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WHY GM OPTED FOR BRAND MANAGEMENT;NEW APPROACH AIMS TO PHASE OUT INCENTIVES;STRONGER BRANDS EQUAL BIGGER PROFITS.

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General Motors Corp. is embracing that equation as it puts into place a brand management system, a key part of an overhaul in the way the company develops and brings new products to market.

By aiming future products at more sharply defined customer segments, GM hopes to leverage the fact that it has more automotive vehicle brands than anyone else in the marketplace. Meeting its eventual goal would mean GM could largely phase out rebates and other consumer incentives that undermine brand image and undercut profits.

"We ought to get to the point where people are willing to pay more for our product in the market, and that's the whole definition of brand equity," said Ronald Zarrella, the former Bausch & Lomb Corp. president-chief operating officer who took GM's top marketing post last December.

GM last week named its first 29 brand managers, each taking responsibility beginning early in 1996 for building the image, pricing, and developing advertising and promotions for one or more designated models.

The brand managers have varied backgrounds, including advertising, market planning, sales and engineering.

While the first 29 brand managers come from within GM's ranks, another six will be drawn from outside the auto industry, one assigned to each division. GM is looking for candidates with brand management expertise to serve as resources.

Those additional six brand managers could come from companies like Procter & Gamble Co., creator of the system in which a single executive oversees all aspects of a brand's marketing. GM began looking at brand management after John Smale, a former P&G chairman, became GM's non-executive chairman in 1992.

At GM, brand managers will work with 13 vehicle line executives, top engineers responsible for developing new products, who were also named last week. The VLEs and brand managers will both be responsible for market performance and profitability.

Ford Motor Co.'s Ford and Lincoln-Mercury Divisions also are putting forms of brand management into place, but the Ford brand managers will interface with the company's worldwide marketing plans unit instead of directly with the engineers designing products.

"The point of having many brands is that we can segment the market more finely than any competitor, and that provides great opportunity," said Rick Wagoner, president of GM's North American Operations.

GM plans to use in-depth market research conducted during the last several years to develop and position products that appeal to customer segments.

"There's a belief in this industry that product is everything, and it's not," Mr. Zarrella said. "Product will always be the most important element of the marketing value chain in the automobile industry, but there are other elements that provide leverage, preciseness and focus that we can use a lot better than we have."

GM hasn't always managed its brands to advantage, and as recently as three years ago there was widespread speculation the company would drop the Oldsmobile brand because of a lack of direction and identity.

"The root of GM's problems, from a marketing standpoint, is that they basically lost sight of what their divisions stand for," said Chris Cedergren, senior VP at AutoPacific Group, a Santa Ana, Calif., auto marketing consultancy. "They have been focused on improving their quality and cost structure, but they neglected their brand images."

Mr. Cedergren said GM's overall direction "appears to be a good strategy," but he questioned whether brand-building efforts should be focused on nameplates instead of divisional names.

"To me, the brand is Cadillac, not DeVille. Somebody has to control the brand managers within each division to make sure products are consistent with the images of the division."

Similar skepticism was voiced by Laurel Cutler, exec VP-global director of marketing planning for Foote, Cone & Belding, New York, and former VP-consumer affairs at Chrysler Corp.

It's harder to manage an auto brand than a package-goods brand or a service brand because of "the size of the ticket and the multiplicity of choices," said Ms. Cutler. She referred to GM's system as "nameplate management," because each brand manager will oversee the brand image for only some of a division's products.

"Nameplate management will improve the image of the nameplates, but what's in trouble are the overall brands," she said. "For the last 10 years, there's hardly been a real brand out of Detroit, with the exception of Jeep and Saturn."

Mr. Zarrella, the VP and group executive in charge of GM's North American sales, service and marketing, said under the new setup divisional general managers will be responsible for "developing strong brand equity for the divisional names." He described the divisional marks as "umbrellas for the individual vehicle brands."

In the new GM structure, the brand managers will report to the general managers of Buick, Cadillac, Chevrolet, GMC Truck, Oldsmobile and Pontiac Divisions.

Each brand manager will head up a team of three to five people, including a product development manager who will also work as a member of a VLE team.

Within each division, there will also be a marketing services organization with specialists in areas such as advertising and promotions. The brand teams will use the marketing services staff as resources.

Mr. Zarrella said the new structure inside the divisions doesn't change the role of Philip Guarascio, the VP and general manager-marketing and advertising for GM's North American Operations.

Mr. Guarascio remains in charge of GM's $1.9 billion media operation. In addition, Mr. Guarascio "will still provide an overall expertise in the area of advertising and marketing, particularly event marketing, that the divisions draw from," Mr. Zarrella said.

According to associates, Messrs. Zarrella and Guarascio have struck a positive working relationship.

"Phil's not one of the GM `old boys' either, and he was glad to have Ron come aboard," said one insider. "And Ron has a great deal of respect for what Phil does."

GM agencies are expected to adjust their staffing to work closely with the brand management teams at the divisions. For instance, D'Arcy Masius Benton & Bowles, Bloomfield Hills, Mich., already had assigned a representative to the Catera brand team at Cadillac and to the brand teams overseeing all Pontiac's models. The Pontiac and Cadillac teams were forerunners of the new system.

A key to the brand management system is to define long-term goals, said Denny O'Donnell, who was the brand management director for Pontiac's Sunfire and Grand Am models and will now be brand manager for GMC Truck's Yukon and Suburban models.

"In the brand management context, you have an objective in mind against which you can measure proposals and projects and ideas," said Mr. O'Donnell, who also served on the GM committee that helped design the new structure.

"Brand management is a long-term commitment, based on the view that two years or four years or 10 years from now you will be where you want to be."

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