General Motors proudly unveiled the Chevrolet Volt hybrid vehicle this week, first to an audience of mainly ex-GM owners and then to a a gathering of media and analysts. The look of a proud parent was impossible to miss at these events, and why not- the Volt can tout an estimated highway MPG rating of 230. This staggering figure changes the game in hybrid vehicles. Toyota Prius, the current market leader, can get only about 1/4 of the Volt’s mileage performance. The Volt’s price tag of $35,000-40,000 makes it less than a slam dunk success when it hits the market in 2010, but its launch is critical to GM’s success going forward. The impressive mileage performance of the Volt sends a signal that GM is capable of producing innovative new products.
The coming out parties for the Chevy Volt signal intentions for change at GM. CEO Fritz Henderson says the company will put consumers first; the meeting with ex-customers before holding the media event was symbolic of the goal to focus more on consumers. Greater effort will be made to get consumer feedback, according to Henderson. Let’s not get too crazy about that statement; that is what marketing is about, after all. At least we should credit GM for adopting the right mindset.
Henderson also discussed marketing strategy. The corporate GM brand will be downplayed as most resources will be directed toward the four remaining GM brands (Chevrolet, Cadillac, Buick, and GM) and the various models that are subbrands of the four brands. This move is appropriate. There is not a great deal to be gained by promoting the GM brand today. It carries a great deal of negative baggage. Greater consumer interest will likely exist for the different GM nameplates, not the parent brand. Focusing marketing efforts on the four brands allows GM to reach customers at the level where they are evaluating choices, at the brand level.
Marketing Daily – “General Motors Addresses Consumers First”
GM turns the page to a new chapter in its 100+ year history today. The bow of of “Reinvention” brings the promise of a new GM. The “Reinvention” commercial includes a prompt to visit a web site detailing the plans of the new GM (http://www.gmreinvention.com). Given what we have seen from the old GM over the last 10-15 years, our expectations should be rather low.
An interesting statement from the commercial is “There was a time when eight different brands made sense.” Oh really? When was that time? A significant problem GM had for years was too many brands. It has not been a problem only recently; the glut of brands led to resource wars within the company. The result was that all brands suffered. GM’s problems are hardly new. It should not have taken being forced into filing bankruptcy protection to bring about radical changes at GM.
A major reason GM was reluctant to declare bankruptcy was it was concerned the effect it would have on customer confidence in the company. Would people be willing to buy cars from a company that had filed for bankruptcy? Months of negative press about GM had the same effect. The company could have been well on its way to making a new GM if it had faced realities sooner. Now, many people are skeptical that GM can reinvent itself given that it squandered its rich heritage over the last two decades with inaction and infighting.
Link: Ad Age – “New Ad Introduces Consumers to ‘New GM'”
News that Chrysler is terminating almost 800 dealers and General Motors doing the same to 1,100 of its dealers is a sad reflection on the current state of the U.S. automobile industry. Local car dealerships are employers of salespeople, mechanics, and customer service personnel. Those jobs will vanish. Also, these businesses have traditionally been counted on to provide support to local schools, sports leagues, and charities. The loss of community involvement by the affected dealerships will surely be noticed by those organizations that have benefited from their contributions over the years.
The reality of the market dictates fewer dealers are needed to service customers today, especially for U.S. auto brands. Lower demand for cars in general and market share losses to foreign brands have left GM and Chrysler with a bloated distribution network. In short, there are too many sellers for too few customers. Downsizing the dealer roster is the best solution to re-size these companies for today’s market. A risk exists that customer service among existing owners of Chrysler and GM cars could suffer. In turn, lower customer satisfaction could negatively impact owners’ decision to buy the same brand in the future.
I was disheartened to hear General Motors plans to phase out the Saturn brand as part of its fight for survival. Saturn, along with Saab and Hummer, will be phased out in 2009. These brands have been on the chopping block since GM’s financial troubles came to a head last year. In addition, the Pontiac brand will be phased out in 2010 as well as major reductions in employee headcount and dealerships.
