It’s brand apocalypse now for general motors

Brand owners are not unlike householders in their response to a prolonged recession. We start by making small economies, but essentially carry on as before in the belief that happier times will soon return. When they don’t, the realisation gradually dawns that sterner, life-changing measures are the price of survival. Out goes private education for the kids and exotic holidays; four bedrooms slim down to three and the Merc is quietly exchanged for a second-hand Passat Estate.

I detect the earlier signs of this behaviour in a number of fast-moving consumer goods categories. Mars has adopted the time-honoured recession stratagem of quietly shrinking the size of its eponymous bars (Snickers, too) without making a corresponding adjustment to the price, in the hope that no one is going to notice for a while. And it isn’t just Mars that’s reducing pack sizes: Strongbow to Pampers and Kraft Dairylea Triangles are at it too. No doubt, behind the scenes, a careful winnowing of brand extensions is also taking place. But we won’t hear too much of this because these sectors – food, drink, household – hold up well in a downturn, being either necessities or comforting indulgences.

To get a glimpse of the other end of the behavioural scale, marketers’ apocalypse – the equivalent of declaring personal bankruptcy and selling off the family silver – take a look at the two most decimated sectors in this recession, financial services and cars.

And where better to start than with General Motors, which went into administrative bankruptcy (Chapter 11) last week? We all knew GM had it coming, but it was still a shock that the company synonymous with American capitalism (some would prefer “economic imperialism”) and which once held over half the US car market had been reduced to pleading in a debtors’ court. The extent of GM’s fall from grace is aptly summed up in the number of brands it has sacrificed, most of them in the current year. At its height it owned (by my calculation) 15, including foreign affiliates. Soon, it will own just four.

With the benefit of hindsight, we can see that a number of these brands should have been killed off years ago. GM’s brand portfolio had long been bloated and baroque. That it remained so, in defiance of simple commercial sense, was less a matter of marketing incompetence than the fact the company had become a hostage to weak senior management, cussed unions and scheming politicians. GM has, for example, only just drawn the curtains on the mid-market Pontiac (famous for sports cars like TV private eye Jim Rockford’s Firebird). And yet the evidence of significant overlap with, say, the mass-market Chevrolet was already becoming apparent by the early Sixties.

The present recession could be said to have passed sentence on a moribund company housing plenty of brands beyond their sell-by date. But we are talking of a rough, summary justice, where good brands are being dispatched along with bad. No one will much mourn the passing of the muscle-bound Hummer, but what of Saturn, a mass-market brand tailor-made by GM 20 years ago? Judging from customer satisfaction ratings – which bested those of Toyota – these were good, reliable cars; but they were failed by the marketing department. They never sold in great numbers because GM never adequately explained them to their target market. Conversely, or perhaps perversely, GM has decided to keep faith with the relatively upmarket Buick brand. And yet it turns out, according to JD Power research, that the median Buick driver is 68 and earns less than the median (downmarket) Chevvie driver. What kind of brand logic is there in that? We should also note the arbitrary fate of the solid Opel/Vauxhall/Bedford brands, now in the hands of a consortium led by a parts manufacturer which doesn’t actually know how to make cars, and a Russian bank that seems intent on making freewheeling oligarch Oleg Deripaska their ultimate custodian (he of bankrupted LDV fame).

But enough of cars and on to that other bombed-out sector, finance. Only two weeks ago Santander Group made an orderly start to what I suspect will end by being far from orderly elsewhere, namely the culling of redundant financial services brands. Out went Abbey, Bradford & Bingley and Alliance & Leicester, all of which will be subsumed into the Banco Santander brand. B&B and A&L, which had tried to turn themselves into racier retail banking brands by borrowing heavily in the wholesale money market when credit was cheap, lost their relevance simply by being rescued from bankruptcy by Santander. Abbey, by contrast, had long been in Santander’s portfolio: the exigencies of the recession have simply given the Spanish banking group the courage to do what it probably should have done some time ago, and axe it. Santander is a brand which has made a virtue of being boring and conservative: with the credit crunch has come its reward.

Next in line is the Lloyds Group which will have to clean up the detritus of its botched nuclear fusion with HBOS. Only this week, Lloyds announced it is closing all 164 branches of its Cheltenham & Gloucester division. The brand will live on, but as a zombie in the hands of mortgage brokers. (For more on this see my blog, address below.)

What will be next? Intelligent Finance looks endangered and even Halifax may be vulnerable. But I wouldn’t rule out brand-culling at Barclays and at much-diminished RBS either.

And the moral? Get your house of brands in order before the force of economic destiny does it for you. Most sectors, of course, do not and are unlikely to face such an Apocalypse Now scenario. Possible exceptions, as the recession goes on, are airlines and packaged holiday companies, which are being skewered by oversupply in the market, depressed demand and (bizarrely, given the circumstances) rocketing aviation fuel prices.

To my mind, however, the shoe that hasn’t dropped yet is the media sector. Consolidation is well overdue, but it is being stifled by an outdated regulatory framework.


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