What do Wal-Mart, Ford, the Los Angeles Times, and The Yellow Pages have in common? They’re all doomed. But two of these are doomed for one reason, and the other two are doomed for another. The Los Angeles Times shares the same plight that all newspapers do or will suffer, that of declining readership. Similarly, The Yellow Pages and all other phone books are in a stage of decline as well. Who reads newspapers or uses phone books? Old people. Where does everyone else get phone numbers and news? The Internet. For those two industries the Internet has spelled doom from the beginning. You’d have to stretch to find a plausible reason why a physical newspaper or phone book is better than the Internet. Most old people continue to use them only because they’re used to them and still scared of the Internet, but even that fear is fading as more and more grandchildren force the ancients to get with it.
Why are Wal-Mart and Ford doomed? This is why.
Ford, Wal-Mart, and a host of other companies are victims of their own brand equity. That is, they have done such a good job at building a brand that when that brand becomes undesirable, they can’t shake it. They’re stuck with the brand for life, and perhaps it will cause their death. And by the way, when I’m talking about Ford I’m only talking about Ford and not their subsidiary brands.
This CNN piece, which reads like a paid advertisement for Ford, is full of painfully blind marketing theories that miss the elephant in the room which is this–as people improve their standard of living they become more “sophisticated” (read: snobbish) and sophisticated people don’t shop at Wal-Mart and they don’t drive Fords.
This morning I was listening to a past broadcast of Forbes on Radio (a delightful program that really needs to create a real podcast rather than offering 12 mp3 files that you have to manually download for each program) in which it was talking about how Wal-Mart is trying to become more upscale by selling $500 bottles of wine and carrying extra-virgin olive oil. I don’t doubt some of it will sell, but I don’t believe Wal-Mart can ever truly compete against Target when it comes to creating an engaging and attractive brand. The radio program stated part of the problem itself when it mentioned that Wal-Mart has traditionally targeted middle to low income families. It’s true, and everybody knows it is true, and that’s why middle to upper income people only go to Wal-Mart when they have to. If Wal-Mart ever recreates their brand to be something remotely close to Target’s I’ll be amazed. The very name with “Mart” in it sounds like something cheap.
Ford has a similar problem. What comes to mind when you think of Ford? If you’re a history buff you might think of factory automation and the Model-T, but I’d be willing to bet that most people think of modern-day Ford trucks. If I were going to buy a large truck, I’d seriously consider Ford, Chevy, Dodge, and more recently, Nissan. Toyota, Honda, VW, Suburu, and Audi don’t even enter my mind, probably because they don’t make heavy-duty trucks (if they do, then they’ve got a branding problem as well, at least with me).
I find it hard to take Ford seriously as a maker of cars. First of all, American car companies seem to have an attitude of wanting me to buy their cars simply because they’re made in the USA. I would love to buy US made cars, but I can’t afford to buy a car that breaks down a lot just because it’s made in the US. Plus they’re ugly cars. If you’re going to sell me a car, don’t make me feel guilty about buying a foreign car, make me feel good about buying an American car, and not just because it’s American, but because it’s reliable, gets good mileage, and looks decent enough. Or if it’s not reliable and gets horrible mileage, at least make it look good. But Ford and other US companies are notorious for turning out cars that don’t look good and therefore don’t sell well, with the occasional exception.
Ford’s problem is two-fold. First, they don’t know how to design a car that looks good. Second, even if they design a good looking car, they’ve got a strong chance it won’t match their brand, and brand trumps looks. Why does Ford struggle with designing an attractive automobile? One problem is in the afore-references article–focus groups. Focus groups are the logical conclusion of a marketing manager (or “manager of brand DNA”) who is afraid for her job. If you get a focus group involved and a product is successful, then the manager takes the credit. But if the product fails then the excuse is “But the focus group said that…” Focus groups produced New Coke. Focus groups have seriously hurt some companies and put others out of business. The fact of the matter is that when you take people out of their natural habitat and show them things and ask them about them you don’t always get useful information. And unfortunately, useless information often ends up getting used. Better to hire someone with a track record of success and trust them to come up with something that will sell. I may be wrong, but I wouldn’t be surprised if a lot of foreign automakers rely lightly on focus groups or use them not at all.
I suspect a second reason why US car companies churn out ugly cars is that they are staffed with designers who simply don’t get it. They know how to design trucks, and occasionally a decent looking car, but nothing that would appeal to “Phil” described in the article.
