CDK Digital, US provider of automotive digital marketing solutions and the sole supplier of the website and online advertising management for more than 4000 automobile dealers of General Motors, was facing a crucial situation when its contract with GM should have been renewed at the end of 2012. General Motors, an American multinational corporation founded in 1908 which has become a major producer of automobiles and its components was the company’s most significant client since 2007. Therefore, the loss of this contract would have represented a really serious issue for CDK Digital (Zettelmeyer, 2015).
The director of the strategic department for this company, Melissa McCann, should have presented its justification for the contract renewing in front of 7 members of the customer relationship management (CRM) subcommittee of the Chevrolet dealer council because in the opinion of GM, the renewal of this exclusive contract represented the joint decision between the manufacturer and its dealers, despite these dealers were independent franchisees. Basically, it meant that if the dealer councils said no, the contract would not have been renewed (Zettelmeyer, 2015).
CDK Digital’s original proposal was based on the larger control of dealer websites in order to ensure the consistency in brands and models marketing which was the requirement by GM; however, the dealers refused this proposition since it did not reflected their need because they required independence and flexibility in selling they had in their inventory. Clearly, CDK Digital’s appeared in the middle of channel conflict and needed to develop the concept which would support the need for dealers’ flexibility and also GM’s need for brand consistency and analytics visibility to help dealers to optimize their sites (Zettelmeyer, 2015).
The conventionally accepted consumer behavior model in this industry was that the task of the manufacturer was to make a consumer aware of the model, and the task of the dealer was to sell it. In practice it meant that the manufacturer had created awareness of the model which was placed in a consumer’s mind as the option to consider and consequently, the dealer was the one who helped the consumer with the model preference, provided price and service attractiveness. However, the research showed that this role division was not correct because only one-fourth of consumer bought that model or brand which was on their mind at the beginning of the purchase process. In result, both manufacturer and dealer’s marketing spending was not effective, and online brand defection has been decreased due to missing marketing consistency and conflicting goals. Therefore, the best approach was to coordinate the digital marketing and make it more unified. However, in order to avoid the channel conflict and gain the contract, the solution cannot be too restrictive for the dealers, should have strong tools for website administrators and provide advanced SEO to dealers (Zettelmeyer, 2015).
The Situational Analysis
The analysis is performed using the SWOT method, as it covers everything necessary to build an effective solution in this case. CDK could not deviate too much from the existing model as it was favored by GM, so understanding its strengths is important. Analyzing the weaknesses of the arrangement is crucial for the same reason, as they would need to be fixed in the solution. Opportunities and threats would also require assessment. CDK might offer a unique solution mitigating the threats or exploiting an unexpected opportunity in a creative way.
The primary strength of the arrangement between CDK and GM was the advanced toolkit for SEO and market analysis which CDK provides. CDK offered a cutting-edge analytics tool which could be used to track the user’s path from the initial ad viewed through the whole process of the online search. Another benefit offered was a targeted advertisement solution, which helped to retain user interest in the product, once it has been viewed online. It served to streamline the operations of both the central GM website and the retailer websites. It also allowed for a unified approach to the advertisement and effective spending of marketing budgets (Zettelmeyer, 2015).
The main weakness of the previous solution was the lack of attention to the retailer brands. For the retailer, it is extremely important to diversify its brand and make it recognizable. A personalized and unique website is an important element of the retailer unique identity which contributes to the company being successful (Henderson & Mihas, 2000). Over the years, as CDK and GM were working together, more and more franchisees started to use OEM-provided websites, seeing their benefits. However, as of 2011, 30% of the retailers were not convinced and wanted to retain their own brand identities. Those websites compromised the overall strategy of the company, creating unwanted bids for the advertisement keywords and increasing the company expenses as well as complicating effective marketing. The inability to effectively cater to those retailers and offer them a way to maintain their identity in the existing framework jeopardized the marketing strategy as a whole. Ultimately, the existence of third-party websites caused a vertical channel conflict caused by goal incompatibility (Webb & Lambe 2007), which needed to be resolved in order to optimize the marketing strategy.
