1 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: firstname.lastname@example.org. I will be happy to address any of your questions. 10 WORKS CITED "Ally: About US." Ally Financial. Web. 11 Dec. 2010. <http://www.ally.com/about/company-structure/history/>. "Ally Bank Made Significant Rate Changes [Bank Reviews]." The Sun's Financial Diary. 05 June 2009. Web. 11 Dec. 2010. <http://www.thesunsfinancialdiary.com/personal-finance/ally-bank- rates-update/>. Ally Bank. Media Services. Ally Bank to Launch Campaign Reflecting Strong Customer Satisfaction. Media Center. Ally Bank, 17 Sept. 2010. Web. 11 Dec. 2010. <http://media.ally.com/index.php?s=43&item=415>. Ally Financial. Media Services. Ally Financial Reports Preliminary Third Quarter 2010 Financial Results. 03 Nov. 2010. Web. 11 Dec. 2010. <http://media.ally.com/index.php?s=43&item=428>. Ally Financial. Media Services. GMAC Financial Services Reports Preliminary First Quarter 2009 Financial Results. 05 May 2009. Web. 11 Dec. 2010. <http://media.ally.com/index.php?s=43&item=326>. Ally Financial. Media Services. GMAC Financial Services Reports Preliminary First Quarter 2010 Financial Results. 03 May 2010. Web. 11 Dec. 2010. <http://media.ally.com/index.php?s=43&item=399>. Ally Financial. Media Services. GMAC Financial Services Reports Preliminary Fourth Quarter and Full-Year 2009 Financial Results. 04 Feb. 2010. Web. 11 Dec. 2010. <http://media.ally.com/index.php?s=43&item=383>. Ally Financial. Media Services. GMAC Financial Services Reports Preliminary Second Quarter 2009 Financial Results. Ally Financial. 04 Aug. 2009. Web. 11 Dec. 2010. <http://media.ally.com/index.php?s=43&item=353>. Ally Financial. Media Services. GMAC Financial Services Reports Preliminary Third Quarter 2009 Financial Results. 04 Nov. 2009. Web. 11 Dec. 2010. <http://media.ally.com/index.php?s=43&item=371>. 11 Ally Financial. Media Services. Ally Financial Reports Preliminary Second Quarter 2010 Financial Results. 03 Aug. 2010. Web. 11 Dec. 2010. <http://media.ally.com/index.php?s=43&item=412>. "Ally Bank to Launch Campaign Reflecting Strong Customer Satisfaction - Sep 17, 2010." Ally Media Center - Press Releases. 17 Sept. 2010. Web. 01 Dec. 2010. <http://media.ally.com/index.php?s=43&item=415>. "American Customer Satisfaction Index - Scores By Industry." American Customer Satisfaction Index - Home. 2009. Web. 01 Dec. 2010. <http://www.theacsi.org/index.php?option=com_content&task=view&id=14 7&Itemid=155&i=Banks>. Campbell, Dakin. "GMAC Posts Quarterly Profit, Plans to Adopt Ally Name (Update2) - BusinessWeek." BusinessWeek - Business News, Stock Market & Financial Advice. 03 May 2010. Web. 11 Dec. 2010. <http://www.businessweek.com/news/2010-05-03/gmac-posts- quarterly-profit-plans-to-adopt-ally-name-update2-.html>. "If Advertising Doesn’t Work, Then Why Is ‘Ally’ a Household Word?" The Financial Brand: Marketing Insights for Banks & Credit Unions. 12 Nov. 2010. Web. 11 Dec. 2010. <http://thefinancialbrand.com/15653/ally- bank-proves-advertising-works/>. Kuehner-Hebert, Katie. "Advertising Themes Shift as Banks' Image Suffers - Financial Planning." Advertising Themes Shift as Banks' Image Suffers. Financial Planning, 18 Sept. 2009. Web. 08 Nov. 2010. <http://www.financial-planning.com/news/advertising-themes-shift-banks- image-suffers-2663935-1.html>. McNab, David N. "Core Deposit Retention: Transparency and Accountability via Flow of Funds." Banking Customer Analytics | Banking Customer Intelligence | Banking Business Intelligence | Banking Product Analytics - FTAI - FlowTracker Analytics Inc. Dec. 2007. Web. 01 Dec. 2010. <http://flowtrackeranalytics.objectivebusiness.com/index.php?module=page master&PAGE_user_op=view_page&PAGE_id=22>. 12 "News Headlines." CNBC Mobile Home. 03 Nov. 2010. Web. 11 Dec. 2010. <http://m.cnbc.com/id/39988735/Taxpayer_Backed_Ally_Posts_Third_ Straight_Profit>. "You've Seen the TV Ads. So What's Ally Bank? - Business - U.S. Business - Msnbc.com." MSNBC. 06 Nov. 2009. Web. 08 Nov. 2010. <http://www.msnbc.msn.com/id/33735357/>. United States. Cong. Congressional Oversight. Advisor Perspectives. By Christopher Whalen. 111th Cong., 1st sess. Cong. Rept. 25 Feb. 2010. Web. 11 Dec. 2010. <http://www.advisorperspectives.com/commentaries/ira_022510.php >.
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