Chrysler's Marketing Mistakes (Forbes)

Summary:

A) Killing Plymouth was a mistake. PT Cruiser originally to be a
Plymouth, with more variants than is now currently available.
Chrysler sold more minivans when it had Plymough than it does now
under Chrysler AND Dodge. Chrysler Voyager to be axed.

B) Chrysler risks damaging the Jeep image by introducing lower-priced
(lower-capability) versions to compete with other "soft" SUV's rather
than badge them under Chrysler or Dodge. Author claims this was done
in the past by badging some cars under Chrysler rather than Plymouth,
ultimately damaging the Chrysler brand (does not mention specific
vehicle).

C) Badge-gap. "I've driven the new Pacifica and I like it. Those LX
sedans may be excellent, too. But it is still a marketing risk to push
Chrysler upscale without expanding the lower-priced lines."

D) Dealer strategy. "Merging together dealer groups
(Chrysler-Jeep-Dodge) is a defeatist strategy. Winners don't do it.
And it leads to more product eliminations. In a few years from now
Chrysler executives will wonder why dealers need to have similar
products like the Dodge Stratus and Chrysler Sebring sitting side by
side in the same showroom."

E) Continued trend of replacing American executives with German ones.
"Chrysler just changed its sales/marketing boss; it replaced an
American with another German executive. So far there's no sign that
the company will reverse any of these destructive strategies. I think
that is a mistake."

And now for the article...

----------------------

Backseat Driver
Chrysler's Marketing Mistakes
Jerry Flint, 08.05.03, 8:00 AM ET
http://www.forbes.com/2003/08/05/cz_jf_0805flint.html

NEW YORK - Let's be honest, it isn't easy being a Detroit executive in
the new millennium. The Japanese are coming on strong in light trucks,
the Koreans are gaining market share, and it's a buyer's market
dominated by profit-sapping givebacks. Compounding these problems is
Detroit's short-sighted emphasis on cutting costs at the expense of
building better cars and trucks.

All these problems are bad enough, but I think that beleaguered
Chrysler, the American division of DaimlerChrysler, has another
serious shortcoming: How it markets and sells its vehicles. I'm not
talking about whether it was a good idea to hire Grammy winner Celine
Dion to sing up Chrysler. To me, Chrysler's marketing mistakes are far
more serious.

The big issues:

1. Killing Plymouth.
2. Plans for a "sissy Jeep."
3. Moving Chrysler upscale.
4. Combining Chrysler, Dodge and Jeep showrooms.

Let's start with the Plymouth division, which was shut down by the
German managers, although there were plenty of Americans who wanted it
closed, too.

I can think of only one good reason to kill a division: when there
isn't enough money or manpower to provide a product line. That wasn't
the case here. The PT Cruiser, which was to be a Plymouth, but ended
up as a Chrysler, would have been the basis for a whole new line of
Plymouth vehicles, including a convertible, a panel truck and a sexy
two-door.

When Chrysler decided to kill Plymouth after the 2001 model year, it
re-badged the Plymouth Voyager minivan as the Chrysler Voyager. In
1999, Plymouth sold 137,000 Voyagers. Through the first six months of
2003 only 10,260 Chrysler Voyagers were sold, and it appears that this
nameplate will soon be killed. Most of these lost sales were not
captured by the upscale Chrysler Town and Country minivan: Its sales
of 68,000 are down a notch from the 70,000 sold in the first half of
last year. These lost sales weren't made up by the Dodge-version
minivans, either.

Chrysler is also in a quandary over what to do with its legendary Jeep
brand. The previous management, the Americans, made the brand Jeep
mean something. In order to wear the Jeep badge, every model had to
make it across the Rubicon Trail, a 22-mile raw northern California
trail. Only vehicles that could survive the toughest conditions--over
boulders, across water and through sand--were called Jeeps.

With all the new sport utility vehicles on the market, it is no
surprise that Jeep sales have softened since 1999, when the division
sold 555,000 trucks. Still, Jeep sold 460,000 units last year, which
is more than double the SUV sales of Toyota's Lexus division, BMW or
DaimlerChrysler's own Mercedes. But Chrysler people figure they could
sell lots more if they could make a lower-priced Jeep model--even if
it might not crawl the Rubicon. (I call it the "sissy Jeep.") And it
looks as if they will do just that.

