On the End of the American Auto Industry

Blitz Magazine, March 2006

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The other day, I was sitting in a long line of traffic. I was at the top of a hill and could see all the cars below. I noticed that, out of 50 or 60 vehicles, only three were not Japanese or German. The US was represented only by a Hummer, a big lump of a Cadillac and an ancient Buick. All the rest were foreign. As I continued to drive around Vancouver that day, I kept an eye out and saw the same thing on every street, in every parking lot. Japanese, German, some Swedish. Lots of Jaguars. And everywhere, SmartCars. Nary an American vehicle in sight.

Meanwhile, the news on the radio was about how Ford and GM are on the brink, and I’m thinking “Well, duh.”

The mantra for big marketing is all about knowing consumers, knowing what they want, and giving it to them. This is nothing new. But American car-makers—who rank among the largest retailers in the world—have never done this. The American auto industry has always given consumers what it wants them to have. Consumer research may have been conducted, but it was ignored. Ditto all research into what the competition was doing. The message from American auto-makers has always been the same: “Here’s what we’ve built. Buy it.”

If I were the president of, say, General Motors, I would have looked at Great Britain, whose citizens pay some of the highest fuel prices in the world and have never wanted anything but the small and zippy. I would have seen the same thing across Europe and thought ‘Hmmm. Maybe the big car is about to do the way of the dodo.’ I would have listened to trend analysts—not American auto trend analysts, but energy trend analysts. I would have seen what the Japanese saw long ago: a growing need for smaller, more fuel-efficient cars with all of the options and comforts. I would have said to myself: ‘Look at how successful those Japanese manufacturers are. Maybe we should do the same thing.’

Well, that didn’t happen. Instead of giving consumers what they really wanted out of a vehicle—fuel-efficiency, safety, reliability etc., American car-makers said: ‘Oh forget the reality. Let’s look at consumers’ cultural aspirations, create vehicles that fit with their idealized self-images and appeal to their egos, and then market the hell out of them.’

So, at a time when roads are true danger zones, and when most couples wouldn’t dream of having more than two children, American car makers produced SUVs—gas-guzzling vehicles that everyone knows are unsafe. Then they marketed them as family essentials. At a time when drivers are increasingly distracted by cell phones and fast food, American consumers got vehicles with entertainment systems. In an era where commuting time can run up to three hours, Americans produce longer vehicles (longer vehicles increase commuting time for everyone).

Did consumers ever indicate that they wanted this? No. But the marketing worked. Until reality sunk in. Those vehicles are no longer desirable. There are millions of them out there, and no one wants them.

auto1Pick-up trucks are only needed by tradesmen. Yet we’re now seeing massive pick-up trucks driven by executives who happened to respond well to hearing Bob Seeger sing ‘Like a Rock.’ For the under-endowed, there’s the Hummer. Meanwhile, the US government is so desperate to find sources of oil that it has gone to war and is ready to plunder a northern nature preserve for a three-year supply. Chop logic.

If you look at the advertising for German cars, the emphasis is on performance and status. If you look at the advertising for Japanese cars, the emphasis is on reliability, safety, stability, comfort—and fun. If you look at the advertising for American cars, the emphasis is on all the snappy things you can fiddle with inside vans—to create toy bins and space for baby carriages. Please.

And speed—we’re still stuck with those tired old commercials showing cars driving very fast along twisting roads. Meanwhile, public tolerance for speeding is at an all-time low. Fines are way up, California drag-racers are going to jail—a Vancouver man was recently deported as a result of a fatal speed-crazed crash. Speed and recklessness are, like, totally yesterday.

The major shareholders of American auto manufacturers have never done anything to remove board members or CEOs. Now all’s lost. And you have to wait in a very long line to buy a SmartCar or a Prius; and a 2002 Toyota Echo costs $17,000—if you can find one.

Big Auto wasn’t paying attention. The lesson that everyone can learn from that is that communicators have to be smarter and make more of an effort to predict the future. We have to watch, listen and learn. We have to hear the ideas in our own heads, and listen to those of others. And we have to be better communicators.

We are in the Age of the Internet. And the Age of the Entrepreneur. Long-term success now depends on communicating, fulfilling needs, listening, providing great products and services at fair prices, and giving clients and consumers what they want and need. Otherwise, adios.

