General Motors Corp. wants to expand a pilot that started a few months ago to give its dealers more say in local advertising.
The tests in 10 markets, originally due to end Dec. 31, 2000, are continuing, with plans to expand to up to 20 markets early this year, said a GM spokesman. The automaker has been discussing with select dealers plans to expand to as many as 50 markets, said execs close to GM.
The auto giant infuriated its dealers when, in April 1999, it eliminated their longstanding local ad groups as part of its reorganization to five regions. GM took control of some $600 million in local ad dollars generated by 1 percent of every new vehicle's invoice price. Groups of dealers in Illinois and Indiana sued GM over the matter. The Indiana suit is still pending.
The retailers still complain the level of ad spending in their regions is well below that of their defunct dealer groups. GM poured money into newspapers, partly because local TV stations wouldn't give in to the carmaker's demand for auto exclusivity in commercial pods. GM's newspaper spending ballooned to $501.3 million in 1999, a 234.8 percent jump from the prior year, according to Competitive Media Reporting.
Many dealers criticized the automaker for promoting deals on GM vehicles from different divisions in single newspaper ads in local markets. "We were fighting our cousins; it was killing us," said Gene Morris, a New Jersey Chevrolet dealer. We didn't need them to advertise in newspapers. We individual dealers can do that."
Bill Lovejoy, group VP-sales, service and marketing for GM in North America, said he'll outline details of the program to dealers at the annual convention of the National Automobile Dealers Association in Las Vegas in early February. Local programs will only be approved if dealers accounting for 75 percent of the area's vehicle-sales' volume agree to the plan.
He said the expanded program will be the same as the pilot: Dealers can volunteer to add 1 percent of a vehicle's invoice price to the local ad pool, while GM will kick in an additional 25 percent of the group's total.
Mr. Morris said he's unsure whether that uneven spending formula would fly with dealers. "That comes out of my bottom line and that [profit] percentage keeps dipping and overhead keeps going up," he said.
Jim Weston, a Pontiac-GMC dealer in Oregon, agreed: "Dealers aren't going to be crazy about it at all."
Both dealers said they're not involved in meetings with GM about expanding the program.
GM isn't reversing itself, said Kurt Ritter, general marketing manager of the carmaker's biggest division, Chevrolet. "It's another approach to cooperative advertising," he said. "We've had great success with individual dealers getting more [ad] dollars at the bottom end of the [purchase] funnel. We need another layer in the funnel for the message."
As with the pilot, dealers can pick from "shared creative" from GM's national ad agencies. Campbell-Ewald, Warren, Mich., handles Chevrolet. D'Arcy Masius Benton & Bowles, Troy, Mich., has Cadillac and Pontiac brands. McCann-Erickson, also Troy, has the Buick account. Publicis Hal Riney & Partners, San Francisco, has Saturn. The GMC truck brand is handled by Lowe Lintas & Partners, New York. Oldsmobile, which will be phased out in the next one to three years, is done by Leo Burnett USA, Chicago.
Mr. Weston bemoaned the lack of communication about local advertising and marketing strategies with GM's regional and national staff since the 1999 reorganization. When the dealer ad associations were still around, he said, "at least you knew you could call somebody that knew the answer."
When GM first discussed the pilot last fall, it said the test restored the finest past of the old dealer ad groups' monthly meetings with dealers and the carmaker's local staffers.
GM's market share slumped to 28.3 percent in 2000 vs. 29.4 percent in 1999, according to Automotive News. GM commanded a 45 percent share 20 years ago.
Copyright January 2001, Crain Communications Inc.