The Homa Files

Excerpted from Harvard Business Online, “How General Motors Violated Your Trust”, by John Quelch, December 11, 2008

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The top eight reasons why GM has failed as a marketer:

1. Focus on products, not customers. For years, Detroit wrongly viewed product types as market segments. Cars were classified as subcompacts, compacts, intermediates etc. But no consumer ever left home passionate to buy an “intermediate car.” Segments are groups of customers, not products.

2. Too many products, too many brands. The Toyota and BMW product lines are very simple, easy for a salesperson to explain and easy for the consumer to understand. There is a logic to the product lineup. Desperate to retain share in the US, GM continues to add to its already confusing array of 60 models under 8 different brand names. The positioning of each brand has long been unclear, a problem magnified by look-alike models built on common production platforms with frequent model changeovers adding complexity costs to production. Buying a car is an infrequent purchase; the consumer needs a clear roadmap of what is on offer.

3. Too many dealers. GM did not reduce its dealerships as it lost share. As a result, dealers began competing on price against each other rather than external competitors. Slipping sales caused dealers to consolidate two or more GM brands on a single lot, further undermining any pretense at distinctive positioning for each marque. And the need to keep sales up at each dealership limited GM’s enthusiasm for embracing new ways of taking new car orders from consumers over the internet.

4. Losing market control. You know you are the market leader when the other players in the value chain – producers, dealers, consumers – all look to your product line as the bellwether alongside which they organize theirs. Today, GM is correctly trying to regain control of the middle with the new Chevrolet Malibu. But will it be able to displace the Toyota Camry and Honda Accord?

5. Bigger is better. Higher wage and benefit costs make it harder for GM to make money on small cars. But the real reason for the migration of the product mix to SUVs and trucks is that the “petrolheads” who run Detroit are all big, tall men. They would rather go down in Detroit history as the guys who brought you the Escalade, not the Prius. They are Jack Palance, not Billy Crystal. Over half the cars bought in the USA are purchased by women; would you know that from the lineup of senior executives at GM?

6. No global brand. Here Ford has a clear advantage over GM. Ford is a global brand. The company name is the brand name. Sure, they have Lincoln and Mercury but the vast bulk of Ford’s marketing dollars worldwide back the mother brand. GM, by contrast, is a house of brands, none of which is global. Marketing resources at GM are inevitably dissipated.

7. Not invented here. Smaller than GM, Ford has been prompted by necessity to better integrate its worldwide operations. In a well-run multinational, this involves US headquarters learning from its subsidiaries, not just telling them what to do or letting them run independently. For decades, Detroit has spurned US launches of high quality vehicles conceived and made in its own European factories.

8. Finance focus. GM has not been run by marketers. It has been run by accountants. The cost focus has crowded out needed emphasis on consumer insight and marketing. Instead of obsessing over the $1,500 per car labor and benefits cost differential separating the big three and the foreign transplant brands, GM should have exploited its market access to develop brilliant new designs that the American consumer would gladly have paid more for. Instead, the Toyota Prius has trumped Detroit and GM’s belated answer is the $40,000 electric Volt.

Edit by DAF

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Full article:
http://discussionleader.hbsp.com/quelch/2008/12/how_general_motors_violated_yo.html

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This entry was posted on December 23, 2008 at 7:45 am and is filed under Autos - Travel, Mktg - Brands, Mktg - Strategy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.