Thursday, 14 October 2010

Micro-Level Trends – Auto Advertising – The Importance of Message Coherence for Credibility, and so Top & Bottom-Line Profitability

Typically investment-auto-motives provides a helicopter investment perspective towards industry, and whilst comment is made upon product and operations, focus is rarely given to specific areas of the internal 'value-adding' value-chain. Unless of course it has pertinent contribution to a specific period of performance, noted via its quarterly, bi-annual or annual accounts. These typically refer to: input cost changes, new product introductions, levels of plant utilisation efficiency or similar otherwise.

As a change of tack, the following comments upon the internally generated yet externally directed world of advertising, which acts as the consumer-orientated counter-play toward expanding sales, and so the top-line revenue; relative to all internally directed efforts which seek to maximise the differential relative to bottom-line income and residual net and per-share profitability.

Obviously, both sides of the supply-demand equation must work at peak levels to maximise the potential of the auto-firm, yet whilst much has been recently focused on directly measurable input costs (ie sourcing costs, inventory levels, labour costs etc), perhaps less focus – because of its nebular nature - has been directed at marketing, and specifically, the role and success of advertising. An area which has seen much change and given great debate outside of the automotive arena.

Advertising's fortunes have obviously been framed by the fortunes of the western auto-industry at large, but given the old adage that “necessity is the mother of invention” needs to be more thoughtfully considered; at both 'channel' and 'connection' levels. There are still good examples of auto-advertising out there, but equally there has been an increase in poorly directed and/or executed efforts, with blame no doubt apportioned to both parties: auto-client and ad agency.

But first, context:

Since the retraction of stimulus monies the automotive markets of the developed economies have once again dwindled. Up on 2008 lows, but not gaining the traction that many auto execs said the Triad regional markets would.

The contrast in the relative level of cut volume between the US and Europe has been stark, the American domestic players recognising the level of re-structuring needed and taking-out approximately 3 million units annually. Whilst simultaneously, the 'national champion' Europeans have made what appear very conservative contractions, as part of their own politically influenced agendas, expecting domestic buyers to re-inflate their industry once economic strength prevails.

So highly interventionist approaches of respective governments either side of the Atlantic. Yet, although EU contraction has been called for, it is only now that GM-Opel intends to close its Antwerp,Belgian plant after the lack of new investor interest. [NB the plant produces the C-segment Astra model which was only partly boosted by the CO2 car stimulus packages – relative to Corsa - but the platform production of which must now be aligned to true EU & periphery market demand, and take advantage of less costly component supplier options].

Caught between the credit-squeeze and collapsed markets all producers paired-back operating input costs – through supplier and labour re-negotiations – which enabled a financial rebound from Q209 to Q2 2010. However that much needed re-bound, whilst dramatic, was short-lived. This event a natural and foreseeable consequence to what was in reality manipulated US and EU auto-markets. This matter of particular concern to those manufacturers without, or generally less, exposure to broad EM coverage which presently counter-balances flagging home market performance.

The wise players made the most of the 2009/10 boost by conserving cash. Even going so far as to momentarily halt shareholder dividends to help the re-strengthening effort – as seen prominently by Dr Zeitsche at Daimler – for the sake of future growth. Such measured, investor-relative acts applauded by investment-auto-motives. Very recently, even Renault - the prime beneficiary of state interventionism, and so apparent 'anti-capitalism' has re-orientated 180 degrees. By selling its $4.2bn 'B-share' stake in Volvo truck it un-hooks itself from Paris's political expectations, any incumbent labour-relations headwinds and critically demonstrates its commitments to capital markets. This in contrast to GMNA's 'blunder' when it ran US advertisements inferring that GMNA had re-paid its bail-out monies in full. A less than true reflection of the proportionate pay-back reality that reportedly saw monies transferred from one government funded source to another.

Thus today, any economic observer recognises the irony of the situation where within the western automotive environment, the very basics of nationally-aligned classical economic theory has been turned on its head, even if GMNA is fighting hard to re-instate such conditions with its IPO.

Yet today, beyond the shallowness of any political figure-pointing and cat-calling, at the operational coal-face, western auto-makers are having to once again pair-back to the bone any non-core overhead costs whilst simultaneously seeking revenue maximisation, so as to try and maintain at least a modicum of the re-buoyed profit margins (or indeed reduced losses) recently enjoyed.

