PRIVATE POWER

CHRYSLER'S AD FUTURE: ONLINE AND 'VERY PRUDENT'

By HOLLY M. SANDERS

Brand new

May 22, 2007 -- Now that Chrysler is going private, Madison Avenue is bracing for the new owners to accelerate changes and further shake up the stodgy world of auto advertising.

While ailing automakers across the board have already resorted to slashing ad spending and shuffling agencies, Chrysler, which was just sold to private equity firm Cerberus for $7.4 billion, will likely take a different track.

Rather than simply slash and shuffle, Chrysler's new leadership is expected to move faster than rivals to adopt newer ad strategies - including shifting more ad dollars to the Web while demanding more proof from its agencies that advertising is working.

"They're very prudent at allocating capital," said Miles Nadal, chairman of MDC Partners, the owner of ad agencies including Crispin Porter & Bogusky. "They will not sustain mediocre performance while still spending a lot of money."

Chrysler, which operates under the Chrysler, Dodge and Jeep brands, has already earned a reputation in the ad industry for being more aggressive when it comes to the Web. The company has experimented with social networking, online video and more sophisticated "behavioral targeting" techniques to track down consumers.

Without Wall Street breathing down its neck, newly privatized Chrysler will be able to experiment even more, ad execs say.

"Their internal marketing folks and agency have been really innovative around how they've used new media," said Mitch Lowe, head of Jumpstart Automotive, a Web ad firm focused on the car industry. "I think if the reins come off they will be allowed to be more innovative and creative."

Chrysler just launched a marketing campaign under the new tagline - "Engineered Beautifully" - to emphasize its technology and fuel economy, among other selling points.

Last year, DaimlerChrysler cut U.S. spending nearly 11 percent, reflecting its struggling Chrysler division. The Jeep division also surprised the industry by dumping longtime ad agency BBDO and switching the account to the newly formed Cutwater.

It will be difficult to cut spending further this year or the next. DaimlerChrysler has announced plans to roll out as many as 20 new cars through 2009, mostly at its Chrysler division.

One way to free up money would be to cut back on incentives. Chrysler reported a 7 percent drop in U.S. sales last year, in spite of incentives that averaged more than $4,400 per vehicle in December.

"The bottom line is they have a big product offensive coming up in the next two years," said Lonnie Miller, a managing director at the Polk Center for Automotive Studies. "Nothing drives spending more than the magnitude of the upcoming launches."