A number of launches and robust growth in Q1 sales encourage car-makers to boost marketing and advertising budgets that were hit after the sector registered a very low growth rate last year.
It’s come-back time for the giants of the automobile industry. After the economic gloom of 2011, when the auto industry hit an all-time low, reportedly registering its lowest sales figures in the last five years, there’s a resurgence on the cards.
The first quarter of 2012 saw more than 65 launches at the Delhi AutoExpo. For the first time at the AutoExpo, 10 top global automobile manufacturers participated and showcased their products. What has added to this confidence is the estimate of the Society of Indian Automobile Manufacturers (SIAM) that the industry will grow at a promising rate of 10-12%. The new launches are viewed as a tool for pushing sales in the otherwise dismal scenario of last year.
Last year, the passenger vehicle category, which is a strong indicator of the Indian automobile industry, was particularly affected adversely by increase in fuel prices, interest rates, excise duty and widening price gap between petrol and diesel cars. Disappointed with the 2011 sales figures, the marketing head of a leading luxury car manufacturer had said, “Gone are the days of 50% growth in India. We now have to be satisfied with 10%-20% growth.” Paradoxically, the period when recession hit the world, 2009- 2010 was possibly one of the best years in terms of revenue for the auto industry. However, 2010 – 2011 was not able to live up to the hype and expectations of the previous year, and slumped to an abysmal low (2.2% growth rate). As a result, with a few exceptions like Volkswagen and Mahindra & Mahindra, marketers spent carefully on advertising last year and were expecting higher efficiency from every rupee they spent. “We were able to keep our marketing budgets intact, but the challenge was how effectively to utilize and channelize the marketing budget. The question before us was whether our budget was being utilized effectively,” says Nalin Kapoor, Sr. General Manager & Group Head, Marketing, Hyundai Motor, explaining the slowdown that the industry went through last year. On the contrary, a few advertisers like Maruti Suzuki, that registered low growth in sales between August-October (also the most crucial period for the auto sector due to festivals-led sales) last year, cut down significantly on advertising spends due to poor sales figures and fewer launches. “The overall business sentiment in the sector was negative. Also, we did not have many launches last year which led us to cut down our marketing spends,” informs Chief General Manager, Marketing, Maruti Suzuki India, Shashank Shrivastava, one of the largest advertisers in the automobile sector.
Nevertheless, the sector kept its chin up to excite and engage the consumer.
THE PROMISE OF GROWTH IN 2012
Recent AdEx data for TV and print advertising for the auto sector in Q1 2011-12 reveals that the volume of advertisements has grown by 8% in 2012 on TV and a whopping 15% in print media as compared to last year. The first good sign was announcement of Japan’s largest car manufacturer Nissan, which announced that it was sure of India becoming the second largest market in the world. Nissan Motors would make huge investments in India to expand its market and make it the export hub of Asia. The brand is currently spending more on increasing its dealer base and focused advertising to establish its brand, with special attention of ROI. “We are still in the early stages so our plans are very aggressive for sales of vehicles. Hence, our marketing plans are also aggressive and we will have bigger spends on marketing communications. However, we would be looking at better efficiencies from our spends. We are targeting at least 10% greater efficiency,” explains Dinesh Jain, Hover Automotive India, Nissan. Global auto giants like Ford and General Motors are also banking on similar buoyancy. As per recent industry estimates, the automobile industry in India will grow to five million vehicles by 2015, and nine million by 2020. This could make India the third largest auto market in the world.
Tata Motors, the largest in sale volume as well as the largest advertiser in the automobile sector as per the TAM AdEx ad volumes, too went through ups and downs last year in terms of its growth figures. However, overall sales figures of its passenger cars was on a sharp growth curve. Though Tata Motors could not be reached for a comment on this report despite several attempts, it can be said that the company appeared robust last year and continued spends in the first quarter of 2012 on the marketing front. As per the TAM AdEx data, Tata Motors has remained the top advertiser on both print and television platforms with 14% and 13% share of the total ad volume respectively in the last year.
