US Automakers See Sales Drop Dramatically And For Newspapers Experiencing a Near 50% Drop in the Auto Spend “It’s A Melting Ice Cube All The Way Around.”

Philip M. Stone - August 7, 2006

That the US automobile industry is in another crisis is no secret. Headlines blare out about Toyota overtaking Ford in June sales, how Chrysler Group sales fells 37% over a year ago, etc. etc., but for the media watcher the real story is how those automakers and their dealers are desperately trying to lure buyers back to the showroom. They are cutting way back on the newspaper spend, TV is still the biggest spend but recent “folksy” campaigns have flopped, and the Internet and mobile are increasing their popularity.

US automobile newspaper ad spending has nosedived this year. For the past nine years automakers and their dealers spent around 60% of their advertising with newspapers. But this year, according to Mitch Lowe, CEO of Jumpstart Automotive Media, the figure has dropped to 30%.

“Unfortunately for newspapers, it’s a melting ice cube all the way around,” he said. “Consumers can get much better information on Web sites that are auto specific.”

And he said dealers are waking up to the point that newspaper circulations are down. He said automobile advertisers are now guided by three major needs for their spend: visual, interactive, and measurable.  A newspaper’s web site can handle all of that but not print. But automakers and their dealers are finding the most successful web sites are their own.

Television is the biggest ad spend, but recent campaigns have not gone down that well. You always know when a company is in real trouble when their CEO is the pitchman.

The first automobile CEO to do that with great success was Lee Iacocca who saved Chrysler from bankruptcy in 1979. His basic business philosophy was, “We are continually faced by great opportunities brilliantly disguised as insoluble problems.” The same could be said for the auto industry today.

Iacocca came back as the pitchman for four more Chrysler ads in 2005, so current DaimlerChrysler CEO Dieter Zetsche decided he would try it this year showing himself in a series of humorous “Dr. Z” ads meant to boost the benefits of combining the Daimler and Chrysler brands. Zetsche came across as an affable, funny mustachioed German and the ads were fun to watch if you’re into seeing a CEO bounce a soccer ball on his head, but they didn’t sell many cars. According to CNW Marketing Research some 80% of those who saw the ads thought Zetsche was a fictional character.

The results were probably summed up best by auto consultant Susan Jacobs. “There’s too much personality and not enough nuts and bolts about what German engineering means for Chrysler cars,” she said.

Ford’s CEO, Bill Ford, tried the same last year and then the company announced its major “Way Forward” plan designed to turn the business profitable by 2008.  Since then, Ford announced it lost $1.3 billion in the first half, it has taken on board an investment banker to figure out what the company needs to sell (goodbye Jaguar?) and Way Forward is being revamped.

But Ford is getting good vibes from its non-traditional marketing. On its  Fordboldmoves.com homepage it sets out plainly the challenge: “Survival of the fittest. That is the challenge facing Ford today. Bold Moves put you at the heart of the story letting you engage, debate, and get involved at what is happening at Ford right now.”

Using the soft approach, the site shows people doing everyday things – a baby learning to walk, a teenager getting a driver’s license and showing how Ford is also undertaking such “bold” ventures to become successful again. Then there are the three-to-five minute documentaries  -- the first of which “Change or Die” saw Ford executives admitting “We’re in trouble because we lost touch with the consumer.”  Now will all of that get you more likely to buy a Ford?

General Motors, the world’s largest automaker -- -- it lost $10.6 billion in 2005 – has also had a “Then and Now” and “Then Again, Now Again” TV campaigns to tug at the emotional heart, but after six months those campaigns have now come to an end. The idea, obviously, from the “Big Three” is  that it takes more than a “hard sell” these days to sell cars. “Their campaigns are built around the emotional connection people have with the company,” said one automaker spokesman. So, the idea is to get one liking the company virtues with the soft sell and then go for the jugular.

Research indicates that the campaigns were somewhat successful in raising a company’s profile, but by no means were they blockbusters.

