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To: Stanley Kranc
From: Kyrsten Johnson
Subject: Report on Impact of GMAC Financials’ rebranding to Ally Financial
Date: November 29, 2010


In response to your concerns of the effectiveness of GMAC Financials’
rebranding campaign to Ally Financial. This report analyzes the impact of
GMAC Financials’ rebranding campaign on new bank deposits, customer
awareness and retention, and general revenue.


Summary:
GMAC Financial recently rebranded as Ally Financial, as a consequence of poor
reputation, and struggling business. As part of the rebranding campaign Ally
Financial released a series of commercials, and print ads branding Ally
Financial as a novel and caring bank. Since the rebranding campaigns banks
deposits have steadily increased, while customer awareness and retention
exceeded industry standard. This rebranding strategy however, has not been
strong enough to have substantial impact on company net income.


Background:
GMAC Financial was established in 1919 to provide auto financing for General
Motors customers (About). The company expanded from its automotive
financing roots into commercial banking, and mortgages (About). Expansion
led GMAC Financial to become one of the fifty largest banks in the United States
(About). In 2006 General Motors sold their majority share of GMAC Financial,
due to financial difficulty, but agreed to maintain a 10-year auto financing
relationship (CNBC).


In 2008 and 2009 GMAC Financial Services received over $17.3 billion in
bailout money from the United States Treasury as part of the Troubled Assets
Relief Program (TARP). In the effort to change the company reputation GMAC
                                                                                 2


Financial Services, adopted the name Ally. The rebranding effort started with a
campaign in their banking division, and continued into their mortgage and
automotive lending services.


The Ally Financial campaign included a series of commercials and a print ad.
Ally Financial uses a light-hearted, unexpected approach with the purpose of
branding Ally as a novel and caring bank, with the purpose of targeting new
customers (Kuehner).


These ads poked fun at current banking industry practices and standards. In
this series of six commercials, the children were promised a toy or treat, but
then were inevitably duped by a banker citing restrictions or fine print
(Kuehnerr). In a simple print-ad run by Ally, the phrase “We Speak Human,” is
encircled by the purple Ally logo (MSNBC). Below the logo is a description, of
how when using Ally Bank’s calling system you can easily reach an operator at
anytime, and wait times are published on their website.


GMAC/Ally also issued a video news release to its current automotive
financing customers. The video news release emphasizes how the company
and products will remain the same, despite the name change. Ally Financial is
maintaining that they will remain in the same position in the automotive
industry. The video news release is specifically targeted for car owners
currently holding GMAC Auto Loans, in order to calms any fears about changes
in their loans.


GMAC Financial created this media campaign with the intention reintroducing
itself as Ally Financial (Campbell). With the GMAC Financial name plagued with
the burden of GM’s bankruptcy, and the Trouble Asset Relief Program bailout
they received in 2009, it was necessary for GMAC Financial to rebrand in order
to improve public image (Campbell). GMAC Financial worked to rebuild their
company, and reputation through this rebranding campaign.
                                                                                  3



Analysis:


Ally
Financial,
created
their
rebranding
campaign
with the
purpose of
increasing commercial deposits, customer awareness and satisfaction, and
general revenue. By engaging clients with funny, and memorable media they
aimed to generate new clientele and increase initial deposits (Kuehner). The ad
campaign was designed to reinforce Ally Financials’ commitment to customer
service, increasing customer retention and enhancing perception of the
company. By increasing deposits, and customer retention Ally Financial
attempted to increase general revenue.


New Deposits:
        As Ally Financial introduced it’s commercial banking arm, Ally Bank, as
        a new online bank; it began with an aggressive strategy including
        offering CDs, and saving accounts, with interest rates significantly
        above those in the market. Ally Financial offered a 6-month CD with an
        interest rate of 2.13%, while the national average of .99% (Sun). By
        coupling these interest rates with the rebranding strategy Ally Bank
        attempted to capture new market. However, the American Banking
        Association (ABA), pressure Ally to lower their rates in order to
        compete more fairly with companies not backed with TARP money
        (Sun).
                                                                             4


