What type of budget do car manufacturers have on marketing / advertising?

krzysiek · 24-05-2012, 05:48 PM

Hi guys,

Not that anyone here will probably know for certain, but some of you might have a decent idea - or at least a better idea than I do.

I am wondering what type of advertising budget car manufacturers work with. I don't mean on a local, dealer level where a dealer might pay for some local advertising for his / her specific dealership - I mean on a wider, statewide (Victoria) scale where the manufacturer themselves (FoA in this case) would spend money to market their 'range' of products, etc.

What are we talking here, on a monthly basis, does anyone know? I have an idea I am thinking of but I need to know what type of budget the big players are working with. It's a brand new concept, so I am just thinking at the moment and trying to crunch some numbers.

Any help would be appreciated.

krzysiek · 24-05-2012, 06:08 PM

So it seems in 2008 they were spending around 50-65M a year (Oz manufacturers - not all, ones like Holden, Ford, Toyota) and I suspect the others would be lower, but still in quite high millions per year.

bobthebilda · 25-05-2012, 07:20 PM

I think i read somewhere that the average spend for a car company in australia is roughly $500 per car for advertising.

JPFS1 · 25-05-2012, 08:05 PM

Advertising or marketing spend would be dependent on many factors, but one would think that to avoid over capitolising, they would look at the market size and potential, and allocate budget accordingly. No point spending 50 million if your potential market size is 100 sales per year (an extreme example to make point).

krzysiek · 25-05-2012, 08:10 PM

If you ever dig that up, that would be very interesting to read over. I suppose there are several ways to justify the costs.

I was potentially considering making a free car booklet/catalog where Aussie car manufacturers & sellers could advertise in (for a fee) and instead of having just an image/etc of their cars, they could do a bit of a write up like you might find in other car mags.

It would be distributed to all of Melbourne (approx. 1.6M homes) and the costs of this exercise approach around $425-$450K on rough calculations per run. I figured there are around 38ish car manufacturers/sellers here in Aus, so if 30 of them ended up participating and buying an ad spot on a monthly basis they could have it for around 15K-20K.

Benefits:
-Distributed to 1.6M Melbourne metro homes
-Instant impact (online advertising etc is good but this will put the cars infront of the people as everyone checks their mail - even if they're not actively looking for a new car they will at least get a peek of the mag and their interest may peak and they might look through it (generate sales).

Cons:
-Ford for example would be in the booklet but so would another 25+ potential car advertisers.
- Can they afford around 20K per month additional on their marketing for a every-door-direct type of print advertising, per page. Pages are approx 1.5x the size of a standard A4.

That is the idea, at least.

bobthebilda · 25-05-2012, 08:44 PM

Quote:

Originally Posted by krzysiek

If you ever dig that up, that would be very interesting to read over. I suppose there are several ways to justify the costs.

I was potentially considering making a free car booklet/catalog where Aussie car manufacturers & sellers could advertise in (for a fee) and instead of having just an image/etc of their cars, they could do a bit of a write up like you might find in other car mags.

It would be distributed to all of Melbourne (approx. 1.6M homes) and the costs of this exercise approach around $425-$450K on rough calculations per run. I figured there are around 38ish car manufacturers/sellers here in Aus, so if 30 of them ended up participating and buying an ad spot on a monthly basis they could have it for around 15K-20K.

Benefits:
-Distributed to 1.6M Melbourne metro homes
-Instant impact (online advertising etc is good but this will put the cars infront of the people as everyone checks their mail - even if they're not actively looking for a new car they will at least get a peek of the mag and their interest may peak and they might look through it (generate sales).

Cons:
-Ford for example would be in the booklet but so would another 25+ potential car advertisers.
- Can they afford around 20K per month additional on their marketing for a every-door-direct type of print advertising, per page. Pages are approx 1.5x the size of a standard A4.

That is the idea, at least.

