Commentary by Al Ries

CONTEMPLATING THE SORRY STATE OF GENERAL MOTORS

Will They Ever Figure Out How to Fix Their Brands?

By Published on .

Most Popular
Recently, General Motors's top sales executive, Mark LaNeve, unveiled the company's latest wave of marketing communications and said: "These ads will say we have the best product, here's why ... and that we also have the best price."
Photo: General Motors
During the past 10 years, General Motors has spent $32.9 billion on advertising but its market share has continued to decline.

But the just-released annual automotive issue of Consumer Reports has published its influential top picks for 2006 and there are no American vehicles on the list. It consists of four Hondas. Two Toyotas. Two Subarus. One Acura. And one Infiniti. Ten automobile models. All Japanese cars and trucks.

So what do you suppose the reaction of consumers will be when they see GM's slick new ads saying "we have the best product, here's why"?

Not reading 'Consumer Reports'
The most likely response will be: "I guess GM execs in Detroit don't read Consumer Reports."

Other industry observers might go on to ask why GM is spending billions of dollars on advertising. As a matter of fact, GM has been the largest advertiser in America for eight of the past 10 years.

Would you believe that GM in the past decade spent $32.9 billion on advertising in the American market? Considering that the automaker had a recent market capitalization of $10.9 billion, the past decade of GM advertising cost more than three times the value of the entire company.

Despite that, GM's domestic market share continues to decline, from a 1962 high of 51.9% of the market to last year's 26.2%. (Its market share has declined 30 of the last 43 years.)

Last year, GM lost $8.6 billion. And just last month, its credit ratings took another hit as Moody's Investors Service slashed the company's rating one notch further into junk territory and warned the company could resort to bankruptcy. "The evidence points, with increasing certitude," Carol Loomis wrote in a Fortune magazine cover story about GM last month, "to bankruptcy."

Look carefully at Mercedes-Benz
Maybe GM executives should look more carefully at Mercedes-Benz, BMW and Porsche. Do you suppose the head honchos of these profitable automotive operations were worried when the Consumer Reports ratings came out? Of course, not. The difference is that Mercedes-Benz, BMW, Porsche and Volvo stand for something and GM' brands do not.

Then there's the old bugaboo about retirees and their health-care costs. "GM and Ford and Chrysler," said Malcolm Gladwell recently, "cannot compete in the world market if they're asked to bear the pension and health-care costs of their retirees. Can't be done. It's that simple."

What about Mercedes-Benz, BMW and Porsche? Germany is one of the highest-cost countries in the world. It costs more to make a product there than in almost any other place on the globe. Would GM be better off if it built all of its Chevrolets in Cologne? I think not.

Notice, too, that these three German brands, on average, are more expensive than comparable GM vehicles.

The difference, of course, is that Mercedes, BMW and Porsche don't just build automobiles. They also build brands.

How to build a brand
How do you build a brand? You stand for something in the mind.

A research questionnaire recently sent to Volvo buyers gave the new owners 24 choices to describe the "image" of their vehicles: Cute, functional, prestigious, classic, responsive, luxurious, conservative, rugged, aggressive, youthful, good value, distinctive, sophisticated, sleek, simple, well-engineered, elegant, fun to drive, powerful, safe, sporty, advanced, family oriented and economical.

Interestingly enough, you could take that automobile questionnaire and build an automobile brand from any of the choices offered. Prestigious (Mercedes-Benz). Cute (Mini Cooper). Youthful (Scion). Fun to drive (BMW). Sporty (Porsche). Safe (Volvo).

Now compare these 24 choices with the current slogans of the eight GM brands.

  • GMC -- Professional grade
  • Saturn -- People first
  • Chevrolet -- An American revolution
  • Pontiac -- Action
  • Buick -- Beyond precision
  • Cadillac -- Break through
  • Hummer -- Like nothing else
  • Saab -- Born from jets

Are GM's brands meaningful?
Do these slogans "position" the brands in any meaningful way? Do they tell you what the target market is for a Saturn? Or a Chevrolet? Or a Buick? Or how they differ from one another?

If a Buick is "beyond precision," does that mean that Saturn, Chevrolet, Pontiac and Cadillac are not precisely made?

To start a meaningful branding process, the first thing that General Motors would have to do is assign a position in the marketplace for each of its brands. Then it needs to make sure each brand stays in that position (in spite of the inevitable cries from dealers who always want their brands to stand for everything). Here are my thoughts:

  • GMC: Scrap the brand, but not the product line. GMC stands for General Motors Corp. That's confusing. How can you build a brand with the corporation's initials that stands for something different than the entire corporation? Invent a new brand for a professional line of trucks.
  • Saturn: Entry-level brand for younger people
  • Chevrolet: Family vehicles
  • Pontiac: Powerful cars, including the Corvette
  • Buick: Conservative styling for older people (Buick should have borrowed styling cues from Bentley, the way Chrysler did with its 300 Series.)
  • Cadillac: Expensive. Really expensive.
  • Hummer: Scrap the brand. Hummer sales last year represented only 1.3% of GM's unit volume. A company GM's size shouldn't be marketing niche vehicles.
  • Saab: Scrap the brand. Saab sales last year represented less than 1% of GM's unit volume.

Reduce short term sales?
Would GM ever use any of these suggestions? Not a chance. Every suggestion would reduce sales in the short term, not increase them. When you dig yourself into a hole, you have to dig yourself out before you can make progress. They would have to take a short-term hit in order to achieve a better long-term position.

Big companies are like dogs. They strain at the leash in order to reach a goal without realizing that the job would be much easier if they just backed up and untangled the leash first.

Fix the brands first. Then fix the company.

~ ~ ~
Al Ries is the author or co-author of 11 books on marketing, including his latest, The Origin of Brands. He and his daughter Laura run the Atlanta-based marketing strategy firm Ries & Ries. Their Web site: www.ries.com.

In this article: