Julie Enzweiler,  Automotive Research Director, The Nielsen Company

SUMMARY: In economic terms, the auto industry was hit by the perfect storm: high gas prices, tight consumer financing, plant closings, brand reductions, dealership pruning, employee layoffs, longer vehicle retention, surplus inventory, manufacturer bankruptcies and waning consumer confidence. Despite a 37% decrease in total auto sales over 2008, bright spots persisted: the redesigned Forester revved up Subaru sales while price leaders Hyundai and Kia gained traction from new models. Online media has changed the rules of the road for auto marketing by placing consumer generated media squarely in the driver’s seat.

Unprecedented. Unbelievable. Unfathomable. The state of the auto nation is shaky at the moment, but all is not lost. Offsetting the unrelentingly negative news are 2009 highlights like a 69% spike in Sorento model sales, a 48% increase in Sedona sales, and the successful launch of the economically-priced Hyundai Genesis and Kia Soul, both targeting younger drivers.

Conversely, luxury vehicles that attract middle-aged consumers managed to outpace the market, although the category experienced a long tail effect, a two to three month delay from shopping to closing the sale. Only one domestic car manufacturer—Lincoln—outperformed the market, even though sales remained in negative territory on a year-to-year basis.

Fueling sales

The Nielsen online panel, comprising 250,000 individuals representing the U.S. online population, detected another hopeful sign for new vehicle sales based on Internet new vehicle shopping patterns. While online new car shopping downshifted by 9%, this represented a mere fraction of the precipitous 37% sales decline, suggesting the existence of pent-up demand. Consumers sought out roadworthy vehicles like the new Ford Fusion, proven gas sippers like the Toyota Prius and Honda Civic, or buttoned up their wallets and opted to maintain their current car or buy used.

Foreign automakers benefited disproportionately from escalating gas prices because of the consumer perception that their vehicles—especially hybrid and diesel models—are more fuel-efficient. German and Korean automakers realized the largest gains in online vehicle shopping activity, posting 1.7 and 2.2 percentage point share increases respectively, while their U.S. counterpart slid 5.5 percentage points. The Volkswagen Jetta and CC models, BMW 1- and 3-series and Mercedes-Benz E class were among the variants driving shopping inquiries.

Model behavior

Sport utility vehicles, with some 61 models available, continue to hold the “most shopped” position and rank number one in the U.S. for share of new vehicle shopping. Although activity waned with rising gas prices, consumers appeared to be hedging their bets, shopping longer in the hopes that gas costs would plummet and justify the purchase. And while the government is putting pressure on automakers to reduce these larger vehicles from their fleet, demand at the moment is not supporting this mandate.

The biggest disappointment among model types proved to be the basic economy vehicle, which peaked with a nearly 30% online shopping share in May 2008 when gas prices were at the highest (around $4.00/gallon), and dropped to half that a year later when gas prices declined to about $2.00/gallon.

Upper middle car models like the Fusion, Camry, Accord and Altima maneuvered into the second most shopped segment by April 2009, with hybrid variants moving the sales needle. Hybrids remain an exciting, but emerging segment, as consumers wrap their heads around the concept and take their time investigating the genre. Luxury entrants cruised along with steady sales, experiencing a boost from the Hyundai Genesis introduction. Luxury models attract aspirational buyers who savor the shopping experience and take their time to consider price before taking the plunge, elongating the buying cycle.

Trading places

Rankings of the Top 25 automakers based on online shopping activity wheeled in some interesting changes, with Kia jumping 11 slots from number 24 last April to number 13 in

April 2009. Volkswagen leapfrogged seven spots from number 15 to number eight courtesy of the CC—their most-searched vehicle on the Internet. The redesigned Forester sparked consumer interest as well and elevated Subaru to the number 22 slot, up from 27.

Saturn fell out of orbit, dropping 13 spots to number 23, followed by Buick’s 12 point decline, GMC’s six point downslide and Pontiac’s five point plunge. A heads-up to Volkswagen, the beneficiary of online buzz over the curvy CC: while initial online interest spikes rapidly, it can quickly taper off. The trick is to sustain interest over time and keep the vehicle top of mind with prospective buyers.