In what is a savage marketplace, this means that corporate brands and their vehicle-lines are having to vie for share of mind with the hope that it translates to eventual share of market. Of course, prior to potential buyers actually gaining a close-up view of a vehicle itself in the showroom, a broader public perception must be moulded across the popular consciousness to attract people onto corporate web-sites and into showrooms.

Populist advertising in all its forms – above the line, below the line, direct and now viral – by far plays the biggest role.

[NB However, alternative 'perception massagers' have re-emerged beyond the now crude efforts of obvious product placement in the media. The most notable being Ford UK's use of the film 'Made in Dagenham'. It uses a plot-line (ie message platform) which has contemporary relevance by juxtaposing the very real needs for UK industrial cost re-alignment in the mid 1960s alongside the changing nature of labour relations – the former very much in the background, whilst the latter sits very much in the foreground. Yet it is a feel-good movie which ultimately has a positive rub-off effect on the Ford persona, seen to be at the vanguard of 'fair' labour-relations negotiations, an important persona to hold if Ford intends to continue its investment levels in the UK, at Dagenham (now solely an engine plant) and elsewhere].

But as stated, by far the greatest 'immediate-effect' influence is typical car advertising. It spans a myriad of strategic and tactical aims, depending upon the corporation, the economic climate, competitor actions, etc etc. That spectrum of far-reach, medium-term and immediate objectives is of course governed by a host of internal issues, perhaps the most important of which is the 'stretch' and impact of what are in reality – and by historical standards – anemic marketing budgets, often necessitating less regionality and more generality. A complaint you'll hear in the advertising world itself, as the creative envelope for regional or national nuance is reduced, and so supposedly the adverts impact/

Even though TV continued to convey the heady days of early 1960s MadMen - living an Upper East-Side lifestyle further down-town on Madison Avenue, the 2010 western reality is very, very different. Advertising executives and account-handlers may well thanking the fact that a plethora of media-entrenched trendy 20-somethings still see the role as an 'advertising creatives' as 'it'; since the laws of supply and demand obviously hold true in employee selection and pay-levels.

So, the erosion of corporate budgets should not automatically mean a reduction in creativity and so consumer impact. Yet whether by virtue of risk-averse corporate clients or indeed risk-averse advertising executives, the attraction and impact of much automotive advertising has lessened and indeed in certain instances become almost generic to TV advertising themes in general for all kinds of products and services.

As such it is not surprising when adverts are remembered for their graphics or music, but consumer recollection of the thing actually being advertised is poor. The importance of brand/product message relative to the creative execution is of course all important.

As such the following looks at various vehicle TV adverts recently shown in the UK, highlighting from (by subjective standards) most successful to least successful.

The Good:

VW Brand:
At what are cost-conscious, risk averse times, VW has maintained a focus on its historical key brand values. Volkswagen UK has pushed its Golf and Polo advertising by focusing on both price and reputation, and closely cross-relating the TV campaign with Bill-Board campaign; therefor creating the circularity of a simple message.
The TV advert shows a bill-board poster operative attaching the fly-sheets and telephoning his boss to questioning the last one (highlighting the price) to be pasted. To him it is an anomaly and cannot believe that the price is right given the brand. Besides highlighting the obvious apparent cost-saving, the very fact that the advert uses a bill-board means that there is a direct cross-relate for viewers when they indeed see the real world bill-boards.
Hence a merging of the virtual and real advertising realms, which re-enforces the central message that VW offers an affordable level of high quality: a central message that is deeply engrained within the brand's history for intelligence and rationality. Moreover, the questioning nature of the central character reflects the general state of mind of consumers today, seeking-out a rational, value-based truth that drives the purchase process in such times.
Thus a price led campaign for what is seen as perhaps the most emotionally and financially stable of automotive vehicle purchases, and as such re-crystallises and re-ratifies the engrained cultural understanding of VW.

