The automotive press is obsessed with new cars, and the automakers know it. As The Big 2.8 flounder on the shoals of their broken branding, badge engineering and bloated dealer networks, they highlight the latest bright shiny object as proof of future salvation. Jerry Flint: “The best news from the domestic industry is that the product, particularly at GM but also at Ford, is getting better.” Meanwhile, car hacks are ignoring the fact that the domestics' business is collapsing, as startling new data from J.D. Power illustrates.
For the first time ever, J.D.’s mob has combined customer loyalty and conquest survey data to create their “Customer Ratio” index. Speaking at the recent National Automotive Dealers Association (NADA) conference, J.D. Power's executive director of automotive research said a car brand must strike an ideal balance between customer loyalty (existing owners re-upping) and new-to-the-brand business. “When below-average loyalty makes up more than half your sales,” Steve Witten pronounced. “That's a brand in trouble."
According to the J.D. Power, Ford's in trouble. Roughly 53 percent of Ford owners buy another Blue Oval model. On the face of it, that's a good thing. But it's a bad thing. These loyal customers represent 72 percent of the brand's retail sales. Translation: FioMoCo is losing twice as many existing Ford owners to rival brands as it’s winning from rival brands. Not to put too fine a point on it, the Ford brand is dying.
According to the survey, Chrysler, Jeep and Dodge also show “weak loyalty numbers.” What’s worse: Chrysler's three brands "mostly conquest sales from each other, while leaching sales to non-Chrysler brands.” Ominously, but not unexpectedly, “something similar is happening at Mercury, Pontiac and Buick.”
Only 13 percent of Saturn’s sales come from customers leaving transplant brands (Toyota, Honda, etc.). The majority of Saturn's new customers come from Chevrolet, Pontiac and Ford. And when Saturn owners leave the brand for other makes, they tend to migrate to Toyota, Honda and Nissan. As Witten remarked at the conference, the data shows that Saturn has utterly failed to fulfill its original remit as an "import fighter"
The study also reveals that GM and Ford’s so-called luxury brands are failing to compete with the German and Japanese luxury marques. Cadillac, Saab and Volvo are not even in the same ballpark as Mercedes, BWM, Audi and Lexus. Caddy, Saab and Volvo are gaining most of their customers from– and losing most of their business to– Toyota, Honda, Ford and Chevrolet.
As this index demonstrates, Detroit’s biggest and most lethal mistake has been its chronic neglect of its branding. While Motown makes a number of terrific new cars, while the majority of these machines are now mechanically reliable, Ford, GM, and Chrysler have done nothing to protect, resurrect, redefine and "save" their brands. They continue to piss on whatever brand equity remains in their stable. When GM Car Czar Bob Lutz infamously described Pontiac and Buick as "damaged brands," he was guilty of epic understatement. Virtually all of Detroit's car brands are terminally ill.
Hummer is the exception that proves the rule. Last year, Hummer sold 55,986 new vehicles, down 21.7 percent from the year previous. The rising price of gas, Hummer’s negative image amongst the chattering classes and the contraction of the SUV market don’t bode well for the brand’s future. BUT J.D. Power says existing customers account for just 16 percent of Hummer's total sales. In other words, despite falling sales, Hummer is drawing in a large number (at least percentage wise) of new customers. In fact, of all GM’s eight brands, Hummer is the strongest.
Well of course it is. Hummer sells a limited line of vehicles that are all instantly recognizable as family members that all do roughly the same thing in roughly the same way. Their national advertising may be a joke to anyone with an environmental conscience, but Hummer's branding is focused, coherent and memorable. You could even say that the environmental blow-back has helped Hummer, setting it apart from the increasing diluted (but still relatively strong) Jeep brand.
Contrast Hummer’s tightly-gathered product line and brand focus with Saab, Pontiac, Buick, Chevrolet, Saturn, GMC, Cadillac, Ford, Lincoln, Mercury, Chrysler and Dodge.
If you really want a fright, contrast those weak, customer-leaking and fraternal brand-swapping car companies with Toyota. According to J.D., Toyota is “bringing in nearly three times as many new customers as it has old ones staying put. Toyota's 65 percent loyalty rating is the industry's best, yet represents just 41 percent of total sales. Its conquest sales are huge. Honda shows similar strong numbers.”
TTAC, the general public and the millions of people dependent on The Big 2.8’s health are not privy to the full data provided by J.D. Powers’ Customer Ratio survey. But even this snapshot provides a horrifying glimpse of a domestic industry in terminal decline. Never mind cost cutting. Why hasn’t Detroit fixed its broken brands?
Breakdowns are so disruptive to our time-pressured lives and the dealer experience is so awful in general that the promise of reliability is supreme. Until the domestics can out-do Toyota and Honda in longevity and ease of ownership, their future is quite dim indeed.
Nice article.
I think the big 2.8’s problems have more to do with individual products than with brand coherence. Cannibalism aside, the big 2.8’s products just aren’t as competitive as those of foreign automakers. Toyota is not a very coherent brand, selling everything from the Yaris to the FJ Cruiser. Instead each vehicle is made competitive by incremental improvements in every segment. You don’t see that sort of across-the-board commitment by the domestics.
