AutoTrader CEO Chip Perry, making a statesman-like appearance on Fox Business News, noted that part of the problem with the beleaguered auto industry is its tremendous marketing inefficiency. The problem begins with the $30 billion it spends to sell 12 million cars – or more than $2,000 per car.
“Dealers are running hard to make the industry more efficient….(but) more than ninety percent of it is spent on traditional mass media,” noted Perry. Meanwhile, only ten percent of the audience is in the market to buy a car at any one time. This compares to efforts by third party sites such as AutoTrader, which figure they sell cars for $100 or so.
Meanwhile, the auto industry’s travails are beginning to seriously crimp ad networks and local sites that rely on national spending. Speaking at our ILM conference in Santa Clara last week, Adify CEO Russ Fradin said we cannot ignore that some industries that have been driving this space, like mortgage or credit companies and auto dealers, are nearly going out of business and that we’re starting to see “wholesale” pricing drops in CPMs.
Indeed, it has been irrational to spend ads $ so heavily on traditional media rather than the new media like internet. Though TV ads is stunning in comparison, more people research vehicles online these days to make their purchase decision. Except my mother-in-law still watches TV daily, my wife and I rarely turn it on. We are researching cars interested to us 100% online. Too bad my mother-in-law don’t buy cars!
There are lots of slices of where that $30 Billion is allocated but i suspect a the largest amount goes to overall big brand awareness. Either way, that $2,000 is built into the price that we all pay for a new car.