Motor manufacturers have had an exceptional two years with growth beyond all expectations, despite the detrimental effect of the strong rand on the industry. Local manufacturers have spent more on advertising and marketing in 2005 (see chart) to increase their share of a market that has expanded rapidly thanks to lower interest rates, growth in the small business sector and the emerging black middle class. At the same time the industry has had to face a number of challenges in its marketing.
Ford’s marketing manager, Neale Hill, says the company operates on a three tier basis in managing its marketing. Tier one is corporate brand marketing. In the second tier, Ford works in conjunction with a dealer committee and advertises particular models on behalf of the dealers. Tier three involves the dealers advertising on an individual basis. The corporate advertising tier consumes around 80% of Ford’s advertising budget, while tier two takes up 18%.
For Ford, and most of its passenger vehicle competitors, television still receives the most advertising. Hill says it is the easiest medium to demonstrate the dynamic nature of the product. As television is visual, motor advertisers can use moving footage and sound to package their product. Television also has the broadest reach across all Living Standard Measures (LSMs) including the lower income groups. Hill believes this creates aspiration in buyers of the future.
In the last ten years, there have been a number of new entrants to the South African market – especially Eastern brands – as well as the return of North American brands such as Ford and General Motors. For the individual brands this has created a situation where it has become more difficult to cut through the advertising clutter.
A subtle trend that is likely to accelerate over the medium term appears to the increased use of relationship marketing. Hill says that above-the-line advertising accounts for around 80% of Ford’s corporate advertising. However, increased competition means the company needs to establish more meaningful relationships with customers. He believes that in future there will be more integrated advertising and more below-the-line activity.
Francois Roestorff, Kia’s Marketing manager, says that the internet has become an important source of research information for consumers. Kia receives a number of visits to its website each month which means that potential buyers arrive in the showroom already armed with much of the information they need to make their purchase decision. Often, the dealership experience will determine what and where they buy.
Lastly, price inflation has increased – particularly in television. Roestoff says this has resulted in Kia shortening it’s advertisements and using a value for money proposition to increase their impact.
Overall, passenger vehicle industry adspend looks likely to continue growing in the next three years, although at a slower pace than in the recent past.
Toyota’s Media Account Director at the FCB marketing agency, Gwen Bezuidenhout, says that the correct communications strategy is vital for a successful advertising campaign. The creative team needs “to understand the strategy and where it is going in order to create an excellent, stunning ad”. “They need to stick to the strategy and the target market,” she says. Bezuidenhout believes that sound media planning is about the numbers, common sense and gut feel.
The commercial vehicle (medium and heavy trucks) faces a number of similar pressures. Similarly to passenger vehicle companies, advertising budgets have increased in line with sales. Tata’s marketing manager, David Blaikie, says competition is intense and has been exacerbated by changing market dynamics. From a standing start five years ago, Tata now holds round 26% of the South African market share. This has prompted a more aggressive response from competitors, at least one of which has aggressively advertised against Tata products.
Tata’s marketing director, Douglas Viljoen, believes that advertising and promotion have been an essential component of the increase in volumes. Tata adopts an extremely focused approach to advertising and uses media such as daily, regional and community newspapers, trucking and related industry magazines, road shows and motor shows. Most of its above-the-line spend is in print. Currently Tata has a 50/ 50 split between above-the-line and below-the-line. Viljoen believes the below-the-line component will increase in future.
Tony Twine, an economist at Econometrix, is more cautious regarding unit sales growth. In a recent report he predicted a more muted 2% – 5% for this year. He cited headwinds, such as the pending change to the car allowance regime, which will make, in particular, luxury cars more expensive for their drivers.
Twine believes that the growth benefits of lower interest rates are now in the base, so cheaper finance will be less of a driver of purchase decisions. If he is right, certain categories of motor manufacturer – especially the luxury passenger car segment – are likely to work harder on their public profile. They will also try to stretch their advertising rands that much further or increase their advertising budgets.