GM: New Advertising Deal Huge For Investors

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Stock Croc
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General Motors (NYSE:GM) has big plans for cementing Chevrolet as a brand recognizable all over the world. To penetrate awareness in emerging markets, General Motors is going to sponsor Manchester United, which claims to be the most popular sports franchise in the world. The deal will last for five years, but no financial details have been released as of now.

We simply do not know at this point how much the deal will cost General Motors. With this deal though, Chevrolet will replace Audi as the club's official car sponsor. Audi, too, has been attempting to court upper and middle class buyers in emerging markets like China. In my view, General Motors is taking the lead in establishing a real first-mover advantage by selling significant volume and now advertising directly to more emerging market consumers.

This particular move, likely one of several international advertising aims, seems to be a good strategy for General Motors to employ. Manchester United has about 659 million fans worldwide, and a substantial portion of those fans come from China. By getting a foot in the door now, a company with a good long-term strategy will most likely reap the benefits of this market in the not-so-distant future. As General Motors sponsors Manchester United, many consumers in China will have added exposure to the Chevrolet brand, which, while in the U.S. is well-known, in China it is a relatively new but "luxury" associated brand.

The car will become a more widely-known and popular motor option. Football is the world's biggest sport, so a focus on using it to promote a brand is probably one of the better ideas the company has had. Even people who have only a cursory interest in the sport have heard of Manchester United, a club that "stands head and shoulders above the other teams in terms of scale, brand value and their legacy in the sport."

Now that much of General Motors' redesign initiatives are well underway, I expect it to double-down on high value marketing. For example, recently, it decided to stop using Facebook (FB) as a marketing platform, as it has had little impact on consumers. While Facebook was a relatively low-cost advertising platform, it was not very effective for selling cars. In addition, it will no longer be advertising during next year's Super Bowl because it is largely aimed at a domestic audience.

General Motors' market is now the world. Some believe that these actions and the company's consolidation of its global ad agencies show a lack of a coherent marketing strategy. Some also believe the company is simply trying to cut costs. Many advertising and auto companies have criticized the company in this regard. The reality, however is that this is just a way to shift resources to where the company will be able to build the most awareness and generate the most sales of Chevrolet products. The deal with Manchester United is only one component of the advertising strategy General Motors is using. The company still intends to maintain its advertisement presence in the U.S. and aims to market Chevrolet at the 2012 Olympics. Thus, international reach is General Motors' new theme.

The change in advertisement strategy will save the company about $2 billion over a period of five years. Aside from the deal with Manchester United, we don't know what GM will do with this money, but investors can hope that it will be channeled into beneficial avenues for them. After Ford's dividend announcement, I anticipate General Motors will follow suit. Either way, having more funds will help open new options to General Motors.

Like General Motors, Ford (F) is in the news for its marketing efforts. The most significant news relates to its collaboration with State Farm Insurance. State Farm Insurance will use Ford SYNC technology in its Drive Safe & Save program in order to provide drivers with a discount on their annual motor insurance premiums. Depending on how much consumers drive, they could end up saving as much as 40 percent. The car will use the Vehicle Health Report feature offered by Ford SYNC technology to keep track of your mileage and determine your discount. This is a sign of increased business for Ford technology, and as a result, it should have a positive impact on Ford stock. How does this news impact General Motors? The company has used the program in its OnStar equipped vehicles. Since this offers drivers the chance to save money, General Motors should offer it as an option in every vehicle. This is another way the company can keep up with rivals like Ford.

Honda (HMC) has put its efforts into the price-front to revive flagging sales. It made the decision to slash the price of the British sold Honda Civic in order to get back into the game by pricing low. This is an interesting strategy, and it will mean that the Civic will be one of the cheapest European cars on the market. We will have to wait and see whether this strategy will indeed put the car manufacturer back into the running as a serious player or not. However, the Honda's competitive advantages largely rested on the Civic's gas mileage superiority, which lately has eroded.

Stockholders should hope that the slash is a financially viable option for them. For the time being, I think this will help the stock increase because of increased top-line numbers, but the long-term effects are largely contingent on Honda's ability to boost sales through other models besides the Civic. Indeed, likewise in the U.K., General Motors is gearing up for production of its next-generation Astra model. The company is planning on running two plants around the clock. I think this will provide General Motors with much-needed sales in the European market.

While competitors like Ford and Honda are also doing well, I think General Motors is a good investment. Its advertising campaign looks like it will be successful, and it is preparing the company for success in the developing market in China. While the stock may remain fairly neutral at the moment, General Motors is maintaining a positive image and will likely see gains in the coming quarters.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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