I would LOVE to see this data. The math nerd in me wants to simulate market share for all the brands knowing these trends. The car nerd in me already knows what’s going on: Detroit is dying.
Basically, Toyota is out-GM’ing GM. They have a cradle-to-grave, every-niche lineup, with a pervasive dealer body, and a loyal fanbase.
That could’ve been a description of the General back in the 60’s, when they owned MOST of the domestic car market. The sole difference is GM went with the splintered “brands”, while Toyota retained the singular Toyota nameplate (minus Lexus, and Scion). Toyota’s just playing from GM’s playbook, only doing it 10x better in the current marketplace.
* * *
We’ve reached a tipping point, similar to the 1930’s…some car brands need to disappear in 3-5 years if their parent co’s want to survive.
“Why hasn’t Detroit fixed its broken brands?”
Because Detroit doesn’t think their brands are broken, that’s why. If Detroit thought that their brands were broken, the following would happen:
SAAB would be sold off to anyone that would have it.
Buick would be shut down due lack of cache.
GMC would be merged with Chevrolet’s line up to give Chevrolet more brand loyalty and value.
Mercury would start importing Euro Fords and rebadging them.
And Lincoln would cease as Volvo would act as Ford’s global luxury brand.
But none of this will happen because at Detroit, “Everything is peachy”. GM continues to extol the merits of their bloated portfolio, Ford are sticking with Lincoln despite the (blatant) fact that Volvo is the better bet and Chrysler is just trying to keep the lights on.
The Japanese got it right twice over and once proving me wrong.
1. With regards to their original brands (i.e Honda and Toyota), they eschewed growth by acquision (a la GM and Ford) and went for organic growth. This meant years, even decades, of painstaking work on building the brand to mean something (i.e a car you can depend on, even though it’s a bit of a plain jane). This resonated with buyers around the world, not just the United States. Everyone wants an “appliance” car to work well everyday. Despite all our bleating about “soul” and “passion” (which I do agree with) we all still need to take the children to school, do the shopping, meet friends and get to work. All with good fuel economy and a decent resale value. Try doing that in an Audi TT! And through time, the brands started to be almost like a stamp of quality. A brand people could trust. Now that is worth its weight in gold! Now compare that to Ford and Chevrolet. In Europe, Ford’s are highly regarded but in the US, they are viewed with a slight derision. In the US, Chevrolet is the brand for everyman. But in Europe, Chevrolets are rebadged Daewoos, economy cars. Even in the US, they are starting to let that leak into their Chevrolet brand (Chevrolet Aveo, anyone?). There’s no consistency. Even in their main brands. But you look at a Toyota plant in the UK and look at one in Thailand, the vision and values are the same. The Toyota doctorine is drilled into staff in order to bring a meaning to the brand of “Toyota”.
2. This is where the Japanese proved me wrong. When Toyota and Honda decided to have a luxury brand, they could have, very easily, gone and bought a luxury car maker (at that time, Jaguar and Volvo were up for grabs). But instead, they launched their own brands, which I thought was a mistake. But using the same principles I mentioned before, they nurtured the brands they created into something which they wanted to stand for. If they’d bought a luxury brand, they’d have had to change the company’s way of thinking to match what they wanted AND change the image of the company in customers’ minds. Twice the work. Now compare that to Ford and GM’s philosophy of buying a marque and either:
a) letting it go to rack and ruin (Jaguar)
or
b) interfering with it until it stands for pretty much nothing. (SAAB)
I suppose really, the problem lies with Detroit not understanding the power of one’s brand. It’s the most valuble part of a company’s arsenal. Without it, you product won’t mean much. Detroit don’t want to nuture and create something which means something, they want to create a quick buck for Wall Street even if it means buying companies which they don’t need just to say “how much the company has expanded”. Organic growth, ultimately, provides the better rewards, but needs more work and who wants to do that when you’ve got to explain to Wall Street how you lost $38.7 billion last year……?
I would love to see the numbers for specific models. Namely, just how high the loyalty is for cars like the H2, Wrangler, Corvette, and CTS compared to how low it is for cars like the Impala, Sebring, and Focus. How could you buy any of the latter and go back? They must be scaring people away by the tens of thousands.
And this surprises…?
It’s merely a product of the Big 2.8’s lackluster product and quality. If I buy 5 Hondas, and they all are great cars, if my 6th is a dog, I assume I got a lemon.
BUT, if I buy three Fords, and they all give me trouble, I assume they build crap and go to the Honda store.
Once you’ve squandered customer loyalty, it takes a huge effort to reclaim it. Fact is, when you’re talking about a $20+K expenditure, you don’t want to take the chance that it’ll be a lemon, so you go with a brand that reassures you of its quality. Both Toyota and Honda have had their problems, but they pale in comparison to what Detriot has done for 30 years.
Let’s put it this way: If your first car was a ’77 Volare, and you traded that on an ’80 Honda Accord, would you ever look back?
The Detroit-3 have lost one generation of purchasers and are working diligently at losing the next. Buyers have long memories and alternatives. They will not accept second-rate products, abysmal quality and shabby customer care.
