An 11% Shift in Car Advertising Indicates Trend
White Plains, NY, (November 9, 2018)
How do you tell what direction an automotive company is steering their strategy? Take a look at their advertising spend.
In 2017, Ford, which throughout its 115-year history was known as a car innovator, reallocated 11% of its TV, cable and radio advertising budget to trucks and sports utility vehicles, according to Media Monitors' advertising spend data.
By September 2018, it had allocated even more: Trucks and SUVs are currently 85% of the auto maker's TV/Cable/Radio advertising. What's more, the shift comes at the expense of the company's car lines, which now account for just 15% of its ad spend in these media.
Earlier this year, Ford announced it would stop selling most of its car lines to focus on trucks and sport utility vehicles. Could it be the manufacturer had a new roadmap in mind more than a year before this news became public?
The advertising data appear to illustrate that Ford and its dealers have been reallocating ad spend for some time. For example, in 2016, in the markets Media Monitors covers, Ford spent 45% of its ad budget for TV, cable and radio on cars. By 2017, though, auto share was down to just one-third of the ad budget.
Ad spend data is a leading indicator: a reliable guide to where a manufacturer is heading. For Ford's competitors, these data points make for invaluable insights into the automaker's sales and marketing activities and into the overall direction of the company.
For example, regional/dealer ad associations mirrored Ford's moves, remixed their ad spend in the same way. The share of ad budget on SUVs increased significantly from 2016 to 2018 – from 42% to 66%. At the same time, they devoted less budget to cars. In the first nine months of 2018, the associations were spending less than one-quarter of what they had allocated in 2016.
In looking at both Tier 1 and Tier 2 combined, it's clear that Ford's shift was happening more than a year before its announcement. In 2016, for example, Ford and its dealer associations devoted a 57% share of the total ad budget on SUVs and trucks. By 2017, this was up to 71% - an increase of 14%. As of September 2018, it was 88.5%. These changes have come at the expense of car advertising, which thus far is at 11.5% - again, less than a quarter of what it had been.
When both tiers move in the same direction – increasing or decreasing spend in tandem – it is a certain indicator of a corporate strategy in motion.
Ford's decision to focus on trucks and SUVs is a bold move for the automotive manufacturer, which transformed manufacturing more than a century ago with its innovative moving assembly line. To some, the latest decision might seem crazy. But industry insiders are well aware that American auto consumers increasingly are expressing preferences for sport utility vehicles and trucks over cars.
Further, the industry itself is changing, as ride-sharing services and autonomous vehicles aim to disrupt the business model on which automakers rely. For Ford, consolidating and focusing on profitable lines is a strategic business decision essential to its future.
One immediate outcome of the decision, though, is a reduced budget. Ford is aiming to make an additional $11.5 billion (on top of a previously announced $14 billion) in cuts over the next five years, more than half of which will come from sales and marketing.
Yet, capturing the attention of car buyers is complex, and influencing them to buy a Ford brand requires strategic investment in advertising at every step along the path to purchase. For example, Nielsen insights show that top of the funnel advertising on TV and radio significantly increases ad recall. In fact, “TV advertising continues to engage car buyers at a level that far outpaces other media,” Nielsen says. Its data shows that more than 71% of active car buyers say they recall the automotive advertising they see on TV.
Ford and its dealer network haven't lost sight of this dynamic, and it shows in the ad spend data. They are committed to changing direction. And despite criticism, they are on to something. In its Q3 2018 earnings report, the company said its full-sized pickup trucks gained market share, while its line of Super Duty trucks had record high transaction prices.
No surprise here. You could see this story unfold in the ad spend data months ago.