Should GM Cut Back On Advertising During Bankruptcy? They Don't Think So
Up until its recent plunge into bankruptcy, GM had been our nation's second-largest advertiser — behind only Procter & Gamble. The company spent $2 billion dollars annually for the past few years — and though they've recently cut back and fallen into third place behind Verizon, the company apparently plans to continue to spend their pre-bankruptcy budget of $40-50 million a month on ads.
The news, of course, has ad agencies breathing a little easier. GM already owes several agencies and media buyers millions of dollars — and the industry overall is hurting. As for the content of the ads, GM has been taking its cues from the airline industry — particularly Northwest Airlines (now Delta).
From the WSJ:
Leading up to its Chapter 11 filing, GM studied how other industries handled communicating with the public while in financial hardship, zeroing in on airlines and particularly Northwest Airlines, which filed for bankruptcy protection in 2005.
GM found that by using its frequent-flier database and sending email and letters to customers, Northwest, which has since left bankruptcy court and was acquired last year by Delta Air Lines, was able to reassure many customers very quickly that it would continue to fly.
In a campaign that began airing shortly after its Chapter 11 filing, GM went beyond reassurance. In a TV spot dubbed "Reinvention," created by Interpublic's Deutsch, it acknowledged its problems but painted a more positive picture of the future.
"This is not about going out of business, this is about getting down to business, because the only chapter we are focused on is chapter one," intones the narrator of the ad, which is scheduled to end later this month.
What do you think? Should GM be cutting back on advertising until it emerges from bankruptcy? Or is it important to reassure the public?
GM Will Hold Ad Budget Steady [WSJ]
(Photo:frankieleon)
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Comments:
I want a company that I am a part owner of (as a taxpayer) to advertise so that they don't lose even more market share. Asking them to stop advertising because they went into bankruptcy is like asking someone with a broken leg to not bother going to the hospital-- both will cripple in the long run of things.
@vincedia: This argument for/against advertising while a company is going under seems really familiar...
you gotta spend money to make money. i would be worried if they slipped another spot or two.
If anything advertising is needed now more than ever because even I wouldn't want to buy a GM car right now.
@vincedia: This guy knows the score. The business that quits advertising is the business that quit all together.
Now that they're an official arm of the government, why should they even have to pay for advertising? Can't we get some special legislation that allows government owned industries to advertise for free? How dare those greedy capitalist media outlets put profits over the good of the nation!
Advertising is part and parcel of selling cars. But making less shitty cars should probably be the end goal of the bankruptcy.
The more I see GM advertising the more I think of all the money that we as taxpayers are flushing down the drain to support them. The only GM cars I would ever buy would be a Cadillac or a Corvette, and even then thats pretty iffy.
They should advertise. And they should evaluate the efficacy and necessity of the nation's second-largest ad budget.
@smartmuffin: You know in your first sentence you invalidated anything you ever have to say by uttering such rhetorical stupidity.
@vincedia: Surely there's some diminishing returns somewhere between $1 million and $50 million, aren't there? If it was so effective they wouldn't be in their current mess.
I'm not sure they have much choice. At the moment there are probably people who think that GM is not just working through a government-guided bankruptcy, but is going out of business. Having been a ubiquitous advertiser in the past, if their ads were to disappear completely, it would only add to the appearance that GM is vanishing.
If they want to keep getting business, and if they want to have a company after the bankruptcy is over, given these factors, they almost have no choice but to keep advertising.
Granted, I'd like them to pare down their ad buying — by a lot — but for them to "run silent" is just not a great idea. It certainly would not help them in the long run ... it might force them to come back, and beg for more government funding.
@Applekid: You're trying to blame their current condition on one isolated variable. Rarely are things that simple.
My last 3 cars have been Hondas but I've been seeing photos of the new 2010 Buick Lacrosse and it looks really good. I would be advertising that car like mad.
An another front, the 2010 Ford Taurus looks really good too (once again have only seen photos).
@HIV 2 Elway: Yep, unless the name of your company is Coke or Microsoft, you need to keep reminding people that you're still out there.
