Marketing 2.0

GM's Chances for Survival

Even with $50 billion in funding can the recently nationalized General Motors (or Government Motors as they are being called) survive? Let’s look at the factors from my previous post to analyze which problems might be resolved by the massive infusion of taxpayer money, the bankruptcy proceedings and eventual reorganization of the company.

Incompetent management - Rick Waggoner was thrown off the bus but there’s been no infusion of new management. It’s highly unlikely that the architects of GM’s demise can successfully manage the company in the future.

Labor costs - these have been reduced with a new UAW agreement. Basically, the American and Canadian taxpayers are helping fund the retirement programs for over 400,000 retired employees. Putting the appropriateness of this move aside, it will certainly help to lower GM’s operating costs.

Inferior products - no signs that this problem will be solved anytime soon. The other problem is changing consumer perception. That takes a long time.

Brand management - some of the brand confusion will be reduced by eliminating Pontiac and Saturn. In return, GM risks losing customers who are loyal to those two brands.

Competition - no amount of government funding can help GM here. They’ve been steadily losing market share to their competitors every year. And for good reason.

Excess capacity - this is a structural reality in the American automobile market that will not change in the near future until several manufacturers either exit the market or go out of business. The only one likely to fold in the near term is Chrysler.

Market maturity - like all of us baby boomers, the market isn’t getting any younger. Not a positive outlook for the total market although there will be segments that offer good growth.

Consumer confidence - will eventually improve along with the economy. More people will return to the showrooms but not necessarily GM showrooms. For one thing, thousands of dealerships will be closed. Losing your local Chevy dealer does not instill confidence and concerns over the resale value and long-term viability will hurt GM’s chances of recovery.

Gas prices - under no circumstances will I even attempt to predict what will happen to gas prices. OK, let me just say that I don’t foresee sustained low prices that would cause Americans to fall in love with big SUV’s anymore. GM’s track record of selling small cars is abysmal.

Recession - this will end, as all recessions do. What’s different is that Americans lost so much equity due to the meltdowns in the housing and financial sectors. It’s going to take a longer time to recover from that. Furthermore, the orgy of government spending will inevitably result in higher taxes, fewer government services and more user fees for things we currently take for granted. There’s talk of a VAT (Value-Added Tax) which is essentially an additional sales tax levied by the federal government. None of these scenarios is positive for auto sales.

So what are we left with? The only major positive here is a lower cost structure. That’s an important benefit of the bankruptcy process but it’s just not enough to overcome all of GM’s other problems. This is a company that is dead and should be buried. Government money would be better spent on retraining workers and providing enhanced unemployment benefits. 

What would you do? Would you invest in GM today?

Top 10 Reasons GM Failed

Today marked a historic day in the annals of business history. General Motors declared bankruptcy and the U.S government will invest more than  $50 billion to keep the company afloat. We can debate the merits of nationalizing GM later — for now let’s focus on the reasons they appeared in bankruptcy court today. Here are the top 10 reasons in no particular order except for reason number one.

1. Incompetent management - more than any other factor, the sheer incompetence of GM’s management is stunning. When you google the phrase “management incompetence” the rogues gallery of GM CEO’s and senior managers should appear. They have steadily driven the company down, missed every major forecast and prognostication (including scoffing at the very notion of bankruptcy) and now find themselves at rock bottom. So what happens? They are rewarded with billions of dollars of taxpayer money to stay in their jobs. The lesson here? If you’re going to fail, do it on a truly grand scale.

2. Labor costs - the wages, benefits and retirement perks granted to the United Auto Workers put the company in an untenable position and saddled them with an non-competitive cost structure relative to their primary competitors, Toyota and Honda.

Both the company and the union deserve fault for this.

3. Inferior products - For years, GM produced products that were mediocre in terms of design, engineering and reliability. Consumers perceive their products to be inferior to Honda’s and Toyota’s. Despite the fact that GM’s products have improved lately, it’s customer perception that matters and that takes time to change. Despite their vast resources, GM is not a leader in any aspect of automobile production that I can think of. They don’t have the safest, most reliable, most fuel-efficient or best engineered cars compared to their competitors. Furthermore, they gave up early on electric vehicles and  missed the boat on hybrids. When Toyota introduced the Prius, GM’s managers gloated that Toyota was losing money on every car they sold. Who’s laughing now?

