General Motors Co. will streamline its global advertising efforts in order to cut costs and simplify its marketing worldwide. The car company will cut the number of its global marketing agencies from over a hundred to maybe around five firms. The auto manufacturer will also significantly reduce the number of global creative ad agencies that handle Chevrolet’s advertising that currently totals to about 70 units.
GM is expected to name a number of major agencies that will perform nearly all of Chevrolet's creative ad duties. In January, the Detroit, Mich.-based GM awarded most of its $3 billion media-buying and planning activities to just one firm, Aegis Group's Carat UK, thus terminating its contracts with dozens of other media agencies.
According to a company spokesman, the auto manufacturer expects to save approximately $2 billion over the next five years, or $400 million every year from streamlining Chevy advertising and GM's media-planning efforts.
The figure represents around 10 percent of GM's global advertising expenses in 2011, which amounted to $4.48 billion. According to the company’s spokesman, the savings made from the global advertising consolidation will be realigned back into the marketing budget. The spokesman, however, refused to divulge where the company plans to specifically reallocate the savings.
The spokesman also refused to disclose what advertising agencies are primed to be selected to do the advertising work for Chevy. The media agency overhaul is the brainchild of Joel Ewanick, GM's global marketing chief.
In 2011, Ewanick told Automotive News that he wants the company’s marketing operations to function as one unit, rather than separately into a web of regional departments. Ewanick also revealed that the consolidation of Chevy's ad work is a chip of a larger plan to hasten the growth of the brand outside the United States and establish it as a true global player.
Although GM does not specify its ad spending by brand, it is estimated that Chevrolet accounted for more than 60% of the company’s unit sales in 2011. The company spent around $1.1 billion in 2011 just to advertise the Chevy in the United States alone, according to Kantar Media North America. The ad agency overhaul is in line with the mandate given to Akerson to slash marketing and engineering costs, in order to boost profit margins. Company executives have remarked that they aim to increase pretax margins to 10 percent this year from 6 percent last year.