@Trulymadlyme: Actually their latest crop of cars are pretty damn good. See all Cadillacs, Pontiac G8, Chevy Malibu, Saturn Sky, etc etc.
I think continuing to advertise is the right thing to do.
I remember back 20+ years ago when Lee Iacocca played a prominent role in Chrysler and Dodge commercials at a time when the auto industry was struggling. I found his message to be very reassuring.
They should be advertising and focusing on selling cars, not selling the bailout.
I worked for a store chain that eventually went bankrupt, but before they did cut way back on their advertising. It was like a patient who is bleeding to death pulling out an IV blood line because the needle represented a point of blood loss.
@Unsolicited Advice: i was reading this and my first thought was that i can't come up with the names of any new GM models that've come out over the last few years. I know they relaunched the Camaro, but that's about it. Maybe GM should learn to advertise more effectively.
Does this mean that GM can restructure its contract with the UAW? I would think that would help costs quite a bit.
If GM were to stop advertising, the probability it would fold rather than recover is 100%.
@MaytagRepairman:
Buicks also have reliability stats up there with Toyota and Honda. Buicks have the stigma of being cars for old people, but I'd buy a Buick.
You never cut your ad budget during tough times.
Advertising is essential to sales and getting GM back on it's feet. If GM is not allowed to advertise then they are dead in the water. Chapter 11 lets them continue to operate - including advertising - while they try to dig themselves out of the hole and become a viable operation.
I'm more optimistic than most and doubt that we will lose the GM & Chrysler names.
I was in both Honda and Chrysler showrooms this week. Surprisingly both were very busy with customers. Due to a factory shutdown earlier this year Chrysler dealers are depleting their inventory and have few options in stock for customers to choose from - until the 2010 models come out at the end of the summer.
I hate to say .. but i think it is to late .. American Car companies have put out for the most part, a boring product my entire life .. And anything i would want is way out of my range (Ford GT , Corvette ZR1 etc..) Not saying i can afford a foreign supercar but i can get a pretty sweet Japanese car for a decent price ..
They don't need any more advertising that trumpets the old failed taglines. They need advertising that makes people believe they make better cars. Better than Toyota or Honda. Because given two equally well made cars by GM and Toyota, I will buy the Toyota. Only a better car made by GM will get my money. An equal car will not.
Why?
It would be helpful if
1) they didn't make cars where the dashboard looks like it was designed by a kindergartener. That has been my main criticism, regardless of how good their engines/bodies have been -- the dashboard feels plasticky and cheap. Just copy BMW if you can't design it yourself, at least.
2) how about an accelerator response that doesn't feel like a wet paper bag? You know the difference between a German pedal and a US one. Floppy, floppy, floppy. and the sound is completely different. It doesn't just look cheap, it feels cheap.
Advertising is important, but how about making non-crappy ads? Chapter One, really??? Who cares about that. Tell people why they should buy your product. None of this feel good nonsense. People don't care about getting down to business - they want to know why they should buy a GM over the Hondas, Toyotas, Fords, etc.
@vincedia: I haven't seen a add for Heinz ketchup in years yet I still buy it. I haven't seen an add for Fancy Feast in years yet my cat still eats it. I haven't seen an add for Barq's rootbeer in years yet I still drink it. Many products stop advertising without seriously hurting their sales, because they're already well known. Everybody knows GM exists, so if they don't have something new to advertise, they shouldn't bother, especially considering they're using your money to tell you to buy them this time.
There was an article on a very similar topic a couple months ago in The New Yorker.
For those who don't want to read the whole thing:
Numerous studies have shown that companies that keep spending on acquisition, advertising, and R. & D. during recessions do significantly better than those which make big cuts. In 1927, the economist Roland Vaile found that firms that kept ad spending stable or increased it during the recession of 1921-22 saw their sales hold up significantly better than those which didn't. A study of advertising during the 1981-82 recession found that sales at firms that increased advertising or held steady grew precipitously in the next three years, compared with only slight increases at firms that had slashed their budgets. And a McKinsey study of the 1990-91 recession found that companies that remained market leaders or became serious challengers during the downturn had increased their acquisition, R. & D., and ad budgets, while companies at the bottom of the pile had reduced them.