Agree with sean362880. Incoherent branding is a minor problem compared to tepid, mediocre product. If anything, The focus has been too much on branding and not enough on product. When I think Pontiac, I think of the pathetic attempt to disguise an incredibly lame car with plastic body cladding.
Mazda is the ‘zoom-zoom’ brand, yet they sell SUVs, vans and pickups. The difference is people actually want to buy them.
I would love to see the numbers for specific models. Namely, just how high the loyalty is for cars like the H2, Wrangler, Corvette, and CTS compared to how low it is for cars like the Impala, Sebring, and Focus. How could you buy any of the latter and go back? They must be scaring people away by the tens of thousands.
Or for their real bread and butter vehicles, the Silverado, F-Series and Ram.
It’s not the brands. It’s the cars and the competition. Hummer loyalty is the exception, because their products are statements, not appliances. Most people buy four-wheeled appliances, and sales there depend on the quality of the appliance, not the customer’s passion for it. It’s hard to get excited about a washing machine. The losers are losing not because they have no brand strategy, but because they’re building lousy washing machines.
86er,
Yeah, for sure. The loyalty for those pickups must be the best in the industry.
“AN reporter Mark Rechtin stated he had a “tacit agreement” with J.D. Power not to publish the full data.” Gee, the news media that wouldn’t hesitate to publish D-Day invasion information if it were happening next week won’t disseminate information embarrassing to Detroit! But then, we have to consider who AN works for …
The best chance for getting the data may come from Wall Street. Investment firms, mutual funds and the SEC may decide that customer retention is as vital a statistic as the numbers on financial statements, and insist on disclosure.
A growing reliance on conquest sales is doubly worrisome because conquests usually require more advertising, price cuts and/or bigger incentives, and lower credit-approval standards. All part of a downward spiral.
Theodore : It’s not the brands. It’s the cars and the competition. Hummer loyalty is the exception, because their products are statements, not appliances. Most people buy four-wheeled appliances, and sales there depend on the quality of the appliance, not the customer’s passion for it. It’s hard to get excited about a washing machine. The losers are losing not because they have no brand strategy, but because they’re building lousy washing machines. And there you have it. The reason why Detroit is in such trouble? No belief in the brand. Brand trumps product. Brand defines the product. Brand IS the product. You can build a terrific sports sedan for Cadillac, but if it’s not a Cadillac, it’s a waste of energy. Call me crazy (and you have and you will), but it actually hurts the brand. When I spoke to the Chrysler PR guy, who wanted me to believe that the company had a real shot at turnaround, I asked him straight out: what is a Chrysler? *crickets chirping* Of course, if brand trumps product, culture trumps everything. But that’s a story for another day.
I wonder if the purchasers surveyed included Rental Car companies? Whether a loyal routine buyer or a new conquest, they probably do more harm than good.
Robert Farago :
February 27th, 2008 at 4:38 pm
Brand trumps product. Brand defines the product. Brand IS the product.
Geez, Robert, you sound like some marketing guys I used to know…
Brand is not product. Brand is an element of product – it’s the salesmanship end. Product is the sum of marketing plus manufacturing – my bias is to weight the manufacturing more heavily – and if what you make is crap, well, all the marketing in the world won’t save you in the long run.
The Japanese grew their business by making good cars. The Americans shrank their business by making lousy cars. As long as that’s the case, it won’t matter how things get packaged by the marketers, because consumers aren’t stupid (at least, in the long term.) They want quality, and they’ll get it wherever it’s available.
Again, though, I’m speaking to mass market cars. You’re speaking to niche markets – Hummers and Cadillacs – where image, hence marketing, does matter more. I think brand is a lot more important to Lincoln sales than Ford sales. A Lincoln is a niche product, a Ford is not. Can every brand carve out a unique niche? I don’t think so – unless it does so by killing its competitors.
Focus of a Toyota / Nissan / Honda – the customers who buy their cars are their customers and they make money by making them better over time and keeping their business (very long term).
Focus of GM / Ford / Chrysler – the shareholders are their customers and the Detroit 2.8 make cars to make money to satiate their shareholders – whatever they can do to turn a quick profit with as little spent is most important (very short term).
It’s nice to see acknowledged in these pages that millions of people are dependent on the Big 2.8. I don’t think most folks here get that.
Robert, you are starting to sound a lot like Ron Zarella if you are saying that brand trumps product.
And the biggest impediment to the Big 2.8 fixing their branding problem is the inability to fix their dealer problem, no way to quickly and effectively get the numbers of dealers down to levels commensurate with their current sales. Sounds like Chrysler is taking a whack at that by telling the dealers up front that the only way they get a full line of vehicles in the future is to carry Chrysler, Dodge and Jeep. But without a cash infusion from the mother ship (not likely given the state of Chrysler and Cerberus these days) it will take an excruciatingly long time to execute. We’ll see how that works out…
Theodore :
The Japanese grew their business by making good cars. The Americans shrank their business by making lousy cars. As long as that’s the case, it won’t matter how things get packaged by the marketers, because consumers aren’t stupid (at least, in the long term.) They want quality, and they’ll get it wherever it’s available.
Assuming by quality you mean reliability and longevity. Well guess what? That’s Toyota’s brand.
