After a record-shattering 2016, automakers are dealing with the difficult task of maintaining or growing volume and margins in a market that is expected to decline by 6 percent or more from last year’s high.
According to the marketing news, Inventories are on the rise, prompting car companies to try and boost sales through their standard marketing strategies of increasing advertising and improving purchase incentives, such as cash rebates, lease offers and low-cost loans. Yet those strategies—if executed in the usual way—may not deliver more than the usual results, causing a negative impact on residual values and brand equity.
Although unit sales might have hit a peak in 2016, the months and years ahead are expected to be strong by historical standards. However, to avoid a sharp decline in top- and bottom-line results, marketers should make more effective use of digital channels and tools to optimize spend per vehicle and more precisely target buyers with a higher propensity to close.
In the U.S., total automotive marketing spending is about $35 billion per year and climbing, with roughly 10% of automotive sales revenue consumed by marketing expenses. Almost two-thirds of the money is variable marketing spend (i.e., purchase incentives); the rest is fixed marketing spend, which covers traditional advertising and marketing as well as digital channels.
The primary challenge for marketers is making sure those dollars are being allocated wisely, between the fixed and variable categories, and also within each category. In particular, they need to answer some big questions, including: What is the right combination of incentive offers—lease, loan and cash—to maximize sales volume and profit? And how should those offers be implemented across specific media channels and properties, both traditional and digital?
Marketing organizations must be able to answer these kinds of questions accurately and quickly.
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