Every industry craves a hit, whether it’s a bestseller, a summer blockbuster or 300k crossovers off a Canadian assembly line. It is, however, only one way to make a buck. According to “The Long Tail: Why the Future of Business Is Selling Less of More,” consumers are quickly evolving beyond cookie-cutter mass consumption. In fact, a careful reading of Wired editor Chris Anderson’s tome indicates that the days when a single vehicle could “save” a company may be long gone. Automakers who want to survive must now chase the tail of the dragon.
Anderson defines The Long Tail as a curve on a graph that looks like an old Hot Wheels ramp; the orange kind clamped with a purple vice high on a kitchen table. The tall end represents a few instances of big numbers; the swooping tail represents many instances of small numbers. To illustrate its power, Anderson’s book applies this curve to several industries. Netflix, for example, will send out thousands of copies of a movie the week it’s released. It will also send out tens of thousands of copies of other movies. They may have only one request for that movie that week.
The single requests aren’t as obvious a source of large profits, but experience shows that all these individual orders can conglomerate into a sum that’s greater than the box office boffo “headline” numbers. In Anderson’s words, "Our culture and economy are increasingly shifting away from a focus on a relatively small number of hits (mainstream products and markets) at the head of the demand curve and moving toward a huge number of niches in the tail.”
In other words, you can make more money hammering away at the small stuff than going for the gold. The implications for the US automobile industry are clear: the days when Henry Ford could base an entire company on one black car are toast. By the same token, the one-size-fits-all mentality that assumes hundreds of thousands of people will buy a new Chevy Malibu or Chrysler Aspen is also extinct. Consumer desire for choice has fragmented the automotive market beyond the point of no-return.
Consumer desire for differentiation is stretching the long tail of the US automotive market like so much taffy. You can see these fragments made manifest in the astounding proliferation of automotive makes and models vying for pistonhead patronage. And yet automotive development costs are massive; the development process is complicated, slow and cumbersome. It’s far easier for Hollywood to crank out hundreds of new movies for Netflix than it is for the automobile industry to create 40 plus all-new models per year— never mind adjusting its retail channels to profit from this niche proliferation.
The explosion in the automotive aftermarket hlghlights the discrepancy between supply and demand. In the last two decades, the Specialty Equipment Manufacturers’ Association has grown to represent a $30b a year domestic industry. BMW earns about a $60b a year. In other words, the North American automotive market now supports the equivalent of half a small car company– just so owners can differentiate themselves from drivers of “stock” products.
The mainstream manufacturers’ recent efforts to capitalize on the long tail underscore their inherent inability to rise to the challenge. It took Cadillac an entire model cycle to develop the sort of bling wheels its Escalade owners were buying in their tens of thousands. And almost as soon as they were released, aftermarket wheel makers offered cheaper, more stylish and more exclusive alternatives. Manufacturers know they must create more choice, but their inefficiency means that have to do so with less. Hence their increasing reliance of platform sharing and its evil twin, badge engineering.
To most enthusiasts, badge engineering is about as acceptable as cannibalism. The differences between a Chevy Uplander and Saturn Relay, for example, are so insignificant as to be insulting. A look at the Ford 500 and Volvo XC90 reveals a different tail. These aesthetically and dynamically differentiated vehicles in no way threaten to steal customers from one another. From style to function to price, these cousins are so far from the Patty Duke variety that they do exactly what the market wants. They offer a genuine, easily understandable increase in consumer choice.
Whether or not the long tail turns out to be a serviceable economic theory is irrelevant. The marketplace in general demands, and now receives, more products: more movies, more books, more videos of cats falling off stools, more cars, more wheels, more of everything. The auto companies that can find a way to cater to this desire with authenticity will find treasure, whether that’s by platform sharing or so-called mass customization. The ones that continue to base their business on breakout blockbusters simply won’t survive.
My beloved Mini Cooper S is rolling proof of this phenomenon.