It amazes me how many people (outside of Toyota) fail to understand that simple fact. This strange belief that the great unwashed view cars “appliances”– and so branding doesn’t matter– completely misses the fact that Toyota has an amazingly strong and coherent brand that stretches across all vehicle types.
“There’s dependable. And then there’s Corolla dependable.”
It does not necessarily follow that the brand that builds the most reliable car wins. Audi is kicking major ass in its segment with cars with infamously poor reliability. You could argue that there is a base line that consumers expect, but again, that misses the point.
The Chrysler 300 and PT Cruiser were fairly large scale hits straight out of the box, before anyone could collect reliability data.
Brand isn’t everything. It’s the only thing.
I agree with Mr Farago (Teacher’s pet!).
I remember reading “Against the odds” by James Dyson (Which I really recommend as it is a story that is hard to believe but awe inspiring!). In it, Mr Dyson explained how his vacuum cleaner was the best on the market (just trust me it was, I have one at home), so when he started marketing his first vacuum cleaners he PURPOSELY made the brand unclear and let consumers buy the product because the technology was superior and built well. Eventually, Mr Dyson’s vacuum cleaners were number one in the world’s vacuum cleaner market and Hoover became a second rate competitor.
The upshot of this is now when “Dyson” releases a new product or an upgraded vacuum cleaner, peoples’ image of it is “Well built, reliable and will do the job better than any other product because of its superior technology”. Because the first vacuum cleaners from “Dyson” were brilliant, they trust that their other products will be, too. EXACTLY the brand image which Mr Dyson was going for!
It’s only when “Dyson” start delivering shoddy goods, that consumers will stop trusting the brand. So, in a funny way, well made goods represent a good brand and a good brand can foster well made products!
I think you overstate the case RF, your analysis brings up an interesting question.
What will happen when the mood of the auto buying public shifts from wanting an appliance to wanting a statement? Will the mood ever shift again? After 100 years of wanting a car to make a statment about us, or to even redefine ourselves, is it possibly the car is now just an appliance for good? Or, is it a trend that may reverse on Toyota.
As for brand vs. product, there are all sorts of brands out there I don’t like much. I own a Toyota. But if someone had the right car at the right price I could go out tomorrow and write a check. Instead, I am driving my old crusher because it’s still a perfectly good “appliance”.
I believe even a single product could drastically redefine some of the American brands. All they need is something like the Miata, or the Chrysler minivan, or some other car that they can use to get started. Trying to save or redefine the brand without new product is wasting time. It won’t sell.
So in the end, I still think the product is the thing.
Mr. Farago is right: brand is everything
See BMW. What do you inmediately think: ultimate driving machine, or “driver’s car”, or engineering excellence. The thing is that they make (or at least made) products following that philosophy, consistently for years. BMW was also like the domestics near the brink in the 60’s, until… they defined what the BMW stands for.
Toyota is a similar case. I’m not a Toyota fan, but the cars are some freakin reliable appliances. And they built their brand around that. Come to see: the cars are ugly, the interiors are simple (though ergonomically “right), and in the last Corolla gen, the suspension was heavily decontented… but there’s a lot of people that will buy them because of perceived sense of quality. BMW cars are similar, people buys them because of perceived sense of “driver’s car”.
To me Toyota is very well built Chevy, no more than that. It’s everyone car same as a Ford or Chevy.
So until the domestics don’t sharply define their brands, commit to it, make quality products and give proper customer service… they will be sadly toast.
As someone pointed, Hummer has a strong image. But also the pickups, and Jeep. I would buy a Ford truck any day over the Tundra, because I know that they’re strong vehicles and cheap to repair. I don’t know the same about the Tundra.
Landcrusher : I think you overstate the case RF And I think you’re missing the point. A Toyota is not an appliance per se. Every product they make is a coherent reflection of their brand promise: reliability and longevity. YOU may think Toyotas are bland and interchangeable with X car brand. But their customers do not. Read those stats in the article again. Equally important, a Toyota buyer is making just as much of a statement as the buyer of any other mainstream car. It may not be a style statement (I would argue that point), but it IS a reflection of who they are, what they expect, their status, etc.
Some of the domestics have a very strong brand, at least individual models.
One I can think of is the Crown Vic/Grand Marquis – if the worst you can say about a car is old people like them, I’d take that.
Of course Ford is running away from them as fast as possible because Ford doesn’t want people who like those vehicles as customers.
The mindless pursuit of “metrosexuals” and women runs Ford marketing today.
Conquest numbers never seemed to me to be the appropriate statistic for what they’re trying to convey.
On the one hand, you (and many other automotive writers) bemoan conquests from other brands within a company as wasteful self-competition.
On the other hand, TTAC and others wax nostalgic about the “car for every purse and purpose” days, when a customer was intended to move, for example, from a Chevy to a Pontiac, an Olds, a Buick, and finally a Cadillac as their age and budget increased.
If this was as perfect a strategy as everyone seems to think, GM (and the others) would have had huge internal conquest numbers because of the strength of their brand architecture.
Hence, I submit that conquests are really only relevant when they come from other companies (which are ultimately the competing entities, anyway), while brand loyalty should be considered from a corporate perspective as well as by make.
