Should a company invest its financial resources into promotional incentives or trade shows? Is a product advertisement likely to generate more consumer interest than event sponsorship? Selecting an optimal blend of promotional elements is crucial to a firm's marketing success, and a recent study by one Boston research firm concludes that automakers' promotional mixes are in need of a major overhaul.

Boston-based Compete Inc.—a market research company whose clients include DaimlerChrysler, Nissan, and Toyota—claims that the auto industry spends too much on incentives. That claim mirrors public data that show automakers laid out $20.3 billion on incentives in the first half of 2006--more than double the $9.8 billion the industry spent in measured media. Compete Inc. asserts that automakers like Nissan spend too little on branding and that, when it comes to auto marketing, ads beat discounts. Specifically, the researcher posited that, by allocating more money to ads and less to discounts, Nissan could save $3 million on promotional spending during the year and reap a potential windfall of $396 million.

Such figures should be music to the ears of marketing directors, but not everyone agrees with Compete's findings. Ian Beavis, VP-marketing of Kia Motors America, claims that incentives outperform advertising in cost-per-shopper efficiencies. Jeremy Anwyl of Edmunds.com argues that comparing advertising and incentives is like comparing apples to oranges. According to Anwyl, auto incentives accelerate sales a carmaker would have gotten anyway; Advertising, in contrast, influences the buy, but not when a buy will take place.