Consumers to GM: You Talking to Me?
Despite a marketing overhaul launched in '95, GM's share in the U.S. has dived from 34% to just 29%
No one ever said running an auto giant would be easy. Even so, General Motors Corp. has had a tougher time than most. It has spent billions of dollars in the past five years to remake its cars and spruce up the image of brands such as Cadillac, Oldsmobile, and Buick. But for a lot of folks, including family man Timothy Dugan, the message hasn't gotten through. "I don't know anyone who owns an Oldsmobile," says Dugan, 41, an import manager for a semiconductor company in San Jose, Calif. "I'm surprised they're still around."
That stings. But Dugan's lack of interest in GM is all too typical of today's drivers, even though winning back consumers like him was the reason GM launched a sweeping overhaul of its marketing back in 1995. That was just after Ronald L. Zarrella was recruited from Bausch & Lomb Inc. to head North American sales and marketing. He promised to restore the auto maker's declining fortunes by applying the brand-management techniques used by consumer-products companies. The idea was to draw upon time-proven tactics such as intensive consumer research and giving broad authority to brand managers to tweak the product or the marketing to keep customers coming back. To date, however, car buyers remain unimpressed: GM's U.S. market share has plunged to 29% from 34% since the campaign began. Says Morgan Stanley Dean Witter analyst Stephen J. Girsky: "Something isn't working."UNDER PRESSURE. That's putting it mildly. And now, Zarrella, who was promoted to president of GM's North American operations in 1998, is under pressure to stop the slide. That won't be easy. While Zarrella's team has struggled to reverse the company's declining fortunes, four brand managers have left in recent months. The most visible departure is Oldsmobile's Karen Francis, who was lured away to a dot-com. Francis, for one, complains that some of GM's "old guard" are resistant to input from outsiders. Meanwhile, European and Japanese rivals continue to snap up market share.
Zarrella promises that GM will see improvements over the next few years as more vehicles developed during his tenure, such as the Buick Rendezvous, a new SUV, finally roll off the line. "Product is everything in this business," he says. But skeptics who have watched Zarrella's less-than-impressive performance over the past five years aren't so sure. Without improvement soon, say company observers and insiders, Zarrella could wind up the fall guy for GM's poor performance. Says one company insider: "Zarrella is one of the more vulnerable people at GM."
Oldsmobile is a prime example of GM's confusion over marketing strategy. Over the past five years, Olds brand managers have tried to recast the division in a younger, trendier light. But it has been a bumpy road. Olds targeted younger buyers in recent years with its sleek Intrigue, Aurora, and other stylish vehicles. But marketers missed a big opportunity to strengthen the brand when ads underplayed those cars' connection to Oldsmobile, says Jim Wangers, a senior consultant at Automotive Marketing Consultants Inc. And that makes it tougher to lure young buyers into showrooms. Critics say that's a big reason why Olds sales have fallen 26% this year. "The Intrigue is one of the best cars on the road, but no one knows where to buy it," says Morgan Stanley's Girsky."FRUSTRATING." Misguided campaigns are just one of the problems eating away at GM's brand-building. Another is the company's constant push to hike sales via rebates. "It's frustrating because we hear a lot about brand management, and then at the end of the month it's `Let's put rebates on it,"' complains a GM brand manager. An even bigger problem is the company's inability to differentiate or dump its similar lines. In the past decade, for instance, GM has tried to sell GMC trucks as luxury vehicles. But Chevrolet dealers sell trucks that are less expensive than GMCs, even though they're nearly identical. That's confusing for consumers and maddening to dealers. "My biggest competitor is the GMC dealer," says Joel Woolf, general manager of Harbor Chevrolet in Long Beach, Calif. "GM should have [guts] enough to eliminate GMC."
Zarrella disagrees and says the problem is not too many brands but car models that were developed before his brand-management campaign kicked in. Now, new lines, such as Pontiac's Aztek and the Oldsmobile Bravada, designed with their newly honed brand images in mind, will come with extensive marketing plans. Aztek's, for example, includes sponsorship of the youth-oriented X-Games and ads in Rolling Stone magazine.
Even Zarrella's stiffest critics concede that his job is a particularly tough one. Other carmakers have had success at brand management, but none have had to apply it to a fleet as broad as GM's. With eight brands and 80 vehicles, GM is by far the most extended carmaker in the business. Sculpting brand images for that many cars is a Herculean task, says Gary Hamel, chairman of Strategos, a Menlo Park (Calif.) consulting firm. That's especially true at GM, which is trying to contrive images for vehicles already on the market. "There's a sense in some of these companies that you can sprinkle some kind of brand fairy dust on mediocre vehicles," he says.
Ford Motor Co., which has just six brands and fewer than 40 vehicles, has an easier go of it. Ford has challenges similar to GM's. But because the auto maker has fewer vehicles to manage, it can do a better job building the branding effort into a new-car model right from the product-development stage. "In this industry, you have to differentiate brands with product," says James C. Schroer, a former RJR Nabisco Inc. marketer and currently Ford's vice-president for global marketing. "If you try to do it with marketing, you won't fool anybody."IN GEAR? That's just plain common sense, of course. Still, it's a lesson that Zarrella and company have had a hard time implementing. That's about to change, they insist. GM promises that Cadillac is about to come up with a great new car and smart marketing to go with it. The new aggressive styling shown in concept cars such as the Evoq two-seater and Imaj sedan will become standard at Cadillac, starting with the Catera sedan coming later this year.
GM's multibillion-dollar plan is to overhaul Cadillac's product line rapidly in the next few years, giving all models edgy styling, more powerful engines, and a rear-wheel drive for better performance. GM will peddle these New Age Caddys with more youthful advertising to attract the sort of affluent drivers now drawn to BMW and Mercedes-Benz models.
Will GM finally get in gear? Observers say it's moving in the right direction--but they warn that GM will never be able to hone strong identities for its cars as long as it holds on to all of those brands. That's why many on Wall Street are calling on GM to rid itself of brands such as Oldsmobile and even Saturn, until recently a GM darling. "GM has too many mouths to feed," says Lehman Bros. Inc. analyst Nicholas Lobaccaro. That's even more true since rival DaimlerChrysler recently disposed of Eagle and Plymouth, and Ford dropped Mercury in Canada."NOTHING IS PURE." But at GM, old habits die hard. In 1998, for example, GM made a $10 million investment to put a Cadillac grille, a spruced-up interior, and an older-model Chevy Tahoe engine into a Cadillac Escalade SUV. That may have helped Cadillac make an extra $350 million in profit--nothing to laugh at. But the tactic goes against everything that brand management tries to accomplish because the new car had nothing to do with Cadillac's brand image. Zarrella justifies deviating from the brand-management blueprint because, he says, the Escalade was not about brand management. Instead, it was about "doing something fast and making a lot of money. Nothing is pure."
To be sure, brand management has had its successes at GM. Every Pontiac, for example, has a distinct Pontiac look combined with powerful marketing that targets younger buyers who want bold, sporty styling. That has helped Pontiac's market share hold steady while other GM brands are slipping. But Pontiac's branding success took years: It started differentiating itself from other GM brands way back in 1981. And Ron Zarrella no longer has the luxury of that kind of time. Indeed, for Zarrella and his vision of brand management, time is running out.By David Welch in DetroitReturn to top