I don't think that Chrysler should walk away from the growing market
for "softer" crossover SUVs. But such SUVS could carry the Dodge or
Chrysler name, or they could revise the old Eagle brand once used by
the firm's dealers for such lesser vehicles. Otherwise, I fear that
Chrysler runs the risk of eventually destroying the integrity of Jeep.

Over the years Chrysler did just such damage to its namesake brand. I
can remember when Chryslers were upscale, well-engineered and powerful
cars. Then management decided to build cheaper Chryslers. They took
what should have been Plymouths and called them Chryslers. Selling
such wimpy cars--some with anemic four-cylinder engines--pushed up
Chrysler sales for a couple of years, but damaged Chrysler's
reputation and ultimately ruined Plymouth.

Now Chrysler wants to move its brand upscale. This is a legitimate
goal, but one that requires great product and skillful marketing. The
drive has already started with the new Chrysler Pacifica and
Crossfire. Next spring we'll see the new LX rear-wheel-drive cars.
These vehicles will sticker for $35,000 to $40,000 or more.

The danger for Chrysler is that this strategy means finding new
customers. What about the old customers who can't afford, or are
unwilling to splurge on, these expensive new models? They may be lost.
Remember, Chrysler dealers no longer have the more affordable Plymouth
line to offer these people.

I've driven the new Pacifica and I like it. Those LX sedans may be
excellent, too. But it is still a marketing risk to push Chrysler
upscale without expanding the lower-priced lines.

Chrysler's dealer strategy also doesn't make sense to me. When the
company first merged with American Motors in the 1987, it had three
separate dealer groups: Chrysler-Plymouth, Jeep-Eagle and Dodge. Later
it merged its Chrysler and Jeep dealers, then it killed Plymouth, and
now its goal is to have 500 combined Chrysler-Jeep-Dodge showrooms in
metropolitan and suburban areas. More than 100 have been created
already.

Merging together dealer groups is a defeatist strategy. Winners don't
do it. And it leads to more product eliminations. In a few years from
now Chrysler executives will wonder why dealers need to have similar
products like the Dodge Stratus and Chrysler Sebring sitting side by
side in the same showroom.

Chrysler just changed its sales/marketing boss; it replaced an
American with another German executive. So far there's no sign that
the company will reverse any of these destructive strategies. I think
that is a mistake.

 

The Germans will kill Chrysler and I think Lee is too old
now to rescue it again. If I recall correctly, Lee did
offer to come in and help Chrysler after the Germans bought
it and they turned him down.
Even tho I have preferred Chrysler cars over Ford and GM, I
may not buy another now that I see what the new owners are
doing.

 

The article shows up some very specific type of American thinking towards
motorcars. Or maybe it's just the thinking of 'enthusiasts' of the sort who
participate in these newsgroups.

1) "Anaemic 4-cylinder engines". Why think like that? I suggest that
most people in the world drive cars with such engines. Why this obsession
with winning the Traffic Lights Grand Prix? Etc etc.

2) Badge engineering. What is the point of a Dodge Stratus and Chrysler
Sebring if they are so similar? VW Group is now a master of 'almost' badge
engineering with its many brands, but the cars still look different and have
different prices. That, however, stems from the different cost bases of
where they are produced - Skoda in the Czech Republic and SEAT in Spain. It
will be interesting to see what happens when the wages in the Czech Republic
are the same as in Germany.

3) Blaming foreigners (in the Chrysler case "the Germans") for the ills
of the US automobile industry. If these cars were so wonderful and such
great value for money, why don't they dominate the world like the Toyota
Corolla does? Why don't the US-based manufacturers manufacture Sebrings and
Lincolns etc in the factories in Belgium and Germany and Spain and China
and....? Why are the ancient taxis in the Middle East and Africa
Mercedes-Benzes and not Fords or General Motors vehicles?

Why does almost nobody outside the US think that a Cadillac is the non plus
ultra of luxury? Why do they go for Lexus, MB, BMW etc?

