Marketing 4th Edition by Dhruv Grewal,Michael Levy

Exercise 2

AUTOTRADER.COM: HOW RESEARCH SEPARATES FACT FROM FICTION
Imagine you are responsible for making next year's media buys for a large automobile dealership. You have your choice among traditional media, like television and newspaper advertising, and Internet-based channels, like social networking sites and automotive sites. How do you decide which types of advertising are most likely to build sales How can you determine if an approach that works for a dealership in one city will work in another
The online automobile dealer AutoTrader.com recognizes that convincing car dealers, associations, and manufacturers to advertise on its site requires proof that their media dollars will be well spent. To provide that proof, it offers the numbers that it collects from its website, which show that it hosts more than 3 million vehicle listings from 40,000 dealers and 250,000 private owners and more than 14 million qualified buyers each month. But these basic quantitative details cannot prove that advertising on the site actually leads to sales. To accomplish that goal, AutoTrader.com also conducts market research to help dealers understand how people shop for cars and how the site can deliver those customers as an integral part of the car-shopping process.
Many media buyers assume that the most accurate measure of the success of an online advertisement is click-through rates, that is, the number of clicks on an ad, divided by the number of times the ad gets shown. Although this measure indicates how many times an advertisement is viewed, it does not provide a reliable metric for the ad's impact on customer behavior, especially when it comes to making the final purchase decision. Car dealers also hold their own beliefs about their customers' behavior, which may be inaccurate but still determine their advertising choices. Therefore, to attract advertising dollars, AutoTrader.com needed to provide hard data, coming directly from the source-that is, the dealers and customers themselves.
Therefore, the marketing research performed by AutoTrader.com mainly serves to demonstrate the value of the Internet for selling vehicles. In a survey of recent car buyers, the company found that 71 percent of respondents consulted the Internet to facilitate their new or used car purchase. Most of these buyers reported that the Internet was the single most influential source behind their ultimate purchase choice, that it was the most helpful source of information, and that social media sites played only a small role in their final decision. The study also helped quantify other metrics surrounding car shopping behavior, such as the average length of time consumers spend shopping for a car and how much of that time involved Internet browsing versus visiting dealerships. The result-that buyers spend more than half their shopping time online-helped substantiate the value of advertising on AutoTrader.com. This finding was strengthened by further data showing that independent sites like AutoTrader were used more frequently than dealer or manufacturer sites.
Going even a step further, AutoTrader.com sought to connect advertising on its site to dealership visits, which represent the main goal of advertising on AutoTrader.com by car dealers. Marketing researchers first determined what dealers believed about their customers' behavior, using surveys. Then they gathered information from customers as they left dealerships, to find out the truth. To ensure accuracy and applicability, these researchers solicited customers of dealerships located in diverse markets, selling a variety brands, and operating as both franchises and independently. The results debunked a lot of conventional wisdom (see Exhibit 10.11). For example, newspaper advertising was less effective than dealers had imagined, but Internet advertising played a more significant role in driving walk-in traffic.
While this information might be true based on an average across national dealerships, some dealers believed it was not the case at their particular business. To help convince these skeptics, AutoTrader.com launched hundreds of mini- research studies, including phone interviews with car buyers from individual stores. The results that emerged were remarkably similar to the national study, though some differences reflected geographic locations of the dealership. Armed with this research, you are now confident that you understand the behavior of car buyers well enough to make your media buy. But can you be completely sure that marketing research accurately predicts customer behavior
Probably not, because human behavior depends on a vast array of factors, many of which cannot be measured. But marketing research can help you ensure that your advertising dollars are spent wisely and in ways that seem most likely to increase sales.
What methods has AutoTrader.com used to collect data about the effectiveness of dealer advertisements displayed on its site