As GM Reviews Media Agencies, Lessons from 1992 GM Review - Full Report

By Jack Myers ThinkTank Archives
Cover image for  article: As GM Reviews Media Agencies, Lessons from 1992 GM Review - Full Report

Originally published October 2011

In 1992, General Motors conducted an in-depth internal review of advertising industry trends and issues, focusing on implications for organizational changes in GM's U.S. advertising agency media planning and buying relationships. The consulting report that led to that 1992 review provides surprising insights for agencies engaged in a similar review being undertaken now by GM, with several parallels that are startling two decades later. The 1992 review, led by then CMO Phil Guarascio, Advertising Director Michael Browner, and Media Director Betsy Lazar, resulted in the full consolidation of all media buying under a single dedicated GM Mediaworks organization within the Interpublic Group of Companies (IPG). A few years later, all GM media planning was concentrated at Starcom Media Group, soon followed by the integration of media buying and buying at Publicis Media Groupe's GM Planworks division. I served as consultant at the time for General Motors and developed the reports and recommendations that led to the creation of GM Mediaworks and GM Planworks. The recommendations then focused on leadership, control and consolidation.The results of the current review are likely to be focused on the same issues, with a similar outcome.

This time the review covers the full global GM media account: $3.37 billion in 2010 according to Ad Age's Data Center, of which an estimated 65%-70% is invested in the United States. The review is likely to include some of the additional estimated $1 billion the company invests globally in non-advertising promotional initiatives, some of which is now being shifted to social marketing efforts and should be incorporated into the media agency review. The parallels between the 1992 review and the review two decades later are striking, and for the several global advertising and media agency holding companies with a vested interest in the outcome, as well as for the hundreds of media companies that depend on GM for a significant share of their revenues, there are important lessons to be learned.

The goal of the 1992 review was to "determine if the current media structure and GM's relationships with its advertising agencies and media partners will continue to be as effective in the future as they have been in the past." The 1992 report I prepared for GM management notes that "the structure of media buying and selling as we know it today will be radically altered in just a few short years," and that the company needs to "be ahead of the industry in recognizing change and acting in its own best interests." I added, "to be as effective as GM's agency media buying relationships are currently and have been in the past few years, those relationships will need to be reorganized to anticipate and stay ahead of a radically changing media landscape." In 1992, GM was just several months ahead of the sweeping restructuring of the agency business resulting from the unbundling of media departments from their parent agency organizations and the consolidation of media buying and planning within a few major holding companies and less than a handful of large independents. Zenith Media and Carat existed only in Europe. Televest, later to become Mediavest, was the first unbundled media agency but handled TV only. GM retained different agency media departments for buying each individual network daypart. Mindshare, Optimedia, OMD, PHD, Mediacom, Starcom, Mediaedge did not yet exist.

One of GM's concerns was the growing realization that, administratively, agencies were "under pressure to evaluate a wide ranging selection of media and to provide clients with improved information on effectiveness." Yet, at the same time, agencies were challenged by declining margins and shrinking profitability. "Rather than approaching the business with a visionary, strategic sense of the future, agencies are responding tactically in an effort to build a more cost effective structure in their media department."

The report anticipated the continuing commoditization of media costs and the efforts by media agencies and their parent companies to diversify into research and other areas to generate alternative profit centers. It also foresaw the emerging issues of media cost transparency and arbitrage as a point of potential conflict between U.S. agencies and their clients. Conversely, though, the report acknowledged agencies' tendency to "be cautious and more likely to seek to maintain the status quo." The trend in media buying, I wrote in 1992, has been to "split it up. Spread it out. Go for the lowest price." I recommended that GM be proactive in developing an organizational model that would bring together "a tightly knit group of individuals dedicated to GM with no competing interests;" an organizational structure that would address the "inevitable reaction to media fragmentation, increased media commoditization, computerization, and your basic competitive drive to pull all your energies and forces together to stay ahead of the pack of wolves that are always biting at your heels."

As one packaged goods marketing executive commented at the time, "there's just too many media dollars being spent on too many media options for me to leave it in the hands of the agency without tight controls. As far as consolidation goes, I can't control four, five or six agencies. So if I want control, I'd better consolidate." The central issue for GM outlined in the 1992 report was "how can GM maintain its dominance, clout and intelligence resources in the media buying arena." The issues today, I expect, are:

1. "How can GM increase its domestic and global media dominance, clout and intelligence resources, especially in digital marketing?

2. How can the company best adapt to the radically altered multi-platform interconnected marketplace to effectively manage consumer, dealer and vendor communications and relationships?

3. How can GM best measure, analyze and evaluate the performance of its marketing investments to assure real-time optimization?"

The responses to these questions that GM executives involved in the review process are likely to arrive at will be focused on the same strategic goals identified by Guarascio, Browner and Lazar in 1992, that resulted in dramatic and radical restructuring of multiple buying resources into a single consolidated and dedicated media buying unit.

· Maximized spending leverage and clout;

· Intensive coordination of media spending within individual media companies integrated across multiple media categories;

· Optimum communications among media buyers, strong communications controls between buyers and planners, and effective communications between media planners and GM executives;

· Increased knowledge of specialized and customized media opportunities; increased attention on marketing relationships and partnerships with multi-platform media companies;

· Full staff commitment exclusively to General Motors with the benefits of staffing continuity, development of creative media programs, and administrative cost benefits;

· More effective integration of media planning and buying with advertising creative development, promotional initiatives, dealer activity, and customer incentives and communications.

While several options were considered in 1992, the report concluded that a single dedicated unit operating within a major agency holding company would ultimately deliver the greatest benefits and best address the changing media landscape. GM has operated under this model ever since. The questions today are:

· Should this same model now be incorporatedglobally, or should the current model of different media specialists in different global regions should continue to apply?

· Should different agencies handle digital media and legacy media or should they be integrated?

· Should promotion budgets remain separated from media considerations and planning, or is social media forcing integration across all marketing platforms?

In 1992, I concluded: "The core message emanating from this study of the advertising landscape of the future is that consolidation is good; consolidation is beneficial; consolidation creates greater efficiencies; consolidation maximizes General Motors' relative position in the media marketplace. We can find no justification for splitting the media buying among two or more agencies." The report argued that a dedicated unit would assure "total GM control over staffing, staff continuity, single purpose and focus of employees, enhanced communications, further development of marketing partnerships, maintenance and control of proprietary information and strategies, and additional opportunities from media. By operating a dedicated unit within a major advertising agency organization, GM can gain the benefits of having the staffs of the agency's companies available for consultation without having to provide information or insight in return."

In 1992 and since then, GM management has embraced the model put forward in the 1992 report. The issue for 2012 and beyond is whether the current trends in media and marketing, which like 1992 are on the cusp of exploding, now require GM to expand the 1992 U.S. model to the global stage and across all media and marketing resources. Or has the market changed so dramatically that the 1992 consolidation model is no longer relevant and in need of a complete realignment, reassessment, restructuring and reorganization?

My bet is on expanded consolidation.

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