Marketing Communications

196 CHAPTER 6 BUDGETS

Further reading

Butherfi eld, L. (2003), AdValue. New York: Butterworth–Heinemann.

Jones, J.P. (2006), When Ads Work: New Proof that Advertising Triggers Sales , 2nd edition.

Armonk, NY: M.E. Sharpe.

Krieger, A.M. and Green, P.E. (2006), ‘A Tactical Model for Resource Allocation and its

Application to Advertising Budgeting’, European Journal of Operation Research , 175(3),

1782–97.

Pringle, H. and Marshall, J. (2011), Spending Advertising Money in the Digital Age: How to

Navigate the Media Flow. London: Kogan Page.

CASE 6:

Budgeting in the automobile industry

ACEA’s report of 2008 reveals a heavy impact of the cur-

rent financial and economic crisis on Europe’s passenger

car and commercial vehicle manufacturers. Production as

well as demand for vehicles, which had grown in 2007,

began to dip in the first quarter of 2008, affected mainly by

the rise in oil prices. By the beginning of the third quarter,

the European economy slipped into reverse, which resulted

in a steeper decline. This accelerated in a turbulent final

three months. By March 2009, government scrappage

incentive schemes had been introduced in ten countries to

boost flagging markets and help sustain the transition to

‘greener’ cars. However, the effect is mainly seen in the

segment of small–medium-sized cars, and measures are

still needed to encourage fleet renewal in all segments,

boosting demand for the cleanest, safest models. The

world economy had a strong recovery in the first half of

2010 but slowed down again in the second half of the year.

The deceleration that was noted in Q3 was expected due to

the withdrawal of stimulus measures and the fading away

of positive impulses from the inventory cycle. The positive

evolution of economic growth remained gradual and uneven

across EU Member States. Germany is leading this recovery,

while other countries are still facing the economic crisis.

European (EU27, no figures for Malta and Cyprus) new

passenger car registrations dropped by 5.5% to 13 360 599

units in 2010 compared with the previous year. These

results varied across the major markets. Spain and the UK

saw an increase of new car registrations by respectively

3.1% and 1.8%, whereas Germany recorded a serious drop

by 23.4%. The Italian (−9.2%) and the French (−2.2%)

markets also experienced a decline. The biggest increase

was tracked in Ireland where new car registrations grew by

54.7%, after a major drop of 62.1% in 2009. In 2011, most

of the significant markets experienced a decrease in new

car registrations, from −2.1% in France to −4.4% in the UK,

−10.9% in Italy and −17.7% in Spain. The exception to this

decline was Germany with an increased demand for new

cars of 8.8%. It is still the largest market with a total

of 3 173 634 new registrations. Germany is followed by

France with 2 251 669 units and by the UK with 1 941 253

registrations.

Consumer choices reflected concerns about the econ-

omy. Market penetration of small cars was the highest ever

in 2009 at 45% but decreased slightly in 2010 to a level of

43.4%; 4 × 4 penetration, which had peaked in 2007 at

9.9%, fell back to 8.8% in 2010, with a dramatic fall in

France from 7.2 to 4.2%. In the EFTA countries (Iceland,

Norway and Switzerland), the average 4 × 4 penetration is

26.6%. Iceland has the highest penetration level of 4 × 4

vehicles at 39.3%. Average engine size fell to 1639 cc, from

1706 cc a year earlier, while average power output, which

had risen steadily since 1990, fell to 85 kW and is at the

same level as in 2006. More than half of all new cars sold

in Western Europe were diesel models (51.8%), compared

with 40.9% in 2002; the diesel boom continues. New cars

with diesel models have the highest penetration in Belgium

(75.9%) and Norway (74.9%).

During 2010 a total of 15.1 million vehicles were pro-

duced in the EU, representing 26% of the total world pro-

duction. With an increase of 8%, the automobile industry

has not yet attained the pre-crisis levels. The total pro-

duced units in 2010 were still down by 6% compared with

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