LUXURY CARS TO DRIVE GROWTH
The growth story of super luxury cars and staggering increase in their marketing budgets is all set to bring cheer to the marketing and advertising industry. With some growth-related challenges in 2011, this segment still grew over 35% last year. Interestingly, the luxury segment does not follow the traditional form of advertising. But luxury car manufacturers, too, spent significantly during the Indian Premier League, a forum considered a marketing haven by luxury marketers in the auto segment in the past four years.
Small cars account for 70% of the passenger cars and luxury and super luxury segments account for a small share. However, the growth story of this segment in 2011 has perhaps been the only encouraging factor for the automobile sector last year. While the growth in overall passenger vehicle industry was not over 6%, the luxury car segment grew by over 35% last year, though this growth was less than the industry expectations. “Last year, we saw de-growth happening in the premium category as well. There were some tough challenges,” says Kamal Basu, Head of Marketing at Skoda India. Industry experts are expecting 2012 to be a better year for this segment. Says Ashish Bhasin, Chairman, India & CEO, South-East Asia, Aegis Media, which handles the media duties for BMW India, “The marketing spends are expected to increase in the premium segment.”
After the first quarter result in 2012 hinted at a sluggish growth of Mercedes-Benz, the company has expressed that this segment may not be able to grow over 30% in 2012 due to fuel prices, gloomy sentiments and other regulatory hurdles. However, experts believe that most marketers in the segment will spend proportionately higher money this year to achieve their sales target.
From a marketing perspective, there could be an interesting competition between the top three players in this segment, namely BMW, Mercedes-Benz and Audi. While Mercedes-Benz was clearly a leader in this category until recently, recent reports reveal that BMW has pushed Mercedes-Benz to No.2 spot. BMW, which is arguably the number one luxury brand in the Indian market as per sales figures of the first quarter of 2012, has increased its marketing spends by 40% in India. The company comfortably achieved its sales target for the last fiscal, but is planning an all-encompassing marketing strategy for India to reinforce its brand identity on the affluent class. “We have increased the marketing budget for Indian markets, but we will not indulge in traditional, mass advertising because we do not want to target mass consumers. We will invest in more actionled, experiential advertising this year,” informs a senior marketing official of BMW India. The marketing strategy will be a part of BMW’s global guerilla marketing strategy. Surprisingly, amid pessimism of buyers across the globe, BMW announced that India was its most successful market in 2011 after it reportedly sold 70% more cars last year. “India was one of the most successful operations for BMW. After discussions, we have increased our marketing budget by 40% in India because India is as big as Europe and it is diverse. Therefore, we will invest in extremely focused advertising,” informs Dr. Andreas Schaaf, President, BMW India.
Another significant player, Audi, which has been trying to expand its presence in India, is focusing on establishing its newly launched product, Audi A4, this year. Overall, as the competition grows, premium segment manufacturers are certain to go aggressive this year. Dinesh Vyas, General Manager, MEC India, which handles the Audi India account, explains, “We foresee the client maintaining the spend levels of last year. We will definitely see more action at the entry level of luxury segment cars with leading competitors ready to fight it out with their respective new launches.” While marketing on mass media platforms may not be visible and does not reflect in the quarterly ad volumes, there is little doubt among industry leaders that experiential and digital marketing will dominate advertising of the premium segment passenger car manufacturers.
AUTOMOBILE ADVERTISING: IS DIGITAL THE WAY AHEAD?
