The Bonneville budget is just one casualty of brand management at the country's largest advertiser. GM says it's "evolving" its once much-ballyhooed branding plan; observers, however, maintain GM's adoption of the package-goods brand-management model was a resounding flop. GM's "evolution" means the definition of a brand will no longer apply to individual models, but to divisions-the way the rest of the industry has done it for years.
While new models will still get dedicated ad launches, they will use the divisional brands' umbrella theme, said John Middlebrook, GM's VP-general manager of vehicle brand marketing and corporate advertising. Bonneville no longer has its own tagline, but uses the Pontiac division's "Pass it on," developed by Bcom3 Group's D'Arcy Masius Benton & Bowles, Troy, Mich., last fall for Pontiac's first divisional image effort since 1997. The tagline was also used to launch Pontiac's all-new Vibe sport wagon earlier this year.
Under brand management, some 30 key models had their own taglines with creative that sometimes barely mentioned the division. That confused shoppers, Mr. Middlebrook said. "The name on the store is where people go to buy the vehicles. Our business is different from Procter & Gamble's."
The thrust of GM's brand-management system was to create personalities for each vehicle with ads to appeal to people based on detailed customer-needs segmentations. The organization was supposed to eliminate the need for incentives because ads would have built strong, desirable vehicles for which consumers would pay full price. Instead, GM built too many undifferentiated look-alike models and lost market share, which it only started to regain after offering no-interest incentives after Sept. 11 last year. Its incentives are among the industry's highest.
John Smale, an ex-P&G chairman on GM's board from 1982 through June 2000, brought brand management to the automaker, Mr. Middlebrook said. Mr. Smale, who led a 1992 board revolt and firing of top management when GM was awash in red ink, didn't dictate how brand management should be executed.
That fell on the shoulders of Ron Zarrella, hired from Bausch & Lomb at Mr. Smale's urging in fall 1994 as GM's first brand czar. The outsider, who rose to president of North America, said in 1998 that marketing cars was no different than marketing soap.
Many experts begged to differ. Few veteran midlevel insiders who disagreed with the system complained to management, fearing they too would be fired. Mr. Zarrella left last November, returning to Bausch & Lomb as CEO.
Mr. Middlebrook credits Mr. Zarrella with bringing "the principles of great advertising to GM and helping us institutionalize it."
Tom Kinnear, executive director of the University of Michigan's Zell-Lurie Institute for Entrepreneurship, sees things differently. "GM implemented P&G's brand management of the 1950s," he said. Modern branding systems of today link teams from product development, marketing, manufacturing, finance and operations, which GM failed to do, he explained.
The marketer's branding organization "really looked great on paper," said a GM insider who asked not to be named. But for it to work, he said, "you've got to have the product, and if not, all the marketing in the world isn't going to help you."
The automaker will now move the spotlight from marketing to developing differentiated, must-have products.
Under brand management, the automaker relied too heavily on consumer research. "What really killed us is we were researching this stuff to death," the insider stated. Relying too much on consumer input for future vehicle designs doesn't work because of the long lead-time to develop the products. "The whole world rotated by the time the vehicle came out."
Under Mr. Zarella's plan, brand managers expected to have more authority over their vehicles than they did. But the vehicle line executives who work with engineers and manufacturing types retained control. On May 1, GM eliminated the brand manager title.
Executives in those spots are now called marketing directors, and there are fewer: 21 now compared to 31 in January and 40 in 1996. Instead of being assigned to individual models, they're now aligned by platform, a vehicle's backbone that includes chassis, suspension and powertrain. The divisional advertising managers now have more power than the new marketing directors, Mr. Middlebrook said.
That's a return to the way things were, when each GM division (except Chevrolet) had small ad teams of about five people working with ad agencies, said the insider. Before 1996, Chevrolet, GM's largest division, had about 10 ad staffers, which ballooned to nearly 100 brand team members. "You were in meetings all the time. It was hard to get things done."
Fewer brand teams is good news for GM's agencies, which had "tremendous overhead" supporting each vehicle's brand team with staff, said an agency executive who asked not to be named.
Since a 1999 regional reorganization by Mr. Zarrella, the national shops have handled all regional advertising. Under the prior structure, the regional dealer ad groups had been allowed to use their own agencies, but Mr. Zarrella disbanded their groups. GM is now unraveling much of that major 1999 field restructuring.
GM's divisional brands are Buick (handled by Interpublic Group of Cos.' McCann-Erickson, Troy, Mich.); Cadillac (D'Arcy, Troy); Chevrolet (Interpublic's Campbell-Ewald, Warren, Mich.); GMC (Interpublic's Lowe, New York); Oldsmobile (Bcom3 Group's Leo Burnett USA, Chicago); Pontiac (D'Arcy) and Saturn (Omnicom Group's Goodby Silverstein & Partners, San Francisco).
The evolution hasn't crimped the marketer's spending, however. GM was the nation's top ad spender in the first quarter of 2002, with $609 million in measured media vs. $555 million the same period a year ago, according to CMR. However, for more than a year GM has shifted more national ad dollars into regional buys.
When Rick Wagoner, GM's CEO since June 2000, hired industry vet Bob Lutz, now chairman-North America, last September, many staffers at headquarters high-fived each other with elation of the arrival of a "car guy." Mr. Lutz, retired vice chairman of defunct Chrysler Corp., shook up GM's design system, recently eliminating GM's divisional "brand character" design studios. Now designers compete against each other in what GM calls a "bake off" to bring more compelling models to market.
Wes Brown, an analyst with consultancy Nextrend, said GM's brand management is evolving because "Mr. Lutz had much more pressing issues," so the old system wasn't completely gutted. But brand management hurt GM brands more than helped because there was so much vehicle overlap, he said.
Mr. Middlebrook insisted brand management is still alive and well at GM, that the system is merely evolving. "We haven't torn up what we put in place," he said.
The marketer still uses its formal "customer-needs segmentation," used to target and differentiate models that often looked alike. "But we're not driving our business with it with monthly evaluations like we did in the past," said Mr. Middlebrook. "You can't process your way into success to the point where you miss new trends." GM still pre-tests ads, but unlike before, "not as a gate whether it should go forward or not," he added.
The way David Cole, director of consultant Center for Automotive Research, sees it, GM is evolving away from very formalized processes. Mr. Cole said "what's changed is the approach of [being] overly analytical with lots of gates and rules." Mr. Lutz has streamlined GM's system of a series of committee approvals for new-model designs because "you can't write an equation about what customers like and don't like," he added.
Mr. Cole has great expectations since GM has significantly cut development costs and improved manufacturing efficiencies to the point it can make different-looking models on the same platforms for several divisions. He cited the hot-selling GMC Envoy and Chevrolet TrailBlazer.
"Now they can do some things they couldn't dream of 10 years ago. I think the results will be faster than many people expected. It's provoking a lot of concerns from competitors."