“Limited editions” like the MC40 languished on dealer lots for months – years in some cases – while demand has been strong for build-to-order cars. I’ve yet to come across one that is an exact duplicate of mine – and that’s jsut counting factory options, not aftermarket ones.
I think that automobiles do need more customizations to succeed. People want racing stripes, a plug for their music player, and stickers emphasizing what they beleive in (Bumper confessionals?). I think it’s not just keeping up with the Jonses, it’s differentiating yourself in a bland sububan sprawl of cookie cutters. A ‘long tail’ of new automobiles sitting on the lot might make the accountant’s heads explode.
But being able to pick and choose more options that make the customer happy (the point) will bring them to your door.
This is opposite the “value engineering” and “you can have any car color you want as long as it’s black”, that at times people (including journalists) bemoan when looking at the $600 CD player or $300 for a little piece of carpet for the back foot wells.
That’s why I’ve always thought that each car brand should concentrate exclusively on a few, tightly focused models that they can afford to concentrate on and develop. This is especially a problem with GM, who feels that they must (probably as a sop to dealers) produce one of every niche of vehicle with every brand. Same with Mercedes, same with Dodge, same with just about everybody. Every brand should merely focus on a five-vehicle core that it does very well, differentiated entirely from every other vehicle under its corporate umbrella.
I think a JIT style delivery system would be helpful. It is time to stop having people just buy whatever is on the lots and let people pick and choose their features, colors, and everything else and have the car delivered soon thereafter.
The worst part is, even if you are willing to wait the months it can sometimes take, the dealer is a complete dick to you and tries to force you to buy now.
It isn’t helped by the large portfolio brand-owners who then try and extend each of their brands everywhere because they don’t look at the company as a whole (e.g. Jaguar X-Type)
Anderson has narrowly focused on the entertainment business – specifically the providing of entertainment – in his article. Applying his ideas to automobile manufacturing and marketing is quite a stretch.
“I think a JIT style delivery system would be helpful.”
You mean, like in Europe? Where mainstream brands have 2-4 month wait and premium (like mecedes and bmw) 6-8 month wait.
And in any case, you get to pick exactly what you want from the list of options (yes, you can get the sunroof without the 6 cd in dash player you’ll never use) and colors and everything else. Plus the salesman is nice and you typically get 2-6% off msrp.
The dealer just does not have any stock. They may have a few ‘testers’ but they will not have the egine/transmission you’re buying, nor the trim you want (for instance, the Golf is available with 9 different engines)
I’m sure the geniuses in Marketing would never want that:
1) too many choices: consumers are dumb, they get confused if they have to make lots of choices.
2) hinders impulse buying: you really really need to buy a car to be willing to wait for it for 4 month. Let’s prey on people who think “let’s go car shopping” like they say “Let’s go out for ice cream”
3) too expensive to retool/remodel/train factories: because you’re going to taylor make each and every one car on the line, the workers will get confused.
So, to summarize: in the US: NEVER.
tms1999:
hinders impulse buying: you really really need to buy a car to be willing to wait for it for 4 month.
Interesting point … which makes me wonder how much of the U.S. auto market is based on more or less unnecessary car purchasing. Let’s face it, most new cars now give 6-10 years of basically trouble-free service, sometimes much more if you like the vehicle enough to put some money into repairing it. Sane people don’t run down to the furnace dealer just because there’s a blowout tent sale on new furnaces and the new ones look so cool. They wait until there’s some evidence that they need a new one. I suspect if car purchasing were handled more like an objective, needs-based purchase, people would buy a lot fewer cars.
TMS1999,
I think you forgot another reason that nearly every American car buyer takes delivery out of dealer stock: they aren’t car buyers. They’re car leasers.
Which means they cannot control the timing of their purchases. The lease ends next month, and they need a car immediately, which means they’ll take the silver one with the options they don’t really want, as long as they can get it for $299 a month…
I believe this was basically the idea behind SMART–modular customization at the dealer level. I was convinced it was the future of automotive retailing.
