Automotive Dealerships Poised To Spend $9.4 Billion In Advertising, Marketing

Automotive dealerships have new reasons to market their products this year, although new and used cars are selling so fast that dealers hardly need to advertise them.

Borrell Associates forecasts $9.4 billion in dealership spending in 2022 on advertising and marketing -- up 8.8% compared with 2021.

The report -- 2022 Local Automotive Advertising Outlook, released Monday -- details how the events of the past 24 months have altered the advertising environment for local auto dealerships, and what this means for their future advertising plans.

The industry spent $38 billion last year -- 4.5 times more than it did on advertising -- to maintain an online presence through search engine optimization (SEO), web maintenance and hosting, online video production, social media management, and other digital marketing services.

The data shows that 2022 marks the beginning of a transition. An increasing amount of a dealership’s advertising and marketing budget will go toward rebranding, educating consumers about what their stores offer, and driving buyers to their websites to interact. Educating consumers on electronic vehicles will become important too.

Dealerships will become complete local fulfillment centers, where consumers can sell vehicles, buy new ones, get them serviced, qualify for financing, or pick up a car they bought online. This follows two years of vehicle sales rising and falling, prices skyrocketing, inventories plummeting, profits soaring, and semiconductor shortages.

An underlying trend continues to emerge — the insatiable consumption of video advertising outside of broadcast TV.

In 2020, dealerships began spending more on over-the-top (OTT) and other forms of streaming video advertising than they did on broadcast media like radio and TV combined. By 2023, they will spend $1.9 billion on OTT -- more than they will spend on paid search, according to Borrell data.

Dealers are scrambling to remain relevant and plan to spend more of their ad budgets on digital media than traditional media.

Paid search is forecast to reach $1.852 billion in 2022 -- up from $1.255 billion in 2015 -- but streaming video and OTT will make a much larger jump.

Streaming video and OTT are forecast to reach $1.502 billion, up from $745.1 million in 2015.

A few traditional channels such as newspaper, out of home, direct mail, cable TV, telemarketing and cinema are forecast to remain in the black this year, while traditional TV, radio, magazines and other print, and print directories will decline.

Of the 17 types of media, targeted banner ads -- which includes paid social-media ads -- will remain the dealers’ largest single spending category, with OTT rising to No. 2 within two years.

There been a “rapid drop in dealer ad spending per new vehicle sold,” a small drop in 2020 and steeper decline in 2021. Dealers, however, spent 10.4% less on advertising in 2020, but 14.9% more in 2021.

In 2022, the new advertising environment is shifting from new cars on the lot and manufacturer’s rebates -- which are both in short supply -- to other things like buy-back vehicles, meeting online buyers in person, provide answers to questions about electric cars, parts and service, and insurance and financing.  

For example, CarMax, with 225 stores, doubled its ad budget in 2021. The money was spent to educate consumers about the online and in-store car-buying experience, and on a new campaign to purchase cars from consumers.

CarMax intends to become the largest buyer of consumer vehicles, weaning its dependence on third-party auctions for its used-car inventory, according to the Borrell report. In 2021, CarMax crossed the threshold and began getting 52% of its inventory from consumers.

 

 

Next story loading loading..