Mini SAV (“Countryman”):
This advert immediately gains by the fact that the car is essentially new. Although seen as a derivative model from the Mini family, it shares platform parts with BMW's X1, and its product positioning demonstrates itself to be so removed from Clubman that it is indeed an all new car. – the first ever conventional 5 door Mini given additional differentiation by being a city SUV/SAV; and popularly coined as “Countryman” though this badge does not appear on the car.
Yet within the initial UK advert although prominent the car is not the star as such.
It is the hyper-real visual setting of young, fashion conscious, ironically mud-averse city-dwellers, 'playing' in a green field with the backdrop of Canary Wharf. The ad-agency seems to have encapsulated the ideology of the 'city-farm' and transposes it over the car and the people. This is the opposite of old-world SUV advertising by the likes of Land-Rover which, by the nature of the origins of its products, previously aligned itself with the true country-side and broader world adventurism (safari, jungle etc), with at most the correlate of weekday city and weekend country-escape.
Mini playfully shows the ironic reality that purveys the reality of a limited off-road yet trendy citySUV; the flip-side (indeed “flippant side”) of the 4WD notion previously conveyed with 'old-money' overtones and the overlaying the countryside dream.
Here BMW does well in creating and re-enforcing the idea of the car's use as a psychological escape machine rather than a truly physical one. Unlike the former poor Mini advertising - 'Mini Adventure' - which was ill conceived from the brand's birth and ran on far too long – the product itself doing much of the marketing 'heavy-lifting' - this vehicle specific advert recognises the irony and plays upon the satire and humour of the car and indeed the self-recognition withing the potential buyers own lifestyle.
This advert echoes the character of the car which in turn echoes the character of hyper-fantasist urban consumerism; yet shows a conscious cultural depth via its self-mockery, which will resonate with a percentage of culture-literate Mini All4 buyers.

Audi R8 Spyder:
This advert for Audi's comfortable supercar, plays upon the central idea of (technical) juxtaposition, which imbues the old “Vorsprung Durch Technik” (“Advancement through Technology”).
It sets the overtone of yesteryear technology in the form of oil-dripping, noisy, Stock-Car Hot-Rods raging in frantic, uncontrolled chaos within the background of an all-white 'clean' arena. So presenting a philosophical contrast of today's 'dirty car' set within the need for a clean eco-friendly environment. The noise abates and into the chaos enters a serene white R8 - an obvious alignment/allegory to its clean surroundings, which masterfully dodges the 'dinosaur pack', and is accompanied by an angelic choral audio track. Having beaten the crowd it comes to rest with the tag-line “mirror, signal, out-manoeuvre”, once again referencing its acknowledgement of the changing face of (super)car motoring”.
This well considered advert, unlike many obvious 'mainstream lifestyle' efforts, highlights the R8 product itself in a very different ethereal setting.. All the cars have no driver, and so have lives of their own which adds to the contrast in personalities between the crowd and the Audi. Given the price-point of the car, the alternative and intelligent execution is refreshing, so reflecting the higher cerebral and emotional expectancies of its target audience, yet also mesmerising the mainstream which has a VW Group rub-off to VW cars.
[NB Interestingly, the vast white arena is populated with colourful cars also has overtones of an art gallery, and its walls and doors carry painted alpha-numeric position codes (eg B9), which reflects not just an space-futurism but also infers chess-board positions so a competitive edge, aswell as mimicking the alpha-numeric code Audi uses (eg R8). The driverless 'angry' cars also culturally reference the 1974 film 'The Cars that Ate Paris' which highlights a destructive localised automotive economy ].

The Average:

Nissan Juke:
This new B-segment citySUV was initiallyyyy introduced to the UK public by using the effective segway of a sign-off message for Juke when advertising the facelifted version of its larger sibling 'Qashqai'.It was given a colourful mischievous personality reflective of its more radical styling and youth.
The dedicated 'Little Star' advert uses the now near cliché of an empty urban night-time backdrop to present a context of 'otherness', with use of neon and fluorescent flicker-stark lighting to provide a jarring yet ethereal effect indicating the world waking-up to Juke's arrival. The use of Gen'Y' / Gen 'A' 'clubbing' characters are seen heading home after a night out, the with the 'safe come-down' psychological effect of the slowly paced female vocalised 'twinkle twinkle little star' soundtrack. It cross-references to toy cars, bunnies and the like aswell as public transport. All together trying to effect a message of offering diverse, uber-cool city lifestyle combined with pyschological security and connection references to childhood and thus 'safe-playfulness'. This diverse milieu of effects intended to draw in different demographic groups at various life-stages, but particularly pointed to young families where the parents wish to remain fashionable, couples and singleton buyers that seek the life-affirming idea of 'exciting but safe'.
To this end the advert diverges from the product's initial characterisation alongside Qashqai, though seen to be necessarily progressive. But the contextual references are cliched, and indeed mixed.

