Decisions...Decisions...

Next to a keen propensity for concern with their personal appearance, the most notable characteristic of a person born under the astrological sign of Libra is the difficulty (or downright inability) to come to a conclusion.

A true Libra will toil under the pressure of even the simplest of decisions, like choosing between sweet or spicy mustard on their ballpark frank (provided someone helped them decide to go the game in the first place). And the difficulty will only increase with the perceived importance of the task at hand. For example, they are completely lost when trying to negotiate what profession to follow, where to live, or heaven forbid, what type of car to drive.

The North American automotive marketplace is not kind to the Libra, especially today. With over forty brands, and even more models to compare, the time it takes to determine the appropriate vehicle may be measured not in weeks or even months, but rather administrations. Now with all of the niche cars and their laundry lists of available options, one could probably do quite well for himself in an occupation that simply involved choosing for them.

People born between the third weeks in September and October aside, what is the "right" mixture of nameplates and models a car company should offer? It seems that people are demanding more and more niche areas be filled, but on the other hand when you look at the two companies with the broadest concoction, both are just trying to keep the proverbial wheels from coming off.

I guess conventional wisdom would be to consider the "anti-GM." Toyota's product assortment neatly spans three distinct income brackets: small, medium, and large (Scion, Toyota, and Lexus). Within each brand is a little bit of something for everyone. It makes almost as much sense as the "Kaizen" business model itself.

Let's try another one. How about the Volkswagen, Audi method? Instead of a three-part approach, they come at you with just two. One would think the strength of the two-sided assault would be like offering small – large, Laurel – Hardy, Peanut Butter – Jelly. Instead, however, they have somehow crossed their wires, and cars that are clearly Audis are sold as VWs, and vice versa.

The plan to offer an attainable "intro" line, with a nice compliment to follow once the kids move out and college is paid for, seems so simple and has been successfully done by others (Honda - Acura, Nissan - Infiniti). At the end of the day, it is in the overlap where the identity and message is lost and you run into trouble.

Well then, how about one-line? Unlike the multi-brand approach, offering just one and then some variations on it can capture a specific bracket of each segment. Very interesting approach. The first three manufacturers that come to mind (Hyundai, Kia, and Suzuki) do just that, and compete in the "economy" bracket with a single brand message, which no one will confuse with anything else.

OK, so we have seen that efficient product mixes can come in one, two, or three brands. Judging simply on the examples we have seen, one is good, two is better, and three is best. How about four? Or more?

Four, hmm, ok…Chrysler, Dodge, Jeep, and Mercedes-Benz. But here is where the law of diminishing returns really starts to take shape. The Sebring is the Stratus? Or the Charger is really a 300C -- no wait, the Aspen, Durango and Commander? Hold on, the line up here is like the "who's who" of evil twins and alter egos. What is a Chrysler and what is a Dodge?

The idea that there might be some overlap between a loaded VW GTI and an Audi A3 may be passable, but making "Doppelganger" the foundation of your product mix simply leaves customers guessing. And its not just brand identity we're talking about here. Once you start messing with a car's DNA -- the Crossfire, for example -- people take one look and say, "Well, what is it?"

So, based on this highly technical and scientific analysis, it seems three's company when considering the optimal number of brands. Maybe that's why we always had three domestic automakers in the first place. If you just keep adding brands and models, do things swing back into shape?

I'm afraid not. All we are left with at this end of the range are Ford and GM, tipping the scales at a hefty eight brands each. What's truly fascinating is that there isn't one brand designated for trucks, one for economy cars, one for sports, etc., but rather they try to cover nearly every segment with every brand. It's like running Dell, Compaq, and Lenovo under one roof.

These companies have grown to the extent that their very names can't adequately describe them. Ford "Motor" Company and "General" Motors, boy we have gotten fat and happy. In this world there are compulsive eaters and then there are those who simply consume for sport. Admitting you have a problem is half the battle.

Having been born in the second week in October, I will not make it past large or small. But for the rest of the buying public who are looking to purchase a domestic automobile, please, just give us a chance.

Comments

[David J. Starr]

From the Wall St Journal
Front page. 8 March 2006.

I only had the energy to type in the most telling quotes.

Lost in Transmission
Behind GM's Slide: Bosses Misjudged New Urban Tastes.
By Lee Hawkins Jr.