Print and television attract over 80% advertisements by the auto sector, but digital spends by the sector is expected to cross the 10% mark in 2012. By 2009, the automobile sector in India had surpassed other leading advertisers in FMCG and Telecom in the digital and mobile media advertising space. Rich media advertising after product launches is a frequent exercise by almost all the marketers in the sector. Digital advertising by automobile sector is reportedly growing at over 100% rate in India with search queries for cars growing more than ever. Lutz Kothe, Head of Marketing & PR, Volkswagen Passenger Cars, the company that spends over 10% of its advertising budget on digital and mobile media platforms, believes that the biggest shift in media will be towards digital, which will garner a disproportionately higher amount of budgets in 2012. “We saw a considerable shift towards communication on the digital platform including social media, especially as it allows the consumer to interact with the brand or the carline directly before he makes his choice. The year 2012 will continue to see a similar trend as 2011 with focus on sales-led advertisement and concentration on the digital platform,” asserts Kothe. Vivek Nayer, SVP, Marketing, Automotive Division, Mahindra & Mahindra echoes similar sentiments. After an overwhelming response to the Mahindra Augmented Reality show at the Delhi AutoExpo this year, the brand will aggressively approach its digital plans and increase the spends too. “Our fans are strong influencers of today. Our Target Group and fans spend a lot of time on the digital media. The share is between 5-10% and we plan to utilize it more effectively,” he says. Social media, too, is high on the radar of the automobile sector, as it is being used vigorously by automobile giants. According to a recent study done by NM Incite, a Nielsen-McKinsey firm, Ford India has become a leader in the social media domain. The company was ahead of the five popular car brands that were in the top 20. Maruti was in third position, Mahindra & Mahindra ranked sixth, Volkswagen India eighth, Hyundai Motor India 11th and BMW India 19th in the list of top 20 companies. Players like Volkswagen have used initiatives like ‘Think Blue’ to leverage this space and increase brand equity quite successfully. “My prediction is that advertising on OOH and Digital will be twice the size of traditional media. A large number of searches are launched before buying a car nowadays, earlier test drives were used as a tool. Now it is definitely the social media where consumers seek opinion before taking a decision,” says Bhasin, echoing this sentiment.
In the opinion of Harish Bijoor, brand expert & CEO, Harish Bijoor Consults Inc., television will still rule the media mix for the auto industry, though auto blogs and searches will influence buying. “Television today overtakes Print in terms of spends overall. This is going to reflect in every marketing move in the auto sector. Gone are the days when Print was found to be a very important medium for categories such as auto, as consumers loved to pore through the fine print of offerings. Today, this role is relegated to the auto company’s website, auto blogs of every kind, and Google and Yahoo searches at large.”
Foreign Entrants: Big Advertisers of Tomorrow
Volkswagen
Already among the top four advertisers in the auto sector in India, the German car manufacturer spends huge money on advertising on almost all media platforms. The brand has adopted a very aggressive marketing approach in the last two years. Despite last year’s tough scenario, Volkswagen created innovative, award-winning campaigns like the Talking Newspaper and outdoor campaigns for Polo that showed immediate results. The brand is arguably the largest spender on digital, social and mobile media platforms in the sector.
BMW
After a successful period last year, the brand has increased its marketing spends by a whopping 40% in 2012. BMW, which recently surpassed Mercedes Benz in India in terms of sales, has increased its visibility through a guerilla marketing strategy. Until recently, BMW was less visible on Print and TV, and focused more on experiential and direct marketing. It helped the brand achieve its sales target without many challenges. BMW India is all set to focus on digital, social and direct marketing in 2012. It is targeting at least 25% year-on-year growth until 2020 in India.
Nissan Motors
Unlike other foreign entrants, Nissan has been a proportionate spender. In short, the brand wants to extract maximum mileage from spends, as Dinesh Jain, CEO of Hover Automotive India puts it. However, the marketing strategy of Nissan may also take a crucial turn eventually, as the Japanese car manufacturer recently announced that India will soon be its second largest market in the world, after its homeland Japan. With significant increase in its media spends on Print and TV, Nissan is expecting 10% greater efficiency in spends.
Ford
Ford is optimistic about growth in the already cluttered small cars segment. It is expecting 60-70% growth in the next 10 years to come from Asia Pacific and Africa, largely from India and China. Currently, India is the most crucial market for Ford after China. Impact on the small cars segment in India affected Ford too, but with insignificant effect on its India marketing strategy. Yet to go aggressive on TV and Print in India, the brand continues to rely strongly on word of mouth and experiential marketing.
General Motors
General Motors, the biggest American auto-maker, was among the top three advertisers on Television and Print last year in India. However, 2012 has not started on a happy note for the brand as sales figures have not met the company’s expectations. While the marketing plan of the brand is unclear at this point, the second half of the year could be busy for the company with a new launch and subsequent media spends. With new marketing initiatives, the brand could make strong efforts to strengthen its position.
Feedback: priyanka.mehra@exchange4media.com
rahul.dubey@exchange4media.com