The sums dont seem to add up. Victorians buy around 20,000 cars per month. Out of those 20,000, your potential market wont be including those out of the melbourne metro area, or government and most fleet purchasers. So your potential market is 50% of the 20,000 purchasers each month = 10,000 car buyers ($500,000 / 10,000 cars = $50 per car). You will be asking a car company to place 10% ($50 / $500) of its victorian (combined national) advertising budget into one catalogue.

krzysiek · 25-05-2012, 08:54 PM

I think you made a small mistake in your calculations by dropping off a 0. It should be $5,000,000/10,000 = $500 per car (which makes sense going by your figures of $500 spent in advertising per car sold).

I think most of the private/business car purchases would be made by people living in Melbourne metro, which the 1.6M homes will cover most of that population. Of course, it won't really have any effect on Government sales but it should hit home to most private and business owners looking to buy.

In either case, it will be hard to drill down to very accurate figures without really know what they are. We are of course both assuming it is $500/car sold that is spent on advertising. It could be more, it could be a lot less.

At the end of the day, the question would be whether a $15K-$20K full page ad placement in a catalog/booklet going out to 1.6M Melbourne homes will return enough sales to justify the advertising cost (ROI).

Maybe I am being optimistic, but $20K worth of cars won't be a huge amount to cover, especially considering the coverage. Anyone know an average profit margin per car the factory itself will make (not the dealer but the general/corporate entity that would be funding the advertising)?

bobthebilda · 25-05-2012, 09:47 PM

Quote:

Originally Posted by krzysiek

I think you made a small mistake in your calculations by dropping off a 0. It should be $5,000,000/10,000 = $500 per car (which makes sense going by your figures of $500 spent in advertising per car sold).

I think most of the private/business car purchases would be made by people living in Melbourne metro, which the 1.6M homes will cover most of that population. Of course, it won't really have any effect on Government sales but it should hit home to most private and business owners looking to buy.

In either case, it will be hard to drill down to very accurate figures without really know what they are. We are of course both assuming it is $500/car sold that is spent on advertising. It could be more, it could be a lot less.

At the end of the day, the question would be whether a $15K-$20K full page ad placement in a catalog/booklet going out to 1.6M Melbourne homes will return enough sales to justify the advertising cost (ROI).

Maybe I am being optimistic, but $20K worth of cars won't be a huge amount to cover, especially considering the coverage. Anyone know an average profit margin per car the factory itself will make (not the dealer but the general/corporate entity that would be funding the advertising)?

Yes your right, my apologies. Friday night, a few beers dont equal good mathematics.

prydey · 26-05-2012, 08:30 AM

Quote:

Originally Posted by krzysiek

I was potentially considering making a free car booklet/catalog where Aussie car manufacturers & sellers could advertise in (for a fee) and instead of having just an image/etc of their cars, they could do a bit of a write up like you might find in other car mags.

It would be distributed to all of Melbourne (approx. 1.6M homes) and the costs of this exercise approach around $425-$450K on rough calculations per run.

how did you calculate the cost of the run? how many pages? what size (a4, a5etc) i work at newstyle printing in adelaide, and if you ever get this off the ground, give them a call and mention me Rob. pretty sure we could get that cost a fair bit lower.

krzysiek · 26-05-2012, 11:31 AM

Hi Rob,

The cost is based on using Salmat to distribute them (same guys who do all of the local paper deliveries around here) so they provide a rate for distribution that is as cheap as it gets.

Then I also extrapolated from pricing data I have received from several local printers here in Aus and then factored in how many copies I would need printed and distributed (1.6M) and the numbers came in to about that region. It may be a bit lower or higher, though.

The question would be whether they would be able to put 15-20K of their budget aside into something like this, especially on a monthly basis (240K/year commitment) - which I, perhaps optimistically, seem to think isn't all that much for year round distribution to millions of Melbourne residents.

I would be interested in giving them a call (your work) if it gets off the ground

PS: The costs I put above include printing, delivery to warehouse for distribution, and distribution.

Edit: I am unsure of the size of the paper stock, but it is about 270mm x 300mm or thereabouts. Can get the actual stock size name (as I forgot the name now, but I met up with a printer yesterday and they identified it - as I brought a sample with me). It would be around 32PP-35PP and printed on 51GSM stock to bring costs down (still ends up looking good, I've got a few 51GSM booklets here and they came out very nice).