But I snapped back into reality and figured out that most people would just as soon take a pre-fab car off the lot, and consequently the dealer would be glad to knock the price down in exchange. Everybody wins, provided you are willing to compromise. The other element of this is the complete idiocy of forcing owners to select certain packages just to get the features they want. The perfect ideal is that every car is shipped as a stripped down version, then the dealers install modular add-ons as they are purchased. I think it would be wonderful to be able to go back to the dealer after having your car for 2-3 years and then buy more aftermarket options at a reasonable price. There is nothing reasonable about dealer option prices, from rims to radios. Those items seem to be priced to sell when the car is new, so the hit can be absorbed over 60 payments. It’s a lot different when you have to spend $1,200 on a set of OEM upgraded wheels, when you could go to tirerack and do even better for half that.
Consumer desire for choice has fragmented the automotive market beyond the point of no-return.
Yet at the same time, there is less real “choice” in cars than there used to be. Where is today’s equivalent of the Saab 99/900, VW camper bus, Fiat 850, Rabbit diesel pickup, MGB GT, etc.? Where are the uniquely-engineered cars with real personality? Most cars are now some version of the same basic front-engine, two-or three-box streamlined design with two or four doors, two or three rows of seating, automatic transmission and air conditioning. So I can choose whatever kind of windshield wipers and floor mats I want, who cares?
MW,
I don’t think a lot of people buy a car with the intention of keeping it till the wheels fall off.
A car might last ten years, but that doesn’t mean what you want or need out of your car won’t change for ten years. It might not matter how many more years your Miata will run for, if your wife is pregnant with baby #2. And if your kids have grown up and moved out, you might not be inclined to hang on to that Minivan until it dies. Maybe you move from New Mexico to New England, and all of a sudden your RWD convertible isn’t so much fun anymore.
Or some people just want the latest and greatest.
If users want different looking cars, how about giving the them option to choose from several different front/rear facias and running boards at the dealership? These are easy to produce, made of a relatively inexpensive material, easy to swap and make a huge difference to the look of the car.
Either do final assembly and spray to order, or have the spray shop at the dealership itself.
People could then mix and match, increasing the originality of their ride.
Plus the manufacturers could keep models running longer and just keep updating and adding new pieces. I could see certain owners going back for the latest new facia, or deciding to change the look of their car after an accident.
Two good examples of domestic manufacturers slow on the uptake of this phenomenon, courtesty of a walk through of a car show with my 22 year old son:
Ford Bronco concept, FJ Cruiser for sale. Um, why isn’t there a Ford Bronco on the lot for sale? F couldn’t sell 50K of them?
Cobalt SS with the “corporate” mags, and charging extra for them to boot. Classic WTF moment courtesy of target demographic. (My son has Scion TC heavily modded already – only the TRD installed supercharger to go).
Doesn’t Scion already do the customization to a degree? I’m currently car shopping for a new back and forth to work commuter and looking around. I browsed through the “build and price” feature on Scion’s website and was surprised at the number of appearance customizations available. Whether or not I can drive an xB comfortably (or even want one) remains to be seen…
Dumb question with a tangential relationship to the thread:
Where does ‘badge engineering’ end and ‘platform sharing’ begin?
The Germans and Japanese seem be able to build an endless variety of vehicles on a platform and they are rarely ever accused of “badge engineering.” Perhaps they change enough sheet metal and interior bits between different iterations of a platform as to not raise the ire of the market?
The Cycling industry (the kind with pedals) has an answer for this need for uniqueness. Bicycle parts are all standardized. If you want to throw a new derailleur on your Trek, there are almost no compatibility issues with doing so. Modular construction allows the consumer to line up all the aftermarket manufacturers and compare their offerings based on weight, reliability and cost.
What this has done to the industry though, is made it so that there are very few companies that manufacture every piece for a bike. They’ve recognized the foolishness in reinventing the wheel. Some companies produce frames, some produce brakes, some produce chains, cables, wheels; whatever. Big house manufacturers buy their parts from the aftermarket like everyone else, (they just buy in bulk to get a discount).
