The Automotive
Industry
Julianna Egner, Mac Bishop,
John Nitti, Logan White
April 11, 2011
AEM 4550 – Economics of
Advertising
Jura Liaukonyte
Agenda
 Industry
Analysis
 Advertising Analysis
o
o
For Dealerships
For Brands
 Advertising
Strategies
 Recalls & Brand Reputation
 Recent Advertising Innovations
 Investment & Advertising
Recommendations
Why the Automotive Industry?
 Automobile
industry a staple of the U.S.
economy
 Americans have developed a deeply
patriotic connection to this auto
manufacturing tradition
 Over $100 billion in revenue in 2010
 Industry expected to grow
 Billions of $ spent on advertising every
year
 Health of the industry impacts nationwide
advertising
Industry Analysis
Industry Definition
 Sub-divided
1.
2.
Industry:
Car and Automobile Manufacturing Companies that manufacture car and
automobile chassis
Light Truck and Sport Utility Vehicle Mfg. –
Companies that manufacture light trucks
and utility vehicles, such as vans, pick up
trucks, and sport-utility vehicles
 Produce
vehicles in assembly plants
Major Products and Services
 Compact
and subcompact sedans
 Luxury Cars
 Mid-size and full-size sedans
 Sports cars
Major Products and Services
 CUVs
(crossover vehicle)
 Large Pickup Trucks
 Small Pickup Trucks
 Large Vans
 Small Vans
 SUVs
Current Industry Condition
 Recession
brings trouble for the big three:
Ford, Chrysler, GM
o
o
o
Bankruptcy
Restructuring
Large losses or dismal profits
 Reasons
o
Reliance on SUVs and larger cars
Signs of Relief
 In
2011, industry profit margins will be
relatively healthy at 2.0%
 Car industry revenue to grow at an
estimated rate of 4.2% annually to $102.3
billion by 2016
o
o
Shifting consumer preferences
General recovery in demand
 Improving
consumer sentiment
 Credit availability is recovering
Why People Buy?
 Past:
All about price
 Current: Price, running cost,
environmental effects
 Motor vehicle affordability on the rise
 Green revolution
o
o
Consumers will continue to demand
environmentally friendly cars
Price of gas will rise in 2011
Distribution Model
< Car & Automobile
Light Truck and SUV >
International Influence
 Imports
represent 51.0% of domestic
demand for automobiles
 Exports generate 19.1% of industry
revenue
Operating Conditions
 Technology
o
o
Design, Innovation (hybrid, plug-in hybrid
electric vehicles ) Engineering, and Production
method
Most auto manufactures are working on a
hybrid or plug-in electric
 Regulation
o
o
and Policy
The Government compiles complaints from
consumers and will prod a manufacturer to
recall a vehicle if warranted.
Obama administration – efficiency mandate
o
o
Cars - Average 39 mpg
Light trucks - Average 30 mpg
Competitive Landscape
 174
total companies as of 2007
 HHI for top 50 firms=1448.8
 Car CR4 = 55.6
 Light
Truck/SUV CR4 = 73.5
Industry Structure




Market Concentration: Medium
Competition in Industry: Medium
Barriers to Entry: High
Competitive differentiation:
o
o
o
o
o
o
o
Price
Quality
Efficiency
Supply-chain integration
Industrial relations
Types of cars manufactured
Product innovation
Industry Data - Cars
Industry Data – Light Truck & SUV
Global Competition
 Finding
an efficient business
model to operate in this
globalized industry
environment is key.
 Example:


One Ford: streamlined design
and manufacturing platform
across Ford’s global markets
GM’s joint venture with China’s
Shanghai Automotive Industry
Corporation
Market Concentration
Market Share
Others
34%
Toyota
17%
Honda
12%
Hyundai
10%
GM
15%
Ford
12%
Competitor Highlights

Toyota:
o 2009 – 2010: U.S. market share fell from 19.5% to
16.8%
o
Toyota Prius first mass-produced hybrid gasolineelectric car – major success for Toyota.
o Toyota Motors is world's largest automotive
manufacturer (overtaking GM in 2008)
GM
o 2006 – 2011: U.S car sales fell at a troubling
10.3% annualized rate
o Total U.S. car sales fell 4.3% annually
o

Panicked and angry car buyers opted to purchase cars
from other companies
Competitor Highlights

Ford
o CEO restructuring the company’s business practices since
2006
o
Put Ford in a better position when the recession hit.
“One Ford” initiative has helped Ford share designs and
other efforts across global divisions
Honda
o Notable for its unusually high spending on research-anddevelopment (R&D)
o

o
o
Competitive in hybrid market – Honda Insight
o

Equivalent to about 5% of revenue
Did not achieve the commercial success of the rival Toyota Prius.
Hyundai
o Second largest Asian automaker
o Sales rose 7.2% annually since 2006 while the U.S. market
decreased 4.3% annually
o Have kept prices low while radically improving vehicle
design
Brand Equity
Brand Values from Interbrand’s Best Global Brands 2010
Rank
Prev. Rank
11
Brand
Brand Value
($m)
Change
Revenue
($B)
8
26,192
-16%
204.44
12
12
25,179
6%
69.00
15
15
23,219
3%
80.14
20
18
18,506
4%
92.55
50
49
7,195
3%
128.95
53
55
6,892
6%
168.13
63
65
5,461
9%
46.97
65
69
5,033
9%
78.46
72
74
4,404
4%
80.75
91
88
3,562
1%
2.15
Advertising-to-Sales
2010:
 Revenues = $76,664 for cars, $94766 for
light trucks = $171.43 billion
 $13 billion spent on advertising
= 7.6 Ad-to-sales ratio
o Medium A-S-R
o Highest: Liquor (15.6%)
Organization
 Integrated
o
o
o
o
o
supply chain
Design
Engineer
Manufacture many of the components and
parts
Market
Sell
 Supply
network: steel, raw materials, other
components
Advertising Analysis
Overview
 Many
different advertising strategies in their
ad campaigns
o
o
o
o
o
Informative
Combative
Persuasive
Celebrity Endorsement
Emotional Appeal
 $13
billion spent on advertising in 2010
 Advertising spending is expected to persist
at 2.2% of revenue in 2011
Auto Industry Advertising
2
layers to advertising in the auto industry
1.
2.
Advertising by dealerships
Advertising by brands
Dealerships
Nationwide
Local
Lower Quality
Establish
Personal
relationship
Brands
Informative
High Quality
Persuasive
Combative
Dealership Advertising