Of all the announcements made by GM President and CEO Fritz Henderson today, elimination of Saturn is particularly sad from a marketing standpoint. Saturn was launched in the early 1990s with the promise of a new era within GM. Even the ad slogan supported the notion: “A different kind of car, a different kind of company.” Consumer response to Saturn was very strong in the early years. Then, consumer preferences shifted toward larger vehicles and SUVs. Saturn was ill positioned to meet that trend with its focus on economy cars.
Saturn also suffered from a lack of resource support within GM as well as bad managerial decision making. One role for Saturn was supposed to be to serve as an experimental brand. For example, the EV1 electric car that Saturn tested in the mid 1990s would have put GM ahead of competitors in the race to offer alternative fuel vehicles. The EV1 was tested in California, and the company eventually destroyed all of the vehicles once their leases expired rather than move forward with production.
I own two Saturns and have followed the brand closely for more than 10 years while researching it for a case study I prepared and subsequently updated for marketing textbooks. From a brand building standpoint, GM did many things right to get Saturn off the ground. GM’s Henderson made an interesting statement at the press conference announcing the changes saying “brands are good for offense.” The problem is GM is in defensive mode. The company is resizing itself to reflect the reality of a smaller U.S. auto market. Saturn will be missed… at least by this owner.
As General Motors fights for its life, one scenario for a slimmed down GM calls for deletion of some of its brands. Among the brands on the deletion list are Hummer, Saab, Pontiac, and Saturn. While Saab and Hummer may be candidates for sale, Pontiac and Saturn would more than likely be eliminated like its late sister brand, Oldsmobile.
As an owner of two Saturns, the possible elimination of Saturn is disappointing. As one reviews the twenty year history of the brand from its conception to its precarious state today, there are many missteps that can be identified. Saturn hit a home run early on with its no haggle pricing, folksy image, and dependable, fuel efficient cars. Then, in the mid 1990s the SUV craze hit the market. Saturn continued on selling its fuel efficient cars. By the time the VUE SUV was introduced in 2001, GM had missed an opportunity to take advantage of the SUV market.
GM has been all over the board with Saturn, trying a mid-size sedan that failed (the L Series), and now selling a minivan (Relay), crossover (Outlook), roadster (Sky), and European styled sedan (Aura). These models were pushed at the expense of Saturn’s core product, the economy car. As GM has tried to expand Saturn’s product mix (and raise price points), the market has come back to lower priced, high gas mileage vehicles. Also, GM missed a golden opportunity to use the Saturn brand as a development brand for hybrid or electric vehicles. An experiment with an electric vehicle in the early 1990s, the EV1, was a modest success. GM decided not to pursue the EV1 further and destroyed all of them once their leases expired.
Perhaps the destruction of the promising EV1 more than a decade ago was a foreshadowing of what would ultimately happen to the Saturn brand. I hope I am wrong.
Link: Business Week – “GM, Ford Prepare for Congress”
Tiger Woods is second only to Michael Jordan in his prowess as a product endorser. He has associated his name with several products since arriving on the national sports scene in the mid 1990s, but one of Tiger’s most visible endorsements has been of General Motors’ Buick brand. His relationship with Buick seemed both appropriate and odd. The pair was appropriate because of an overlap between the target market characteristics for Buick and PGA Tour followers. The Tiger-Buick link seemed odd because Buick and golf are perceived as skewing toward older males, and here was a twenty-something “kid” endorsing an old guy’s brand. Turns out that the partnership worked for Buick as owner data indicates the average age of a Buick driver dropped from around 50 to 40 during the Tiger Woods-Buick era.
That era is coming to an end as Woods and Buick amicably part ways. Both sides are saying all the right things, but GM’s woeful financial picture has to have played a role in the decision to end the relationship. GM had already announced it would not be advertising during upcoming high profile events such as the Super Bowl and the Academy Awards. Fortunately for GM, the positive effects of its association with Tiger Woods will likely carry over for a period of time following the end of his endorsement deal. While brand building needs are taking a hit at GM these days, the company is in a fight for survival first.
Link: Ad Age – “GM Ending Tiger Woods Endorsement Deal”