The resignation of MG Rover sales and marketing director John Sanders has given the impression of someone abandoning a sinking ship (MW last week). His departure coincides with the introduction of a tactical sales-led strategy at the expense of traditional car marketing, a move that has only served to heighten perceptions of a last-ditch battle for survival. It also comes only weeks before the launch of two new models that could be crucial to the future performance of the business.
Sanders’ duties are being assumed by John Edwards, deputy chairman of Phoenix Venture Holdings, the consortium of Midlands businessmen that owns MG Rover. Eyebrows have been raised and the industry is curious to see how Edwards’ background as a Rover dealer will prepare him for a global marketing role. Edwards is not to be confused with the global marketing director of Land Rover – once part of Rover, now owned by Ford – who shares the same name.
Edwards was unavailable to talk as Marketing Week went to press, but an MG Rover spokesman rejects the suggestion that his background is unusual for someone controlling global marketing for a car company. He says: “Edwards is a successful car retailer in his own right. What better CV could you have?”
Edwards has been working alongside Sanders on marketing for the past four months and his background as a dealer already appears to have made an impression on the car manufacturer’s strategy. MG Rover’s switch from the traditional approach to car marketing – with its reliance on brand-building through the soft sell of TV advertising – to a heavy use of price-led tactical promotions has come about since Sanders informed his bosses he wanted to leave and Edwards was called in to work in the marketing department.
It is no surprise, then, that MG Rover is reviewing its relationship with M&C Saatchi and has terminated contracts with other agencies in order to bring work in house. M&C Saatchi remains tight-lipped about its relationship with the beleaguered car maker, and sources outside the agency suggest it is on the look-out for another car client.
The agency’s most recent TV campaign, rather than attempting to define the brand, pushed the message that MG Rover is prepared to match any competitor on price. Industry commentators suggest that this purely sales-driven approach to advertising will have made the agency uncomfortable.
Across its brands, MG Rover’s media spend for the past 12 months is £30m, but this is set to fall. In 1999, while still under BMW ownership, the company spent just under £50m on advertising – though that figure included Land Rover and the Mini.
The marketing director of a rival major car brand says MG Rover’s strategy is unprecedented in the automotive sector. While some industry insiders suggest the strategy has the whiff of a closing-down sale about it, others say it is appropriate for the company.
An MG Rover spokesman denies that the change in strategy will be accompanied by a reduction in the company’s marketing budget. He adds that MG Rover is simply making the most effective use of its marketing resources, which the company accepts are smaller than those of rivals.
One example of a change in the way resources are deployed is the deal with Welcome Break, which allows MG Rover to mount small, staffed displays of its cars at motorway service stations. The aim is to gather the names and addresses of potential private buyers and pass them on to dealers.
It is three years since BMW infuriated the Government by deciding to offload Rover, or “the English patient” as it was dubbed, for £10 to Phoenix. At the same time, BMW sold Land Rover to Ford and held on to the Mini, which has since become a roaring success.
At the time, it was touch and go whether the Rover brand would survive. The latest change in strategy at MG Rover suggests that the brand has again hit a rough patch.
Sanders, like M&C Saatchi, refuses to be drawn on MG Rover’s change in strategy. A marketing director from a rival company, who prefers to remain nameless, says: “Sanders probably felt it was not the right strategy and that his marketing integrity was being compromised.”
Sanders simply says that MG Rover’s strategy is about making marketing “a discipline that affects the bottom line”. He adds that he is leaving because he is tired of being in a corporate structure and is now setting up his own consultancy.
Nick McElwee, who looks after the Peugeot account at Euro RSCG Wnek Gosper, suggests it might be no bad thing if MG Rover’s marketing budget was redirected, given the nature of the company’s recent work.
However, he questions the way it is being done. “I am all for breaking the rules, but taking such a tactical approach smacks of desperation. It has to be the beginning of the end for Rover,” says McElwee.
A marketing director for another major brand says MG Rover’s strategy is a short-term one of driving immediate sales, rather than building the brand for the long-term health of the company. Already, residual values for Rovers are taking a hammering and the company has stepped in with its own factory-based outlet to sell used (primarily ex-fleet) cars that are “factory-approved” in an effort to stop the rot.
But MG Rover also has its defenders, who suggest tough times are forcing the whole industry to think tactically. Professor Garel Rhys of the Institute of Automotive Industry Research at Cardiff Business School takes a bullish view of MG Rover: “It is not going under, just reassessing the way it sells and markets its products. The company just thought it would try something else.” He claims research shows that MG Rover’s dealers are “a happy bunch”.
Rhys says that MG Rover has surprised sceptics by halving its losses each year since it was bought from BMW. The company claims they have fallen from £800m in 2000 to an expected figure in the tens of millions this year. But MG Rover will not be drawn on when it expects to break even. However, new car sales have continued to slide: total registrations of 32,590 for the first four months of the year are down from 35,789 for the same period last year. Total sales of 147,037 cars for 2002 were also down from 163,144 in 2001.
MG Rover hopes that its two new models will give it a boost. The first is an as yet unnamed small car, built in India by Tata Engineering, part of the Indian conglomerate that owns Tetley Tea. MG Rover hopes the new model, based on the Indica but badged as a Rover, will encourage younger people to visit its dealerships. But commentators suggest the car’s bargain-basement positioning will put it into competition with the second-hand car market, rather than with new cars from rival manufacturers.
The second car, to be launched in autumn, is a 200mph supercar, to be sold under the MG XPower sub-brand. But with prices starting at £65,000, the MG XPower SV will be taking on the likes of Porsche.
Both cars will need particularly careful and sensitive marketing. The rest of the industry will be watching, but without much fear, to see if MG Rover, with its new marketing director, succeeds in that task.