A little over a week ago, GM announced its plan to launch a review of its media buying agencies. According to Advertising Age, GM released this news through a company statement reporting: “As part of its normal review of business processes, General Motors will request proposals on ways to improve the efficiency and effectiveness of its global operations for purchased media. The request for proposal (RFP) will be issued to several global media companies and will include all consumer-facing planning and buying operations in support of all media channels including print, digital, broadcast, SEO (search engine optimization) and social media.” This news is creating a lot of buzz in the industry mainly because of the size of GM’s advertising budget. The company reportedly spent about $4.26 billion in 2010 on its worldwide advertising. GM’s spend for creative work is included in this figure, but the majority of the spend represents actual media, such as TV ad placements. About 67% of 2010’s global advertising spend was for media buys placed in North America.

The media planning and buying responsibilities for GM are currently distributed across more than 20 global media buying companies. The New York Times adds that the bulk of GM’s spend is handled by three major agencies. Starcom MediaVest Group, a division of the Publicis Groupe, oversees advertising in North America. Carat, a division of the Aegis Group, handles advertising in Europe; and Universal McCann, a unit of the Interpublic Group of Companies, covers Latin America. The media planning and buying for China and India are not part of the scope of work for this initiative because GM operates as part of a joint venture in those countries.

Many industry professionals are trying to understand why this review is taking place. Vice President and Global Chief Marketing Officer at GM, Joel Ewanick, is leading the initiative and stated that GM is “looking for an innovative model that helps us become more effective in leveraging global marketing opportunities more efficiently. We will make a comprehensive assessment of all options before reaching a decision, and in fact, may end up validating our current approach.” Advertising Age followed up with another article that looks a bit more closely at GM’s motives; and several speculate that GM’s main objective is to uncover costs savings. Apparently, GM is in the midst of developing a plan in the U.S. to reduce spending so that it can eventually reach the level of spend it was at before filing for bankruptcy. In the first quarter of 2011, GM’s ad spending dropped by 8.3%. Even if cost cutting is GM’s main objective, Ralph Paglia of Tier10 Marketing points out that “media consumption patterns have changed dramatically in the last five years.” Therefore, some agencies included in the bid process may present creative proposals that address these pattern changes.

One aspect of this review that is important to note is that GM’s creative duties are not included in the scope either. GM’s advertising spend is unbundled as is the case with many global advertisers. Plus, GM already made some bold moves about 15 months ago when they moved Chevrolet and Cadillac to Goodby, Silverstein & Partners and Publicis’ Fallon, respectively, without a review.

To help with this review, GM has hired R3:JLB, a global marketing consulting firm based out of Chicago. R3:JLB will oversee the process and work with GM to overcome challenges encountered along the way, such as conflicts of interest. The pool of agencies included in the review may shrink due to the fact that exclusive relationships may already be in place with direct competitors of GM.

Since GM’s media buys are already unbundled from its creative spend, the real question that needs to be answered relates to whether or not consolidation makes sense. GM should also be mindful that when it comes to marketing, cost should not be the “end all, be all.” An agency's ability to collaborate with your creative team is highly important as well as the actual strategy to make sure the appropriate target audience is reached. Several factors need to be evaluated when the proposals are received. It should be very interesting to see how this all unfolds.

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Kathleen Jordan

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