Wednesday, June 11, 2008

Ask the Economist: Why are There So Many Car Commercials?

Yesterday in the comments Nora Rocket asked why are there so many car commercials as compared to other products? This article indicates that is the case as auto dealer ads account for 20-25% of most local TV ad revenue, so car companies really are advertising more. I looked around a bit but I could not find any explanations of why cars advertise more than other products, so here are a couple of guesses.

1.Franchising: Most local car dealership are affiliated with a major automaker. That means the crazy guy singing or dancing might own the dealership, but someone else makes the cars. In the case of franchising it is important to the local dealer that people know about the brand they are selling products. If you sell Fords, you want people to have Fords on their minds. In fact many franchising contracts stipulate how much should be spent on advertising. In some sense car companies sell both the car and the brand to the franchise/car lot owner. Fast food restaurants are also generally franchised, which may explain their heavy ad buys.

2.Imperfect information: Transmitting these messages is costly. But as opposed to many other products comparing cars purchases is difficult. Include possible finance options and the ability to negotiate on price and comparing is even harder. New car models come out every year, somewhere I recall hearing that the start of new TV shows in the fall was meant to coincide with new car models.

3.People don’t buy cars that often so, they don’t know where to buy them. I’m 28 and have never purchased a car, thanks to parental hand me downs and my wife’s college car. So I have no relationship with any car seller, so I don’t know where to start. Watching local TV you learn all the car dealers, so why not start there. Our Nissan has 135,000 miles on it so sooner or later I'm going to purchase another car, but really I could not name one local car dealer, probably because I stopped watching brodcast TV. I still remember Fred Rickard "we're dealing" and the adress of Graham Ford in Columbus

So those are just three guesses, anybody else got any ideas?

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HolyKnitter said...

I think there's also a psychological component: you never pay attention to car commercials until you need to buy a car. So they're on all the time, but it's only when you're in the market for a car that you actually notice them. Car companies know this, and have to assume that they have to reach out to everyone all the time in order to reach someone at any given time.

Nora Rocket said...

Woo hoo! The Economist speaks!

Anyway, these are excellent musings. Thank you! I will certainly mull it all over.