Consumer-Oriented Cars

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[This Commentary originally appeared in the November 15, 1990 issue of The Mendon-Honeoye Falls-Lima Sentinel.]

CarosaCommentaryNewLogo_259The American automobile industry, and General Motors in particular, has failed to successfully incorporate consumer behavior into their American marketing efforts. Market share data clearly shows the industry’s poor performance. From 1978 to 1989, the market share of the Big Three (GM, Ford and Chrysler) has fallen from 82% to 67%. (“Detroit Under Siege,” The Economist, April 14, 1990). Furthermore, GM itself saw its market share drop from 46% in 1979 to 35% in 1989. (“Detroit’s Big Three,” The Economist, April 14, 1990). Only in light of overwhelmingly negative market share figures has GM finally begun to realign its organizational structures to address the critical consumer behavior issues.

GM’s Failure

We can see GM failed to recognize or successfully execute upon four basic assumptions of consumer behavior:

  • The Consumer is Sovereign – Sitting on top of the post World War II world for nearly 30 years, GM refused to innovate in the early seventies, falsely believing consumers would continue making purchasing decisions as they had in the past.
  • Consumer Behavior Can Be Influenced – While GM understood this, they failed to see how influential factors evolved or how non-traditional influential patterns can arise (e.g., as a result of the oil crises).
  • The Consumer Can be Understood Through Research – GM went through the motions of market research. Despite this, GM’s multi-layered organization suppressed their ability to successfully identify important findings and to successfully incorporate those findings it did indentify into its marketing effort.
  • Consumer Influence is Socially Legitimate – GM thrives on this assumption. As before, GM’s primary fault lies in its bureaucratic structure. This structure has led the company to be compared to the lumbering dinosaur in an industry where the fleet-footed gazelles capture the customer.

Japan’s Success

Japan’s success – and Detroit’s ultimate failure – resulted from targeting the baby boomer population. GM, and Detroit, correctly assumed their purchasers exhibited a high degree of brand loyalty. Japan saw this, too. Instead of trying to convince loyal (i.e., older) customers to switch, Japan focused on the relatively new (i.e., younger) car buyers. These younger buyers had not yet developed a firm loyalty in American cars. These buyers would be more open to new ideas (including buying a foreign car).

Admittedly, Japan did possess some degree of luck. The two oil shocks of the 1970’s opened the door for Japanese imports. Quite simply, American automakers failed to produce energy efficient cars when the consumers demanded them. Younger, poorer buyers had to consider foreign cars. With its foot in the door, Japan’s customer-oriented “Kansei engineering” (defined by an absolute awareness of both reason and emotion) began paying big dividends.

GM’s gas guzzlers could not complete with Japan when people began buying cars based on gas mileage. Once American consumers allowed themselves to buy Japanese cars, they realized those cars scored higher in other important features as well (e.g., price and reliability). The Japanese, through customer focus groups, continued to insure it built cars which buyers preferred. Though it has made some headway, Detroit’s manufacturing philosophy to this day prevents it from being able to compete on a level field.

Detroit’s overburdened manufacturing system cannot easily respond to customer needs. On one hand, GM sells ten cars per employee while, for example, Toyota sells 45, (“Detroit Under Siege,” The Economist, April 14, 1990). With so much overhead, GM cannot easily compete on price. In addition, it takes Detroit on the average of 8 years to replace older models, while the Japanese average is 4.5 years. (“A New Era for Auto Quality,”  Business Week, October 22, 1990). Even with correct market research data, Detroit cannot possibly address consumer behavior preferences as quickly as the Japanese.

What Happens Next?

The Japanese have hooked the baby boomers. “Nothing [American carmakers] could do would get me into a showroom,” notes one typical American car buyer. (“If it’s not Japanese, they would bother kicking the tires,” Business Week, April 9, 1990). As this demographic group has become more wealthy, Japan has produced cars more suitable to their socio-economic status. Where once Japan used low cost flexible manufacturing techniques to beat American car producers, they have begun to use the same strategy to challenge BMW and Mercedes Benz.

With the initiation of the Saturn Project, GM has unveiled a corporate strategy meant to mimic Japan’s success. From product design to manufacturing to sales, Saturn hopes to incorporate consumer-oriented problem solving. To be successful, however, Saturn must overcome the tarnished image of its parent. Only time will tell if Saturn becomes GM’s beacon of hope. If Saturn flops, it will be just another example of the American automobile industry paying lip service to innovation.

Summary

Japan targeted a growing market with no clear brand loyalties. They attracted buyers by delivering cars which had what people wanted. Japan went straight to consumers to discover their needs and to maintain quality control. They designed their entire manufacturing system to cater to the customer.

The American car industry, on the other hand, failed to recognize the importance of the primary (in terms of overall purchasing) demographic group. Instead, they continued building cars for the older generation. Their systems did not – and may still not – have flexibility built into them. Only now, with their backs increasingly against the wall and the baby boomers loyal to Japan, have the Big Three begun to address critical consumer behavior issues. America, and the thousands of workers whose jobs rely on a thriving American automobile industry, can only hope it’s not too late.

Next Week #85: White Cream Donuts (originally published on November 8, 1990)
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[What is this and why is here? See Interested in Discovering My Time Machine? for more details.]

Comments

  1. Chris Carosa says:

    Author’s Comment: Hmm, this reads suspiciously like a term paper for business school. I don’t remember for sure, but I did concentrate in finance and marketing, so it’s plausible the source of this paper stemmed from a class assignment.

    The paper hypothesized Saturn might signal the future of the American auto industry. Indeed, and unfortunately, it has. GM and Chrysler made their deal with the bankruptcy devil and Saturn, which started with so much promise, found itself on the chopping block. That’s too bad. Saturn started by outwitting the Japanese with a truly American-made solution, but the innovation and growth of Saturn ultimate fell victim to the politics of Detroit.

    Today, America only has Ford and a carcass known as GM. Chrysler exists, but does it really? Until the economy cycles around, we won’t know the final answer to any of this.

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