When the new[ish] Chevrolet Tahoe SUV was released, reporters asked GM Car Czar Bob Lutz whether rising gas prices would discourage SUV buyers from jumping into The General’s gas-guzzling truck. ”Rich people don’t care about gas prices,” Lutz remarked. Yes well, it’s time for Maximum Bob to take a class in Remedial Marketing. It’s a five minute course that starts with the Bell Curve.
Place potential car buyers along an axis showing unit price and you’ll get a big Bell Curve shaped hump in the middle. If you want to be the world’s largest manufacturer of automobiles– defined as the company that sells the largest number of cars per year– it really doesn’t matter what rich people think. There’s no way they can generate enough profits to make your nut. You have to play the law of averages.
The Big Three fell off the curve at the end of the ’80’s when they began chasing [imagined] high-margin niches filled with wealthy people. The more high-priced, high margin trucks and SUV’s GM, Ford and Chrysler sold, the less they cared about the millions of financially challenged customers who helped create their companies.
In this they were not alone. Even VW (Peoples’ Wagon!) neglected smaller cars in favor of big and expensive platforms. VW quality nosedived as the smart eggs within their organization set about building Phaetons, Touaregs and a limited edition ultracar, the Bugatti Veyron. Today they’re all fighting to claw their way back to the mean– before it’s too late.
Probably suspecting a trick (you’re ceding us the mass market?), Toyota and Honda took a good close look at the Car Customer Bell Curve and arrived at a very different conclusion. They asked: ”What if we offer affordable cars to the people right smack in the middle of the graph? A car range with just a touch better features, quality and service than similar servings from the domestics?” Rocket science!
We’re looking at two strategies here. Toyota: build affordable transportation for the masses at a quality level that slightly exceeds expectations relative to price. GM et al: build oversized, under-engineered and fuel inefficient cars for people who don’t care about money while palming off sub-standard cars on mainstream customers. Is it any wonder that the truck-crazed domestic manufacturers lost mission critical market share to the transplants? Lutz and his cohorts failed to recognize that the vast majority of potential customers were simply looking for affordable quality transportation.
Having taken their eyes off the chart, The Big Two Point Five are now paying the price. While they sent their best resources into an imagined land of promised gold, the transplants stuck to looking squarely at the needs of mainstream of car buyers. This focus also helped them gaze into the future. They asked themselves a question Detroit didn’t even consider: ”How do we keep our cars affordable as fuel costs and environmental pressures increase?”
Here’s Bob Lutz on the same topic back in 2003: ”It just doesn’t make environmental or economic sense to try to put an expensive dual-power train system into less expensive cars which already get good mileage.” Clearly, Maximum Bob’s take on good mileage is different from a Prius owner’s. Lutz belief that gas would go back under $2 a gallon certainly didn’t help his ability to gauge GM’s ”new” target market. And then GM was forced to cough up gas rebates for Lutz’ hulks, covering the spread in gas prices over $1.99 to the tune of $1000. These days, Bob’s a hybrid convert– who’s short on product.
To get back into the real game, the domestics will have to party back in The Land of Averages– provided they want to remain on the list of the world’s top five automobile manufacturers (the last time I looked it was still a priority). In this effort, there are no shortcuts.
In Ford’s case, success will require an immediate return to the reason behind Henry’s decision to create a Model-T assembly line: to build a ”reasonably priced, reliable and efficient car” that’s ”easy to operate, maintain and handle.” Hey; that sounds a lot like how people describe Toyota’s products today.
Mounting a convincing return to the essential mass market is going to be a lot harder than simply inventing imagined premium niches (I’m looking at you Chevrolet SSR). The domestics will have to make their cars both relevant and affordable in an age where everyone, including the supposedly oblivious rich, have woken up to the true cost of energy. An age where the competition is creative, well-funded and focused. But GM et al can only make a start if they stop applying yesterday’s problems to tomorrow’s solutions.
So, the lesson for today: you can’t please most of the people most of the time if you don’t even try.