GM Marketing. Bold Moves or a Business Case for Procurement’s Role in Marketing Services?

31 Jul

General Motors and its CMO just parted ways, suddenly and unceremoniously.  The Wall Street Journal, which broke the story, cited sources “familiar with the matter” when suggesting that the CMO had failed to “adequately appraise the financial details of a recent British soccer sponsorship deal.”  Of note, under that multi-year deal, GM will allegedly pay Manchester United up to $600 million over a seven-year period for Chevrolet to become the club’s jersey sponsor, which includes a $100 million “activation” fee.

Without passing judgment on GM, on their recently departed CMO, or on decisions regarding its $4.4 billion global advertising budget, even a casual observer might ask, “What’s up with GM Marketing?”  Prior to appointing Joel Ewanick to head up marketing for the organization in the spring of 2010, GM had gone through three Marketing Chief’s in the prior twelve months.  

In the two years since Mr. Ewanick’s arrival from Nissan, GM’s Marketing Team implemented a number of dramatic changes, including an overhaul of their marketing services agency network.  This included the abrupt termination of Chevrolet’s agency of record Publicis, firing Bartle Bogle Hegarty on the Cadillac account after five short months without a review (they learned of their fate by reading of GM’s move in the press), consolidating global media buying with Aegis’ Carat, and in March of 2012 GM pared their global creative agency network by 70 to 90 shops and awarding the business to a yet to be constructed agency, Commonwealth Detroit. 

Of note, Commonwealth Detroit is the combination of two agencies; Goodby Silverstein & Partners and McCann Erickson from Omnicom Group and IPG respectively and involves recruiting, building and relocating a team of disparate ad professionals from different agency cultures/ backgrounds to the MotorCity to handle GM’s global business.  Certainly a cross-holding company entity is an interesting approach that is historic in both its boldness and scope.  However, the process of nurturing two distinct creative agencies from two separate agency holding companies to share creative responsibilities, revenues and profits is unheralded.  Does anyone remember Dell and Enfatico?  The irony is that Enfatico was created by recruiting top personnel from agency brands all from within the WPP family. 

Any change in agency alignment is challenging.  Change of this magnitude in an organization’s marketing agency network is both difficult and risky.  Often done under the guise of future “expense reduction” the measures used to forecast those savings typically don’t hold water.  The reason being is that they often fail to account for factors ranging from the cost to unwind the incumbent relationships to the impact of new agency learning curves on account assimilation to the risks this can present to the advertiser on the demand generation side of the ledger. 

According to Bloomberg News, GM posted a global sales increase of just over 2.9% during the first half of 2012 while rival Toyota grew 34.0%, putting Toyota on pace to reclaim the global sales lead this year in the wake of last year’s tsunami in Japan.  In the U.S., GM’s sales rose by approximately 4.0%, in a category that grew 15.0%.  According to Autodata Corp, GM’s first-half U.S. market share fell to 18.1 percent from 19.9 percent a year earlier.  What is the value of a share point you ask?  The answer:  $910 million according to IBISWorld’s Car & Automobile Manufacturing market research report in which they forecast the U.S. automotive market will achieve $91 billion in revenue in 2012.

So what are the chances for success?  Time will tell.  We certainly wish GM and their interim CMO well in addressing the challenges associated with the breadth and depth of changes to their agency roster and the attendant impact on marketing strategy development and execution.  Let’s hope that a sense of reason governs their moves going forward and that the change at the CMO level doesn’t usher in another round of changes in their agency network.  The costs are too high and the risks too great.  While it wasn’t that long ago that GM severed ties with its century old agency of record, Campbell-Ewald, it seems like an eternity.  Interested in reading more on this subject?  Check out the coverage in Automotive News.

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