part of the launch of its F-150 pickup truck. Still, Ford Division president Steve Lyons says Ford won’t cut back on traditional prime-time advertising. “It’s very difficult today to just stand out, and we see an opportunity with integration for the brand into programming, particularly where the demographics are right,” he says. Based on sales, Ford had its best launch in years with the F-150, which has posted double-digit sales increases for six months in a row.

As part of its 24 sponsorship, Ford’s agency, J. Walter Thompson, Detroit, in 2002 ran two ads during the 2002 premiere show, one at the beginning, one at the end. Last year, the only ad on the premiere show was a six-minute piece, split in half, called “The Donation,” less an advertisement than a short film that many viewers thought was a setup for the show itself. Jan Valentic, evp at Young & Rubicam, formerly Ford’s vp-global marketing, says the return on Ford’s investment was huge. According to advertising metric consultancy IAG, New York, Ford’s 24 spots for the 2002 premiere were the No. 8 and No. 18 most remembered spots of that year, and Nos. 1 and No. 2 in ad recall for the weeks after they ran. According to IAG, the first part of the “The Donation,” which aired before the 2003 premiere, was the seventh most recalled ad of 2003. And they all ran only once. “Nobody had done it before,” says Valentic.

Andy Prakken, executive director, communications services at J. Walter Thompson, says media integration with TV shows isn’t new, but the deals like 24, in which the Ford brand and vehicles seemed to be part of the show instead of being imposed on it, is new. “I don’t think that developing integrated programs—from having an idea, trying to find media partners and bringing that to life—is new. It’s been going on forever. What’s new is moving beyond simple product placement and getting more into the brand story being brought to life in ways where it feels natural and complementary,” he says.

Prakken, who directs all communications planning and buying at JWT, says integration within the agency is key to making deals in which a Ford vehicle isn’t passing scenery. “Five or six years ago we broke the silos down at Thomspon and created a fully integrated communications group; planning, buying and creative development is in one fully integrated shop, so when we sit down with the networks, it’s not like somebody struck a media deal and walked away from the table.”

Valentic says deals like 24 take time. “It’s talking to a very different part of the media organization,” she says. “There’s a separation of church and state between media sales and content. The upfront and media side of the fence are interested in selling you the time.”

PHD’s Steve Grubbs agrees. “When you’re buying spots, theoretically you can buy them up until the day before. When you are trying to integrate brand and product message into the show itself, you have to be there at the production stage and those deals are negotiated before the production stage, and they can be months in advance.”

On NBC’s The Apprentice, in which Chrysler has product integration with off-channel elements on its Web site, Chrysler vehicles, such as Crossfire, Pacifica and 300C, are featured on several episodes. In one that aired in late March, Katrina and Amy, two contestants, had to haggle with a dealer in Atlantic City, N.J., to offer a Crossfire as a promotional win at a casino.

General Motors’ Pontiac division, which is also in its second year of a multiyear NCAA sponsorship, will air a 30-minute special, Secrets of the Stuntmen, on cable and syndicated TV this year. The show, via Chemistri, Detroit, runs in April and May and next fall, and centers on a series of spectacular car stunts showcasing upcoming Pontiac cars like Solstice and G6. The effort, which drives viewers to a Pontiac Web site, is a stealth carrier for Pontiac’s excitement positioning implied by its “Fuel for the soul” tag.

None of which means advertisers are leaving the world of :30s and :60s. Valentic says in spite of deals that seem to contradict or even obviate the need for an upfront buy, the upfront helps Ford protect its position in advance of marketing cadence for new launches, and serves as a weather vane for media pricing. “It’s an insurance policy, and if it’s way out of wack, we’ll walk away from a vendor and hold off until scatter comes along.”

Chrysler’s Rooney says that, ultimately, an advertiser, whether doing 30-second spots or product placement, has to remember the idiom of TV. “Television is an entertainment medium, so we are in the entertainment business. That means we are constantly looking for ways to engage people, in ways that they’ll remember after the 30 seconds are over.”

Karl Greenberg is the automotive reporter for Brandweek.