4. Brand management - or should I say lack thereof? GM had too many brands that were not clearly differentiated from each other including Chevrolet, Pontiac, Oldsmobile, Buick and Saturn. Brands that were clearly positioned  such as Cadillac have done pretty well. The rest simply cannibalized each other’s sales. Worse than the branding of its major divisions was GM”s approach to individual model brands. They simply churned them far too much. Think about Toyota and Honda’s main models such as Camry, Accord, Civic and Corolla — they’ve been around for decades. Consumers know what they stand for and what to expect.  By contrast, GM’s divisions continually replaced their recognized models with new ones. They forfeited brand recognition and the opportunity to build and maintain a loyal customer base.

5. Competition - Toyota and Honda are world-class companies that build the products American consumers want. They both have significant manufacturing investments in North America and they are tough to beat. Other competitors such as Volkswagen, Nissan, Mazda and Ford are also turning out good products. The automobile business is brutally competitive and a weak sister like GM can no longer survive.

6. Excess capacity - There are simply too many manufacturers chasing too few buyers in the American market. Not all of them can survive. It would actually be healthy for some to exit the market since consumers have more choices than they can handle right now. This is just the beginning of the restructuring in the automobile industry.

7. Market maturity - the U.S. market is in a late stage of maturity with low growth prospects for the future. I also believe the dynamics of the market will continue to be depressed over the next five years. Why? The average American family has seen its net worth tumble significantly due to the stock market meltdown, business bankruptcies (like GM’s), bond and bank failures and the overall impact of the recession.

8. Consumer confidence - the typical new car purchase is now financed over 4 or 5 years. How many people have enough confidence in their jobs lasting for the next five years to commit to a car loan? Faced with job uncertainty and the need to reduce debt levels, consumers will be driving their cars longer before replacing them or looking at other alternatives such as used cars, car-sharing services and public transportation.

9. Gas prices - when gas prices spiked to over $4.00 per gallon, consumers reacted by immediately shifting their purchases to more fuel efficient vehicles. GM was sitting with a reliance on large SUV’s and trucks with low mileage ratings. The SUV was the cash cow keeping GM operating. When SUV sales died, it wasn’t long before the company followed.

10. Recession - a deep and severe recession proved to be the final nail in GM’s coffin. In this case, the financial crisis and bank bailouts tightened the credit markets. This, on top  of weakened demand for autos, proved to be the one-two punch that put GM down for the count.

With all of these factors conspiring against the company, the only surprise is that it didn’t fold sooner. GM has been in a steady death spiral for several years and now it’s the American taxpayers who own this turkey.

Brand Autopsy: Video Recap: MySpace or Facebook? Or Both?

Here are two good summaries comparing Facebook and MySpace for those of you considering which site best fits your target market.

Brand Autopsy: Video Recap: MySpace or Facebook? Or Both? .

Twitter Ad Agency Starts Up

Here's a video report from Ad Age on the use of Twitter as a marketing tool in the entertainment industry.

Advertising Age: Original Video: 18982295001.

New Domains

Good article on the new domains that will be available soon.

The Mission of a University

I found this marvelous quote from Alfred North Whitehead on the mission of a university. It comes courtesy of Jay Cross, from a recent book by Richard Ogle. I take this viewpoint to heart in my work at Ithaca College to teach and hopefully inspire students toward a marketing career.

Link: Knowledge + zest for life — Internet Time Blog.

How to Build a Lasting Brand | Fast Company

Here's an interesting article from Fast Company on the Mayo Clinic's approach to branding. I found a couple of interesting points that run counter to the traditional best practices of high-performance organizations. For example, there are no incentives for managers and doctor's salaries are capped after a period. Imagine trying that with managers in a typical Fortune 50 company!

Link: How to Build a Lasting Brand | Fast Company.

Avenue A Razorfish 2008 Digital Outlook Report

Here's an excellent report on Internet trends that I picked up from Guy Kawasaki's site. There's interesting data here that ties in with several things I've discussed in my Ithaca College class recently. It's all about accountability especially as the economy gets tougher. That's why pay-for-performance strategies continue to grow.

