How General Motors Violated Your Trust
Here's Harvard Business School Professor and HarvardBusiness.org marketing expert John Quelch on the eight reasons GM's marketing efforts have failed so catastrophically. This post originally appeared at HarvardBusiness.org
In a fascinating mea culpa, General Motors has finally discovered the consumer (also known as the taxpayer). Desperate to achieve bailout funding, GM admitted in a December 8 advertisement titled "GM's Commitment to the American People" that it had "disappointed", sometimes even "violated" the "trust" of American consumers. The advertisement went unsigned and was published only in Automotive News.
I support loaning money to GM to keep the company afloat. The state of the US economy is too perilous at this time to contemplate the alternative. But I am far from convinced that my tax dollars will be well-invested.
Sadly, this year marks General Motors' 100th anniversary. A proud -- perhaps too proud -- company that lost its way in the global marketplace. Perhaps the current crisis will galvanize the forces of change. Or perhaps the weaknesses in the company's culture - specifically, the lack of consistent attention to excellence in design, in marketing and in product quality - are simply too endemic.
Here are my 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. Later, Detroit discovered lifestyle marketing but GM was trumped by Chrysler on minivans, was late to market with SUVs, then missed the mood swing of consumers towards crossovers. There must be pockets of consumer insight at GM but they do not readily translate into market-shaping product initiatives.
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. To command respect, you have to be selling the most popular models in the middle of the market, the ones that consumers strive to trade up to, the ones that consumers aspire to move beyond. 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. GM even continues to sell Opels in Europe and Holdens in Australia. 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.
Over the years, GM has made changes, but never fast enough to get ahead of its problems. So what "commitment" is GM making in the Automotive News ad? There are ten bullet points, the first four of which are:
. Producing automobiles you want to buy and are excited to own
. Leading the reinvention of the automobile based on promising new technology
. Focusing on our core brands to consistently deliver on their promises
. Streamlining our dealer network to ensure the best sales and service
Are you convinced? Do you think GM can fulfill its commitment to the American people and "begin repaying you in 2011" for your loan?
More on the auto industry at HarvardBusiness.org:
Bill Taylor: Memo to Detroit's CEOs: Less Head, More Heart
Umair Haque: Detroit's 6 Mistakes and How Not to Make Them
Kathy Bloomgarden: Detroit's PR Lessons and the Right Way to Ask for Help
A professor at Harvard Business School since 1979, John Quelch is known worldwide for his research on global marketing, global branding and marketing communications. John is a non-executive director of WPP Group plc, the world's second largest marketing services company, and of Pepsi Bottling Group. He served previously as a director of Reebok International.
By
HarvardBusiness.org Editors
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December 15, 2008; 10:00 AM ET
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Posted by: emanuel1009 | December 15, 2008 1:55 PM
I am not good in write but wanted to bring up this to GM and its Dealers. This can be added to the above list.
Though GM has many dealer but what are the hours they work? It is same as what consumers go for his work. if a consumer want to make a enquiry or to fix a problem in his car , he has to take vacation from his office. You don’t see them working after 5:00 PM and weekend is holiday for service center and show rooms. Look at the other manufacturer dealers/service centers. They work on weekend which convenient for consumer get his quote or to fix a problem.
How do you expect more sales from consumer market being inconvenient o consumer?
Posted by: support2 | December 15, 2008 3:23 PM
FINANCE FOCUS hits the nail on the head: FAR TOO MANY American companies in many industries are run by beancounters rather than product innovators and marketers; rather by narrowily focused, 1-year-timeline, bottomliners lacking vision because...well, that's why they are accountants...numbers crunching is more their forte. No crime...but accountants and other beancounters have no place in top tier company leadership in a fast-paced world demanding invoation, longterm foresight and marketing savvy.
Posted by: whotmewory1 | December 16, 2008 12:39 PM
I think the article presents a good analysis of how GM has failed. But WHY GM has failed needs more discussion. I joined a GM company as an executive; I came from outside of GM. What I witnessed was a company full of very smart, capable people all lost in a company culture gone horribly wrong.
The "GM way" is why GM fails. That company has built over time what it believed was a proven way to succeed. But, times changed, customers changed, and the GM way did not. Its failures in products, design, segmenting, marketing, etc. are all due to culture issues. It's a rigid culture full of unwritten rules and insular thinking.
For example, insiders at GM used to say "This is the only company in the world where anyone can say "No", and no one can say "Yes." Translation: Crisp, timely decisions are almost never made, and so GM misses and is most often late to market with what customers want.
The General Manager to whom I reported once told me "it's crazy to buck the system." He was right, and he was wrong at the same time. If you challenged the system (and the groupthink of GM) you'd get nothing done, and get tossed out. But, of course, GM leaders not challenging the system has resulted in epic failure.
I left GM, as most do who come in from the outside. It was the worst experience of my career thus far. That was over 10 years ago; imagine what GM must be like right now! So, come on, do you really think GM in its present form can succeed? I do not.
So, to those in Congress making decisions about loans / bailouts to GM please know this:
GM's only chance at success at this point is to break itself up as follows:
- Chevrolet, Caddillac, Buick & Saturn should each become a company, and develop distinct brand identities and cultures.
- GMC and Pontiac should be killed off.
- Hummer should be sold to some oil guy in Texas who likes to throw his money around.
- Saab should be sold.
- ONSTAR should be an independant company. And what a company it would be if EVERY carmaker in the world had access to its product!
- What ever is left that GM does that is unrelated to cars, sell it or shut it down!
It the management team does not do this, GM will end. It has, and it will continue, doing things over and over again in the same way. Now, to be fair, they really do think they have been doing things differently for some time, but...that's the GM way.
Posted by: BobMemphis | December 23, 2008 2:52 PM
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I could not write this any better.
For almost 30 years I have been following the US automotive industry and never saw GM make a right decision, always the wrong, always too late.
They prefer to blame the cars for not making it in the market and thats why they keep changing names.
Try to make a list of all models that no longer exist (Caprice, Nova, 6000, Park Avenue to name few). It wasnt the cars' fault, the people who designed it, priced it, approved its quality and ruined the residuals are to blame. Where are all these peolpe? They were promoted.
GM better go into chapter 11 and start from scratch, this time learn from Japan & Korea how to plan for the long term.
Good luck GM.