Setting your sites

The auto industry enjoys a relatively unusual electronic landscape, with a host of powerful, established third party shopping sites available to consumers like Yahoo! Autos, Kelleybluebook.com, AutoTrader.com and cars.com to name a few. Manufacturer or OEM web sites need to maintain a polished look and feel with robust content to stay in the game, offering complementary information and highly interactive features like build-a-car customization tools, 360° rotating car views, dealer information, engaging games that keep customers returning to the site, virtual experiences, testimonials and incentives.

While 86% of online shoppers rely on third party sites for price information, OEM sites are the preferred source for visualizing build-outs, researching special offers and obtaining financing information about tax incentives, special offers and government programs. The combined use of both third party and OEM sites actually enhances the consumer shopping experience, providing complementary rather than competing information.

Value of video

Kia Soul, one of the year’s most successful launches, earned kudos for an exciting web site that features techno pop music, robot animation, a personalized video from the chief designer about his “rhino with a backpack”  vision, a floating picture gallery, build-a-soul feature and “Escape from Hamsterdam” game, which leverages the primary advertising visual—hamsters. Of course, the under $14,000 price tag and 31 MPG green angle helped jump start things.

Video streaming is playing out across the computer screens of America, with 124% annual growth overall, and a turbocharged uptake rate of almost 200% for Ford videos. At last count, there were more than 80 million videos available on YouTube, and that video library is growing by some 200,000 clips per day. Nothing engages consumers like real-life clips from owners and test drivers sharing their experiences. In addition to posting videos on OEM sites, manufacturers can enhance both reach and impact by pushing out digital clips to social media outlets like YouTube, Hulu, iTunes, Facebook and others.

Ad impressions

Nielsen data show local magazines, national newspapers and local radio taking the biggest hit with shrinking ad budgets, accounting in large part for the precipitous 31% downtrend in total first quarter auto ad spending from 2008 to 2009. Online ad impressions ramped up during Q1 of 2009, stabilizing at approximately five billion impressions per month during the March to May period, with a correspondingly constant spend rate of $35 million per month.

Following a classic advertising paradigm, exposures may indeed be rekindling demand. Nielsen surveys suggest that “intent to buy” is rebounding from an all-time low in the Spring of 2009 to a more historic level as seen in summer’s past. It seems that consumers have been kicking the tires, but doing so via virtual showrooms.

Listen and learn

“Listening” is the new marketing. To succeed in a multi-media world, automakers will need to engage and interact with shoppers, delivering a complete experience from initial contact through post-purchase. In the process, they’ll need to leverage the power of search and social media, developing a cadre of independent reviewers and product evangelists willing to spread the word about their cars, without filters.

Search engines represent the first point of contact for many shoppers, and carmakers would do well to influence the tone of the conversation and their placement on the page one rotation. Deploy the power of Web 2.0 on OEM sites, incorporating quotes, surveys, reviews, testimonials, buyer videos, interactive games, audio and video feedback loops, special offers and incentives that hook the consumer and give them a reason to keep coming back.

“These estimates help manufacturers and marketers better understand the markets that have ‘green’ potential, and help them focus their resources,” said Bruce Wilkinson, Vice President of Media and Communications for Nielsen Claritas. “Additionally, it helps them to plan media campaigns and determine inventory levels for each model, market-by-market.”

The research looked at the national ownership rates of high-mileage vehicles including the Honda Fit, Toyota Prius, Toyota Yaris and Mini Cooper. Using auto registration data from RL Polk and Nielsen’s PRIZM segmentation, the percentage of each segment owning these vehicles was calculated. Individual market potential then was calculated based upon the segment composition of each market.

The top ten was made up primarily of coastal metropolitan area, including Boston (4th), San Diego (5th), Chicago (6th) and Los Angeles (9th), all with populations of over one million. Two exceptions were the relatively small areas of Monterey-Salinas, CA (7th), which has a population of 234,000 and Honolulu, HI (8th), with a population of 442,000.