Now, compare this to the current automotive industry. Almost every part is proprietary. Sure, there’s an aftermarket, but unless you have a model that’s popular to modify, good luck finding parts. Want to do an engine swap on anything built in the last 10 years? Heaven help both you and your bank account. Most any kind of part swapping requires extensive custom fabrication (very expensive).
I realize that an automobile is far more complicated than a bicycle (though the technology going into modern racing bikes is comparable). I also realize the near complete futility there is in posting this. But the concept has been proven before. Modern computers are largely this way as well.
So, my suggestions (some admittedly repeated from other posts), are these:
1: Start offering ‘tuner’ versions of cars that are stripped down and basic; like the tuner version of the Scion tC.
2: Ladder frames really aren’t all that evil.
3: Make a unified set of standards for all drivetrain components. i.e. All 8-cyl heads will fit on all 8-cyl blocks. All engines are compatible with all transmissions. etc…
4: Modular body panels. If I want a wide-body kit with wheel vents for my 4d sedan, why does it have to be custom-fabricated by some guy in another country? If I want a aerodynamic belly-pan for my econobox, why shouldn’t I be able to just pick one up from a custom shop or dealership? Ladder frames would help this out as well.
5: JIT manufacturing process. As noted earlier, I want to pick up a single option without having to order a $7000 “package”
6: Spray shop at (or near) the dealership. Right now if I want an orange car, there’s only a few choices out there. Which leaves me with paying Maaco.
7: Standardize ECUs.
There are others but that’s just off the top of my head.
The only real obstacle I see in all this is getting the engineering departments to agree upon standards. If I remember correctly, one of the editors of Sport Compact Car suggested this a while ago as well.
Just my $.02
gakoenig
My take is this: Platform sharing usually means that very little of the sheet metal is carried over, while the engine, drivetrain, and the bulk of the parts are common. A good example would be the VAG B5 chassis: Most people saw enough differentiation between the Audi A4 and VW Passat, though surely a fraction of the market cross-shopped them. Both had the same engines and trannies, wheel patterns, etc…but the sheetmetal was unique in both cases. Only to a well-read pistonhead would you really glance at them and see the strong similarities. But there are plenty of things on the Audi that you just couldn’t get on the VW, no matter what the package.
OTOH, you have the most egregious examples of badge engineering (most have been reviewed on this site). Those are the ones that occupy the same market space and can be equipped almost identically, but still maintain some artificial price separation. Usually they have nearly identical sheetmetal, with nothing but a grille/headlights to differentiate them.
Chrysler has three vehicles that look pretty different on the same platform. Why couldn’t you have ten and just allow a person to select the body style and options they want as a special order? Perhaps someone wants a Dodge Charger but wants red leather seats and matching inserts instead of the craptastic gray. If its all a special order why does it really matter, just build it the way the customer wants.
Another example, the Solstice/Sky. Why not 3 more roadster designs as well as 5 coupe designs to go with it?
Badge engineering is simply taking an existing vehicle, say the Dodge Durango, altering the sheet metal every so slightly (like a new front fascia), slap a badge on it and call it a Chrysler Aspen.
Ford Fusion – Lincoln Zephyr is another example of badge engineering. They look damn near identical.
Platform sharing is taking an existing platform (drivetrain/chassis) and using it to produce models, none of which look similar. For instance, VAG utilizes the Golf platform in something like 16 models across 4 manfucturers: VW, SEAT, Audi, and Skoda.
Interesting point, MW. As a “mature” product, cars have long since ceased to be a utilitarian purchase, and much more a lifestyle or fashion one. And I am sure I am not alone in admitting, I have gotten rid of more than one perfectly serviceable vehicle simply because I was bored, or tired of the rattles.
You don’t even need a lot of takers when you offer customizing options. I can think of several people who were attracted to Scions being different and full of options, but when it came to actually buying the car they felt the options were too pricy for the time. But they did buy the car, with the rationalization that they would get the accessories later.