Ford Fiesta:
The 'This is Now' campaign has been running for a few years now, as part of the Fiesta's need to grow its female and young couple target demographic. The July forward advert primarily shows a montage of interesting excerpts of a young couple's life, interposed by periodic thru-windscreen shots of the couple inside the car, inferring that it is the 'lifestyle enabler'.
By using supposedly jerky time-lapse cinema-photography and other surrealist efforts, the advert references certain 1980s pop videos by the likes of Talking Heads, this itself based on the recent '80's' cultural phenomenon playing out at street-level in London and elsewhere in the UK (Boy George and Marilyn look-a-likes abound in the West End!)
Ultimately the advert mentally connects to its target demographic by virtue of its formulaic component ingredients, but as with so many adverts, the medium and not the product ends up as the central message.
This is not surprising given that Fiesta has such a broad customer base, from targeting provincial 20-somethings that see themselves as London Trendies, to rationally motivated German pensioners to Mexican young families and far beyond. So the persona of the product is manufactured via targeted advertising relative to region and buyer-type. This the typical character of much 'global goods' advertising.

The Bad:

Kia '7 Year Warranty':
Hyundai owned Kia provides the 'value-conscious' portion of the Hyundai-Kia equation. Thus is vehicles are, though far better than previously, still bought for cost and function reasons, a raison d'etre well understood by Kia UK. To maintain its competitiveness in this harsh field, Kia extended its new car warranty to 7 years, thus demonstrably longer than European or Japanese peers.
Such a simple yet powerful brand message obviously does not require a convoluted advert, yet to bolster brand equity should be executed both conceptually and visually with aplomb.
Unfortunately, the 'Leading Thinkers' advert does neither. Supposedly humourous, it uses brainiac academics and scientists sat in an auditorium to see and state the obvious and see the light. But it is a parody that does not really 'carry', and as such was a lost opportunity for Kia. Undoubtedly the central simple message of a 7-year warranty will drive more foot-flow through dealerships, but little additional brand-building has been accomplished, which is a shame given the exploratory efforts and ground gained that vehicles such as the unconventional Soul have achieved.
This was a prime opportunity to visually demonstrate why Kia has true belief in its product's engineering integrity which enables the long-life warranty. Whether scientifically explained or just creatively inferred, much more could have been done to align what are obvious multi-issue corporate objectives.
Ultimately it seems an obvious case of limited budget allocation, or poor project direction and/or limited creative solution provision. No matter which, this advert reflects a low-tide level of corporate and agency interaction.

The Ugly

SAAB 9-5:
SAAB was always seen as the poor cousin under GM stewardship, but now has been taken over by The Dutch firm Spyker, under a broader holding company. Prior to the GM disposal, SAAB was touting its re-invention with new era concept cars, the new owners presumably providing greater management freedoms at Trollhatten to achieve their aim of a differentiated premium car brand that can grow UK and global sales. Thus, the recent UK ad campaign should have publicised the intent and ability to offer the exec car market something new and meaningful, at brand and vehicle levels.
Unfortunately the advert, set in an unconvincingly stylised old drawing office layout, consists of the formulaic depictions of leaves and sky, a paper plane (referencing SAAB's past but lost on most), with 'brand value' words of : “power”, “heritage”, “inspiration” shown. Generally a weak brand and product message. (However, even the ad-director / agency thinks its being clever by giving the paper-planes a sound-track with the lyrics “I've got stories you don't know”. Almost an in-joke on the public, for the art-director community that is designed to win ad-direction awards as opposed to sell a powerful purchase convincing message to the public. The sign-off is “Anything but Ordinary”, when infact the advert is very much that.
Ultimately it tries to be too clever for its own good and as a result dismally fails in conveying what should be an important message and so fails the corporate client.
This should be of major concern to SAAB UK, Trollatten HQ, Spyker Cars and the parent holding company that is trying to rebuild the brand and Swedish company.

