General Motors is retreating from a two-year-old effort to control local dealer advertising.
GM is bringing back local dealer ad groups to give dealers a greater voice. But strings are attached. GM will control the ad budgets, and the dealer groups must use the factory's advertising agencies. Thus, many dealers see the change as a minor victory.
The groups allow dealers in a market to pool money and buy regional advertising. The company is scurrying to sign up as many groups as possible within 30 days.
In April 1999, GM abolished funding for 954 dealer ad groups. The reorganization shifted responsibility for $600 million in local ad funding to the factory at five regional offices. Many dealers complained that GM staffers at the regional offices did not craft ad strategies suited to each local market.
Several dealer groups sued GM over the loss of the ad groups. Notably, GM settled with 90 Chicago-area dealers in April 2000. Terms were not disclosed.
Membership of the new ad groups varies. GM is trying to structure the dealer ad groups by brand, GM spokeswoman Peg Holmes said. But some areas lack enough dealers of a certain brand, so they will have multibrand groups.
In Chicago, for example, each brand will have its own ad group. But in the Southeast region, where at least eight groups are set up already, Chevrolet is the lead brand in multibrand groups.
A small dealer victory
Also, the five regions aren't going away. So to help coordinate the local groups, each region will have a local advertising and marketing manager.
The old dealer marketing groups were largely independent of GM and did their own work with various ad agencies.
The new system will be different, said Holmes:
Dealer participation is voluntary.
GM's national agencies will develop the creative work.
Dealers will have input on that creative work, but GM will control where the money is spent.
Bill Stasek, whose Chevrolet dealership in Wheeling, Ill., was involved in the Chicago-area lawsuit, said he is optimistic.
'I don't think any partnership can make progress unless people are talking and looking at ways to make it better,' he said. 'We've got to put something together to market effectively on a regional level again.'
GM started testing the new ad groups in 10 markets last fall. The company planned to disclose details at the National Automobile Dealers Association Convention this week in Las Vegas.
GM has set up several dealer advisory boards across the country to determine how much dealers should contribute to the ad groups. Under consideration is a range from 0.5 percent to 1 percent of a vehicle's invoice price. GM will kick in 25 percent of that total to the pot.
'In some areas, 1 percent would work; in some other areas, only 0.5 percent would work,' said Stasek, who is part of the Chicago advisory board. 'In our area, dealers might consider 0.5 percent if the cooperation is there' with GM.
Program is voluntary
The dealer groups can use creative work from GM's six national advertising agencies. Campbell-Ewald Advertising handles Chevrolet advertising; D'Arcy Masius Benton & Bowles handles Pontiac and Cadillac; McCann-Erickson Worldwide handles Buick; Lowe Lintas & Partners Worldwide handles GMC; Publicis Hal Riney & Partners handles Saturn, and Leo Burnett USA handles Oldsmobile.
The new program is voluntary, but each ad group needs enough dealerships to account for at least 75 percent of an area's sales volume. If a group lacks 75 percent, Holmes said, GM will try to persuade dealers that haven't signed up.
At least one suburban GM dealer, who asked to remain anonymous, said he won't participate because the cost of advertising in his market is affordable, and it would be uneconomical to contribute to the group.
The system will work best in high-cost media markets, Holmes said.
Meanwhile, GM is pulling an estimated 50 percent of its $600 million national network TV buy for the second quarter.
Holmes denied that those savings are being shifted to the dealer ad groups, but she would not say where they are going.
Said Holmes: 'We expect our total advertising spending for the year will be about the same.'