Despite Automakers' Drive for More Cost-Effective Advertising, Industry Comes Up Short
BOSTON--May 15, 2006--Compete, Inc. today announced the findings from its latest Automotive Spark! "The Price of an Automotive Shopper: Advertising Efficiency and Its Impact on Automotive Demand." In this Spark! Compete reveals that the industry's average advertising cost was $192 per shopper in 2005, virtually unchanged from $191 per shopper in 2004, though there were exceptions at the brand level. In addition, the 2005 results supported earlier Compete results showing that advertising expenditures have a decreasing marginal efficiency.For this study, Compete identified all brands' efficiency performance for 2005, the most efficient brands, and the brands with the most improved performance year-over-year. Compete measured ad spend efficiency in "dollars per shopper" based on correlating monthly brand advertising dollars to the number of unique in-market shoppers by brand in the same month. The approach yields a powerful, consistent technique that allows automakers to evaluate the cost-effectiveness of their efforts to drive in-market vehicle shoppers, evaluate and reverse-engineer advertising budgets based on shoppers needed and spend allocated, and benchmark vehicle-level results to brand results.
"As the automotive industry has become more tactical, there is increasing pressure to drive efficiencies while simultaneously reach retail sales goals," said Lincoln Merrihew, managing director of Compete's automotive practice. "The lack of year-over-year gains at the industry level means efforts to drive efficiency are, at best, a work in progress."
Key findings from the study include:
-- Cost per shopper worsens as ad spend increases. Of the 22 brands that spent less on advertising in 2005, 16 had better media spend efficiency in 2005
-- Full-line brands had more cost-effective spend. Toyota spent more than one billion dollars and had better-than-average efficiency; Chevrolet and Ford spent the most yet achieved better-than-average efficiencies
-- Results at the brand level vary considerably. Toyota stands out as one of the top 10 most cost-efficient advertisers despite total spend near the highest of all brands. Subaru stands out for entering 2005's top 10 (it was #12 in 2004)
Compete's Media Spend Efficiency Top 10 (2005)
2005 Efficiency Rank 2005 $/Shopper 2004 Efficiency Rank ------------------------------------------------------------------- 1. Isuzu $7 1 ------------------------------------------------------------------- 2. MINI $38 2 ------------------------------------------------------------------- 3. Scion $38 4 ------------------------------------------------------------------- 4. Porsche $53 3 ------------------------------------------------------------------- 5. Honda $88 5 ------------------------------------------------------------------- 6. BMW $90 6 ------------------------------------------------------------------- 7. Mazda $105 9 ------------------------------------------------------------------- 8. Subaru $116 12 ------------------------------------------------------------------- 9. Acura $127 7 ------------------------------------------------------------------- 10. Toyota $127 10 ------------------------------------------------------------------- Industry Avg. 192 NA -------------------------------------------------------------------
Additional considerations:
-- 2005's lack of gains may have been impacted by employee pricing promotions. Mid-way through 2005, much of the industry shifted to promoting employee pricing--often at the expense of vehicle-specific ads. The shift was increased overall market-demand in July, but may have been less cost-effective, and so may have masked other efficiency gains across the year
-- The lack of gains in 2005 may also indicate that new media is appropriately priced. If new media is priced comparable to traditional advertising--on a cost per shopper basis--a shift toward more new media would not produce a lower cost per shopper
To read the entire Spark!, go to http://www.compete.com/research/spark.xtp
About Compete
Compete, Inc. extends online market research to transform the way consumers and brands communicate. By combining permission marketing, predictive analytics and the industry's largest consumer behavior database, Compete helps marketers identify and reach their target consumers. Compete delivers conversant marketing solutions that increase profitability and customer loyalty and result in measurable and effective marketing programs. Compete delivers these solutions to leading brands such as Carlson Hotels Worldwide, DaimlerChrysler, Hyundai Motor America, Teva Neuroscience, Toyota Financial Services and Upromise(R), among others. Compete is headquartered in Boston, Massachusetts, with offices throughout the US. For more information, please visit http://www.compete.com.