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Case Study: Toyota Turns Itself Around

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A new car, they say, is the second-largest purchase you’ll make in your lifetime. ‘They’ (the experts) also say that what you look for is quality, dependability and reliability, or ‘QDR’.

You want an attractive, safe, comfortable vehicle that won’t require much maintenance and will rarely break down. And unless you’re concerned about status and aren’t concerned with cash flow, you will look for a vehicle which offers a high QDR rating at the lowest possible price.

Until two years ago, Toyota was at a disadvantage on the latter point. While its QDR ratings have always been high and while, in BC, Toyota has always been the number-one selling import, Toyota vehicles were a little too pricey for many people.

Then, according to Garth Gilson, Toyota’s Manager of Vehicle Sales for BC, a number of things happened.

“Corporately, the company went through a transition. We re-engineered our way of thinking and we looked at our production and distribution systems to find efficiencies which we could translate into better pricing. We re-designed the Corolla and Camry, we introduced the RAV4 into the sport utility market and we re-introduced the Sienna into the van market. We’ve been able to put added value into our vehicles and offer new, high-value vehicles without an increase in price. That has made us more competitive with the domestics.”

Meanwhile, as Toyota became more efficient and improved quality while holding the line on pricing, the price of domestic vehicles went up. Now, the price spread between the high-quality Toyota imports and the comparable domestics is vastly reduced. As a result, for the first time, Toyota has the number-one selling intermediate car in North America (the Camry has displaced the Ford Taurus). In Canada, Toyota’s 1997 sales rose by 18%. In industry terms, that’s huge—anything over 10% is impressive. But in BC, the 1997 Toyota sales increase was a whopping 23%. This is due, in large part, to effective media communications.

“I’d like to think that the BC sales increase can be credited to communication and strategy,” says George Cruickshank, Account Director for Toyota BC Dealers at Glennie Stamnes Strategy, which has been the dealer association’s AOR for the past eight years. “With all of these developments taking place, we completely re-worked the advertising strategy. We said ‘we’ve now got a quite a horn to blow, so let’s really blow it. We’ve got a great new story for the consumer, terrific new vehicles, all these market advantages…we decided to let the vehicles do the talking and let the advantages dictate. We changed the way we looked at the business.”

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There are 33 Toyota dealers in BC and, when compared with other Toyota zones, the BC zone holds the largest market share within its zone. Toyota’s advertising operates at three levels—corporate, dealer and dealer association. The latter is a voluntary association, overseen by eight director/dealers who approve the association’s annual $4 million advertising expenditure. Gilson says that, while individual dealers are free to advertise whatever and however they like, they have found that the association campaigns are strong enough that it’s in their best interest to stay with the group.

“It makes more sense. It gives them a bigger voice and much more impact. All the players can tell the same story. It’s not an exact science—dealers have different opinions, approaches, budgets. But it’s a lot more effective when dealers work within the association campaigns.”

Dealer communication and participation is essential to the success of Toyota’s marketing efforts. You may think that this is an obvious point, but Gilson says that not all car companies are as conscientious as they could be in this area. At Toyota, paying attention to those who actually sell the vehicles makes good business sense. It makes for happier dealers, more profitable dealerships, and a stronger flow of information from customers.

“We need to know what consumers are saying. This market is very fluid and, as a manufacturer, we have to embrace change. And change is brought about by shifts in consumer tastes. Over the course of a year, consumer tastes in everything from vehicle styles to colours can change significantly. Equipment goes in and out of fashion very quickly. We conduct a lot of market research, but we depend on our dealers to keep us abreast of trends.”

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While Toyota stays in touch with its dealers, Cruickshank says that Glennie Stamnes focuses on the sales managers. “We’ve worked hard at building relationships with the sales managers. They’re at the front line of the business and have to be involved. We need to know what they’re hearing from customers. What consumers compare our vehicles against, what it is about our vehicles that stands out. So we meet with the managers regularly, hold focus groups with them and present creative to them before it goes out. We go to the dealerships to make sure that p.o.p. materials are placed properly—which is unusual because many dealer associations regularly put out campaigns with no dealership execution. This interaction makes a big difference. It also helps that this is the best dealer group I’ve worked with. They respect each other, they agree to a program, they get behind it, they execute it.”

A change in execution was a large part of the strategic shift made over the last two years. The traditional media mix of TV, radio and newspaper has been heavily augmented by outdoor buys—mainly exterior bus kings, which are now a key element of Toyota’s sales events.