Dealership Advertising
o
o
o
o
o
o
o
Primarily informative in nature
Demand is more price elastic
Ads are more focused on price than car
attributes
Ads are almost always local and usually feature
the boss of the dealership— “personal
connection”
Ads are lower in quality and much less
expensive to produce
Often loud, repetitive, and low quality
Notable slogan: “No Hassle, No Razzle Dazzle”
from a local Ithaca dealership
Dealership Ads
 http://www.youtube.com/watch?v=A82A
mZ3Glmk
Dealership Advertising Trends
 Dealership
advertisements reflect
consumer preferences in local area
 Consumer preferences influenced
o
o
o
o
Climate
Income
Reason for purchase (car use)
Car culture of city
 Data
o
o
on dealership advertising 2008-2010
Sub-sample of different markets nationwide
Associations between brands and cities, etc.
Dealership Advertising by City
Top advertised brands by market
Dealership City
Top Advertised
Brand
Total Amount
Spent ($)
Atlanta, GA
Ford F-Series
1,277,509
Dallas, TX
Ford F-Series
9,693,999
Denver, CO
Ford F-Series
2,727,011
Houston, TX
Ford F-Series
Los Angeles, CA
BMW 3-Series
7,223,330
8,570,245
New York, NY
BMW 3-Series
6,345,458
Normalized Dealership Adv.
Highest Total Dealership Spending by City
City
Population (mil)
Adv. Spending
Adv. Per Capita
Los Angeles
9.9
$102,669, 540
$10.37
New York
8.4
$44,609,248
$5.31
Houston
2.3
$39,159,786
$17.03
Dallas
1.3
$38,815,813
$29.86
San Francisco
.9
$33,640,608
$37.38
Philadelphia
1.6
$18,582,866
$11.61
Phoenix
1.6
$16,601,331
$10.38
WILKES BARRE
WACO
TUCSON
SPRINGFIELD MO
SOUTH BEND
SEATTLE
SAN DIEGO
SALT LAKE CITY
ROCHESTER
PORTLAND OR
PHOENIX
PADUCAH
OKLAHOMA CITY
NEW YORK
MINNEAPOLIS
MIAMI
LOS ANGELES
LEXINGTON
KNOXVILLE
JOHNSTOWN
JACKSON,MS
HOUSTON
GREEN BAY
FRESNO
DES MOINES
DAYTON
DALLAS
COLUMBIA,SC
CLEVELAND
CHICAGO
CHARLESTON, WV
CEDAR RAPIDS
BOSTON
BATON ROUGE
AUSTIN
ALBUQUERQUE
Ford F-Series
Total dealership advertising spending for the F-Series by city
10000000
9000000
8000000
7000000
6000000
5000000
4000000
3000000
2000000
1000000
0
ATLANTA
AUSTIN
BALTIMORE
BATON ROUGE
BIRMINGHAM
BOSTON
CHARLOTTE
CHICAGO
CINCINNATI
CLEVELAND
COLUMBUS,OH
DALLAS
DAYTON
DENVER
FRESNO
FT. MYERS
HONOLULU
HOUSTON
JACKSONVILLE
KANSAS CITY
LAS VEGAS
LOS ANGELES
LOUISVILLE
MIAMI
MILWAUKEE
MINNEAPOLIS
NEW YORK
NORFOLK