Yea, because i shop at amazon.com and newegg.com because they advertise SO much. Not because of their steller service, outstanding prices, fast shipping. Hell, i got a 2010 camaro in my driveway because i saw that GM commercial... i mean transformers 2 trailer.. now im just waiting for megan fox to come over and "do me" cause i bought one.
"GM had been our nation's second-largest advertiser - behind only Procter & Gamble."
Wow -- WHY? P&G advertises thousands of products, many of which are bought on a monthly basis. GM advertises far fewer, people buy them only every few years, and GM is like, "Here's a car. Here's another car. Here's a car ad you're going to want to stab your television over when you see it the 5,000th time."
That blows my mind that they were SECOND in advertising.
@bobert: I don't think an inadequate advertising budget got them in this mess, and simply more advertising will not get them out of it. Talk is cheap! Build a good, affordable, reliable, energy efficient vehicle (something that might give car buyers reason to think you've actually changed your image) and then worry about the advertising budget.
I went to my local GM dealer's website today to see if they had any deals on cars I would want to purchase. Nope. No deals, and no cars I'd want to purchase. Well maybe a corvette or caddy, but I'm in the market for under 20k.
What's amazing to me is that the context is always "should they or shouldn't they spend this?!" Advertising isn't evil. It can be stupid, but it isn't evil. GM has been inarguably stupid with its advertising expenditures - a real company evaluates the effectiveness of its behaviors.
@AirIntake: People know GM exists, but GM still needs to change their image. Building better cars can only go so far, they need to advertise to get the word out that they have cars worth purchasing.
If they are going to advertise then they should advertise with short inexpensive commercials or other cheap media. They should tell consumers in their advertisements that they will no longer have cars made of parts that contain cheap plastic components at crucial locations. If I knew that I would not have to spend $250+ to replace a single part just because some tiny piece of plastic broke then I might someday in the future visit a GM dealer.
@Jim Topoleski: You know in your first sentence you invalidated anything you ever have to say by uttering such obvious denial.
@Eyebrows McGee (now with more baby!): People (hopefully) spend a lot more time thinking about a car purchase than a toothpaste purchase, so on a per unit basis, GM requires a lot more advertising than P&G.
If GM is trying to advertise cars, then the ads are all wrong. GM is actually in the stock price market. GM is like the old .COM companies: there was nothing but hype and an implied promise. The ads should be directed towards the investors trying to pump up the stock price. Forget the cars. My bet is that GM is not going to change anything except try to pretend they're in the car business with more vigor.
@vincedia: So true, at least thats what the folks in the advertising department, with their Italian leather chairs and $400 a day coke habits keep telling me.
Its funny actually - I would like to see what the advertising budget is for Google. Then re-present your argument with that fact to back it up.
@Eyebrows McGee (now with more baby!): I think they had to spend more because the hype was much better than reality. Ever notice that people and companies start yelling how great and wonderful they are when reality is the opposite? The more I hear how great something is, the more suspicious I get.
If something is really great, you don't have to advertise that much.
Don't advertise until you make a product that people actually might want to buy. Until you've got that, your wasting your (er, I mean our) money.
I agree with Chairman O. If AIG can't spend money to drum up business then neither should Government Motors (GM). We shouldn't let AIG and GM, use taxpayer money to try to drum up business so they can pay back the taxpayer. Once they take taxpayer money, advertising should stop and their business be run into the ground due to reduced business so they can't pay back the taxpayer. Sheesh! You'd think we were investing in a business and not locking people on the welfare plantation.
Advertising is NOT a waste of money! It is the only way to keep business rolling in, and as much as I don't like GM and would prefer not to see their ads anymore, they need to keep what business they can if you want them to pull out of bankruptcy.
Cutting advertising when trying to survive a rough patch only leads to a larger rough patch.