The Internet’s Impact on Print Advertising Session

1. The Internet’s Impact on Print Advertising Session The New Automotive Marketing Paradigm Newspaper Association of America National Automotive Account Managers’ Conference, NAIAS- January 9, 2002

2. Presented By • Sheila L. Sasser, Ph.D. App. • Lecturer, Marketing • www.sasscomm.com s.sasser@sasscomm.com • Dr. Edward A. Riordan • Professor, Marketing • e.riordan@wayne.edu • Wayne State University • Detroit, MI, USA

3. Detroit, Michigan sheila.sasser@wayne.edu e.riordan@wayne.edu

4. Outline “Road Map” • Trends • Advertising • Automotive • Website/Internet • Research • Behavioral • Ideas & Future Opportunities • Summary

5. Trends • IAB reports Q1 & Q2 Internet Ad Revenue of $2.76 billion in US… • J.D. Power shows continued growth in Automotive Internet usage in 2001 • ...43% of all used vehicle buyers use the Internet as part of the vehicle shopping process, a 27% increase over 2000 • R2: Vary by gender & type of channel • R3: Vary by ethnic nationality & type of channel • R4: Vary by customer geographic residential location

6. Industry Ad Trends • Automotive sales represent a major proportion of all retail sales • Even Pre Owned Segment comprises 12.5% of all retail sales equal to ($370 billion) • Auto advertising represents 16.4% of all nationally measured advertising • Newspapers = #2 medium: $18.9 billion in ‘00

7. National Newspaper Advertisingsource: Ad Age 9.24.01

8. National Internet Advertisingsource: Ad Age 9.24.01

9. Spending Trends - Signals??? • Note the mixed trend directions for OEMs…some are way up and some are way down…. • How do we interpret these changes?

10. Automotive Advertising Trends • Long term planning difficult (due to 9/11 and 0% incentive wars) • Ad Spending should slow in ‘02? • However last period reported 1999-2000 up 6.3% ==> $14.6 billion to $15.5 billion

11. Automotive Advertising Trends • 0% Financing/incentive war has pulled ahead approximately 500,000 unit sales from 2002 (400,000-700,000 range) • “GARAGE LOADING!” • 215 million units of vehicles • The automotive industry equivalent of retail “PANTRY LOADING” has now hit the automotive sector proliferating multiple vehicle households and aberrations of demand curves & forecasts...

12. Dealer Ad

13. Automotive Advertising Trends • We expect the OEMs to continue incentive programs to keep the plants running and to continue sales “pull aheads” (ie. GM’s $2002). • We expect the OEMs to continue to re-evaluate dealer advertising (ie. GM’s $500m holdback) and impose stricter format standards on their dealers for both print and broadcast.

14. Dealer Ad

15. Automotive Trends • On average, the automotive Internet user visits 6.8 automotive sites before making a purchase…preferring 3rd Party Sites • 6% of vehicles were sold online, up from 4.7 % in 2000, small but significant…. • Kelley Blue Book, kbb.com remains the most visited site for the 4th straight year

16. Automotive Trends • 50/50 Split between Car/Truck for 2001…. • Truck sales for 2001 were approximately 49% of the market, with light duty trucks rivaling passenger cars (Autopacific): • SUVs = 44.4% • Minivans = 16.9% • Pickups = 35.8% • Caruck & Tall Station Wagon hybrids... • This will affect nature of advertising segmentation different buyers “millennials”

17. Dealer Ad

18. Web Trends • More dealers are creating full service websites like OEMs • NP ads must contain web addresses & more interactive elements • Everyone wants to get buyers to website • Dealer NP ads can be shown on NP websites along with promos, offers, etc. • DFP - DN - O&E examples • Drive dealer classified ads to NP websites • Conversion & integration are critical to mitigate loss - cannibalize or be cannibalized...