The biggest opportunity for the development was the emergent social media marketing. Implementing social media in the marketing strategy might have helped the company to gain the upper hand on the competition. Creating company pages in various social networks and encouraging the website visitors to subscribe to them would have helped increase customer retention rates and advertise the GM products much more efficiently by creating buzz and collecting information from the users (Saravanakumar & SuganthaLakshmi, 2012). Other than that, the customers can achieve connectedness with a social media page of the retailer if it supports a sense of community in the visitors. Connectedness is not easily achievable for the regular retail websites as they can hardly fulfill any of the criteria: relatability, dependency or sense of community (Maulana & Eckhardt, 2006). On the other hand, it can be achieved by a well-managed social network page.
The biggest threat in the situation described was the other brands diverting the attention of the possible customers. Other companies, like Lexus and Toyota, were capable of directing the users towards a purchase more efficiently by using more streamlined networks (Zettelmeyer, 2015). Cross-referenced websites assured that the user would only see the deals offered by the company running them, making them changing their initial decision less likely. While the chance of a customer going through with his initial decision when buying a car was pretty low for all brands, other companies had a better chance of retaining their customer due to a better constructed and unified website network.
Giving the retailers more agency over their GM-provided websites can make the franchisees more accepting of the unification. Mitigating the threat of other companies retaining the potential customers more easily is essential to the success of GM. Updating the website network is a necessary move to achieve that.
Possible solutions
The solution CDK offered needed to be friendly towards the retailers and still satisfy the requirements of GM for a unified and concise website network. One possibility would be a complete revamp of the existing system. For example, using the GM website as a hub linked to the personalized and unique retailer websites. That solution would allow GM to fully consolidate all of its retailers using a single platform, save the retailers a lot of advertisement expenses and make it easier to keep a prospective buyer interested if the site is equipped with a convenient search engine capable of finding an appropriate retailer for each customer. However, this solution is likely to cause a lot of dissatisfaction among the retailers, as their websites would essentially become just pages of the GM website. Even if the retailers are given more freedom to customize their pages, it would matter little to them if they are incapable of supporting the independence of their brand. Financially the solution is also far from ideal, as it would require large investments into the reorganization of the existing network.
A more sensible approach would be to offer the retailers a more flexible platform for their websites. A powerful management toolkit for the standardized websites would help retailers tailor their pages according to their needs while still maintaining the brand identity and helping retain the customers. Moreover, it would allow making use of the company’s analytical capabilities, and even expanding their usefulness by offering the franchisees the ability to use analytical tools which are embedded into the standardized websites. Undoubtedly, some of the retailers would still be unhappy with the limitations, but it would help to convince more of them to join the unified network. However, giving the franchisees too much freedom might compromise the purpose of unification, allowing them to create websites which would fit the guidelines only nominally.
The third option would be creating social network pages for each of the retailers, in addition to them using the standardized websites. That solution would allow CDK and GM to run two separate networks, with little additional costs. This solution would allow the retail companies to integrate their websites into the GM network while using their social network pages to maintain their own identity. Social networks offer a lot of benefits in terms of marketing. They can be used to gather additional analytical data, advertise new products and create communities of interested people, increasing customer retention. This solution would provide the franchisees with an opportunity to create a powerful brand identity of their own by building an online community, without sacrificing the benefits of using a uniform website, containing a full toolkit provided by CDK. The main disadvantage of this solution lies in the fact that retailers might distrust social media as the main source of publicity for their brand. It is an ambitious solution, likely to meet a lot of initial resistance.
In 2011 the social networks were emerging as a new powerful tool for marketing (Saravanakumar & SuganthaLakshmi, 2012). Using this tool could have been extremely beneficial to both GM and CDK, making the third option a risky, but a very lucrative proposition.
References
Henderson, T & Mihas, E (2000). Building retail brands. The McKinsey Quarterly, 110.
Maulana, A & Eckhardt, G (2006). Just friends, good acquaintances or soul mates? An exploration of web site connectedness. Qualitative Market Research: An International Journal, 10(3), 227-242.
Saravanakumar, M & SuganthaLakshmi, T (2012). Social Media Marketing. Life Science Journal 2012, 9(4), 4445-4451. Web.
Webb, K, & Lambe, C (2007). Internal multi-channel conflict: An exploratory investigation and conceptual framework. Industrial Marketing Management, 36(1), 29-43.
Zettelmeyer, F (2015). CDK Digital Marketing: Addressing Channel Conflict with Data Analytics. Kellogg School of Management. Web.