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Every brand from Mercedes to Mercury wants a full line of cars and trucks. It's a marketing nightmare and confuses buyers. How is this good for business? When i was a boy my mother would slice a few Florida oranges and make orange juice. Later someone invented frozen juice. Next came the plastic-coated cartons of orange juice that tasted a lot like Mom's.
Then a torrent of variations started. Cartons From Concentrate and then Not From Concentrate. No Pulp, Some Pulp and then Lots of Pulp. Calcium and Vitamin D Enriched and then Low Acid. Then they began subdividing the flavors. Orange/tangerine, orange/strawberry/banana, orange/pineapple, orange/peach/mango. What used to be so simple is now ridiculously complicated. I see a similar excess in the auto industry. One publication, Automotive News, counts 267 nameplates. (A Ford Expedition is a separate nameplate from a Ford Explorer, but not from an Explorer Eddie Bauer.) Auto-Pacific, a market analysis company, counts nameplates slightly differently but reaches a similar conclusion. Its chart goes from 33 nameplates in 1947 to 208 in 2000 to a predicted 274 in 2009.
This atomization of the market means billions spent to design and tool up for all the vehicles. Worse, there just isn't enough money to build marketing campaigns around that many models. It's difficult to get production runs long enough to be really profitable. And it's tough for customers to figure out what's what. How is this good for business?
Some of the variation is unavoidable, the result of 20 auto companies fighting for attention. (At least 3 should quit America and cut their losses.) You can also blame the advent of the sport utility, which comes in large, medium and small; rear drive, front drive and all-wheel drive.
But worse, the companies show no restraint. Every brand from Mercedes to Mercury wants a full line of cars and trucks in every showroom. Not just high-priced or low-priced, but a full line.
Instead of working to sell more of an established model, they'll bring out a new one and say they've found a new niche. Look at the sports car market, which includes Porsches, Corvettes and Mazda Miatas. It's a tiny market of 200,000 sales a year, but I can count 18 models for sale, not including the rarities (Ferraris, Lamborghinis, Aston Martins and so on). Result: Most don't do much business.
Everybody wants to get into every market whether it makes sense or not. General Motors brings in a Korean car, the Aveo, to have something in the cheapie market. It's not much of a car, and GM won't sell many. Why not spend the money to sell its own better cars?
Ford is going to bring out a Lincoln version of its big pickup truck. It's a Ford truck with more chrome. Will this help Lincoln's image? Why not invest in building a better Town Car?
Toyota brings out three new models in a new division, Scion, to capture the youth market. The problem: There is no youth market for new cars here.
Subaru wants to move up the income scale with a fancier wagon. The company would do better spending more money to sell the excellent vehicles it already builds. Another version of the wagon is for sale through Saab, so there will be two additions, not one.
Honda keeps selling its two-seat Insight, an outmoded hybrid that should be put to sleep: 485 sales in six months. Volkswagen tries to sell a $70,000 luxury sedan, the Phaeton, which is just about the last thing VW needs. I figure maybe a fifth of today's models are excess baggage that we would be better off without.
In the old days a new model was a line: a four-door, a coupe, a station wagon and maybe a convertible. Now they build a four-door, and often that's it.
Example: Ford will build a new four-door called the 500 in its Chicago plant this fall. It will also build a station-wagon-like SUV off the same frame in the same plant. But instead of calling the SUV the 500 SUV, it is a different model called the Freestyle. So Ford will need two marketing campaigns, not one.
The theory is that the market is so competitive that automakers must cater to smaller and smaller segments. I say these segments don't exist. Instead of improving what they have, the auto companies come up with new names, which makes it harder, not easier, to make a buck. I say don't enter a market just to be in it. Cull the number of distinct models and try to build up the volume on those.
No, cars aren't orange juice, but I'm getting the same headache trying to keep track of all the variations. Link: http://www.forbes.com/free_forbes/2004/0816/088.html |