OKLAHOMA CITY
OMAHA
PHILADELPHIA
PHOENIX
PITTSBURGH
PORTLAND OR
ROCHESTER
SACRAMENTO
SALT LAKE CITY
SAN DIEGO
SAN FRANCISCO
SEATTLE
SPOKANE
ST LOUIS
WACO
WILKES BARRE
BMW 3-Series
Total dealership advertising spending for the 3-Series by city
9000000
8000000
7000000
6000000
5000000
4000000
3000000
2000000
1000000
0
Advertising Spending by City
 Top
o
Spender: Los Angeles
Total spent by dealerships 2008-2010 =
$102,669,540
 Why?
o
o
17.8 million people in metropolitan area
Extremely strong car culture – revolutionary
highway system, mediocre mass transit
o
o
Cars crucial to livelihood in the city
Highest income disparity but extreme wealth
in the area
Brand Advertising
 Brand
o
o
o
o
o
Advertising
More persuasive in nature
Demand is more price inelastic
Ads are more focused on car attributes
than price
Ads are typically national or regional,
covering a much larger area than
dealership ads
Ads are higher in quality and much more
expensive to produce and air
Total Ad Spending
Total Ad Spending by Parent Company
0%
0%
0%
0%
12%
5%
BMW Ag
0%
Chrysler Group Llc
6%
Daimler Ag
Ford Motor Co
18%
Fuji Heavy Industries Ltd
11%
1%
Honda Motor Co Ltd
Hyundai Corp
6%
0%
General Motors Corp
18%
Mazda Motor Corp
MITSUBISHI MOTORS CORP
12%
9%
Nissan Motor Co Ltd
Porsche AG
Spyker Cars NV
SUZUKI MOTOR CO LTD
Toyota Motor Corp
Volkswagen Ag
Total Ad Spending
 Auto
industry “Big Three” top spenders on
advertising:
1.
2.
3.
Ford – 18%
GM – 18%
Chrysler – 12%
 Biggest
1.
2.
3.
advertising threats:
Toyota – 12%
Nissan – 11%
Honda – 9%
Average Ad Spending by Brand
Volkswagen highest spender = $167,510 per ad
Average Ad Spending by Parent Brand
Volkswagen Ag
Toyota Motor Corp
SUZUKI MOTOR CO LTD
Porsche AG
Nissan Motor Co Ltd
MITSUBISHI MOTORS CORP
Mazda Motor Corp
Hyundai Corp
Honda Motor Co Ltd
General Motors Corp
Fuji Heavy Industries Ltd
Ford Motor Co
Daimler Ag
Chrysler Group Llc
BMW Ag
$0
$20,000 $40,000 $60,000 $80,000 $100,000$120,000$140,000$160,000$180,000
Average Ad Spending by Brand
 Highest
1.
2.
3.
4.
5.
spenders per ad:
Volkswagen
Ford
Nissan
Honda
Hyundai
 Implications
o
o
Primarily foreign automakers
Trying to win larger part of the market
o
o
Buying more expensive ad spots, large audiences
Foreign brands higher reputations recently
Brand Ad Spending Trends
Ford Fiesta

