Gene Cameron, VP, auto marketing/media solutions at J.D. Power & Associates, has good news for TV stations: Auto sales will rebound 15% next year and television will continue to be a major component of auto marketing plans. The big change is that instead of driving consumers to showroom floors, he says, TV’s job is to drive them to manufacturer and dealer Web sites.
There was a time, not too long ago, when more than 16 million cars and light trucks were sold in the United States each year. That volume of vehicles and dollars generated a lot of advertising, much of which showed up on TV stations.
But when the recession and the credit crunch hit with full force in 2008, vehicle sales plunged and so did auto advertising.
The loss of that advertising contributed heavily to the 25 percent revenue decline that the TV station business is expected to post when it closes the books on 2009.
But the good news, say the experts, is that the auto sales — and auto advertising — has hit bottom.
Among those experts is Gene Cameron, vice president, auto marketing/media solutions at J.D. Power & Associates. In this interview with TVNewsCheck Editor Harry A. Jessell, Cameron says that auto sales will rebound 15 percent in 2010 and that TV will continue to hold its place as a vital component of auto marketing plans. The big change is that instead of driving consumers to showroom floors, he says, TV’s job is to drive them to manufacturer and dealer Web sites.
An edited transcript:
There’s a one-to-one correspondence between new vehicle sales and how much is being spent on auto advertising. In light of that, can you tell me how many cars are going to be sold next year?
We’re predicting we’ll see about 11.6 million new vehicles sold next year. It’s about a 15 percent increase over this year. We’re seeing this year ending at about 10.3 million units.
And how long before we get back to the good old days of 16 million or 17 million vehicles sold?
Five years out, we might be in the 16-million range again. There are demographic factors that are creating more buyers, more drivers, but it’s going to take us a while to get there.
What is driving the 15 percent growth in 2010? Is it just the improving economy?
It’s the improving economy, but it’s also a lot of new model introductions. The manufacturers are responding to consumer demand for smaller, more fuel efficient cars. They’re also better priced.
Are there going to be an unusual number of new models, major upgrades next year?
Yes. We see a very heavy list of introductions in 2010. We see at least 13 new models coming out in the first half of the year, 14 in the second half. We think it’s going to bring people back to the market.
What’s the current conventional thinking about how to market cars and light trucks these days?
The dominant shopping mode is on the Internet. Our data shows 76 percent of all new vehicle buyers shopped on the Internet for their vehicle before purchasing it and so auto marketers are focusing a lot of attention on the Internet activity.
What we see auto marketers trying to do is develop integrated cross-media platform programs so that the media will work together. It isn’t just a choice between TV and Internet, for example. It’s a way to integrate those two so your investment in television and your investment in online work together to produce a more effective result. That’s what we see as a trend.
Does that mean they’re taking money out of the legacy media — newspapers, television — to do more online?
We have seen reductions in newspapers and magazines, but not so much in television. Television is still highly regarded by the auto marketers and so we don’t expect television to be displaced any time soon.
And why are they abandoning the newspapers and the magazines?
There are several reasons. One is where the customers are going. I’m certain it’s no surprise to your readers that newspaper readership is way down. Magazine readership has held up, but neither of those media are as accountable or as trackable as the Internet, which has great appeal to the marketers.
What’s the magic of television? Why is it holding up?
You can present the visual appeal of the product and you can have that product in motion. So, in terms of explaining the product and presenting it in an appealing way, television is very powerful.
So the idea is to use television to sell the brand — the idea of the car — and then use the Internet to close the deal?
That’s a good metaphor for how it works. We talk about the purchase funnel. You have to get on the consideration set and television is a great medium for that, for getting your model considered, but, then, people want to know more facts. They want to know MPG, they want to know the functionality and that’s when they go to the Internet.
I get that. What about the dealers?
They’re very active on the Internet, too. Dealers have a Web site of their own. Often times that site is supported by the OEM because they want that dealer to have an active and functional site. In many cases, they will provide inventory [for the sites] so that consumers can find exactly the vehicle they want, where it is and what the price it will be.
Let’s probe the Internet end of this thing a bit more. Where exactly are the marketers spending their money on the Internet? Is it general interest sites or are they going to car sites or sports sites?