I am not trying to deny or downplay the significant problem of internal competition. Rather, I am suggesting that internal conquests, as a statistic, can be indicative of proper branding strategy.
Therefore, there needs to be some other way to represent detrimental internal competition. Maybe it’s a nebulous more issue suited to abstract discussion than statistics. Maybe someone here has an idea for a better statistic…?
Could you be a bit more clear about the meanings of your statistics, please? I got through 3/4 of the article before I realized about what exactly you were trying to talk.
I still don’t get “new customer ratio.” Can someone define that for me?
Does anyone know the these stats for the Jeep Brand? Im curious to see if this brand is “healthy” using this metric.
I’m going to have to agree with RF here. Let’s look at some brand-stretching exercises where the Japanese have failed:
Leading contender: Acura/Honda NSX. A legitimately great car in many respects, a real rival for a contemporary 911 in performance, and it pretty clearly sent some shockwaves through Maranello (when the F355 came out Ferrari management was pretty upfront about their wanting to make sure they didn’t lose out to a mere Honda in “everyday supercar” performance). And yet it struggled to find a market for more than a decade before Honda finally gave up. Why? Because the customer image of Honda — zippy, astutely engineered everyday cars — couldn’t easily stretch to encompass the notion of a $75K+ sports car. If Ferrari had built it and badged it as a Ferrari Dino 306, it would have been a hit for them.
Runner-up: Nissan 300ZX Twin Turbo, Gen3 Mazda RX-7, Toyota Supra Turbo, Mitsubishi GTO/3000GT. Again, scorching performance, advanced technology, and a good dose of day-to-day livability (although the RX-7 tests the latter — on icy roads it’s a widowmaker). But buyers were apathetic, mostly because of (again) price point and lack of cachet. Even as these Japanese supercars were dying on the vine, the Germans were bringing in the Benz SLK, BMW Z3, Porsche Boxster, and Audi TT, which were quite successful. The Germans cost just as much as the Japanese cars and their raw performance was generally somewhat inferior, but they won out on brand appeal for that price point. And ven if Corolla and Celica buyers had wanted to trade up for a Supra, it would have been too much of a reach.
Consolation prize: Subaru SVX. Funky, Giugiaro-styled AWD Japanese Thunderbird that was greeted with a near-universal cry of “$30,000 for a Subaru?” Granted, it bowed just as demand for big, lazy coupes was sinking fast, and Subaru hamstrung it with some stupid blunders (mouse belts instead of airbags, no manual transmission, autobox stretched way beyond its torque capacity), but its major problem was that it was too weird for Subaru’s traditional conservative snow belt drivers and had no badge cachet for the $30-$40K coupe shopper.
None of these were bad products (in many cases, far from it), but they were out of step with what their brands could support, and they died for it.
taxman100 :
It’s not just going after “metrosexuals” and women that has been a finacial drain on Ford and others.
Actually, going after “manly men” is not profitable either. Now, maybe in the pickup department, although that market is shrinking.
No, I’m talking about muscle cars. Heavy duty sports cars by pedestrian manufacturers (that is, the Detroit 3, not Porsche or Ferrari) always lose money. They are expensive to design and sell in small numbers. The Ford GT lost Ford many millions.
Toyota doesn’t play that game. The Supra was an excellent car. But it wasn’t profitable. Toyota realized that entire segment wasn’t profitable, so they just stopped making cars in that segment. They get a lot of criticism for doing so, but if you look at the Scrooge McDuck money pit full of the profits they made from selling ten bazillion Camrys and Corollas, you can tell they made the right decision.
Argentla, The NSX did not have enough sex appeal to really get the juices flowing. I know, I really wanted to have its reliability but it just wasn’t exciting enough to pull the trigger.
Geotpf:
Since we’re talking about brand image, are you denying the efficacy of the “halo car” phenomenon?
The GT got (and gets) fantastic reviews and certainly earned Ford some positive reputation among the gearheads. The Supra may have lost money, but the so-called “fast and furious crowd” idolizes it more than anything but the Skyline. You can’t get better street cred.
Granted, those examples really only apply to customers who keep up on car news, but there’s also the (supposed) effect of drawing people in to Ford dealers (e.g.) to gawk at GTs in order to sell them Mustangs (or Fusions, or whatever).
Anybody with more advertising smarts than me want to chime in?
Back in 2000 I leased the then brand new Toyota Celica GTS. It was a cool car, had the 180hp motor, I think yamaha helped with it, and a 6 speed manual. The transmissions were really really stiff when new, and guys were mis-shifting and blowing the engines … and toyota was replacing them. I leased that car for 3 years, and it was exactly the same the day I traded it in as the day I bought it, other than the transmission eventually losing some stiffness, which was a good thing in this case.
So there’s your recipe, a reliable car with a good support system in place. The fact that it was a pretty good drive on good on gas were a bonus.
I think the point that is being missed here is that BRAND IS BUILT ON PRODUCT. That is, you have to build a brand around product characteristics, not try to convince people of your product attributes. Ford is a crummy brand not because of it’s marketing people, but because it’s cars are markedly inferior. In trucks, where Ford has always made a decent product, they do just fine.
