chip perry at j.d. power and associates automotive internet roundtable

The Future of Internet Automotive Advertising

October 18, 2007

“Detroit’s going to be scared [of the direct online sales model].” -Forrester Research, May, 1999

“Detroit’s going to be scared [of the direct online sales model].”

-Forrester ResearchMay, 1999


“Everywhere I go, people always ask if we could do the Dell model in cars and when is it going to happen.”

-Michael DellMay, 1999


“We’ll keep the [dealership] land, but we won’t have people on the showroom floor.”

-idealab chairman on the Michael Dell-backed direct Internet sales model

May, 1999


“Analysts predict the direct model will eventually win out…”

-Citi FinancialMarch, 2000


“By 2006, 32% of all U.S. new car sales—totaling 5.7 million vehicles—would take place online…”

-e-marketer.com December, 2002

Key Takeaways

• “Media model” will continue to dominate the scene

• Awkward transition phase will continue for awhile

• More holistic shopping experience will emerge

8

People still buy cars from people…

And will continue to buy from people!

3

The name of the game is NOT…

4

Context for Automotive Marketing (Pre-Internet)

Key Consumer Decisions

MediaMarketers Action

Prior to the advent of the Internet communicating with a potential car buyer was a

proposition

Context for Automotive and Dealer Marketing to Consumers (Pre-Internet)

Key Consumer Decisions Action

Vehicle Purchase

Which vehicle?

When to buy?

Which dealer?

Right Price?

MarketersTraditional

Media

Ad Associations

TV

Radio

Magazine

Outdoor

NewspaperDealers

OEMs

Tier 1

Tier 2

Tier 3Tier 3

Tier 3

Tier 3

Today’s Context is Different

MarketersTraditional

Media

Ad Associations


Vehicle Purchase

Which vehicle?

When to buy?

Which dealer?

Right Price?Dealers

OEMs

Internet

The Internet Efficiently & Effectively Influences All Key Consumer Decisions


Vehicle Purchase

Which vehicle?

When to buy?

Which dealer?

Right Price?

65% will buy in next 60 days 1

28% Impacted by Internet 2

1 MORPACE; AutoTrader.com User Profile Study2 J.D. Power and Associates; 2007 New Autoshopper.com Study

3 R.L Polk New Vehicle Shopping Media Usage

59% considering multiple vehicles 1

Most Important ItemResearched Online 3

Car Shoppers Are Bombarded by Automotive Advertising

What’s sticking?

9

Key Research Questions

1. What sources of information are most helpful in your new car buying decision?

2. What are the most important kinds of information you need?

Buyers Consider Multiple Vehicles

0 0.5 1 1.5 2 2.5 3 3.5 4

Beginning Phase

Middle Phase

Final Phase

Average Number of Vehicles Considered

OverallEntry LevelMidlevel CarMidlevel TruckLuxury

Middle Phase

Final Phase

Beginning Phase

Average Number of Vehicles Considered

Source: R.L. Polk CO., 2007 New Vehicle Shopping Media Usage.

0

5

10

15

20

25

30

35

40

45

1 2 3 4 5 6 7 8 9 10 12 13 14 18 20 24

Months

Perc

ent

Length of New Car Shopping Process

On average consumers take slightly less than 3 months shopping for a new car

2.74

2.67

2.79

2.63

3.04

0 0.5 1 1.5 2 2.5 3 3.5

Overall

Entry Level

Midlevel Car

Midlevel Truck

Luxury

Average Number of Months

Q24. How many month(s) did the entire new vehicle shopping process take you from start to end?

Overall, the Internet and the Dealership visit are considered Most Helpful throughout the Entire Process.

QUESTIONThinking about all of the sources of information used during the Beginning, Middle, Final, & Entire process, please rank order the sources according to how helpful they are.

Consumer Ratings of Car Shopping Information Sources

Source: R.L. Polk CO., 2007 New Vehicle Shopping Media Usage.10

Most important information consumers say they“need” to know when shopping for a new car

PRICE INFORMATION

QUALITY/RELIABILITYINFORMATION

GAS MILEAGEINFORMATION

SAFETY INFORMATION

MAKE/MODEL INFORMATION

13

QUESTIONWhat one source of information (TV, Internet, etc) did you find most helpful with each of the items that you needed during the entire process?



14

Source: NADA Data 2007 Report. R.L. Polk CO., 2007 New Vehicle Shopping Media Usage.

Dealer Spending vs. Car Shoppers’ Preferred Media

25

Media Share of Ad Spend

27

Internet

Other

Radio

Television

Newspapers/

Print

QUESTIONInternet sites offer different features to assist new car buyers. Not all sites offer the same array of features. Rank order the first five most helpful features during the vehicle buying process.



15

Importance ofInventory

16

17

Importance ofInventory

Tier 2

Tier 3 – Used

Tier 1

Tier 3 – New

21

Importance ofSpecials

Tier 1

Tier 2

Tier 3

Challenge: Proliferation and Complexity of Vehicle Options

29

Personalized, Psychographic Approach

30

e.g. Professional, Families, Young Couples


PRICE INFORMATION

QUALITY/RELIABILITYINFORMATION

GAS MILEAGEINFORMATION

SAFETY INFORMATION

MAKE/MODEL INFORMATION

13

One Stop Shopping: A Comprehensive Approach

34

Implications• Things won’t get simpler for awhile• Marketing and sales process re-engineering has just

begun• OEMs and Tier 2 players will get better at fighting for

consideration• Get ready for an interesting Third Party “Arms Race”• Ad spending shift from traditional media to Internet will

accelerate

Thank [email protected]

35