Effects of online advertising on automobile sales

Abstract

Purpose

The purpose of this paper is to explore the effects of online advertising spending on automobile sales through both search and non-search advertising.

Design/methodology/approach

Sales data of the top 52 vehicle models were collected in two consecutive years in China. The advertising spending data of both formats were collected from a leading consulting company and a major search engine company. Then several empirical models were proposed to evaluate the effects of online advertising on automobile sales. Two extended models were further investigated for search advertising.

Findings

The results revealed that both formats of online advertising have significantly positive effects on automobile sales. However, excessive spending on non-search advertising does not help sales and a moderate budget is preferred. On the other hand, spending on search advertising has no such constraint to improve the vehicle sales.

Practical implications

The empirical findings have proved the importance of online advertising to the automobile companies and thus can help companies improve their decision making in online advertising allocation strategies.

Originality/value

This study provides a better understanding of the relationship between online advertising spending and automobile sales, and helps business to define sophisticated online advertising strategies to improve sales performance.

Citation

Peng, J., Zhang, G., Zhang, S., Dai, X. and Li, J. (2014), "Effects of online advertising on automobile sales", Management Decision, Vol. 52 No. 5, pp. 834-851. https://doi.org/10.1108/MD-10-2012-0753