Why does GM invest so much money in the Media Titans who have damaged its Reputation?

In my last post, I made the case that the media industry, not the unions or debt holders, are the biggest obstacle to GM’s success in the US market.  However, despite decades of front-page articles and headlines criticizing GM’s management team, the company has remained loyal to traditional advertising approaches to drive demand for its products.  I find it particularly ironic that GM continues to pump hundreds of millions of dollars into the very companies that are profiting from its demise.  Consider that in 2009, GM has spent $112M on newspaper advertising this year alone, which amounts to 27% of its overall advertising budget.  And this is only the money spent by GM proper.  It does not include advertising spent by local dealer franchises to drive customer demand.  Even the week of their bankruptcy filing, GM has purchased expensive full-page ads in national newspapers to distribute communications from CEO Fritz Henderson about the future of the company.

GM’s Love Affair with the Media

A June 2nd article in the Wall Street Journal entitled Pain Spreads throughout an Ecosystem of Companies detailed the amount of spend GM has historically devoted to advertising through traditional media.  Key facts cited by WSJ include:

  • GM is the second largest advertiser in the US behind Procter & Gamble
  • GM spent $5.3B on advertising in 2008
  • 40% of 2008 spend was with Disney and CBS
  • Year To Date, GM has spent $218.8M on TV advertising
  • Year To Date, GM has spent $112.2M on newspaper advertising

GM’s Advertising Spend (Source: Wall Street Journal)

WSJ GM Ad Spend

My favorite part of the article was the following paragraph:

“Of all the industries to be hit, the media business stands to suffer the most, experts say. GM long bought up beachfront media properties at a frenetic pace, including pricey TV events such as the Olympics. TV executives dubbed network TV time as GM’s “crack cocaine,” while Madison Avenue executives dubbed the company ‘Generous Motors.’”

What should GM do for Marketing?

David Meerman Scott, author of the New Rules of PR & Marketing and more recently the World Wide Rave, published a great post on his Web Ink Now blog earlier this week.  He outlined five actions GM could take to reinvent its marketing approach during the reorganization process.  His first recommendation is, of course, to fire the Madison Avenue advertising agencies, and channel more funds to web-based marketing.  Something tells me that they will fail to heed his advice.  However, GM should listen, because the first place prospective car-buyers go is to the Internet to compare the features, prices and options for various makes and models.  More and more, short lists of potential car choices are being influenced by user-generated content such as product reviews, discussion boards and blogs.  GM’s failed to recognize that the general public views the press as much more objective than corporate advertising.  However, the power of the media is declining dramatically in a Web 2.0 world.  Anyone with an Internet connection and an opinion can shape perception using blogs, podcasts and video.   Those companies who can influence the everyday consumer have the potential to disrupt their markets with grass-roots, word-of-mouth marketing strategies that have an ROI orders of magnitude larger than any newspaper ad will ever yield.

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