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Tuesday, May 31, 2005


The New GM Strategy

Insightful interview of Mark LaNeve by Paul Eisenstein, writer for TheCarConnection.com. I've been reading about GM's desire to "rationalize" its lineup for sometime now. As more and more entrants dive into the US marketplace, GM's individual models are losing relevancy, especially among the younger audience. Fewer and fewer young Americans are growing up with a Ford oval or Bowtie imprinted on their foreheads. What to do?

I'm actually going to propose the opposite of what Mark LaNeve and the other experts say. I believe GM's marketshare losses have nothing to do with the need to rationalize its individual brands and combine dealerships. No...it has to do with GM's (and Ford's for that matter) obsession with trying to "manage" multiple brands via a corporate culture that looks for "price" and "cost" wins at every turn. There is not a platform that doesn't have to serve multiple masters. The decision on what to build and for whom more often is based on cost instead of potential demand at a higher margin. Simply put...we must make all pencils out of wood and with lead. Makes for boring pencils from GM.

The Solution?

Ok...strap in. This is shocking. Give each Division (car/truck brand) the authority to build what they want...as separate identities. Let them find their own alliances and let them act unilaterally. And if the Division head doesn't cut it...you cut the Division head...instead of "promoting" them to the next job. How long does GM need to nurture a loser like Saturn? On the other hand, if Saturn had been given more autonomy it could have sourced engines and, possibly a platform, from the Koreans and built SUVs sooner...thereby making a profit. Sure...this would have "upset" the careful "GM strategic" plan to have each division get exactly its correct marketshare without eating into the neighboring divisions market share. Only one problem...it hasn't worked in 30 years! Let's be real here...a Chevy dealer's # 1 competitor is not Ford...it's the next Chevy dealer, or GMC/Pontiac dealer! Instead of rewarding mediocre product by slicing it thinner (like baloney) via re-badging...force Division heads to start thinking like....Division heads instead of marketing guys with a big fat ad budget that gets spent on TV.

My favorite quote in the interview?

TCC: You've long been the biggest advertiser in the U.S. , but a huge portion of your billion-dollar-plus ad budget goes to network TV. We hear that's going to shift. True?

LaNeve: I'm not sure, over the years, that we were totally effective. Here's an example. Pontiac was a small player on TV, but they could be the biggest player on the Internet if we choose to be there.

Could be? When, oh when will someone wake up and realize that you don't build a brand by running TV commercials? You build a brand by developing a unique product and then promoting it. How you promote it is almost irrelevant! The Wassmann math once again, quickly. 10-15% of US households buy a new car in a given calendar year. TV indexes at 100 vs. new car buyers. Therefore, 85-90% of TV ad dollars are wasted on people who could give a rat's a** about your message. Worse, since less than 30% of those who are actually in market, will actually CONSIDER your specific vehicle...the math gets much worse.

You'd be better off hiring 500 GM retirees and paying them $1,000/day to call each and every potential new car buyer and telling them why XYZ brand should be high on their consideration list.


Ok...enough for today.

Sorry I haven't posted more regulary (to my 5 readers).

Keep posting good stuff, and you may get a few more than 5 readers!
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