Furthermore, it is far easier to reconfirm a previous impression than to create a new one. When I get into a rental GM vehicle and feel the Chinese-Recalled-Toy grade plastic switches, it reconfirms my impression that it’s a hunk of junk. I know that past GM vehicles have had Trabant-like quality and it just confirms them. You can’t build a premium brand with inferior products.
I think the biggest threat to the domestics is not Toyota, but Hyundai. There were always people who wanted to pay the least in any vehicle class . Hyundai is taking these from the domestics. They are the ones that out-chevy’d chevy.
RF,
I think Toyotas are bland, AND I am a customer. I can only speak for myself that I would trade up if there was something I really wanted at a good value. We will just have to wait and see if lots of people don’t jump on the next thing in spite of having to visit the dealer more than once in the first few years.
Rix makes a similar case to mine. My point is that you can take it even farther with the 2.8 because their brands are soooo shattered. What they MUST have is a good product.
Then, and only then, can they have something to build a brand around.
Product comes first. Toyota wasn’t always the reliable appliance brand. If that was their plan all along, I give them more credit; but, even if it were their master plan, they had to build the cars before anyone would buy into it.
Do you really think that GM would recover if they made the same cars, but managed to brand them properly? Certainly, shameless badge engineering was responsible for a good portion of the nails in their coffin, but no all of them. Look at Hummer, for instance. The whole thing really spawned off of the H2. The H2 is a spiced up Yukahoe, but people buy it in spite of that. You say it’s better branding, I say you have no brand without the H1 and H2 to build it around.
I want to just zero in on Hummer, that strong military like tank that looks like it’s going to ride over the top of regular traffic ala monster trucks in a demolition derby. However, the insurance safety institute showed an H3 with it’s front bashed in on a collision test and thus given a poor rating. Now I ask, if it gets terrible gas milege, handles like a pool table on roller skates, isn’t safe in a crash, but has the most macho image, will this thing succeed into the future? Are there enough macho young guys with unlimited funds to keep buying these things? Or is this another case of all those who always thought they needed one have one and the masses will never buy one anyway?
Decisions to buy a particular car are based on a variety of factors. Part of what IMHO is the problem with discussions like these is that we, a bunch of people who are really into cars, are attempting to rationalize why consumers make particular choices (i.e. increasingly foreign (and boring), decreasingly domestic). So what do we gearheads conclude: Americans buy Japanese products either because of: (1) perceived reliability and value; and (2) those people are just not that into cars.
There are many, many factors that influence a buyer’s decision in choosing a car. Some buyers are eminently “rational”: sit down and crunch numbers, thoroughly research and cross-shop, haggle with a number of dealers, and the like.
What are the most-often missed factors are the “intangibles” — what do your neighbors drive, what people in your profession and income level buy, what kind of image you want to portray to the world, how much money in your budget do you want to devote to a car relative to your other priorities (tuition, savings, vacation, home), what does your spouse and/or best friend want you to get, etc. In other words, things that have nothing to do with perceived quality or resale value (which for these people are typically just afterthoughts to justify a decision one has already made).
For instance young (and well-paid) male professionals flock to Audis and BMWs, because (a) you want to show the world that you are successful; and (b) you want to impress women. So what if the lease payments are $550/month, the fuel economy is so-so, and repairs are astronomical, it will get you laid! (or so you think).
Similarly, a Japanese car does represent a perceived increase in status for many people over a comparable domestic.
GM dug itself into a whole, IMHO, because it lacks coherent intangible reasons to buy them. What does driving a GM / Ford car say about you? That you are pro-American? At least American trucks retain a “macho” intangible that works in so many parts of the country. The domestics have for so long deeply discounted its big-sellers that the only reason to buy one is for VALUE (a rational choice), but no other “intangible” reason.
Rix: “I think the point that is being missed here is that BRAND IS BUILT ON PRODUCT. That is, you have to build a brand around product characteristics, not try to convince people of your product attributes.”
Nope, you must FIRST define your product characteristics and build it according to them. The product characteristics are defined or will define your BRAND.
And be sure you choose the right features. If you already have a product, but no brand definition, take the characteristics people prizes more and define your brand based on that, the proceed with product. Take into account that also consumer tastes changes, so you must update from time to time the brand, or at least check it.
If you don’t fix the product characteristics you have the risk of creating a product with near the same characteristics, effectively watering down your brand. Example Jeep Compass. A better product to achieve what Jeep wanted with the Compass is the Patriot, that looks like a real Jeep and have some off road ability.
Toyota, again, is a good example, right now it stands for me as quality, everyone, FWD,boring car. This way they can enter almost any market save for the luxury. They’re eating into Buick sales with the new 5 seat CUV, they went to full size trucks, and so on. They made sports cars, and were respected doing so: AE85, Celica, Supra, but they left that market. It will be interesting to see them enter that market with their current image.
detroit1701, I agree with you on the that intagibles influence the purchasing decision big way but I can’t agree with you on the reasons:
“what do your neighbors drive, what people in your profession and income level buy, what kind of image you want to portray to the world, how much money in your budget do you want to devote to a car relative to your other priorities”
1) I can care less about what my neiborghs drive. Even more if it’s an Aveo, Corolla or such. In fact I think it’s lame to see what the neighbor drives and base any purchasing decision on that.