Places where gas guzzlers still rule the road tended toward the south and Midwest, with the states of West Virginia and Mississippi holding seven of the ten areas that had the lowest rates of green auto ownership.

Learn more about Segmentation & Targeting.

Thanks to raves about its quality, size, style and dealer experience, Toyota achieved the highest rating of 69 followed by Honda (68), Lexus (68) and Acura (67).

Creating a positive brand image online has grown in importance because that’s where most consumers go to research their purchase decision. “Before people buy a new vehicle they are looking to the Web and social media sites,” said Julie A. Enzweiler, automotive research director, Nielsen Online.

“Auto marketers have to understand that the positive and negative comments people say will impact the sale. It can either pick up a brand up or weigh it down.”

Despite Hyundai’s new offerings and extensive advertising efforts, the brand’s rating falls lower than many other automakers because of quality issues and poor dealership experiences among survey respondents. It scored a 46. Only Isuzu (39), Suzuki (41) and Jaguar (43) ranked lower.

Kia, meanwhile, found itself in the middle with a score of 52. Price and value drove its advocacy, which is common among lower priced brands, however quality concerns dragged down Kia’s overall score.

For brands to be successful and gain advocates, Enzweiler said, “their brand pillars must resonate with consumers. If you want to be known for great quality vehicles, your top consumers need to perceive you that way. The BAQ is a snapshot in time for brands to see the lay of the land and adjust accordingly.” — Kenneth Hein

Q: An article in the latest BusinessWeek explains how program engagement and advertising effectiveness measurements are changing the way companies place their ads. How is Nielsen helping to change the game of TV advertising?
Lois Miller: Nielsen’s TV ratings have always been – and still are – an important tool in measuring how many people are watching any particular show. But those numbers alone can’t measure how engaged an audience is with that show, or more importantly, with the commercials. Understanding a need for these measurements, Nielsen’s IAG product has emerged as an industry leader for measuring program engagement and advertising effectiveness. This has helped advertisers target buys where the spots are most likely to be recalled by the audience. We’re essentially changing the currency for how ads are bought and sold.

Q: How exactly does your data help advertisers target their buys?
LM: Let’s say there are competing shows on Network A and Network B. Both have similar ratings and both cost the same. But our data indicates that the audience engagement with the program is 30% higher on Network A than Network B. Because there is a strong link between how closely viewers watch the program and their recall of the ad, airing an ad in the show with higher audience engagement will help ensure higher ad recall. In this scenario, that’s going to tip the advertiser’s purse strings toward Network A.

Q: Can’t networks use the data to their advantage to boost ad sales, too?
LM: Of course they can. While the IAG product was initially designed with the advertisers’ interests in mind, this new currency of ad data has helped to level the playing field for the networks. If a show or network might be struggling with lower ratings, it can point to our effectiveness data and argue that its audience has a strong base of attentive viewers. The network can also offer guarantees that its audience will be engaged with the show at a particular level. Not only does this help the network but is also ensures the advertiser will have attentive viewers that are more likely to recall their ads.

Q: You’re the President of IAG Automotive. How important are these effectiveness metrics for car and truck advertisers?
LM: In a time when the auto industry is under tremendous pressure, it’s more important than ever. Car companies need to make every dollar count and that’s exactly what makes our metrics so useful. If a company can spend less money on a spot that they know will be seen by a more engaged audience, then it’s an efficient use of its ad budget.

Our data can also help these car companies develop compelling and memorable ad campaigns. In 2008, for example, we saw 50% more airings for car and truck sales event ads than the previous year. That leads to a lot of ad clutter on a viewer’s TV screen and it can make it hard for that viewer to remember which automaker is offering what. That’s when effectiveness becomes the name of the game. Advertisers can use our data to see which creatives were most effective in connecting with the audience.

Just last month, Lois Miller presented the 3rd annual Nielsen IAG Automotive Ad Awards at the New York International Auto Show. A video recap of the awards can be seen here.