The very nature of what has been a near century of a media-led world means that the presented imagery forges citizens' own perceptions, understandings and ultimately experiences of the man-made world around them. The idea of 'hyper-reality' and simulacrumhas become so engrained in popularist understanding that they have become central tenants of the very world that is newly created; as initially seen by re-made films, to recycled fashion ideas, to the merging of physical & cyber realms via console game play, to products that are self referential their classic origins – as seen with VW Beetle, BMW Mini, FIAT 500 in product form and Citroen DS in brand form.

As many have noted, the western world has been post-modern (ie the re-played use of eclectic and re-invented sources) for many decades

As such it would be only natural to believe that the once diverse realms of profit-driven commercialism and exploratory creativity have co-coalesced. And in some sense they have, even it be in a very formulaic sense when devising vehicle products and then marketing/advertising them. Indeed, the process itself should theoretically deliver consumer-directed, high-appeal products, are immediate hits and profit maximisers.

In one way the commercial creative world of various creatively interactive disciplines are thought to be closer than ever, after all, all the 'Gen Yers' and 'Gen Aers' working are from the same cultural background as so should share mutual outlooks. But equally so the level of progressive originality has arguably dissipated, into something less and less meaningful to culture-savvy audiences and consumer groups.

This means that the general consumer / automotive world is a very different to the one which created the iconic long-live products and ad campaigns of the past, and as seen over the last 40 years advertising has played an increasingly important role to massage lifestyle and aspirational perceptions when the very offering of the product itself is less and less understood and so meaningful. Consumer's beliefs and expectations are filtered through the 'media machine', in stark contrast to the hands-on experience of say a 1950s car magazine, the annual Motorshow and the local dealer showroom.

That multi-level media complexity relative to the different buyer-types is what needs to be properly understood and controlled by automotive executives and their senior managers, and is a very pertinent aspect of how investors themselves should assess the management capability of any auto-firm.

Such good appreciation is evident in the echoed simplicity of VW's adverts which exactly 'hit the spot' of consumer consciousness today, whilst at the other extreme, SAAB's generic advert ultimately performs very little service whatsoever for a re-capitalised, reborn firm that is supposed to be the very antithesis of the generic, homogenous consumer durable.

This is part of the reason why the large yet well-controlled VW (with Audi) holds its place as an investor favourite, and why SAAB must dramatically sharpen-up its outward appearance and character via Ad-Land, if its new era is to truly make its mark amongst the premium Euro-set.

Long gone are yesteryear days of Issigonis philosophically considered Mini, designed for practical needs of a mobility-hungry nation focused on the 'magic enabling mechanism' of the car itself.
50 years on the world is very different, even for new mobility nations. And as such, today's “Twinkle Twinkle Little Star” evocation of the Sunderland build Nissan Juke, represents a very average effort by a risk-averse client and ad-agency to generate target-buyer attention for what has ultimately become a relatively short-lived, consumer durable. Juke has gained popularity and should continue to do well in the UK and abroad thanks to its styling.

But such efforts represents an auto-dream for the individual, public at large and the client corporation. It must be constructive and compelling, and not represent something that is self-directed, self-congratulatory and open to accusations of self-aggrandisement. Its real remit to generate car purchase motives a long long time ago.

Of the 7 very short case-studies presented, 4 fail in their remit. Whilst 2 of the best 3 are from the same corporation though reflecting very different vehicle types and ad campaigns. The failed 4 show mediocre and possible mis-management at corporate and agency level, whilst the best 3 illustrate harmony of the process.

Today, more than ever the auto-industry is about “the money” given the fact that the western world is about 'the economy stupid!”. That means ever clearer lines of strategic assessment and expanded due-diligence will be drawn by investors as to how to deeply judge car-makers across the full spectrum of their internal value-chains and their outwardly directed efforts.

And at a time when a single mainstream vehicle programme costs over $1.5bn just to engineer, this figure excluding massive overhead costs and major additional marketing & advertising costs, the onus is to get the strategic and operational formulae exactly right to maintain investor's interest.

Moreover, this 'game' is critical to the very health of national and international economies, so little margin for error. Thus a billion and one reasons to get it right.