Ford Focus
Ford Fusion
Ford Mustang

Ford Taurus

Lincoln MKS
Lincoln MKZ
Ford Fusion – Gas powered or
Hybrid
Emphasis on Fuel Efficiency
“We Speak Value. We Speak
MPG”
Volvo C70
Buick Enclave
Volvo S80
Buick Lacrosse
Buick Lucerne
Cadillac CTS



GM – Chevrolet Malibu
Gas powered, but fuel
efficient – 33 MPG
“Fuel economy that a
comparable Toyota Camry
can’t match”
Chevrolet Aveo
Chevrolet Camaro
Chevrolet Cobalt
Chevrolet Equinox
Chevrolet HHR
Chevrolet Impala
Chevrolet Malibu
Pontiac G5
Pontiac G6
Pontiac G8
Brand Ad Spending Trends

Acura
Acura RL
Acura TL

Acura TSX
Honda Accord
Honda Civic
Honda Fit

Honda Accord – Honda’s
bestseller
Honda Insight – Honda’s
hybrid
Lower starting price than Prius
($18,200 v. $23,050)
Honda Insight
Lexus ES



Toyota Prius – Put hybrid
vehicles on the map
“Harmony between man,
nature and machine”
Toyota Corolla – Comparable
to the Honda Accord
Lexus HS
Lexus IS
Lexus LS
Scion TC
Scion xB
Toyota Camry
Toyota Corolla
Toyota Prius
Toyota Yaris
Brand Ad Spending Trends
Average Cost /Ad by Day of Week
$180,000
$163,743
$160,000
$140,000
$111,557
$120,000
$102,690
$110,035
$101,367
$100,000
$80,707
$80,000
$57,404
$60,000
$40,000
$20,000
$0
SUN
MON
TUE
WED
THU
FRI
SAT
*Sunday Early Fringe = 6pm
*Prime Access 1 = 7pm (post evening news)
*Late news = 11pm
Weekend Late News
Weekend Late Fringe
Sunday Morning
Sunday Early Fringe 2
Sunday Early Fringe 1
Sunday Afternoon
Saturday Prime Access
Saturday Morning
Saturday Early Fringe 2
Saturday Early Fringe 1
Saturday Afternoon
Prime Access 2
Prime Access 1
Prime
Overnight
Morning Daytime 2
Morning Daytime 1
Late News
Late Fringe
Early News 2
Early News 1
Early Morning 2
Early Morning 1
Early Fringe 2
Early Fringe 1
Afternoon Daytime 2
Afternoon Daytime 1
Brand Ad Spending Trends
Average Spent/Ad by Time of Day
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
Implications
 Sunday
Why?
o
o
o
Sporting events
Awards shows
Largest audience – home with family, etc.
 Time
1.
2.
3.
highest ad spending by brands –
of day with highest ad spending:
Sunday Fringe 2 – ends of sporting events,
etc.
Prime Access 1 – Post evening news,
entertainment television, game shows
Late News – Post sitcoms, dramas
Advertising by Program Type
Average Advertising Cost/Program Type
$500,000
$400,000
$300,000
$200,000
$100,000
$0
Advertising by Program Type
 Program
1.
2.
3.
type with highest average cost:
Professional Football – Game
Professional Football – Post-Game
Award/Pageant/Parade/Celebration
 Primarily
air on Sundays
 Fits with data on time of day spending
o
o
o
Highest ad spending Sunday Fringe 2
Sundays around 6pm
Coincides with end of games and beginning
of post-games
Where Brands Advertise
 BMW
– 79% advertising during Golf
 Mercedes – 15% advertising during Golf
 14%
during News Forum/Interview shows
 GM
– 45% advertising during college and
professional sporting events
 Toyota – 21% advertising during drama shows
 15%
during Professional Football Games
 Conclusion:
Luxury brands advertise to
target educated consumers of higher socioeconomic status
Advertising Strategies
Brand Informative Advertising
 Conveys
simple search attributes to
consumers
 Consumers look for product specs and
special features when making purchasing
decisions
 Automotive Industry:
o
o
o
o
Fuel efficiency
Technical features – engine size, horsepower, etc.
Price point
Available financing
Brand Informative Advertising
 Highlighted
attributes differ between
product categories
o
o
o
o
o
o
Luxury
Economy
Truck/SUV
Hybrids
Sport
Minivan
Informative: Luxury
 Target
new features usually focusing on
technological and performance upgrades
 Primarily in TV
commercials
 Mercedes:
http://www.youtube.com/watch?v=Ho4PI9
zaZy4&feature=related
Informative: Economy
 Economy
class brands’ informative
advertising highlights vehicle
o
o
o
o
Fuel efficiency (MPG)
Price
Performance
Warranties
Informative: Economy
Informative: SUVs & Trucks
 SUV
& Truck advertising focuses on
qualities such as:
o
o
o
Fuel efficiency (MPG)
Towing Capacity
Usability features
Informative: Hybrids
 Informative
Advertisements in the hybrid
segment focus on
o
o
o
New hybrid technology and how it works,
Ecological benefits of hybrids
Fuel efficiency (MPG)
Informative: Minivan
 Similar
o
o
o
o
to economy, but also focuses on
Kid friendly attributes
Ease of use
Storage capabilities
Long distance travel capabilities
Persuasive Advertising
 Goal:
to portray your respective brand’s
vehicles as different from those of your
competitors so as to alter consumers’
tastes and create a perceived product
difference
o
o
Emotional Appeals
Image Changing
 Perceived
product difference allows brand
to charge more for their products
o
Decreases elasticity of demand relative to
price
Emotional Appeals





