In 2017, estimates show that over 206 billion dollars was spent on advertising in the US according to a report made by eMarketer, advertisers in the automotive industry were listed as being among the top spenders in the advertising industry.
In the automotive marketing space, there are three tiers:
Tier 1: (OEM) original equipment manufacturer
Tier 2: dealer/regional ad association
Tier 3: retail dealer advertisements
All three of these automotive marketing tiers have different roles assigned to them and when working in conjunction can provide enormous synchronization, efficacy, and (at the end of the day) sales for the major automotive industry brands and dealerships.
Now that we’ve outlined the three tiers of automotive marketing let’s go over these tiers in detail and explain the roles that they play.
Tier 1: OEM Or Manufacturer
Original automotive manufacturers have the deepest pockets and work with some of the industry’s top advertising agencies. The goal of tier 1 marketing campaigns is to increase brand awareness, promote brand identity, and inform consumers of new product launches. The different types of advertising channels in tier 1 range from traditional TV and radio, to product placement in movies (a la Fast and the Furious), to major sponsorships such as Hyundai in the Super Bowl.
Manufacturers and their respective ad agencies have to do more than simply showcase their products. They have to make sure their ad dollars elicit emotions from their potential customers and evoke a deep connection with their brand. A recent example of this would be Matthew McConaughey partnering with Lincoln to try and connect his ultra-cool persona with Lincoln’s brand of luxury vehicles.
Tier 2: Regional/Dealer Ad Associations
Before digital marketing tools such as Facebook and Instagram began dominating local advertising, manufacturers and dealers felt a need to pool their money in local markets to broadcast local deals and increase awareness of industry accolades in attempts to inform local customers and ultimately drive sales. Dealerships would advertise their local deals showcasing a monthly payment, APR, or deep discount as the highlighted local deal.
Advertising dollars in Tier 2 typically come from a collective group of local dealers pooling their money in addition to a contribution from the manufacturer. Occasionally local dealers source the same advertising agency as the manufacturer and at other times a local advertising agency is used that is more familiar with the local market.
In conjunction with Tier 1 advertising buys, Tier 2 ad buys should increase awareness by highlighting manufacturer accolades and driving traffic to local dealerships by advertising local deals. In this era, consumers will still see Tier 2 ad dollars on TV and radio but dollars are increasingly being spent on Facebook marketing, paid Google search results, Instagram marketing videos, and overall social media posts.
Tier 3: Retail Dealer Advertising
Originally, Tier 3 dealer advertising was deeply ingrained in television. Local dealers would purchase TV spots and run high energy ads with dealers screaming into the camera professing their insane deals and lowest prices in town. Today, things look very different.
The marketing paradigm has shifted. Traditional marketing has taken a hard turn in the past decade. We are no longer in the days of television, radio and print ads targeting local in market shoppers. We are in a new marketing landscape and now, according to the NADA 2020 Data report, local dealerships spend 55.4% of their advertising budget on internet marketing. Traditional media such as television, radio and print represent a much smaller portion of monthly and annual ad spend. What’s more trends show that number is set to shrink even more over the coming years. One of the key factors impacting this new trend is dealerships inability to measure the efficacy of traditional ads on their bottom line and the lack of hyper targeted detailed analytics that digital marketing provides.
Reports show that in order to be a successful Tier 3 marketer one must have a completely integrated multi channel approach that hyper targets local customers whilst still remaining in communication with the dealers current customer base.
Both marketers as well as advertisers have experienced enormous change over the past decade and trends show there is more change to come as technology continues to evolve. Luckily, the auto industry is no stranger to change. Autonomous vehicles, car sharing, and electric vehicles have already shifted the local dealer paradigm immensely and will continue to do so.
In spite of all of this, US car manufacturers as well as their local retail partners will continue to play a large role in the shape of this new advertising landscape. The three tiers continue to survive in these changing times and responsibility will lie with the advertising agencies that service these tiers to remain ahead of the curve and keep this distribution method relevant and cutting edge.