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.