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Sunday, June 7, 2009
Get the Marketing Right US Auto Manufacturers!
GM is being restructured. Chrysler is getting ready to be sold to Fiat out of bankruptcy. Ford is
barely hanging on. We all have opinions as to how the US auto industry got itself into its current mess. We have
heard our politicians lecture us on the importance of automobile manufacturing jobs to the US economy. We have
been told that the money the US government has invested in GM and Chrysler will be returned to the Treasury. No
one has really addressed what must happen for the American auto manufacturers to right themselves and become long term sustainable
businesses.
The bottom line is that a very high percentage of young (under 40) auto buyers don't see any US
auto brand as a great value in comparison to Toyota, Honda and many other foreign brands. The foreign brands are setting
the market standards and the US auto companies are followers, not leaders. The market dynamics of 30 to 40 years ago
have been completely reversed.
One of the most fundamental principles of consumer product marketing is delivering
great value to the customer. Give the customer a better product for less money. Back in the 60's and 70's
Japanese cars were laughed at by many, however, for a certain market segment they represented great value. The Japanese
continually improved their products and created great value for more and more customers. In the last few years they
set the market standard as the world leaders in automobile manufacturing with Korea ( and China is next) playing the upstart
role that Japan filled decades ago.
In recent months I have heard many US auto executives claim their cars are
now "as good as the Japanese". That may be true on a technical level, but when you are not the market leader
you must offer greater value to the consumer than the market leader. US auto companies are not close to offering
great value again. US cars must be cheaper than the competition and offer more features. The employees at all
levels of the US auto companies and their suppliers cannot justify the price of their products. All costs, including
labor, must go down and the product quality must go up until the US auto companies can rightly claim to offer great
value to young auto buyers again. The actions taken so far are not close to reaching this mark. The decision makers
in Detroit and Washington need to get real!
I have purchased two new cars for my twenty something sons in the past
year. No American car was even under consideration for either purchase. My sons didn't consider American
companies to be relevant their buying decisions. We bought a Mazda and a Volkswagen. We believe we got very good
automobiles at low prices. We got great value.
My family owned US auto company cars exclusively
from 1972 until 2003. I was a loyal American buyer. But the high prices and lesser quality of the American
cars during the past decade changed my attitude. My wife bought a Lexus in 2003 and she got great value.
She loves her car. I bought a Buick in 2005 and continue to drive it today. I never thought I would ever buy
a Buick in 2005. I needed a specific type of vehicle in the summer of 2005 and GM was struggling so it offered many
vehicles at employee pricing, a very deep discount to its normal MSRP and selling prices. I would never have purchased
the vehicle I am driving today if GM's standard pricing had been in place in the summer of 2005. I bought
the vehicle I needed at a very good price. Buick gave me great value and they got the deal. For a short time
GM's marketing was right. The quality of my Buick is excellent and has exceeded my expectations.
I would
have hoped GM and the others would have learned their lessons in 2005 but they didn't. The competitive situation for
them is worse now and will get more difficult in the future. They will have to earn their customers one buyer at a time
based on fundamental market principles and no government intervention will make a difference in the end. The people
working in the industry will have to earn their pay and benefits based on their performance in the market place, otherwise
they will become useless economic basket cases that will eventually die.
I plan to buy a new car for myself in
2010 or 2011. We will see who will be offering me great value the next time I am in the market.
TPM
11:36 am
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