2) Same as above.
3) Well, driving a toyota won’t give me the eccentric image I like to have. Driving a “different” brand would. So well it influences. Now I ask you: what is the image a camry owner chases? sigh
4)Status, I will never understand how an import car gives you more status over buying domestic. I don’t care about that crap either. Again, which kind of status do you seek buying a Corolla? being a cool mom?
5) The last reason is very important. Totally agree.
Rix: “I think the point that is being missed here is that BRAND IS BUILT ON PRODUCT. That is, you have to build a brand around product characteristics, not try to convince people of your product attributes.”
Nope, you must FIRST define your product characteristics and build it according to them. The product characteristics are defined or will define your BRAND.
Bingo. If the Big 3 had built quality and dependability into their brands like Honda and Toyota did, then they would’ve built better products. Instead they never quite knew what they were building, but they knew they had to build them cheaper in order to keep up sales.
A good brand is a roadmap that keeps the product on course. You can look at a potential product and ask, “Will this product detract from our brand, or will it further build it?” And even though the Big 3 are finally realizing the importance of quality and dependability, they still largely lack those brand roadmaps to keep them focused.
I get where the “Product makes the brand” folks are coming from; as a consumer, yes, you’re dead on. The products, together, define what the brand means to you.
However, that’s not what Robert’s talking about. He’s talking about the execs having a coherent set of attributes and strategies that push their engineering and marketing decisions. That’s the brand he asks about when he does interviews, and when the people he speaks with draw a blank, it speaks volumes to direction, strategy, and placement.
You can have fantastic engineering, capable manufacturing, and great styling, but if you don’t know what it is you’re building, no one will know what you’re selling. I know what Honda, BMW, Hummer, Jeep (although some recent things have made me wonder…), Toyota, Lexus, Scion, Audi, Benz, Ferrari, Volvo, and Mazda are. I have no clue what Ford, Acura, Pontiac, Chevrolet, Jaguar, Hyundai, or Kia are about. They’re all chasing something, or multiple somethings, rather than making cars that are defined by what their brand is intended to represent.
As educated consumers, we at least are able to consider cars based on their merits individually. But I think we can all look at an unnamed car hitherto unseen and identify what it is, what it should be, and stab it.
Also, when it comes to measuring internal conquest sales, when it comes to GM, the pricing and brand overlap is so rampant that the volume sellers all compete with each other, so any actually upward movement would be to low-volume sellers.
This is sounding like a chicken and egg thing here. If you can’t produce a decent car, branding will only tell you what failures are priorities to fix. If you can’t do branding, you could build perfectly good cars and not be able to sell them well.
IMO, if you were going to have one without the other you better toss out branding. Branding can be fixed in much shorter time, and realistically can be done by hiring outside help. The consultants will come in, see what your strengths are, and build a brand around it.
What brand will still sell after years of failure in design and engineering have educated your prospects to the fact that you build crap? Are you going to go out and sell your cars because they are “craptastic?”
Is the Branding juju supposed to be a management fix which will get everyone involved to perform better because they can see the goal? If that’s the case, then maybe I see your point.
OTOH, if your point is that lack of branding was responsible for GM to quit building in quality and reliability, I need more specifics. Even in the heydays, I don’t remember any of the GM lines being about less quality and reliability than any of the others. Do you need branding to tell everyone not to build crap? That’s too much of a stretch isn’t it?
What I had in mind when I wrote my earlier comment was Pontiac, to illustrate the theme. Sticking go-fast plastic cladding on an econobox that handles like a cement mixer doesn’t make for ‘excitement.’ That is why the pontiac brand is worthless. The product did not live up to the brand. Lexus is a good brand that receives a premium price not because of it’s superior marketing people but because they have delivered superior, premium products. Thus, Lexus brand is prestigious because they make a good product. Your brand will get a reputation for whatever qualities you put into the products. This leads to certain conclusions about what the domestics should do.
If I were running GM, I would move all of my crummy vehicles sold primarily to fleets to one brand where it couldn’t contaminate the other brands. Say, Pontiac. Make it a fleet only brand.
Then create a unique and different image for another line- say, Buick. You could, for example, use it for a line of exclusively hybrid or exclusively diesel engines, the way Subaru has been sucessful with their All-AWD lineup. That’s because nobody knows what Buick stands for anyways. Keep Saturn as only Euro-style cars, independent of where they’re built. In time, if GM builds quality vehicles the brand will reflect the new qualities of the vehicles. GM fails today bbecause it doesn’t have the product to live up to what it’s brands claim.
Also, as an aside, I don’t think GM has too many brands, just too many vehicles. There’s no reason for Saturn to have a CUV that competes with Chevy. There are many automotive brands that do just fine with limited lineups.
While I generally agree with RF, I don’t think it fits with what happened with the Taurus.
Ford’s branding didn’t change when the Taurus came along and took a failing company and made it immensely profitable. The branding stayed the same but all of a sudden Ford had a good product.
