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Aston Martin’s marketing spend hurts profits, putting brand investment plans on the line

Aston Martin is pinning hopes on the launch of its DBX SUV model

Aston Martin has issued a profit warning driven in part by lower sales and increased marketing costs, which has led its chief executive to guarantee cost saving measures in a year earmarked for brand investment.

The car manufacturer, which is slated to publish its full-year 2019 results next month, issued the profit warning today (7 January) after its peak delivery period of December proved to be “challenging” for business.

Despite a rise in retail sales, dealer orders of its luxury vehicles fell by 7% year-on-year, with Europe in particular underperforming. The automaker now expects to report gross earnings of between £130m and £140m ($170m and 184m) in 2019, a drop from the £247.3m ($324m) it reported in 2018.

In a trading update, the company also attributed slashed estimates to “incremental fixed marketing spend to support retail campaigns, particularly in the US, leading to lower cost savings than originally planned”.

Andy Palmer, Aston Martin Lagonda’s president and group chief executive, described 2019 as “a very disappointing year” and committed to a comprehensive cost-saving program going forward.

However, the auto brand will have to handle its marketing budgets carefully with regards to any cost-cutting. Its on-screen partnership with the James Bond franchise will require a marketing push timed with the spring release of No Time to Die, while the company is looking to the unveiling of its new DBX SUV to boost cashflow throughout the year.

Back in 2019 Q3, Mark Wilson, Aston Martin’s chief financial officer, said the marketing costs associated with promoting the DBX were already “[weighing] on the numbers”.

However, he highlighted plans to put more support behind selling the Vantage model, too, stating “we're now focused on getting the message more widely disseminated that it really is a great car”.

“I think the one thing dealers are saying to us is we need to invest a little bit more in marketing to get the story out there to tell people how good these cars really are,” he said.

After a period of financial instability and an entry onto the London Stock Exchange, Aston Martin has been focused on broadening its customer base beyond western male petrolheads. Its chief marketing officer, Simon Sproule, runs a female advisory board in order to better market to women and has handed creative briefs to the likes of Rankin and Nick Knight.

The marketer has also inked partnerships outside of the luxury automotive space with the likes of Hilton and Beats by Dre, in order to “accelerate” the brand’s own ad spend. Last year, the company also invested in an “entirely new CRM engine” that allows drivers to customize cars online.