July 27, 2001

Interep released a new report on automotive advertising entitled, "Radio Works for Automotive Advertisers." Automotive is the largest national advertising category in the United States, and generally ranks 3rd among the top national ad categories for radio.

Last year, according to Competitive Media Reporting, automotive advertisers spent $11 billion on media, up 25% since 1997. Of that total, auto advertisers spent $289 million on national radio, up 34% since 1997.

Despite the importance of the automotive category to radio on a raw dollars basis, and despite advertisers increasing investment in the medium, last year automotive advertisers allocated just 2.5% of total media spending to national radio. By far, the vast majority of automotive media dollars, 66% in 2000, are directed toward broadcast and cable television, followed by newspapers and magazines. Looking specifically at Dealer's Associations, which tend to have a more regional focus, radio receives 8.6% of total dollars, with the rest going primarily to newspapers and spot television.

According to Debbie Durben, President of Interep's Marketing Group, "We see a tremendous growth opportunity for radio within the automotive industry, and are aggressively targeting these companies. Our challenge is not to introduce auto advertisers to the medium, since most are already using radio to some degree. Rather, we must show them the additional opportunities in radio that can be tapped into with a relatively low additional investment." She adds, "Every 1% of automotive dollars that we can redirect toward radio brings an additional $100 million to the medium."

An increasingly competitive sales environment within the automotive category may be motivation for auto marketers to consider switching the media mix. According to the Interep report, radio offers marketers a host of advantages, including greater share of voice for comparable spending levels, greater reach than newspapers in key consumer groups, and targeted messaging for the increasingly diverse auto consumer base. As an example of this diversity, 45% of auto decision-makers are now women, 31% are young adults 18-34, 28% are over 55-years, 10% are African-American and 9% are Hispanic.

This year, new car sales are slowing compared to a record year in 2000, though sales rates are strong by historical standards. Domestic automakers saw the biggest decline, as they lost market share points to foreign-based makers for the first six months of the year.

Mimicking this pattern, CMR data shows that automotive advertising has slowed from January to May 2001 compared to the same period last year. Overall, the automotive advertising category is down 7%. Radio is showing similar trends in auto advertising compared to the exceptionally strong first half 2000. Compared to the same period in 1999, however, automotive radio advertising is up 14%, and compared to 1998, spending is up 49% - showing a strong long-term growth trend in this category for radio.

So far this year, the sharpest advertising declines within the automotive category are coming from domestic manufacturers, which could potentially lead to further share erosion to foreign automakers whose ad spending has been more stable. According to Durben, "Historical data shows that companies that sustain advertising during slow economic periods generally see a market share bump when conditions improve. So it certainly makes sense for companies to maintain a strong advertising presence throughout the remainder of this year. If advertisers choose to do this by becoming more strategic and targeted with their media dollars, we are confident that radio will benefit from a larger share of spending."

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