Some insights on the Insight

The 2010 Honda Insight is having a tough time breaking out of the Prius’ shadow as the majority of consumers often compare the two vehicles. However, keep in mind that the Honda Insight just came on the market in March 2009 while the Toyota Prius has been around for roughly 10 years. Buzz generated by the Insight’s release in March was no comparison to the attention it gained at the Paris & Detroit Auto Shows.

Shoppers, Buyers and Rejecters are turning to Twitter to tweet about their intentions and experiences. Thus far, the 2010 Honda Insight is outpacing both the 2010 Prius and 2010 Ford Fusion on Twitter.

Which hybrid has the most “positive” charge?

2010 Honda Insight online discussion is driven primarily by comparisons to the Toyota Prius. Price is frequently referenced as the Insight’s selling point; however, some do not feel that the difference in price makes up for the Insight’s lower MPG rate (compared to the 2010 Prius) or perceived lack of features. When diving into the topics surrounding the conversations around the Insight and Prius to gauge sentiment, the Insight created a more polarized view.

If consumers regularly evaluate the Insight as a potential “Prius Killer,” the Insight may fail to emerge with a unique reputation, divorced from the Prius. The perception that the design of the Insight is too similar to that of the Prius highlights the belief that the Prius is the gold standard to which all other hybrids must aspire. Insight and future hybrid cars will have to keep an eye not only on the road, but also the web to help shape the conversations of the new breed of hybrid shopper.

Winners will be announced by Lois Miller, President of  Nielsen IAG Automotive, at the New York Auto Show on Wednesday, April 8.

“The automotive industry faced a very challenging year in 2008,” said Miller. “These awards celebrate the creative advertising process and they recognize how the talents of great ad agencies, savvy media planners, and automakers with a vision can work together to effectively reach their audience.”

Nominees for the ad categories are as follows:

GREEN AD OF THE YEAR

• Lexus – “Missing H” – Agency: Team One, Media: Team One
• Chevrolet - “Disappear 2.0 Volt Reveal” – Agency: Campbell-Ewald, Media: Starcom Mediavest
• Cadillac Escalade Hybrid – Checkmate – Agency: Modernista! Media: Starcom Mediavest

SALES EVENT CAMPAIGN OF THE YEAR

• Toyota – “Toyotathon of Toyotathons” – Agency: Saatchi and Saatchi, Media: Saatchi and Saatchi
• Volkswagen – “Autobahn for All” – Agency: Crispin Porter and Bogusky, Media: Mediacom
• Lexus - “December to Remember” – Agency: Team One, Media: Team One

AUTOMOTIVE AD OF THE YEAR

• Chevrolet – “My Truck Anthem” – Agency: Campbell-Ewald, Media: Starcom Mediavest
• Volkswagen – “Nimoy” — Agency: Crispin Porter and Bogusky, Media: Mediacom
• Ford – “Focus Briana” — Agency: J Walter Thompson, Media: Mindshare

For more information on this year’s awards or for media credentialing, please contact Ian Beavis at (714) 813-6300 or ian.beavis@nielsen.com.

Consumer reactions to recent government moves toward U.S. automakers GM and Chrysler range from skeptical to supportive, based on Nielsen Online’s analysis of Internet consumer buzz.

The Obama Administration’s weekend request for GM CEO Rick Wagoner’s resignation is merely “symbolic” for some consumers, contributing to their belief that Wagoner is being made a “scapegoat.”

Despite the President’s assurances that the federal government has no intention of running an automotive company, consumers remain concerned about the future of American capitalism and what some perceive as a shift toward socialism. Yet, some consumers agree that the government has a right to take these actions given that automakers asked for government-backed bridge loans and taxpayer support.

These recent developments have created significant Internet buzz since March 30th, surpassing discussion levels from mid-February related to the submission of restructuring/viability plans from GM and Chrysler.

