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Dollars flow to Web, alternate ad media Mary Connelly Automotive News / December 4, 2006 Last spring, Tommy Brasher ran an advertisement for his Weimar, Texas, dealership in the hometown newspaper. A typographical error knocked $10,000 off the $35,000 price of a Chevrolet Silverado. Brasher didn't get a single customer for the bargain pickup. "It makes you wonder if anyone is reading the newspaper," he says. Starting this month, Brasher says, he plans to shift about half his dealership's annual ad budget from newspapers to cable TV. Advertising in local newspapers is the traditional foundation of dealerships' marketing plans. But as dealerships upgrade their Web sites and move ad spending to other media and as newspaper circulation continues to drop, papers are fast losing their primacy. Some dealers say they have stopped running ads in newspapers altogether and their sales are growing. Newspapers still attract more ad dollars from dealerships than do any other medium. But last year dealer ad spending in newspapers fell to its lowest dollar level since 1998. And this year, newspaper industry officials concede, dealer ad spending is off as much as 20 percent from 2005 in the largest U.S. markets. Put another way, U.S. dealerships spent an average of $270 per new vehicle sold on local newspaper ads last year, an Automotive News analysis finds. That figure is virtually unchanged from the $266 average a decade earlier. Last year's average reflects a 13.2 percent decline over just two years. The figures are not adjusted for inflation. And the drop almost surely will be bigger this year. "The minute that dealer profitability starts to drop, the first thing (dealers) start to cut is advertising," says Jake Kelderman, director for automotive and advertising relations of the Newspaper Association of America, an industry trade group. "With the advent of the Internet, they can do that and still have an advertising presence. "It is less expensive," Kelderman says. "But is it more effective? The answer is still out on that." Downward trend Carmichael Honda spent $270,000 to advertise in newspapers in the past year. Over the next year, though, the dealership in suburban Sacramento, Calif., is slashing its newspaper ad budget to $80,000. Why? One word: Internet. "We do surveys when our customers purchase a car," says Todd Stamps, the store's general sales manager. "We ask what brought them into the dealership. Less than 10 percent say newspapers. Number one by far is the Internet, at 70 to 80 percent." In 2005, the average U.S. dealership spent $118,790 to advertise in newspapers, the National Automobile Dealers Association reports. That figure represented one-third of the typical store's ad budget. TV was in second place, at 19.5 percent. The Internet accounted for about 10 percent, on a par with direct mail. That spending does not include the cost of maintaining dealership Web sites. A decade earlier, NADA says, dealerships spent 53.9 percent of their ad budgets on newspapers. The Internet wasn't even a category. Kelderman predicts that dealership advertising in newspapers will stabilize in 2007. But others foresee further declines. Mitch Lowe, CEO of Jumpstart Automotive Media, says his online advertising network works with about 1,000 dealers, mostly high-volume. Lowe estimates that nine of every 10 of his dealer clients have cut their newspaper ad spending this year by an average of 20 percent. And they plan to reduce that spending even more next year, he adds. "Ad dollars follow consumer usage," Lowe told Automotive News. "The biggest area of growth will be digital marketing and media." Fighting back NADA figures aren't available for 2006. But Paul Taylor, the association's chief economist, says newspapers are fighting to keep their share of dealers' ad dollars. For example, he says, dealerships are advertising lease deals and service promotions in newspaper sections other than the classified pages. "I was looking (in the sports section of the Washington Post) to see how Virginia Tech did in a football game," Taylor says. "I found out nothing about the game. But I ended up reading an entire Audi lease ad." Dealerships also are promoting their Web sites in newspaper ads, Taylor says. "The more important the Web site is, the more likely the dealership is to maintain a significant presence in the classified section," he says. Taylor says he expects the slump in dealership print advertising to continue "at least through part of 2007." By the end of next year, he predicts, newspapers will have "either stabilized the share or at least reduced dramatically the rate of decline." Meanwhile, the newspaper association's Kelderman says, newspapers are offering dealerships more monthly, rather than annual, advertising contracts. They are upgrading the editorial content and design of their automotive sections to attract readers, he says. "There likely isn't a newspaper in the country that isn't rethinking its print products and its online products," says Kelderman, a former NADA executive and Automotive News reporter. "How can these be more intriguing and made more effective?" Newspapers are providing more automotive content on their Web sites to generate dealer advertising, Kelderman says. The sites "allow for local blogging and car clubs and photos," he says. Measuring impact Jumpstart's Lowe argues that digital media offer dealers what newspapers cannot: precise tracking and measurement of how consumers use auto ads. Dealers know what they are getting for their Web ad dollars, he says. "Three years ago, the Internet companies had to provide reasons to market with them," Lowe says. "Now dealers are going back (to newspapers saying), 'I have been spending $10,000 a week with you. Give me a reason to know it is doing anything.' " A study of vehicle buyers' behavior this year by the Newspaper National Network LP, the industry's marketing arm, sought to reassure dealers about the continued value of newspaper ads. The study tested the assumption that vehicle shoppers mostly consult newspaper advertising near the end of their searches. But it found that newspaper ads come out about equal to TV spots when consumers first seek information about vehicles to put on their shopping list. Kelderman insists that despite the industry's problems, newspapers will remain a vital element of dealerships' media mix. "Thoughtful dealers will have a presence across all the media," he says. "They understand how the customer base gets its information." But Thomas Vann, a Chrysler group dealer in Hillsdale, Mich., says he hasn't advertised regularly in newspapers for a decade. He doesn't think that choice has cost him anything. "Newspaper advertising is ineffective because people don't trust it," Vann says. "They go on the Internet." |
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