Why Auto Dealerships Will Turn to TV Advertising in 2010

Recently, I pointed out a post on the Harvard Business Publishing site that described the strengths of the local car dealership business model. As a quick summary, these owners tend to have good reputations, deliver what their customers want, and entrench themselves in their communities. But these business owners also struggled to maintain market share and turn a profit in 2008. As a result the auto industry purchased far less TV advertising than it does in a typical year. crystal_ball

The Hollywood Reporter notes that TV station operators suffered a 33% drop in auto advertising revenues last year. The report references a regression analysis that studied the link between increases in TV advertising by the auto industry and higher vehicle sales over a period of 21 years. The regression analysis indicates that at least 39% of the increases in TV advertising can be explained by higher vehicle sales. Based on patterns revealed by the regression analysis, some experts predict that local TV stations should experience increased ad business from local auto dealerships in 2010 because consumer demand for autos will rise next year.

Not everyone agrees. Industry analysts point out that each market contains unique characteristics that affect demand for advertising.  The bottom line may be that auto dealerships will increase 2010 advertising simply because they have survived the recession, have cars to sell and want to brand themselves as the place that offers the best deal. If auto dealers elect to advertise on TV, it may be because their account executives have shown them the reach and influence of this media form.

[Source: Szalai, George. Auto Ads Will Kick into Gear, The Hollywood Reporter, June 2009] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.