GM, Chrysler and Government Loan Situation Buzz (January 1 – March 30, 2009)

Given the skepticism toward the government’s involvement in Wagoner’s resignation, what do consumers think about the President’s announcement of a government-backed Warranty Commitment Program for domestic automakers to bolster consumer confidence? Nearly half of immediate consumer responses to the Warranty Commitment Program are negative, influenced heavily by concerns about government involvement in the automotive sector. Consumers do not trust the government’s ability to manage the program and fear this level of regulation erodes the basic principals of capitalism, a sentiment that overshadows the intended impact of the program.

Consumer Sentiment within Warranty Commitment Program Buzz

(Sample of 100 Comments from March 29-30, 2009)

Buzz has been rapidly evolving over the past few days. No doubt online consumers will continue to discuss unfolding events while the clock ticks for GM and Chrysler.

However, 20% of consumers do respond favorably to the warranty program, saying that it improves their perceptions of GM and Chrysler products or that the program accurately addresses a concern for prospective buyers. This includes prospective owners who say the program has a positive impact on their consideration to buy a GM or Chrysler product.

Topic Discussion within Warranty Commitment Program Buzz

(Sample of 100 Comments from March 29-30, 2009)

Buzz has been rapidly evolving over the past few days. No doubt online consumers will continue to discuss unfolding events while the clock ticks for GM and Chrysler.

*Scott Hamm also contributed to this analysis

The automotive industry’s ad spending fell hardest in 2008. The industry slashed its spending by almost $1.8 billion, or 15.5%. Among the Big Three automakers, Chrysler (Cerberus Capital Management) and Ford Motor Co. cut advertising 31% and 29%, respectively. General Motors trimmed its advertising 1%.

Pharmaceuticals also cut back its spending significantly, declining 18% and almost $1 billion compared to 2007. Quick Service Restaurants, however, was the only category in the top 5 to spend more in 2008, with 3.8% more expenditures in 2008.

Cable TV was one of only two media (along with Hispanic Cable TV) whose ad spend showed growth in 2008. Its 7.8% jump in 2008 accounted for almost $2 billion in additional revenue for cable networks. Meanwhile, Network TV ad revenue declined 3.5% in 2008.

Print media continued its anticipated decline in 2008. Local and National Newspaper ad spends declined 10.2% and 9.6%, respectively. National Magazines fell 7.6%, while Local Magazines dropped 3.7%.

Procter & Gamble maintained its perch as the top advertiser this year, despite a 19% decline vs. 2007.

To see the full release from The Nielsen Company, including a media breakout and top advertising companies, click here.

A Look Under The Hood

A. Prius discussion spiked in the summer months, driven by its status as the benchmark hybrid in the time of high fuel prices and buzz about the next-gen version.

B. Peak buzz for the Chevy Volt in September was driven by the unveiling of the 2011 production version and publicity events.

C. The Nissan GT-R generated strong buzz throughout 2008, peaking in October when Porsche contested its Nürburgring lap time.

D. Ford Fusion buzz shows an upward trend, driven by consumers discussing updates for the 2010 models, the debut at the L.A. Auto Show and the hybrid version’s surprisingly strong fuel economy.

If you are interested in the complete Monthly Automotive Industry Overview, please contact Larry Black.

Overall ad spending dropped 0.6% in the first nine months of 2008, compared to the same time period in 2007. 

The drop came despite overall growth in TV advertising.  Four of the top-five growing media were TV-based.

The top three ad spending industries — Automotive (-8%), Pharmaceutical (-4%), and Local Auto Dealerships (-3%) — all decreased their advertising, compared to last year.  The remaining top ten industries either showed increased or flat ad spending.  Direct Response Products, which increased ad spending by 27% in 2008, showed the largest growth.

During the first three quarters of 2008, Procter & Gamble continued to outspend all other advertisers, despite reducing its ad spending by 7% — to $2.3 billion — vs. the same time period last year.  General Motors and AT&T were the second and third largest advertisers, with $1.7 billion and $1.3 billion in ad spending, respectively.

View the press release.

Read coverage of Nielsen’s findings by the Associated Press and in Broadcasting & Cable, Multichannel News, The Hollywood Reporter, Adweek, and Media Life.