Branding Lessons From GM: What Not To Do
Jack Trout, President & Founder Trout & Partners Ltd.
posted by Hasan Fadlallah, Managing Director Brand Lounge
Toyota is about to pass General Motors’ seven-decade reign as the world’s largest car producer by volume. That’s right 70 years of leadership coming to an end. Today, Toyota has America’s best selling car, the Camry, and GM is struggling to make dwindling brands, such as Buick and Pontiac, mean something to consumers.
When something like this happens to a company of this stature, it’s important to discover why this occurred. These are important lessons as George Santayana warned, “Those who cannot remember the past are condemned to repeat it.” I mentioned the GM brand schizophrenia problem in an earlier column. Here’s a more detailed analysis of what went wrong.
When Alfred Sloan joined GM in 1924 as operating vice president, he inherited what he called an “irrational product line”–one that had no guiding policy for the marketing of its many brands. The company’s only objective was to sell the cars. The brands stole volume from each other and, with the exception of Buick and Cadillac, all lost money.
Sloan immediately realized that GM had too many models and too much duplication and lacked a product policy. In one of the earliest examples of market segmentation, he reduced GM’s offerings to five models, separated them by price grades and emphasized individual brand image to entice customers into the GM family and move them up.
These distinct and strong brands allowed GM to capture more than 57% of the U.S. market by 1955. Aware that pursuing more market share could lead to antitrust actions and the threat of a breakup, GM fatefully shifted its strategy from making better cars to making more and more money from a relatively stable number of sales.
Nothing dramatized this new direction more than the concept of “badge engineering,” or selling identical vehicles under different model names. This invention of GM’s finance staff was a way to increase profits through uniformity, by, among other things, making parts interchangeable. Slowly but surely, the different brands lost the individual personalities that the company had so painstakingly established. At the same time, to improve their numbers (and bonuses), the GM divisions began to push the boundaries of the product policies that defined their brands: Chevrolet went up in price with fancier models, as did Pontiac. Buick and Oldsmobile offered cheaper versions. In time, GM was once again producing multiple cars of different brands that both looked and were priced alike. For GM, it was 1921 all over again, with brands that look alike and are priced alike.
Like BMW, Toyota (nyse: TM – news – people ) pushed one brand in many forms. All these cars benefited by sharing in one powerful differentiating idea: reliability. And when they went up into the super-premium category, it became a Lexus with all “Toyota” identity carefully eliminated. Also, they are quick to invest in new innovations such as the hybrid (Prius) and, coming soon, the wheelchair friendly Porte, aimed at Japan’s elderly population.
The bottom line is that in the branding business, less is more.
A successful brand has to stand for something. And the more variations to attach to it, the more you risk standing for nothing. This is especially true when what you add actually clashes with your perception. If Altira’s (nyse: MO – news – people ) Marlboro stands for cowboys out in Marlboro Country, how can it sell Marlboro Menthol or Marlboro Ultra Light cigarettes? Real cowboys don’t smoke Menthols or Ultra Lights.
If Coca-Cola (nyse: KO – news – people ) is the company that invented cola and the owner of that special formula, how can it be the “Real Thing” when the company offers a parade of new things including one called “Zero”? Why change that unique formula?
Should Wal-Mart Stores (nyse: WMT – news – people ) try to sell more up-market products to compete with Target (nyse: TGT – news – people )? No, that’s not its market.
Should Porsche risk its sports car image by selling SUVs? No, it’s an iconic sports car brand.
Should Dell (nasdaq: DELL – news – people ) try to sell home electronics to compete with the Japanese and Koreans in this category? No, it sells computers directly to businesses.
Until companies come to grips with the simple fact that they don’t really have an inordinate need to grow, but an inordinate desire to grow (because of Wall Street), bad things will continue to happen. Slowly but surely, brands will lose their meaning as they try to become more.
What is happening to General Motors (nyse: GM – news – people ) should be a lesson to all companies no matter how big and powerful they are. You cannot be everything for everybody, and the more you try, the more you risk sinking the ship.
As I say to many senior executives as a reminder of what can happen, put a simple sign on the wall that reads: Remember the Titanic.
With more than 40 years of experience in advertising and marketing, Jack Trout is the acclaimed author of many marketing classics, including Positioning: The Battle for Your Mind, Marketing Warfare, The 22 Immutable Laws of Marketing, Differentiate or Die, Big Brands, Big Trouble, A Genie’s Wisdom and his latest, Trout on Strategy. He is president of marketing consultancy Trout & Partners and has consulted for such companies as AT&T, IBM, Southwest Airlines, Merck, Procter & Gamble and others. Recognized as one of the world’s foremost marketing strategists, Trout is the originator of “Positioning” and other important concepts in marketing strategy.