Although Ally Financials’ strategy to increase was dampened by
lobbying by the ABA the overall strategy was effective. GMAC Bank
announced the rebranding campaign at the release of their first quarter
2009 earnings report in May (Bloomberg). By the announcement of the
second quarter earnings report in August 2009, Ally Bank had
generated $25.4 billion in new deposits, compared to $22.5 billion in
the previous quarter (2Q 2009). Ally Bank saw a 12.89% increase in
deposits, in the quarter immediately following the rebranding. Of the
$25.4 billion in deposits during the second quarter $14.5 billion, or
57%, were retail deposits (2Q 2009). Compared to first quarter 2009
where retail deposits totaled $11 billion, Ally Bank increased their retail
deposit by 32% (1Q 2009). By coupling a rebranding strategy, with
aggressive interest rates, Ally Bank, was successful in raising new
deposits in the quarter immediately following the release of their new
name, commercials, and print ads.


Ally Bank has continued to increase their retail deposits quarter over
quarter through the third quarter 2010. In November 2010, Ally Bank
reported deposits of $36.9 billion (3Q 2010). This was a 7.6% increase
over the previous quarter, and a 64% increase since the beginning of
the rebranding strategy. In the third quarter of 2010 Ally Bank retail
deposits were $20.5 billion (3Q 2010). This signifies retail deposits
were up 9.6% over the previous quarter, and an 86% increase since the
beginning of the rebranding strategy.


Ally Bank’s increase in total, and retail deposits in the quarter directly
following the rebranding campaign, through the third quarter of 2010
show the effectiveness of the campaign’s ability to generate deposits.
The third quarter 2010 earnings statement discuss how deposits now
comprise 29% of the company’s total funding (3Q 2010). Ally Bank’s
                                                                                  5


      rebranding campaign was successful in capturing customer’s attention
      in order to generate new deposits.


Customer Awareness and Retention


     The message behind Ally Bank’s rebranding campaign was their
     dedication to customer satisfaction, and becoming a bank, which their
     customers love. Time and again the company repeated their dedication
     to fairness, and quality service. During the commercial series they
     highlight their lack of fine print and restrictions, while their print ads
     emphasize their phone-system customer service (Kuehner). While these
     values are emphasized, the company’s customer satisfaction, retention,
     and brand awareness determine if Ally Bank has established strong
     customer relations with their target audience.


     During a November 2010 study 40% of Ally Bank’s target audience were
     familiar with the brand (Advertising). 27% agreed that they knew
     something about the brand, while 29% felt they knew a significant
     amount about the brand (Advertising). Because the Ally brand had only
     been established for approximately 18 months earlier, these numbers
     are impressive and robust. 40% of their target audience feeling familiar
     with the brand shows the breadth and penetration of the campaign. In
     particular this indicates the effectiveness of the ads ability to capture the
     audience’s attention. Ally Bank was consistently ranked in one of the top
     campaigns during 2009, showing that customers appreciated,
     understood, and remembered Ally’s message.


     In a September 2010 press release by Ally Financial, they announce that
     they received a customer satisfaction rate of 90% (Launch). Further
     findings, and information behind this survey was not released, and other
     scientific studies on Ally Financials customer satisfaction were not
                                                                               6


     available. The American Customer Satisfaction Index found that the
     average customer satisfaction score in the banking industry was 75%
     (American). Assuming that the two studies were done approximately on
     the same scale, this would mean Ally is receiving customer satisfaction
     results 15% higher than the national average. This indicates that Ally
     Bank customers are far more satisfied with their banking experience,
     then the average customer.


     Stated in the 2010 third quarter earnings report, Ally Bank experienced
     an 88% CD retention rate (3Q 2010). This functional indicator of
     customer experience is 3% above the national average retention rate of
     85% (McNab). This indicator establishes that Ally Bank is experience
     better customer retention then the banking industry average,
     presumably due to customer experience above the national average.


     Customer awareness, and satisfaction metrics indicate that one-year
     after the rebranding strategy Ally Financial is perceived as a customer
     centric bank, as advertised. Ally Financials’ rebranding campaign
     covered a wide breadth of channels to reach target audiences,
     reinforcing the idea that it is a customer centric bank. Retention and
     satisfaction scores indicate a customer’s true experience with Ally Bank,
     but are part enforced by perception of the company, which is
     attributable to marketing campaigns.