Social (Status)
Fear
Humor
Lifestyle
Endorsement
Social Appeals
 Ads
o
will target the idea of “fitting-in”
Toyota - recent campaign with the
Highlander
 http://www.youtube.com/watch?v=80pN
UxIczig
Fear Appeals
 Within
the automotive industry, most of
the fear appeals mention safety attributes
o
o
Show the harsh realities of accidents and
their possible effects
Highlight brand’s unique safety features
Fear Appeals
 Acura:
o
http://www.youtube.com/watch?v=6p9ZH
G8Fac0
 Mercedes:
o
http://www.youtube.com/watch?v=_jqnR2
pucm4&feature=related
Humor Appeals
 Humor
is an element that is used in around
30% of advertisements across industries
 Benefits:
o
o
 In
Excellent tool to catch the viewer’s attention
Can help in achieving better recall – potential
to increase sales
auto industry, sometimes parody the use
of sex appeals
Humor Appeals
 Volkswagen:
http://www.youtube.com/watch?v=GTq
M1LLxMSg
Lifestyle Appeals
 Many
brands strive to target the lifestyle of
their customers or the lifestyles their
customers would like to have
o
o
o
Sporty/outdoorsy
Family oriented
High status
 Advertisements
highlight activities
associated with target lifestyle
Lifestyle Appeals
 BMW:
http://www.youtube.com/watch?v=Jt662ix43k
Endorsements
 Celebrities
and well known personalities
often endorse certain products
 Endorsements can help drive sales
 Potential to increase advertisement recall
if celebrity is appealing to the consumer
Endorsements
 http://www.spike.com/video-
clips/bnhcqi/cadillac-tiki-barber
 http://www.youtube.com/watch?v=CE2lI
BQn2KM
Image Changing
 Automakers
trying to change their brand
image in response to rising fuel prices and
to appeal to a more environmentallyconscious nation.
o
SUVs now made as hybrids—they are trying to
change image from gas guzzling to eco-friendly
haulers
Example: Mustang & Mileage
 Mustang’s
recent commercial—who
would’ve thought 5 years ago that
advertising for a model like Mustang
would ever focus on MPGs?
 Bloggers: “Who the hell buys a Mustang
for the mileage?”
 http://www.youtube.com/watch?v=ZAX5
50biM7c
Honda Odyssey & Dads
 Honda
o
Odyssey
Reinventing the image of the minivan. SoccerMom  Cool Dad
Combative Advertising
 Method
used in mature markets
 Goal: To shift consumers preferences
towards the advertising firm
o
o
Redistribution of consumers among brands
No expansion of the market
 Differs
o
o
o
o
by segment in the auto industry
Luxury
Economy
Sports Cars
Hybrids
Combative: Luxury
 Advertising
focused in major cities,
especially Los Angeles and New York
(higher income areas)
 Notable Battle: Audi vs. BMW
o
o
Perhaps the most clearly visible example of
combative advertising in the entire industry
Audi puts up a billboard in the LA metro area,
BMW then responds with another right next to
it
Combative: Economy
 Nationwide
 Notable
Battle: Toyota Camry vs. Honda
Accord
 New Battle: Kia Optima vs. Toyota Camry
o
o
o
Camry has been the “go-to” economy
vehicle in America, often first in consumers’
minds
Kia trying to get into the game with the
Optima
Competitive advantage: Kia focuses on
o
o
Lower price
Features the Camry doesn’t have (aerodynamic
styling and Sirius satellite radio)
Kia Optima
 http://www.youtube.com/watch?v=wc9
Aj7RTUlY
Combative: Sports Cars
 Notable
o
o
Battle: Subaru vs. Audi/BMW
Audi and BMW more prestige and better
reputation for manufacturing sleek and
fancy-looking sports cars
Subaru chosen to focus on performance,
specifically engine capability, as its
competitive advantage
Combative: Hybrid
 Notable
o
o
Battle: Lexus vs. Infiniti
Lexus - originally the main player in luxury
hybrids
Infiniti now getting into the game
o
o
o
Advertise how they are passing other hybrids
Producing unassuming vehicles that exceed
consumer expectations— “not what you
think”
Advertised as hybrid with performance
Infiniti Hybrid
 http://www.youtube.com/watch?v=pzWy
d10icS4&feature=relmfu
Mixed-Method Advertising
 Combining
elements from various
advertising techniques and strategies
 Eminem for Chrysler
o
http://www.youtube.com/watch?v=SKL254
Y_jtc&bid=5079147&adid=233347236&pid=5
7249858&KWNM=super+bowl+commercial&
KWID=150763308&channel=PS
 Audi
o
“Progress is Beautiful” campaign
http://www.youtube.com/watch?v=LQ6R7
c3cnEE
Recalls & Brand Reputation
Product Recalls & Reputation
Recall: when a manufacturer notifies all
owners of a specific vehicle of a condition
or defect that could affect safety or safe
operation.
 Impact brands’ quality reputation –
reputation based on the quality of the
product provided by the brand
o
Quality reputation suffers the most from
product recalls
Benefits of a Good Reputation
 Reputation
used as a solution to
uncertainty for consumers
 Reputation a signal of quality
 Benefits to brands:
o
o
o
o
Ability to charge higher prices (inelastic)
Higher growth and sales
Higher status in the minds of consumers
Protection against new entrants to the market
 Reputation
of a brand creates
expectations for its products
Liability of a Good Reputation
 Rhee
and Haunschild (2003)
 Explored relationship between brand
reputation and the impact of recalls on:
o
o
o
Market share
Profits
Consumer perceptions/attitudes
 Studied
o
o
recalls between 1975 and 1999
Of the 46 automakers sampled, 1,853 recall
events
Average of 2.26 recalls per automaker per
year
Liability of a Good Reputation