Those sales events also last longer. “Traditionally, automobile advertising was done through one-month promotions,” says Cruickshank. “Last year, we drew our promotions to two and three months. With one-month promotions, by the time consumers heard about them, and then arrived to take advantage of them, the promotions were over. Consumers were getting fed up. Now, the media has time to kick in and consumers have time to get to the offer. From the acceptance stand-point, it’s better for the dealer and the consumer. There are also no breaks between sales events any more—Toyota doesn’t want to take a break from selling cars, why should there be time between financing and leasing offers?”

Two other consumer annoyances were dispensed with. Toyota buyers can now get 60-month financing on new vehicles—48 months used to be the limit. And Toyota BC Dealers now advertise only what they have on the ground, as opposed to advertising vehicles which are scheduled to come in.

“There are two reasons for this,” continues Cruickshank. “We have to help dealers move what they have on their lots. But it often happens that a car company launches a new car, it promotes it, customers come in to buy and the cars aren’t there yet. That makes people angry. There is no point in spending advertising dollars if you haven’t got the goods to sell and you’re going to tick off your customers.”

Glennie Stamnes also did away with another auto industry practice—the adherence to seasonality. “Traditionally, the belief was that no one bought cars in January, February or March, what with Christmas bills and tax time coming up. In fact, business may be slower during these months, but people are still buying cars. So we’ve advertising aggressively during those months, and that’s where we saw growth last year.”

Creatively, dealer testimonials were replaced by light humour mixed with an increase in the provision of factual information about pricing, quality and financing. And, for the first time, notes Cruickshank, all creative was adapted for the Asian community.

“BC has a large Asian population which is incredibly important to Toyota, which is the number-one name plate in that ethnic group. So all of our creative is reflected in the Asian community. We’ve become involved with the Chinese New Year celebrations and the International Dragon Boat Festival. We buy Asian media and tailor the creative for it. We also tailor the offers. The Asian community tends to buy cars—they’re less likely to lease. So where we’ll offer the general public a leasing program, we’ll offer the Asian community a purchase program.

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“The goal of all advertising over the last two years has been to build on QDR and wrap it up with value and affordability. Price has always been the biggest hurdle for us. But now we can find a better balance. Instead of trying to get people to buy an expensive product, we can now come out and say that, in addition to their excellent QDR ratings, Toyota vehicles are more affordable than ever. We’ve had a lot of information to communicate, but we’ve done it. And our sales increases are strong and our dealers are happy.”

And Toyota’s happy. In BC, its market share is 8%. Nationally, its share is 7% (as compared to Ford’s, which is 21.6%). But The Big Three is now The Big Five—General Motors, Ford, Toyota, Honda, Chrysler. In 1997, for the first time, Toyota sold over 100,000 cars in a calendar year (106,000, including Lexus). Demand is up. The company has taken an aggressive attitude, setting the goal of a 10% market share by the year 2000.

“Toyota already had a lot of loyal, satisfied customers,” concludes Cruickshank. “But with the new price points and new vehicles, it has opened itself to a whole new consumer segment. It has never been in a stronger position to make a serious impact on its marketplace.”

Gilson is a little more cautious. “The industry itself can only grow so big. In our effort to reach our 10% market share, we realize that we have to retain our existing customers, while looking at ‘conquest customers’—those who are driving something else. We’re dealing with educated consumers in a highly-competitive market and we can’t afford to get lost.

“But our advertising has been very effective. The strategy has worked, and I think our sales show that you can’t under-estimate the value of strong advertising.”

Blitz Magazine, March 1998

Jimmy Does Whistler: GMC Moves Up in the World

            Some people call them Environmental Assault Vehicles. Others can’t live without them. For General Motors Canada and Whistler/Blackcomb Resorts, they’re the perfect promotional vehicles.

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            They’re Sport Utility Vehicles, or SUVs. People love to complain about them–they block visibility, guzzle gas, take up two parking spaces. But British Columbians are active people. And in Vancouver, where people do golf and ski in the same day and kamikaze soccer moms run rampant, SUVs are must-haves.

            SUVs are the vehicles of the moment. Their 4×4 capability allows owners to go off-road (5% actually do; the rest go to the mall). They can handle different road and weather conditions, they’re flexible. SUVs are not cars–they’re trucks with car characteristics. And, in Vancouver, the sport utility market is 45% of the truck business; much higher than in other markets.