Ford is also going back to basics. It has started a national “grassroots” campaign, taking the Shelby GT500 and the Escape Hybrid on one national tour, and the Ford Mustang, F150 and the new Edge on another tour of 75 cities to events coordinated with local dealers to get customers to come out and see the products. It has hired entertainers, sports personalities, even a celebrity chef to promote its wares.

And Ford has developed a campaign that speaks directly to three American ethnic groups – African-Americans, Hispanic-Americans, and Asian-Americans – taken together they make up about 25% of the US population. The company even has a “multicultural marketing manager”. Marc Perry, who holds that title, says, “Bold Moves focuses on the choices people make every day about how to live their lives. What we’re doing is putting a lens on that message to communicate with the various cultures that make up the United States.”

So with Toyota doing so well, is its advertising any different from what the US automakers are doing? Not really. It also has major TV campaigns – indeed it has refused a demand, along with Chrysler, to withdraw advertising from the Rescue Me TV show that the Parents Television Council (PTC), the country’s leading anti-TV decency lobbying group, calls “cultural sewage” for how it has depicted rape and violence.

But at the same time it is launching a new TV campaign to drive viewers to watch a new made-for-mobile video series – “The Pool” six short videos about carpoolers who just happen to use a Toyota Camry.  It’s not so much commercial content as it is product placement, but to run a commercial TV campaign to get people to watch the mobile series is unique. Once the mobile videos become available this week Toyota plans an online campaign.

According to Jan Thomson, VP-marketing for Nissan North America, automakers account for 25% -- $17 billion – of the US total advertising spend – a figure she calls “shocking”. In the past 20 years auto advertising has increased 1,378% while new vehicle sales have increased 17%.  In two decades what used to be an industry-wide advertising cost of $50 per new car sold has risen to $1,000.

That is why Nissan (which is experiencing a US downturn this year) and all other automakers are looking for new media cost-effective ways of getting their message across. All marketing costs, including incentives, now can add up to $4,000 per new car sold, and that is why the Internet seems so attractive – it is measurable, it allows video, and it is interactive.

Nissan, for example, has struck search deals with MSN, Yahoo, and Google. And a Google paid-search promotion campaign earlier in the year drove 40% of Nissan USA’s web traffic, with research showing that 31% of vehicle sales made during the special promotion came from search marketing.

But because the Japanese carmakers are doing so well, their advertising campaigns are now being aimed more against one another than they are the American automakers. Nissan, for instance, premiered its new Versa automobile on a popular TV show, as roomier than most compacts. The ad was aimed at those Americans suffering “auto claustrophobia” from such small Japanese cars as the Toyota Yaris and the Honda Fit.  “Never fear a small car again,” the ad extols.

So with the advertising patterns of the Americans and the Japanese about the same, how come the Japanese are becoming more successful and the US automakers less successful in the US market? Is it the advertising, or could it just possibly be that the Japanese are making fuel-efficient, reliable automobiles, whereas the US car makers still have their SUVs and large sedans, with reliability still a question.

Advertising sells what you have; not what you don’t have.

Is there any hope for American automakers? Possibly one – Toyota cars have achieved their success because their quality is rated highly.  When it comes to buying a Japanese car there are few fears of buying a “lemon” – a car that just goes wrong continually  from the moment it is driven off the showroom floor. But Toyota is beginning to experience some quality problems.

The Toyota Avalon is beginning to get a bad name for bad joint welds, faulty catalytic converters, oil supply line leaks, air bag problems, problems with the steering column, and transmission hesitation problems, all of which has caused Consumer Reports to lower the car’s quality rating to average – if that’s average in the US market then one would hate to think what a car worse than average is like!

Other Toyota models have had recalls for various problems and industry analysts believe the problem is the company is growing too fast and quality has suffered. That was the beginning of the problems for the US automakers and why the Japanese did so well,

If there becomes a perception out there that Toyota cars are not of the quality they once were then that alone can be the biggest marketing aid that US automakers could ever get.

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