But even if a focus group were to work or Ford hired a designer away from Audi they’ve still got a problem. Do you like how Audis look? Right, who doesn’t? Think about what would happen to an Audi if you simply removed the Audi logo from the grill and put a Ford logo in its place. Staggering to think about, isn’t it? The value of the car drops by at least 80%. I’m not exactly sure why I feel that way, but that’s the power of branding. In reverse, think about taking a F-150 and putting an Audi logo on it. Even though I love Audis (when they’re not in the shop) I perceive less value in an Audi truck than a Ford truck, simply by brand. I’m not sure that Ford can ever twist their brand to be seen as a credible car company.
So what should Ford do? First, keep making trucks, that’s a no-brainer. Second, if they’re going to make cars, don’t use the Ford brand to compete with Toyota, Honda, Audi, or VW. Third, come up with some better names. Edge? C’mon. Third, get the family out of there. Quitting the CEO role was a good move for Mr. Ford, now he needs to quit the Chairman role as well and let the professionals do their jobs. That last bit doesn’t have anything to do with branding, but as long as I’m griping about Ford I had to put it in here somewhere. No extra charge for that.
But is Ford really doomed? Probably not doomed as such, at least not immediately. A big company is like a moving train–hard to stop. The question is whether they can grow, or if the reality is that the best they can hope for is to minimize the rate of decline. What I foresee is that in the absence of a revolutionary change, Ford will eventually stop making cars altogether and be known exclusively as a truck and van company. And maybe that’s not such a bad idea. It might be better than throwing away billions bringing cars to market that will never be profitable and will only hurt shareholder value. Then again, maybe the can make the necessary changes and 20 years from now perhaps Ford will be a going concern as a major automaker on the world stage. It doesn’t look likely to me right now, but you must bear in mind I may not know what I’m talking about.
“I find it hard to take Ford seriously as a maker of cars. First of all, American car companies seem to have an attitude of wanting me to buy their cars simply because they’re made in the USA.”
I hate this kind of thinking. It means no matter how bad our product it, the buyer will be loyal. It is totally backwards and completely arrogant. I grew up talking about buying American cars because they were american, but my ‘91 ford probe dead on the road changed my mind. 5 years later my ‘92 toyota is still running strong. Can you guess what kind of car I am going to buy next?
Companies that can’t compete, shouldn’t.
If Ford brought over every car they sell to their European customers, they would probably not be in such hot water. Their EU lineup is much more exciting, reliable, good-looking, better made, and all around better cars than the crap they peddle over here on our shores. Ford Taurus? Please! Get on the internet and search for Ford Mondeo or Ford Focus ST and you’ll see what I mean.
Toyota has made a huge impact in the full-size truck market with the awesome Tundra, but are still nowhere near the sales numbers of Chevy and Ford trucks. Not that I care, because I am not a truck guy myself. My little Scion xB hauls enough stuff for me while getting 36 mpg.
The funny thing is that the concept of “American Made” is largely untrue these days. Many Toyotas and Hondas are built from scratch right here in the good ol’ US of A. Yet many Chryslers and Dodge vehicles are designed by the Germans from the Daimler side of the company…strange. That Ford engine is probably shared along the line with a Mazda. A good example is the Focus; it shares a platform and many parts with the Mazda 3. It seems every small car company that exists falls under the umbrella of either GM, Ford, Volkswagen, or Chrysler.
What Rick says is true. My Toyota Sienna was designed is Japan but was 100% manufactured in the USA. Its a great car and my wife loves it. I bought it when Ford and GM were screwing themselves with employee pricing. I could have bought a Yukon for about $8k less than my Sienna but I knew that buying a Toyota would mean quality and reliability. I will always own a Toyota or a Honda. The whole “buy American first” thing is a joke. If you buy a Ford or a GM over the Internet from the factory, its 100% manufactured in Mexico.
I’m not sure I agree with your position on Wal-mart. Look at the financials. Their growth is amazing. As the lower and middle classes expand, Wal-mart will too. Just my two cents.
Perhaps “doomed” is a strong word, but we’ll see. Where I think Wal-Mart is going to find challenges is in continuing to grow at a quick enough pace to please analysts. They’re going to build 300 stores this year, and they’re building smaller grocery stores in urban areas so they may end up competing against smaller, regional grocery stores as a means for growth, but they’ve already saturated the rural areas, and they’ll soon have nowhere to expand in more populated areas, at least within the US. Then the question will be whether they can grow within the US by going after the same market as Target, or if they’ll push a large international expansion policy. Personally I think they’ll have more challenges competing against Target whereas building 3,000 stores in Mexico seems like a no-brainer to me. Then China. Of course who’s going to buy a DVD for $10 at a Wal-Mart in China when they can get 100 DVDs outside the door for the same price?