Avenue A Razorfish 2008 Digital Outlook Report: "

Avenue A Razorfish released the 2008 Digital Outlook Report yesterday. The purpose of the report is to help Avenue A's clients understand consumer behavior in the digital space. In the report experts cover topics such as media spending, mobile web usage, social influence marketing, the state of search, and behavior targeting. Here are some tidbits from the report:

• Vertical content properties and paid search were the biggest beneficiaries of the increase in spending. Verticals grew from a 37% share in 2006 to 39% in 2007. Increasingly, advertisers are showing a desire to work with a broader range of partners, as evidenced by the expansion of the number of sites the agency used in 2007. The majority of that expansion has occurred in the vertical category.

• In difficult economic conditions, the most accountable marketing channels will be best insulated from cuts in spending. This clearly bodes well for online advertising relative to other channels. However, there will be an impact, even in the most efficient digital channel—search marketing. Search has become a powerful tool for shoppers, and in a recessionary environment, consumers will search, shop, and buy less frequently.

• Only a few years ago, a Web site’s home page was the most prime piece of digital real estate a publisher could offer. Not so much today, however. The relevance of the home page as a media buy is on the wane. Search, social networks, blogs, and RSS (among a host of other online sources) are driving more and more users deep into today’s Web properties. Now, the majority of consumers bypass a site’s home page completely.

• Every page is now a home page, each of which will have a wider reach, a lasting shelf life, and the ability to attract a new audience like never before. To capitalize on this, ensure that every page has a strong, clear global navigation scheme and related content that is visibly promoted. And don’t forget to make sure that display advertising gets prominent, above-the-fold, home-page-like treatment (300x250 rectangles and 728x90 leaderboards). Remember, every page can be accessed in any conceivable manner and in any conceivable order—you can’t design properties to control user flow anymore.

• Despite user requests for a single mobile, PC, or gaming device to do everything, we found users increasingly willing to embrace multiple devices—even when those devices possess overlapping capabilities. For instance, a Nintendo Wii for the whimsical side of their gaming lives and an XBOX 360 for competition. A laptop for managing the business of life and another littered with stickers for fun. A smart phone for e-mail and a flip phone for weekends. We found users unwilling to make the compromises that come with an all-in-one while willing to embrace devices for different highly specialized aspects of their lives: ‘We bought my brother-in-law an iPhone specifically so we could get him to check his e-mail. Nothing else seemed to work.’ (Laura, 26)

• Consumers don’t see the Internet as something distinctly different from their offline worlds anymore, and they expect seamless transitions. Every key consumer activity has online and offline components—each one contributing to the total experience. The reason? Finally, the online world is getting more social, and as a result, more like the offline world.

• In social media, marketers need to understand where their brands intersect with the passion points of their consumers. But ultimately, they need to empower consumers to express themselves via their connection to the brand. In most cases, brands can craft the framework of a campaign, but the customization of content and the dialogue around the campaign will be up to the consumer.

The report is stuffed with useful information and challenging thoughts that will change a thousand PowerPoint presentations. The material is so good that I'm surprised that the Avenue A folks are letting me post the report in its entirety, so download it before they change their minds. The person who manages the report is senior vice president Jeff Lanctot, and he has just started a blog that's worth checking out too.

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PS: if you liked this posting and want to read 'all the top stories' about social media, please check out this 'single-page aggregation'.

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(Via Let the Good Times Roll by Guy Kawasaki.)

Is Your Marketing Strategy a Recipe for Failure? - Seth Godin - Meatball Sundae - Facebook

Here's an excellent article from Fast Company on the spotty success when traditional companies like Budweiser try to use new media.

Is Your Marketing Strategy a Recipe for Failure? - Seth Godin - Meatball Sundae - Facebook: "

Illusion, Not Quality: The Transformation of the Luxury Niche into a Global Mass Market - Knowledge@Wharton

Here's a very interesting article from Wharton on the proliferation of luxury brands and their rapid growth from hand-made to mass produced. Faced with burgeoning demand, some brands have secretly moved production to China in order to boost output and lower costs.

Link: Illusion, Not Quality: The Transformation of the Luxury Niche into a Global Mass Market - Knowledge@Wharton.