The first place of investment is the OEMs’ own Web sites. Those have become much more sophisticated and deliver a lot more value. We have a study that shows that the sites have become much more functional.
That’s bypassing all media, isn’t it?
No, because you need media to drive people to the Web sites. Then, there’s investment in online media. The first place they go is to the third-party shopping sites, an Edmonds, a Kelley Blue Book.
Then what happens?
Then there’s intense shopping. We see that for three months prior to the purchase. About two-thirds of the people who will eventually buy are on the Internet actively shopping. They’re gathering information, they try to find the vehicle and they try to get a price quote or some feeling for the price and then they’ll go down to the dealer and make that purchase.
So the role for television and the other media is to drive people to these OEM and car dealer sites?
That’s exactly it. It really is to provide enough information to get the model considered and drive people to the OEM site or the third-party site. Television is also used specifically to announce a deal: Buy it now. It’s a special deal.
Traditionally, local TV advertising was aimed at generating foot traffic at the dealerships. The dealers felt that if we if we get them in the door, we can sell them.
Yes, but that has changed dramatically because people can get so much information on the Internet about the vehicle they intend to purchase. In about 60 percent of the cases, the dealers will give a price quote either on the phone or through an e-mail. People now become fully knowledgeable, fully armed with the information that they need before they walk into the dealership.
So, by the time they’re walking into the dealership, they’re ready to make the deal.
In most cases because they have had all the information that they need to make that decision. They know the performance of the vehicle, the miles per gallon, they know the engine configuration, they’ve see it in all sorts of photos and so forth so that in many cases they know more about that vehicle than the salesman on the floor.
Are people actually buying the cars on the Internet?
No. AutoNation is conducting an experiment where it will bring the car and the papers to you so you do not have to even go to the dealership. We’ll see how that goes, but you have to sign the papers. You have to physically deal with a dealer. Under current laws from state to state, only a dealer can sell you a car.
Now let’s talk about drill down on television. You say that it is being used to get included in the “consideration set” and to announce sales and special deals. What kind of TV is best suited for that? Broadcast? Cable? Local?
All of the above. It really depends on where the marketers think they can find that audience.
In your Media Financial Management Association presentation a few weeks ago, you seem to prefer cable networks because they have niche audiences and you can reach certain audiences through them?
Yes. Traditionally, the median age of the new vehicle buyer is about 44 years old so there is a lot of demographic targeting that’s done in trying to reach new vehicle buyers.
TV stations talk about the advantages of geo-targeting — that is, buying ads by market or region. Does that make sense to the car marketer?
Very definitely. There are different preferences in vehicles by market. There are different situations competitively. Simply put, convertibles sell better in California. So you want to talk to a California audience if you’re selling a convertible.
What about social media? Where does it fit in?
Social media has become very, very popular with new vehicle buyers. In fact, in our latest research involving new vehicle prospects, the single most visited Web site is Facebook.
Why is that? Are people sharing information about new cars?
It’s not just cars. It’s their social life. The point is that when people decide they’re going to shop for a vehicle they don’t just suddenly drop all their media habits that they’ve established. They continue to be on Facebook. They continue to watch CNN.com. But then they add in the third- party shopping sites or the OEM sites.
I’m still not sure how Facebook relates to car buying.
It doesn’t necessarily. It’s just the fact that the people that are buying cars are on Facebook.
Oh, I see. There’s a correlation there.
Yes. When we talk to new car buyers, we find they have their daily digital habits, a set of Web sites that they go to on a regular basis. Facebook, for many, is one of them.
So how should the car marketer respond to that information?
By using these social sites in the best way possible. It’s not traditional advertising. Ford, for example, with the Fiesta movement, created a group of bloggers and then gave them vehicles that they could then do videos about and then post on YouTube, which is a social video sharing site. They’ve had tremendous success with that even before the new Fiestas have been introduced.
You say none of this is cutting into the TV end of the game?
I think there is some competition for the advertising dollars, no question, but TV is still highly respected. So while the Internet is certainly going to grow, particularly in the social areas, we don’t see a big decline in television.