The auto industry sharply cutting advertising expenditure. A major blow to newspapers and other mass media
9, 12. 2008
Japanese carmakers are cutting down on their advertisement expenditures. This reflects their urgent need to reduce their costs because of the soaring materials prices and the economic slowdown in the United States, their major export market. The advertisement expenditures of the auto industry have tended to decline for some time, and the decline is now being accelerated to deal a blow to the mass media industry.
Toyota targeting at 30% reduction?
Reflecting the crude oil price increases and the sluggish sales to the North American markets, the sales of the carmakers have been rapidly deteriorating. The consolidated financial report announced on Aug. 7, 2008 by Toyota Motor Corp. for the April-June term of 2008 by the American accounting standard, for example, showed that its operating profit sharply decreased on year by 38.9% to 412.5 billion yen. Nissan Motor Co. also reported a decrease on year of 46.1% in its operating profit to 79.9 billion yen. Of the eight major carmakers, five reported decreases in their operating profits. All of the carmakers except for Mitsubishi Motors reported increases in their car sales over the world, but the rise in materials prices sliced their profits.
Against these backgrounds, all of the carmakers are embarking on cost cut efforts, and the expenditures for advertisements and public relations are likely to be subjected to the efforts first of all.
According to the Jiji Press news agency report on Aug. 30, Toyota Motor is expected to reduce its advertisement expenditures for the current term ending in March 2009 by almost 30% from the previous term. According to a study by the Nikkei Advertising Research Institute, the annual advertising spending of Toyota Motor totaled 105.4 billion yen in fiscal 2006, placing the carmaker the largest company in terms of such spending in the country for 12 years in a row. If Toyota reduces the expenditures by "almost 30%", the reduction would amount to 30 billion yen, no small figure for the industry.
A person in charge of the public relations at Toyota neither confirmed nor denied the report by saying:
"We can not comment on each individual report."
People in the auto industry said, however:
"Toyota is targeting at a '30% reduction', but our view is that it would be difficult for the company to achieve that target because it has to maintain its past relationship with advertising agents. We understand the company wants to cut down at least 10%, and the company's evaluation of newspapers as advertising media is sharply going down."
The people in the industry further said:
"If Toyota reduce the expenditures, it is strongly possible that other carmakers will follow suit. Cutting of advertisement expenditures is also certain to spread to other industries."
Honda: "Advertisement expenditures are not made public."
Here are some comments from other companies:
"We have not heard of such expenditure reduction." (Nissan)
All these companies are tight-lipped, but all the same they are under the pressure for cost cutting.
In reality, the auto industry as a whole is tending to squeeze down the advertisement spending toward existing mass media firms.
According to the "Nihon no Kokoku (advertising of Japan)" published by the advertising agent Dentsu Inc., the auto and auto-related advertising expenses paid to the four major media (newspapers, magazines, radio and television) decreased by 5.2% to 235.04 billion yen in 2006 from 247.96 billion yen in the preceding year. The amount went down further by 7.7% to 216.91 billion yen in 2007. By the media, decrease rate as a whole in 2007 was 7.7%, but the decrease rates for newspapers and magazines were 11.9% and 9.7%, respectively, while that for television was 5.3%. This shows that the cost cut for advertisement is first targeted at the paper media.
The "30% reduction" by Toyota is likely to spur the trend.