I think the boycott of Ford by the AFA is probably having a huge impact on its sales as well. I have a copy of an e-mail from a Ford dealership to Ford imploring the company to stop supporting gay rights as they have received numerous complaints and their business is dying because of it. The company has ignored dealer complaints because it wants to “position” itself for the future. This sends a clear message to consumers that Ford’s direction is contrary to their own family values and the consumers are sending a clear message back to Ford that they refuse to support the firm.
You won’t see this story in the Associated Press or on television for obvious political reasons (you’ll have to search the web or go to afa.net), but it sure is nice to see the “real” people in this country–the majority–winning one for now.
I’m aware of the AFA boycott but I’m not sure how many other people are, and therefore I’m not sure how much of an effect it is having. Leaving the question of morals aside, here’s a little speculation on why catering to the gay community is a bad business move for Ford. This is somewhat tongue in cheek and includes a healthy deal of stereotyping, but bear with me, maybe I’m on to something.
Issue #1
1. Gay people seem to be more style/fashion conscious.
2. Ford is not a style conscious company.
3. Therefore gay people probably don’t and won’t buy Fords (they probably prefer VWs and other European cars), no matter how much marketing Ford does to cater to the gay community.
Issue #2
1. People who drive Fords, especially trucks, are good ol’ straight, American cowboys.
2. Good ol’ boys don’t particularly like gay people.
3. Ford’s catering to gay people is going to be a turn off to good ol’ boys.
The result? Ford’s sales to gay people don’t increase at all, but sales to good ol’ boys decrease. Net result? Bad.
Again, that’s pure speculation. Maybe gay people do like Fords. Maybe cowboys do like gays (I’ll refrain from any Brokeback Mountain references here). Maybe cowboys don’t realize that Ford is marketing to the gay community. Maybe Ford’s bad sales are due to making cars that nobody likes. But then again, maybe I’m right, who knows.
Hmmm…Our single largest retail industry is in jeopardy of imploding. Haven driven many Fords well past the 200k mark, I can’t imagine that their products are overall of inferior quality or are bad enough to boycott. Most people today in this country could care less whether an American industry is preserved or not; so what does that say about their dedication to their country? On the same note, it will be interesting to see how many Chinese cars sell in Japan, as the Japanese tend to be protectionists for their industries.
If we’re going to accuse an auto maker of making ugly cars, look no farther than Toyota or Subaru. AMC Pacers are gorgeous in comparison to the vast majority of their product line. The influence that “international” styling has had on the automobile industry has not been positive. One thing I loathe, for instance, is only having the choice between grey and brown interiors. How absolutely depressing and boring.
Ford could improve its overall performance and styling image, such as with the Mustang and its European products and fare very well so long as the cost of the cars is kept in check.
>What comes to mind when you think of Ford?
Sears Toughskins jeans, wholesome family 70’s TV scmaltz, squares, Sears and Roebuck, K-Mart, Ron Howard, freshman republicans with dorky haircuts, clip-on-ties, pants-too-high, dysfunctional families whose kids go on shooting sprees, gross candy Easter eggs with a million year shelf life, people who actually eat those eggs, bad dressers, dinosaurs.
Ford is fogey…..
Being built on American soil does not make a car American, any more than a child born to an American serviceman and his wife who are in Germany makes the child German. Just not true. A Honda built in Tennessee is still a Japanese car.
Other points are very well taken. Just being the last free-market American car company is not going to be enough to save Ford. The cars are going to need to stand on their own, and represent a product that a person will want to buy, regardless of the nameplate.
Much like food stamps, the stigma of buying a “foreign” car is gone. There is no more shame in stabbing your country in the back buy sending your hard-earned money to the only nation ever to drop bombs on US soil because you are only out for what’s best for you as an individual. No wonder there is no such thing as national pride in America. And it won’t return anytime soon, unless companies like Ford can make us proud to be Ford owners. I think it may be too late, but dammit, don’t stop trying!
That being said, I think the Fusion is one of the finest cars ever built in its class. And it’s made by an American car company! I would buy one if my Oldsmobile will ever die. But these facts don’t make a consumer like me WANT a Fusion…it makes us accept a Fusion. To drive a Fusion is to like the car, but you can drive a Camry and like it just as much (although Camrys have become deliberately uglier the past 10 years.)
The collective mindset of consumers has to believe that there is no correlation between Ford of 1985 and Ford of today. It may take a collapse and a phoenix-like resurrection of a new car company from the ashes of Ford with new name, new logo, new styling, new everything. It won’t happen soon enough to make a difference, I fear.
ford is kicking ass now. new ceo does wonders.
And who would have known the government would come in and take over two of their primary competitors and run them into the ground.