19. Web Trends • OEM Website Examples • Instead of viewing the Internet as a competitor to NP advertising, both should work together to complement message • Sell the NP-Web mix to dealers • Traditional retailers have been integrating print, direct, web & broadcast interchangeably • Broadcasters have also integrated the Web • Several stations showcase Web & NP

20. Web Trends • Toyota Interactive Matrix Video Promotion • Mazda Zoom-Zoom Interactive IMC • DCX PT Cruiser CRM Launch • Ford Focus Youth Tour • GM Buick Rendezvous with Tiger Woods • All of these unique programs were very successful in effectively generating new targeted prospective customers

21. Our Web Research Findings • The best website factors: • High Utility: • easy to navigate & read • consistent page formatting • understandable icons, menus • Pleasing Aesthetics • sharp images, color, quality graphics • Entertainment & Engagement • ability to grab and hold attention • high entertainment value

22. Our Web Research Findings • Does this list sound like rules for good newspaper advertising??? • The worst websites “bombed” on all these features especially those that trapped the user in a closed loop! • Time is a critical factor

23. Web Behavioral Findings • Advertisers & Automotive Dealers still trust print more than the web, but are slowly migrating and testing new ways to integrate both formats… • Overall Web Benefits perceived are: • Greater control of content on the web, • Flexibility to change offers • Immediacy of knowledge gathering • Instantaneous potential communication • Customer segmentation opportunities

24. Web Behavioral Findings • Disadvantages: • Distrust of nationally sponsored sites • Loss of direct dealer customer control • Lack of knowledge of database CRM • Potential technology glitches • Customer wariness of long term viability • Varying levels of consumer confidence • Measurability & tracking issues

25. Web Behavioral Findings • Most Business Advertisers are hesitant to pull print advertising and risk web only • Print still has proven tangible attributes • Sense of security with existing system • As national websites and customers become more sophisticated, change will occur… • Transitioning from print to Internet will depend upon ad industry innovation, advertisers, users & consumers

26. Gender Findings Analysis • Men rated online sites highest in trust & security • Women trusted catalog sites more than online • Women also trusted retailers more than the web • Why?

27. Gender Findings Analysis • Evolutionary Life Cycle of the Web? • Familiarity, Usage, Routine Shopping Behavior? • Access Barriers & Convenience Issues • Male => Transactional Task Orientation • Female => Interpersonal Orientation • Both read Newspapers & Buy Lots of Stuff!

28. Ideas & Future Opportunities • Smart dealers have used the Internet to reach highly profitable specialty segments of customers • Pre Owned, customs, collectibles, performance... • Newspapers can target gender, age & lifestyle specific ad message appeals combined with web, like cable TV strategy • Tracking of promotions, customers & CRM • Still use print in IMC for mass market image

29. Ideas & Future Opportunities • Automaker Research may also benefit dealers, newspapers & CRM • -Customer centric user design findings • -Internet focus group testing breakthroughs • Elite status of key dealers prompting more sophistication & evolution… • 5 Star - Blue Oval - GM • Balancing act of budgets & performance

30. Ideas & Future Opportunities • Programs that will affect the future of advertising in Newspapers • Used/Pre Owned Cars • Certified pre-owned programs growing rapidly: • Both OEMS & Dealers will need to advertise the specifics and benefits of these programs • Incremental budget opportunities • Large volumes of vehicles to move from expired lease programs, fleet & other

31. Ideas & Future Opportunities • The US pre owned car market is 3 times larger than the new car market... • It is also much more profitable for dealers thus greater ad dollars... • ($500/unit used vs $100/unit new) • Dealers will need to advertise more to help increase their profits and move vehicles • Greater control of ad funds in this area

32. Ideas & Future Opportunities • New Cars • OEM dealer co-op and Dealer Group Advertising will have more structured standardized modules...Multi-Brand Dealer Ads will be used for increased visibility & efficiency • Themed messages, headlines, events (Home) • White space, white space, white space • New ways to measure effectiveness & allocate funds…response cues...tracking

33. Dealer Ad

34. Ideas & Future Opportunities • “Two years ago the number of people who located their vehicle through a published classified ad outnumbered Internet classified by more than 7 to 1…the gap narrowed to only 2 to 1 this year and it is likely that Internet classifieds will surpass the traditional published classifieds within the next few years.” …Chris Denove, JDP

35. Ideas & Future Opportunities • The Automotive Category represents 16.4% of all US ad spending (CMR data, 2000, Ad Age) • In times of economic uncertainty…there is even more challenge, as dealers try to sustain growth fueled by 0% financing and rebate incentives…

36. Summary • Pay closer attention to specific segments of buyers & their needs • Leverage the gender differences existing on Internet in favor of Newspaper Adv • Recognize sophistication levels in users • Promote comfort and security as key • Print can provide stability to web • Drive synergy with IMC & CRM

37. Summary • Proactive Interactive Program Modules • Work more closely with Advertisers to track results of integrated print/web ads • Create multibrand & themed modules • Set up third party endorsement sites • Inform, Engage and Entertain customers • Leverage print equity & reader base • More promotion, database & research

38. THANK YOU!!!