Heck, my boss bought a BMW 525i with the understanding that he could “chip it” to get “the same power as the 530i”. Options have a halo effect of their own.
I’m gonna have to agree that the VW model is a good example of Platform sharing, but not “badge engineering.” The Audi TT and the VW golf shared the B5 platform. Obviosly these are very different vehicles in appearance and in purpose. That is good platform sharing. Take the Pontiac G5 and the Chevy Cobalt on the other hand… same market, same purpose, same look, different grille. Why would you buy one over the other?
maybe thats why everyone hates the camry. EVERYONE has one.
everyone and their mom.
I would like to add that platform sharing/badge engineering are on a continuum, distinctly different appearing and driving products on one end, clones on the other.
G5 and Cobalt are good examples of slapping a grille and badges on. GM’s maligned CSV’s are here too.
Zephyr/Fusion have different interiors, MKZ has a different drivetrain, but sheet metal is identical.
Honda with their Accord or world car platform (Accord, EU/JDM Accord/TSX, Odyssey, Ridgeline, MDX, Pilot), Toyota’s Camry platform (Camry, Solara, Avalon, Highlander, Sienna) with their multiple derivatives are examples of platform engineering done right.
GM’s W platform – Impala, Monte Carlo, Grand Prix, LaCrosse – yep, different sheet metal and interiors, but the devil is in the details. Didn’t I just see the Grand Prix is now GM’s Taurus, destined for fleets?
My favorite example: VW Phaeton/Bentley Continental and Flying Spur – sample platform, W12 engine, one’s a sales dud, the other they can’t make enough of.
mauthbaux: I think your cycling analogy is good, however, I think the state of the union in the cycling world got this way because of a huge powerhouse (Shimano). Here’s how I see it, the cycling engineers of the world didn’t get together and decide on some standards that everyone would design to. What happened was that Shimano got so huge that they set the standard and everyone else designs their stuff to be compatible with Shimano (and everyone gets up in arms when Shimano changes the standard – e.g. the new cranks the designed a couple of years ago). I don’t know what Shimano’s market share is (if NICKNICK is reading this thread, I bet he’ll chime in with the right answer) but I would guess somewhere around 90% of bikes in the US have Shimano components. For this to happen in the auto industry, we’d have to have someone huge make a standard that everyone wants to follow. The biggest we have is GM and that’s somewhere near 20-25% market share.
I think that if/when GM/F go bankrupt, we may run into the senario where we get a set of standards to follow. Once they go bankrupt, then the parts suppliers (e.g Delphi) will need to sell their wares to everyone, not just one buyer. If they make a set of standard components that anyone can use, then the manufacturers can spend their time on the rest of the car. Just like it is in the cycling world, you basically pick the frame company you like and then as you go up in price you just get better components. It would be nice if I could pick the car company I liked and then just spend more to get better stuff.
This would also really help with the niche manufacturers. If you have a small company and only want to make one model of car, that’s fine, just put your tooling investment into the body and frame and then buy all the other (standardized) parts from someone who gets to spread their tooling costs across all car companies. You’d probably end up with big companies that cover just about the whole automotive spectrum (analagous to Trek and Specialized) and you’d also get smaller companies that were able to actually compete in the market because of the lower cost of entry (like Cannondale). In all, it would be a great thing for the consumer in terms of both quality (everyone could spend time perfecting a small part of the system) and choice (lower cost of entry means more ideas make it to the market place).
I think the bankrupcy of a major US auto company (or 2 or 2.5 of them) would be a great thing for the US auto industry.
Yes and no. As long as millions upon millions of dumb Americans keep buying silver Camrys the industry is justfied in looking for the next big hit. At the same time that could mean that eventually, maybe, just maybe, some will start looking to differentiate themselves from the herd, at first by buying different stereos for the their Camrys, eventually by getting a different car altogether.
Anyone who get paid to write should know the difference between a vice and a vise.