            Ten years ago, the sport utility vehicle market consisted pretty much of Range Rovers and Land Rovers, which were exclusive to the wealthy. Then there were the trucks and boxy 4x4s driven, in the main, by the blue collar crowd. Those who wanted more space drove station wagons. Then people tired of wagons and went to mini-vans. There’s nothing remotely cool about mini-vans; SUVs were the next logical step.

            The industry-wide transition–from van to SUV, from blue collar to white collar–began in 1993. It coincided with a rise in disposable income, an increase in the number of people having children and, in the case of BC, an increase in the number of vacations taken at home. At the same time, SUVs became more rounded and elegant in appearance. They were sold with embroidered or leather seats, state-of-the-art stereo systems, sun roofs, air conditioning, heated power windows, power steering, power brakes. They became large luxury cars.

            Despite ever-increasing awareness about environmental issues, sales of SUVs are booming–Ford now sells more trucks than cars. The small car market is still almost half the total car market and vans account for 30% of the truck market, but SUVs are taking over.

            However, by 1996, while everyone else’s SUVs were flying out of showrooms, sales of the GMC Jimmy had declined. It had an image problem.

            “At that time, the Jimmy design had been around for 18 months, which is a long time in a market that’s changing so rapidly,” explains Michelle Whelan, Account Supervisor at MacLaren McCann, General Motors’ long-time agency. “Maybe it was the design, maybe it was the blue collar image–for whatever reason, people didn’t see this truck as being what they wanted to buy. We wanted the Jimmy to be perceived as a high-end vehicle, increase awareness of its attributes and make it an aspirational brand.”

            So the Jimmy’s image needed a socioeconomic up-grade. What better way to achieve that than by tying it in with one of the world’s most socioeconomically exclusive activities–and one of BC’s most popular activities–skiing? Skiing, specifically, at Whistler/Blackcomb, North America’s top ski resort. To which, for the past ten years, GM has had the exclusive car manufacturer’s product placement rights.

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            The solution was stunningly simple. Beginning in September 1997, the ‘97 GMC Jimmy became available in a Whistler edition and a Blackcomb edition. Vehicle badging was created. The truck was outfitted with running boards, leather interiors, CD players and Thule ski racks. People who purchased the Jimmy received fleece jackets or vests with the Whistler/Blackcomb logo, as well as the Whistler/Blackcomb Express Card (for direct-lift, lower-cost skiing on a debit basis). As promotions go, it was not terrifically complicated, either to understand or execute, but it was a tremendous success.

            “It was very straightforward,” continues Whelan. “The SUV market is growing very quickly in BC, more so than in the rest of the country. The need was already there; it was just a matter of getting consumer attention and communicating the Jimmy’s benefits.”

            With a budget of $300,000., MacLaren conducted a province-wide newspaper campaign. In the Lower Mainland only, the promotion was advertised on radio and TV, plus on billboards and through traffic report sponsorship on Mountain FM. In addition, the agency obtained the Whistler/Blackcomb data base and a direct mail piece was sent to all Express Card and season ticket holders. The target market was the 30-50 age group with earnings of $35,000.-$40,000. And while this was going on, there were Jimmys parked at the base of Blackcomb and in Whistler village; every time someone walked by and triggered it, an automated tape touted the vehicle’s benefits.

            The promotion’s effectiveness was quickly apparent–sales of the Jimmy went up 38%, or just under two market share points. So last year, the promotion was repeated. But GM has other vehicles serving this market segment–the Yukon and the Suburban. So last September, the promo included the three vehicles and used the same strategy. Jimmy sales went up 40% in September, 69% in October, 43% in November and 149% in December. Yukon sales went up 15.3%, Suburban sales 47%; with respective share climbs of 3 and 4.8 points. The whole GMC target group has changed; the blue collar image is gone.

            Which is not to say that an entire market segment has been shut out. It’s true that SUVs are expensive and if you have to worry about the cost of fuel you can’t afford one. The hottest category of SUVs is the mid-size–the GMC Jimmy, Ford Explorer, Chrysler Grand Cherokee, Toyota 4Runner and the Nissan Pathfinder. Those run in the $44,000. range. The large size SUV is increasingly lucrative; this is where you find the GMC Yukon and Ford Expedition ($48,000.) and the GMC Suburban and GMC Tahoe ($52,000.). However, with $4,300. down, you can lease a Jimmy for $338. a month which, obviously, was a figure which appealed to British Columbians in various income groups. And the benefits of the Jimmy were communicated in such a way that it increased the purchase intent of those who, in a market already favourably disposed toward an SUV, were thinking of buying one.

