In the past 12 months alone, seven auto brands with annual measured media spending of just over $1 billion have either shifted accounts or called agency reviews. That's double what changed hands in 2005, if you exclude the massive $3.5 billion General Motors Corp. media-planning and -buying consolidation.
It's a sobering figure, especially considering the auto category historically has enjoyed some of the industry's most stable client relationships. But as carmakers wrestle with escalating competition, reduced margins on vehicle sales and skyrocketing costs -- not to mention the rapidly evolving new-media landscape and shifting consumer trends -- loyalty is running thin these days.
No wonder: U.S. sales of new vehicles slid 2.4%, to 2.3 million units, in the first two months of 2007 vs. a year ago, according to Automotive News -- a trend that also carried through 2006. And while all the Asian transplants saw increases, Detroit saw drops.
"The agency of record is often an easy target in difficult times," said John Casesa, managing partner of consultant Casesa Shapiro Group and a former analyst for Merrill Lynch.
Among the 12-month casualties are Hyundai's $200 million creative business; Volvo's $150 million global account; Saturn's $200 national and regional and dealer creative business; and GM's $190 million corporate account, as well as its $160 million Cadillac business. Last week Porsche Cars North America joined the list, tossing into review its $33 million national creative and media, held by Carmichael Lynch, Minneapolis and Kastner & Partners, Los Angeles.
And given the industry's copycat instinct, more may be on the way, said William Hopkins, an auto-ad-agency-exec-turned-consultant. "I don't think any agency is safe right now because of the herd mentality," he said. "Nobody ever got fired for doing the same thing as everyone else."
Porsche's David Pryor, promoted in December to VP-marketing, said the move was driven by a desire to "bring the media and creative together with a higher level of coordination and get a better feeling for what is out there in the agency world."
But there has been talk in auto circles that another factor came into play: cost cutting. Mr. Pryor denied that the automaker's procurement and finance units sparked the review, and said that since marketing can't be perfectly measured, there is "always a natural pressure" to conduct reviews.
so much red ink
Losses are mounting at the giants. GM, which is expected to post delayed, adjusted fourth-quarter and total 2006 filings this week, reported a $10.6 billion global loss in 2005, with a smaller loss of $914 million for its North American auto operations in the first three quarters of 2006. Ford Motor Co. recently reported the worst results in its 100-plus-year history: a $12.7-billion worldwide loss for 2006 and a pre-tax loss of $6.1 billion at its North America auto arm vs. a loss of $1.5 billion in 2005. Chrysler Group, after posting a loss of nearly $1.5 billion last year, has said it expects another loss in 2007.
With so much red ink, bean counters naturally have more sway over marketing spending, auto experts said. The industry has "allowed the accountants to determine that advertising is a commodity when it is an art," said Charlie Hughes, founder of auto consultant BrandRules. He said auto procurement people figure it's possible to get better deals from their agencies, but the focus should be on getting great advertising.
Another common reason for changing agencies: new marketing leadership looking to make a mark. Such was the case at GM's Cadillac, which moved its national creative account to Modernista, Boston, last summer shortly after the arrival of Liz Vanzura as marketing manager.
"There's more movement on the client side as the auto companies are downsizing and reconfiguring," said Phil Guarascio, GM's former advertising czar who retired in 2000. "There's sort of a gunslinger approach because they are looking for quicker success." The personal client-agency relationships at the top and middle levels no longer exist, he said.
John Bulcroft, an ex-Porsche and Audi marketing chief, blames the shifts on brand-marketing leaders with insufficient vision inside the car companies. "Very few of them have the soul and understand what motivates people or captures people's attention," said the president of consultant Advisory Group. "Advertising is only as good or as poor as the person managing the agency" -- provided the person is there long enough. Mr. Bulcroft compared CMO tenure -- which averages a paltry 24 months in the industry -- to a shooting star, noting that many view marketing as a necessary stop along a career path one must dutifully follow to reach the top ranks.