USA: Vehicle makers increase advertising spend - report
Vehicle makers have increased spending on advertising in the United States by about 16% this year, Reuters reported, citing an industry analyst's research.
According to the news agency, Merrill Lynch's John Casesa said in a research report that US automotive ad spending was seen at about $US9.9 billion in 2003 compared with $8.5 billion a year earlier.
Citing industry sources and reports in automotive and advertising trade publications, he reportedly estimated that total spending was likely to increase another 7% to 8% in 2004, to about $10.7 billion.
Factors driving the rise, which will put pressure on vehicle earnings, include a flurry of new product launches - especially from Detroit manufacturers - and the growing need to "sell the deal" amid intensified consumer incentive activity, Casesa said.
"The nature of advertising spending in the auto industry is changing," reportedly wrote Casesa, who estimates that advertising and marketing expenses now account for more than 15% of automotive revenues in the US market.
"Evidence is mounting that advertising is becoming an increasingly fixed cost, as it is essential to compete in a free-for-all characterised by converging market shares, oversupply, and shortening product cycles," Reuters quoted Casesa as writing.
Casesa also noted that spending on car ads had risen steadily since 1995 with the exception of 2001, when it declined due to a weakening US economy and the events of September 11, Reuters added.