So I guess it’s both, with product being king. Toyota’s “brand” may be reliability, but that also happens to be the product…
This may not qualify as “branding” but i thought about the Ford 500/New Taurus, Mercury Montego/New Sable twins. The 500 name (Fairlane 500, Galaxy 500) goes much further back in Ford history than Taurus does and Montego goes back to the 50’s or 60’s (not entirely sure the year or decade)for the Mercury division. These cars didn’t sell not because of the reason given by Ford, chiefly poor name recognition by the public. Ford managed to sell fewer of the 500/New Taurus in Sept. ’07 than they did the 500 in Sept. ’06. And i’m not sure, but i’d say the Montego/New Sable did worse in the same time period. It was just poor marketing and brand management on Ford’s part. The 500 name is rich in Ford history and they failed to cash in on it. The domestic 2.8 are in the mess they are in mostly of their own making and by that i mean crappy products for 30+ yrs. and the public has recently caught on. For years the US auto consumer had no choice but to shop the 2.8 and then about 40 yrs. ago the compitition (mainly Japanese at the time) started with better quality, more reliable products with better MPG ratings and the 2.8 are now getting ther corporate butts kicked (big time). And the argument about the “perceived” quality and reliability of Japanese brands isn’t “perceived”, it is a fact!!!!! Consumer Reports Magazine just today said the 3 top car brands in terms of quality are 1): Honda, 2): Toyota and 3): Nissan. Not FoMoCo, GM or Chrysler. Wonder why??? Give you three guesses on that one. And here’s a hint: PRODUCT QUALITY (or the lack there of!!!) has something to do with it !!! But, i’ll let you the do the guessing. All 3 domestics automakers have a rich history in the brands and model names they have (both current and past) they just need to use them to full advantage. But they care more about making the board of directors happy and keeping the money rolling in to the stock holders. Customers be damned and ignored. Money and profits first, product and customers second or third or forth or not at all in some cases. Just may be too late to save these sinking ships.
P.S: And Consumer Reports also today announced it top vehicle picks for 2008.
Here are the winners.
Small sedan: Hyundai Elantra
Mid-size sedan: Honda Accord
Mid-size SUV: Hyundai Santa Fe
Mini-van: Toyota Seinna
Full size truck : Chevy Silverado
Guess this says something for the domestics and their products, huh????? Only one domestic in the bunch. And it’s a Chevy, not the sales leader Ford F-150. Very interesting indeed.
RedDawg: As usual I am very entertained by your Hyperbole. But please stop overlaying 1970’s crap quality of Detroit on Today….particularly as it relates to Ford.
I encourage you to read more deeply into the Consumer Reports quality data—-it will show that Ford quality has risen over the past few years to the point where 93% of Fords fall onConsumer Reports avg-above avg. relaibility list. Facts are a stubborn thing—just sayin.
BTW—do not disagree with you on the naming stuff—Detroit—particularly Ford is guilty of some pretty stupid branding stuff—back to the original point of the article.
I think that you need some level of a coherent theme in your products, but branding does not have to be present throughout the line-up. While TOyota might be tied together for reliability, their green label comes from the Prius. Likewise, Subaru’s relatively recent brand perception change to AWD performance was largely due to the WRX/STi. Thus, you need a decent line-up and a halo car can really tie together whatever branding you want.
Lumping Buick, Pontiac, and GMC dealerships together wasn’t an altogether bad thing, but the failure to differentiate the brands is.
Why have a Pontiac Grand Prix, Buick La Crosse, and Buick Lucerne–pretty much all the same car?
Decide, let’s say that Pontiac is to be the RWD/AWD car division selling small and intermediate cars plus an improved Solstice; and make Buick the large, cushy,FWD division, including heavy-duty FWDs for stretch limo/hearse conversions (Give Caddy an exclusive ultra-plush factory-built limo for the private market that doesn’t look at all like it should smell of prom vomit in the back). Give Buick another Riviera with a basic body design not available anywhere else at GM.
SUVs/CUVs, vans,minivans belong with GMC, period. No more Pontiac Torrents and Buick Enclaves. And give Jimmy at least one SUV or CUV that can’t be bought at the Chevy store down the street.
Allow NO OVERLAPS between one PBG division and another.
Finally, banish the alpha numeric non-name. The fancier G-8 should be a Bonneville, a smaller and lighter V-6 version RWD a Catalina, a performance-oriented stripped-out Catalina shell with a big Bonneville engine and a 6-speed manual, could be a Ventura.
A simple-to-work-on RWD Pontiac compact–basically a throwback to the Falcon/ChevyII era but with a nicer interior, IRS, and bigger options list could be called the GrandAM or maybe the LeMans, and a performance-oriented version the new GTO.
zenith :
And Bob Lutz couldn’t figure this out?
Robert: i agree with you premise on the strength of the Toyota brand—-but what baffles me is the way Toyota has diluted one of the most important branding elements its logo with the somewhat recent addition of the logo for trucks vs the corporate logo.
http://phillips.blogs.com/photos/uncategorized/2007/09/22/108logo_toyota_trucks_2.jpg
vs.
http://www.lifehack.org/wp-content/files/2007/05/20070514-toyota-logo.jpg
I know the rationale probably is that the truck logo looks tougher—but Toyota is breaking a branding / marketing 101 rule…thou shalt not dilute you logo. To add further confusion—the Toyota truck logo only makes it to communication vehicles and not to the product.