Despite automakers’ drive for more cost-effective advertising …..

Compete, Inc. announced the findings from its latest Automotive Spark! “The Price of an Automotive Shopper: Advertising Efficiency and Its Impact on Automotive Demand.” In this Spark! Compete reveals that the industry’s average advertising cost was $192 per shopper in 2005, virtually unchanged from $191 per shopper in 2004, though there were exceptions at the brand level. In addition, the 2005 results supported earlier Compete results showing that advertising expenditures have a decreasing marginal efficiency.

For this study, Compete identified all brands’ efficiency performance for 2005, the most efficient brands, and the brands with the most improved performance year-over-year. Compete measured ad spend efficiency in “dollars per shopper” based on correlating monthly brand advertising dollars to the number of unique in-market shoppers by brand in the same month. The approach yields a powerful, consistent technique that allows automakers to evaluate the cost-effectiveness of their efforts to drive in-market vehicle shoppers, evaluate and reverse-engineer advertising budgets based on shoppers needed and spend allocated, and benchmark vehicle-level results to brand results.

“As the automotive industry has become more tactical, there is increasing pressure to drive efficiencies while simultaneously reach retail sales goals,” said Lincoln Merrihew, managing director of Compete’s automotive practice. “The lack of year-over-year gains at the industry level means efforts to drive efficiency are, at best, a work in progress.”

Key findings from the study include:

Cost per shopper worsens as ad spend increases. Of the 22 brands that spent less on advertising in 2005, 16 had better media spend efficiency in 2005

Full-line brands had more cost-effective spend. Toyota spent more than one billion dollars and had better-than-average efficiency; Chevrolet and Ford spent the most yet achieved better-than-average efficiencies.

Results at the brand level vary considerably. Toyota stands out as one of the top 10 most cost-efficient advertisers despite total spend near the highest of all brands. Subaru stands out for entering 2005’s top 10 (it was #12 in 2004).