In December, General Motors Corp ran a series of ads across the US showing Cadillacs being driven in snow. The decision to do so was made by the giant car maker's executives in Detroit where on Christmas day the temperatures hovered just above freezing.
The ads also ran in Miami, a vibrant car market where GM has bombed for the past 15 years. As Christmas dawned, temperatures there started climbing into the high 70's.

[snip]

In the late 1990's, years before GM's Cadillac Escalade became a hit, dealers in Miami suggested that GM build such a luxury sport-utility vehicle. They were shot down by executives in Detroit who said it would never work. GM later went on to sell more than 400,000 of the luxury SUV's.

[snip]

In addition to these geographic units the company is divided along functional lines, with global groups overseeing areas such as marketing, product development, and human resources. GM calls this "the Matrix." To explain how the two chains of command interact, GM has produced a chart that shows them overlapping in a pattern that resembles a basket weave.
It's a system that's confusing even to insiders, especially mid level employees who often feel as if they had two bosses. Marketing ideas often get lost as they bounce between departments.

[snip]

In an interview last year, GM Chief Executive Rick Wagoner said it was critical that GM halt its two-decade-long slide in big coastal cities such as Miami. "We have a very specific strategy to address these markets one by one, East and West," said Mr. Wagoner, who doubles as head of GM's North American auto operations.
As for the company's complex structure, he made few apologies. arguing that a global auto maker needs such a "matrix" style organization. "People really have trouble because they want to know who's in charge," Mr. Wagoner said. "And the answer is going to be increasingly: It depends."

[David J. Starr]

Brand Name: A psychological device to make a commodity more desirable and thus to command a higher price in the market place. Brand is a perception in the mind of the customer. Brand takes time to create, and once created it tends to persist. In many cases brand names outlive the company that created them.
In the good old days, Alfred Sloan created five brands at GM, Chevrolet, Pontiac, Buick Oldsmoble and Cadillac. He sold the same basic product (a four door six passenger sedan) under all five brand names. Cadillac had the most prestige and commanded the highest price. Chevey was the low end and sold for the lowest price. Note that the commodity was just a sedan and the cost of production was roughly the same for a Chevy or a Caddy, only the Caddy brought in more money because the prestige of the Caddy brand made the car desirable and customers willing to pay more for Caddy.
Unfortunately for GM's survival, the bean counters upset this scheme. They removed the distinctive styling and engineering that made the five car lines look different in order to save money. Once this happened, customers stopped paying extra for the more prestigious models.
GM's problem today is to get back to making high volume vehicles at a profit. Right now GM hopes to make profits selling fancy SUV's and just break even in the competitive heart of the market, the family sedan. This business plan depends upon continued sale of high markup SUVs. Most observers, myself included, don't believe this business plan is going to work. SUV sales aren't going to be large enough to keep GM in business.
The only realistic business plan for a behemoth like GM is to compete in the highest volume segment of the car market, making and selling at a profit, family sedans and get-to-work econoboxes. Each day I drive to work, I see a whole lot of sedans, small, medium and family on Rt 128. I don't see all that many SUV's.
Right now, GM's sedans (it has a lot) are unexciting, painted grey, and blandly styled. Personally, I would not spend new car money on any of them, they are just too boring. GM needs to make them exciting, with advertising, good styling, a racing program, bright paint, and some decent brand names. The product line is really only four cars, a bottom-of -the-line econobox, a small sedan, a family sedan and a big plush sedan. GM needs to pick ONE good brand name for each of the four products, and stick with that name. I think we can all agree that the large plush sedan works best with the Caddy name. The family sedan might have the Chevy Impala name. The small sedan gets the Pontiac GTO name. The bottom of the line econo box gets the Chevy Monte Carlo name. Once the brand names are permanently tied to real products that are distinct from each other, we can build up brand awareness and bring back some meaning to the concept of brand. One could say "I bought a Cadillac" and the audience would be able to visualize a large quality sedan. Right now when people say "Cadillac" they might mean a large sedan, a crewcab pickup truck, an SUV or a small sedan. If each vehicle type had a distinctive name it becomes easier to talk about, and sell, that vehicle. GM needs a connection in the public's mind between a brand name and a vehicle.
What to do with the "extra" brand names (like Buick) which lack a product? Put them on something else. Buick would be a fine SUV name. But remember that SUV's are a niche market, profitable perhaps, but not large enough to keep a company the size of GM running.