I drove the Sebring Cabrio last April for a few days (posted that before)
and liked it, and it's a great lower-price competitor for the Merc CLK
Cabrio, but how good is it to own for several years? I had the 2.7 l engine
which, if I am not mistaken, has been criticised in this newsgroup on
grounds of reliablility.


The point is that people like the writer of the article seem to mourn the
passing of some 'golden' age and are railing against the present. But the
present is only brought about because of big changes. The US car market is
much more part of the world, not least because so many non-US-origin
companies are manufacturing in the US. So the present is a reaction to
global events, with car manufacturers trying to survive, especially in an
environment where too many new cars are chasing too few customers.
Introducing a 'sissy' Jeep is one of those strategies. Maybe it should have
been done years ago? Range Rover and Land Rover have existed together for
years...

Rant, rant, rant...

DAS

 

The "Krauts" took over Chrysler the same year I retired - 1998. And ever
since, things have SOURED at DaimlerChrysler. Of course the good old
American Chrysler executives at the time sold the whole package to the
Germans. And don't even about how I feel about the that "traitor" Bob Eaton.

Dan

 

How do you mean? Damiler is committed to keeping Chrysler and keeping it
going. They're pumping in billions.

Landau vinyl roofs were passe.

 

How so? We've got the Crossfire and Pacifica. We've got rwd Hemi V8 sedans
coming.

And financially, Chrysler went through bad times about every decade anyway.

Would you have preferred Chrysler go out of business? Because all the parties
involved, including Lutz, say that was a real possibility.

 

It's real easy to throw stones at a marketing strategy employed by a company
that is
losing money. But the author is ignoring that just about all automakers
today are losing money.
Therefore according to the author's logic, just about all automakers's
marketing strategies are wrong.

Well if that is the case who is buying the cars?

The truth is that ALL automakers are suffering sales volume drops, across
the board, except for tiny,
niche automakers. And those don't make up anywhere near what the lost sales
of everyone else is.

Globally, all economies are down. More people are deferring purchasing
decisions, and fewer
people are buying cars. There's many many people who 5-10 years ago owned 2
cars in the
family, then one member lost their job and ended up having to get another
job that paid less.
The family then decided to drop one car, or decided to drive fewer miles.
Thus the cars last longer.

There are really only 2 possible ways to jazz up the auto industry. The
first is to fix the global
economy, get more money into the hands of the workers, get more of them
working and off
unemployment, get the ones that aren't on unemployment some fat raises so
they have extra
money to go throw at toys like new cars. The second is to make the cost of
driving the car a
lot cheaper, by dropping fuel prices. Neither is likely to happen anytime
soon.

Until then, sales are going to remain soft. Automakers are going to have to
adapt and figure out
how to be profitable while selling fewer cars. This isn't easy when your in
an industry where
the more cars you manufacture, the cheaper the per-unit cost is to make.
You start to make
fewer cars, your unit price goes up and you either lose more money faster,
or you raise your
prices and even fewer people buy your cars and you still lose money faster.
Either way
creates a vicious downward spiral. But on the other side of the coin, the
more cars you make
the greater the oversupply, thus the less people are willing to pay for
them, thus you have to drop
your prices, and if your prices drop faster than the cost to manufacture the
car is, you lose
money even faster and it still creates a downward spiral.

It is pretty obvious how the market will self-correct if sales don't get
pumped up across the
board. Simply put, all automakers would continue to oversupply the market,
the prices would
get more depressed, all automakers would lose money faster, and whichever
automaker runs
out of money first goes bankrupt and exits the market. The remainder of the
automakers will
then be able to sell more cars and reverse their downward spirals, and the
market will
stabilize.

What your looking at with a lot of these articles is people who are just
pounding out
FUD because they are hoping they can get one of the automakers in trouble a
lot faster
than the others, that way that one will go bankrupt faster, and the rest of
them will be
better off.

And the rest of these columnists are making money writing columns like this
because
that is all they know how to do. If this bozo in Forbes actually knew how
to run a
company and make money at it, he would be too busy doing that to spend time
writing articles that the magazine gives him peanuts for.

This is no different than the JD Powers and Comsumer Reports columnists.
Those
people don't know anything about how to design cars if they did they would
be making
the big bucks actually engineering products. So instead they spend their
time telling
other people how to do their jobs. Losers is what they are, mostly.

Ted