Background
As part of our series examining the automotive sector, we asked Dominic Charles, MD of Audience Intelligence & Marketing Science at media agency Wavemaker, to provide an overview of what econometric analysis tells us about the category.
Using data from the Media Mix Navigator – a tool that’s fuelled by econometric data from 52 EssenceMediacom, Wavemaker, Mindshare and Gain Theory client brands, totalling £2.2 billion of media spend over 3 years - Dominic delves into what matters in terms of short and long term ROI and the factors that influence the optimal media-mix in the auto sector.
ROI varies by sector
One of the first things you can notice from using the Media Mix Navigator is that ROI varies significantly from category to category.
Taking automotive as an example, the short-term revenue advertising ROI is typically around 15:1 (dependent on exactly how you set up the scenario in the tool) with total ROI including long-term effects being 75:1.
Comparing that to FMCG the differences are stark with expected ROIs of 1.3 and 3.0 in the short and long term respectively.
It’s worth noting that the value of the product makes a huge difference in terms of revenue ROI. Obviously, cars are much more costly than toothpastes and therefore generate more revenue. This analysis doesn’t take into account the profit margin on each product which will typically put things on a much more even footing.
Automotive’s optimal media mix
As well as impacting total ROI, sector affects optimal media mix.
If we look at the optimised spend for brands of equivalent scale and equivalent spend, we can see the optimal mix varies greatly across categories.
One of the sectors that varies most from the average is automotive. The chart below, based on data from the Media Mix Navigator, shows the optimal automotive mix for a brand spending £20m and how that indexes compared with the average brand at the same spend level across all categories (where in the below chart the index for TV means that it commands X1.19 the share compared to the average brand.)
We can see immediately there are some clear areas where automotive varies from the ‘average’ brand. The first is AV (TV & Broadcaster VOD) which combined account for 71% of the optimal media spend - around 10 percentage points more than the optimal mix for an average brand and representing one of the highest AV shares of any category in the Media Mix Navigator databank.
This is not surprising given AV’s unique strengths and the nature of the automotive category.
Firstly, automotive is a naturally visual category therefore showcasing your model and its features in large screen, sound on, high attention format will naturally be an advantage – more so than if you were, say, advertising health insurance.
But another important dynamic which naturally favours the use of AV is purchase frequency.
Long-term media power
Cars are, obviously, an infrequent, high value purchase.
The infrequency of purchase has been compounded in recent years as around 92% of car purchases now involve some sort of finance agreement [1] meaning consumers are out of market for years at a time, regardless of how compelling any advertising is. This means that channels such as TV, that can create longer-term priming effects will naturally be more effective in this category as they can keep the brand salient for when the consumer is next in market.
The emotive power of these channels to create long-term behaviour change is also particularly powerful given this dynamic and we see this in automotive’s long-term ROI multiplier [2] being substantially larger than the equivalent for the other categories (see chart below).
Prominence of print
With an index of 237, another noticeable channel within the optimal mix in the automotive sector is print. (This index means that it commands X2.37 the share compared to the average brand.)
Partly, as with a number of the channels that index well, this will be a function of print being a visual medium which obviously suits itself to showing off the latest model of car.
However, the other area that bolsters print for automotive is the strength of specialist titles. Titles such as Top Gear Magazine, Autotrader and Autocar are still able to reach relatively scaled, but highly targeted, in-market audiences and provide an avenue for automotive brands. This high-interest aspect of autos is less prominent in other categories.
That said, print is also one of the areas where the actual category spend most starkly differs from the optimum, a trend which is present across the databank which suggests brands have generally disinvested in print more quickly than print’s effectiveness would suggest, particularly in automotive.
Negligible impact of generic search
A final clear point of contrast with the other categories is the impact that generic (unbranded) search has for automotive brands. It doesn’t really feature.
However, this is not surprising as searching generically for ‘new car’ in Google is a relatively unusual behaviour in a way that searching for ‘mortgages’ is not. As an example, there are nearly 10x as many searches for ‘BMW’ as there are for ‘new car’ [3]. Therefore, because people search directly for the brands and not search generically in the category, there is just less search interest for generic PPC to scoop up and so it’s a lower proportion of the optimal spend.
This lack of people searching generically also results in greater prominence for other ‘performance’ channels such as paid social and print, which in our digitally-focused world is often, wrongly, not regarded as being a ‘performance’ channel (much to the chagrin of old school DR planners!).
Interestingly, if you compare its optimal mix to actual category spend, you can see that the automotive category generally spends significantly higher than optimal proportions in online display. This is often in the pursuit of lead generation activity focusing on encouraging test drives. However, the data behind Media Mix Navigator suggests that, whilst this activity is generally effective for that purpose, those leads often have relatively poor conversions to sales and therefore other channels (social, radio, print) would be more optimal to maximise ROI whilst still performing a short-term acquisition role in planning.
[1] Source: Automotive Management
[2] Long Term Multiplier is a measure of the long term (3 months – 2 years) return achieved above the short term (0 – 3 months) performance
[3] Source: Google Trends