Earnings
      GMAC/ Ally Financial
      struggled with
      creating a profit since
      the company’s near
      collapse in 2008,
                                                                          7


which lead to their bailout by the United States government
(Bloomberg). The $17.3 billion bailout was desperately needed in order
from keeping the massive financial institution from failing. Since the
bailout, Ally Financial has faced the difficult task, of generating a
positive net income in the current financial recession (Congressional).
While the rebranding initiative has generated significant deposit
growth and customer recognition, it has not been influential enough to
have a significant impact on total net income (Congressional).


During 2009, Ally Financial reported a total net loss of $10.3 billion
(Bloomberg). Ally Financial begun creating a meager net income
through 2010, but is still heavily indebted to the United States
government. Ally Financial struggled through the recession like many
other financial institutions, however unlike most institution Ally
Financial was heavily vested into two industries, which were
dramatically impacted by the financial recession. Ally Financial has
strong ties to the American car industry, and remain a major sub-prime
mortgage lender (Congressional). These attributes have caused Ally
Financial to struggle in the past three years.


As the American car industry struggled to remain competitive, against
foreign car automakers, auto lending slowed for Ally Financials’ North
American Auto Financing business (Bloomberg). In addition to the near
collapse of Ally Financials’ main partners General Motors, and Chrysler,
automotive delinquencies increased, and Ally Financial restricted retail
auto lending, due to issue in the capital and credit markets (3Q 2010).


In addition to issues in capital and credit markets Ally Financial is
plagued with problems from their home lending branch. Ally Financial
had net losses of $7.3 billion during 2009 due to this business (3Q
2010). Ally Financial currently holds billions in sub-prime mortgages
                                                                                 8


       (Congressional). In early 2010 Ally Financial was forced to put a
       moratorium on foreclosures in 23 states, while they are under
       investigation for fraudulently foreclosing thousands of homes (CNBC).


       While Ally Financial was successful in leading a rebranding which
       successfully increased bank deposits, the rebranding campaign was
       unable to address the scope or magnitude of the problems, which the
       company faces. Retail deposits, which have been healthily growing are
       currently 29% of the business funding, Ally Financial will not be a
       successful company until the other 71% of the business reform and
       become profitable (3Q 2010).


Conclusion:


Ally Financial successfully created a rebranding campaign, which appealed to
consumers by using a light-hearted approach, to poke fun at the banking
industry, and introduce itself as a new bank. Ally Financial took a step away
from their roots and history as GMAC Financial, which grappled with
bankruptcy, declining auto sales, and the sub prime mortgage crisis, in order to
increase profitability (Bloomberg).


Ally Financials’ rebranding efforts focused on creating a reputable, and
profitable institution, in wake of recent company problems. Ally Financial was
successful in increasing total bank deposits, with substantial increases in retail
deposits, through their policies that promise high interest rates, and no fine
print of fees. These policies and campaign lead Ally Financial to have strong
customer penetration in the first year of their transition, complimented by
high customer satisfaction and retention. Although Ally Financials’ rebranding
efforts had a strong impact in retail, and customer relationships they were
unable to have strong effect on the company’s total profitability. Ally
                                                                                9


Financials’ involvement in the car, and sub-prime mortgage industry has
caused the Ally Financials’ legal, and financial difficulties.


In response to this analysis I recommend further study and analysis of Ally
Financial concerning:
      The effect of the current investigation against Ally Financial for
       allegedly illegally foreclosing homes. Will this investigation have a
       negative impact on Ally Financials’ customer satisfaction responses, and
       retention? How will this investigation impact Ally Financials’ overall
       profitability?
      Ally Financials’ ability to repay Troubled Asset Relief Program loans,
       and the effect of doing so on overall profitability.
      Further study of customer recognition of the Ally Financial brand. Does
       Ally Financials’ target audience recognize the brand as a new company,
       or as the rebranded GMAC Financial?


Thank you for your time and consideration of this issue. If you have any further
questions regarding the effectiveness of GMAC Financials’ rebranding
campaign to Ally Financial please feel free to contact me at: krj5033@psu.edu.
I will be happy to address any of your questions.
                                                                               10



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                                                                                11


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                                                                              12


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