Severe recalls tend to decrease brand’s
market share in following month
Non-severe recalls result in no damage to an
automaker’s market share
o

Why? Small recalls can be perceived as the
automaker taking initiative to fix a problem
High reputation automakers more likely to be
damaged by recalls
o
Why?
1. Consumers greater expectations for these
brands
2. Media focuses on recalls of reputation firms
Toyota Recall 2009-2010
Problem: ‘sudden unintended acceleration’
 Claimed ill-fitting floor mats caused pedals
to stick
 True cause of sudden unintended accel.
faulty accelerator pedals
Recall: 22.4 million automobile owners
received recall notices in 12 month period
ending Summer 2010
o
8.54 million for faulty pedals and floor mats
Recalls and Advertising
 Combat
recalls with:
Incentives
 Toyota offered an
average of $2,256
in incentives
 Competitors also
offer incentives
o
GM offered up to
$1000 if traded in a
Toyota
Advertising
 Apologetic ads
o
Superbowl 2010
 Stressed
o
o
brands:
Commitment to
safety
Importance of
customer
satisfaction
Advertising Response
<< “As you may have heard, in rare cases, sticking
accelerator pedals have occurred in some of our
vehicles. We believe we are close to announcing an
effective remedy. And we’ve temporarily halted
production at some of our N. American plants to focus
on the vehicles we’ve recalled. Why? Because it’s
the right thing to do for our customers.”
Toyota Recall 2009-2010
Toyota Pricing Data (April 2008-April 2010)
 No apparent break in the relative price of
Toyota cars
 Recalled Toyotas lost 1% of their price
advantage over unrecalled Toyotas
 Never larger than 2% change in price
o
Never outside the margin of error
Conclusion: If recalls matter, small, short lived
effect
o
Appears directly after initial media coverage of
the recall event
Ford & Bridgestone/Firestone
 Summer
2000: Tire tread separation on
Bridgestone/Firestone tires
o
o
Number one tire for Ford Explorers
Recalled 6.5 million tires August 9, 2000
 Prime
recall
o
o
o
example of short lived impact of
Survey of consumers attitudes toward Ford on
August 16, 17
50% polled said “less likely” to buy vehicle with
tires
25% SUV intenders who shun Explorer blame
recall
Impact of Apologetic Ads
 Apologetic
campaign
o
Ads – newspaper advertising
Ford President stating “Our goal is your safety
and trust”
 Focus
Groups August 12 & 13 to measure
effectiveness of recall ad campaign
o
o
o
34% participants said impression of Ford
improved
5% said impression of Ford worsened
25% said more likely to consider a Ford next
time they buy a vehicle based on how the
company handled the situation
Recent Advertising
Innovations
Online Advertising
 Joining
trend towards online advertising
 Now utilize all main forms of online
advertising
o
o
o
o
Banner ads
Search Engine Advertising (keywords)
Rich media – full length car ads preface
videos viewed on Youtube and Hulu
Social Media – Facebook and Twitter
Social Media – Facebook
 Facebook
creates online community for
lovers of a brand
 Automakers utilize Facebook to engage
consumers
o
o
o
o
Easy exchange of information between the
two parties
Dialogue that was not possible before
Easy word of mouth marketing
Encourage user generated content and
interaction with the brand’s offerings
Example: Toyota USA – Facebook voters
determine which 100 do-gooders win Toyotas
Social Media - Facebook
 Corporate
o
CEO stated: “Social media is the future”
 Ford
o
o
initiative at Ford
Explorer launch
Used Facebook as integral part of the launch
Real-time Facebook reveal with New York
City launch event
Social Media – Twitter
 Twitter
can keep followers updated
around the clock on brand news
Recommendations
Future Advertising Strategies
 Crucial
to create a concrete identity of
brand through advertising
 Move towards strengthening core
products
o
Continuing emphasis on fuel efficiency
 Concrete
identity that leaves old players
of auto segment in dust
o
o
Brand community like Saturn
Advertising with many appeals like Audi
 Creation
of strong brand community
makes even harder for consumers to
leave
Future Advertising Strategies
 Move
towards ads with more emotional
appeals – ads that leave the greatest
impact
 Mixed method advertising
o
o
o
o
Humor appeals
Social & Lifestyle appeals
Image changing – new luxury, etc.
Highlighting innovation
 Social
media – better connection with
consumers, greater reach & cheaper!
Advertising Investments
 Advertising
goal – reach large, interested
audience with least expenditure
audience
o
Earn highest return on investment
 Advertise
more on college sports, less on
professional sports
o
o
o
Similar audience
Cheaper placements
Also on Sunday, most popular advertising day
Advertising Investments

Family oriented cars
Children’s/Family
entertainment, daytime
o
o

Luxury hybrids
increase advertising
across the board to compete
o

Target moms
Even target kids – see cool minivan, tell parents
about
Prestige + Eco-friendly, previously unavailable
Move advertising $ to similar programming
that is less expensive
o
o
Professional Football post-game
pre-game
Cheaper, but same target audience
Questions?