            The decision to buy a vehicle involves a six-month purchase funnel. When a consumer decides to buy a new car, he will spend two months looking at different makes and deciding what type of vehicle he wants–a mid-sized car, an SUV etc. Over the next two months, he’ll narrow his choices; he knows what type of car he wants, now he has a short list. In the fifth month, he will further narrow his choices and decide on the style he needs; in the sixth, he makes his final decision based on price and options.

            For manufacturers, image advertising–particularly in print and television–captures the attention of the purchaser in the first five months of the funnel. It’s the promotions, packaging and pricing which catch the buyer in the last month–this is how the manufacturer moves up on the buyer’s list and affects purchase intent.

            The creative strategy for the Jimmy promotion was simply to create an aspirational vehicle image and move that image higher up on the purchase funnel. Experience and focus group testing showed that the best approach was the straightforward one–no dancing girls, no silly humour.

            “We just showed the vehicle in the mountain setting,” says Whelan. “The image told people that this vehicle offered a way to have the freedom to get out of the city on week-ends. It showed the truck in the mountain environment and created the outdoor connection in people’s minds. The copy provided the straight facts.”

            “We want our creative to be tasteful,” says Brian Webber, Zone Marketing Manager for GM BC. “We want to communicate specific information and we don’t want clutter. People who buy these vehicles are sophisticated; they know what they want and they want you to cut to the chase–state the features and benefits, the price, the lease payment, the down payment.

            “In our campaigns, we use outdoor extensively to show the look of the vehicle. Print advertising is the primary source of information–what it is, how much it is, where to go and get it. At the point where this promotion appeals to the consumer, he’s already going to buy an SUV and you just have to tell him why he should buy yours. He’s done his homework, you make him an offer.”

            The success of this promotion is clearly indicated by the fact that people are still asking for the Whistler and Blackcomb editions, even though last season’s advertising stopped in January. Not all Jimmys have the badging, but that hasn’t hurt sales. The attributes and image of the GM vehicles, and their association with the glamour and excitement of Whistler, have made such an impression on people that they’re buying them anyway.

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            “The image of Whistler/Blackcomb means different things to different people,” says Mark Woodburn, General Manager of Business Development for Whistler/Blackcomb Mountain Resorts. “People in BC are proud that the leading ski resort on the continent is in their back yards. Some feel a sense of ownership. Others want to communicate that they’re alpine enthusiasts and part of mountain culture. In some people’s minds, there’s a certain stature associated with that. That’s part of our brand equity and GM’s use of that equity altered how their vehicle was perceived. It helped stimulate test drives and sales, significantly affect its market share and exceed sales targets. We’re glad that we helped a partner and enhanced our own brand awareness at the same time.”

            Woodburn couldn’t be happier with the GM promotion–for the price of the give-away merchandise, Whistler/Blackcomb has been able to expand its relationship with GM outside of the resort and, in the process, advertise itself.

            “It’s always a struggle for us, as we go through the winter, to remind people in the Lower Mainland that Whistler/Blackcomb does not suffer the same rainfall that the Lower Mainland does. We need to get in people’s faces as often as we can and this way a great way to do that. The fact that our logo was on the back of a high-quality 4×4 vehicle communicates the nature of Whistler and continues with the culture that people enjoy here. The displays in show rooms, the direct mail campaigns, the advertising–it all helped us. But the greatest value to us was having the logo on the back of the vehicles. Someone’s sitting at a red light staring at our logo on the vehicle in front of him, he thinks of his experience here, it elicits fond memories and stimulates another visit.

            “This was a unique opportunity because it’s not very often that you get to put your name on a product manufactured by someone else–especially one with such a high profile. GM used our brand to strengthen its business, we used its vehicles to strengthen our brand. It’s a classic example of partners borrowing equity from each other. And its simplicity is the reason for its success. Obviously, GM makes great vehicles and they’re attractive to anybody looking for something in that category. But being able to tie the vehicles’ connection with this place and its activities, and to the emotional connection that British Columbians have with Whistler, gives GM an edge which its competitors don’t have. It is a win-win situation all around.”

Blitz Magazine, September 1999