July 16, 2008

For Detroit, perception is the new reality.

By Peter M. De Lorenzo

Detroit. For the last several years, the war cry emanating from Detroit’s top executives has been that the “perception gap” between consumer impressions of the domestic automakers’ cars and trucks and the reality – in terms of quality, safety, design, performance, handling, durability, efficiency, value, etc. – was giant and patently unfair, because the vehicles Detroit was turning out were vastly improved over the bad memories festering in buyers’ minds.

And for the most part, they were right.

The contemporary products coming from Detroit - especially over the last 36 months - are seriously competitive and in some cases actually equal to their German and Asian rivals, but the lingering perception gap in the American consumers’ minds was so negatively skewed against even the idea of considering an American car or truck that Detroit marketers could make little if any headway when it came to actually convincing shoppers to give their domestic entries a serious look.

The same questions dominated Detroit marketers’ discussions in meeting after meeting: How do we convince them that we’re worth a look if they won’t even give us a glance to begin with? How can we possibly fortify our brand identity when we’re not even on these consumers’ radar screens? How do we close that perception gap when these people are clinging to bad memories of a decade (or more) ago? How can we get through to those who won’t give us the time of a day that we’re not the same car company that we once were?

If you had anything to do with marketing at the Detroit car companies in the last decade, you didn’t have time to think about much of anything else. Needless to say, “closing the gap” was what kept everyone up nights here in the Motor City.

And now, just as Detroit is showing marked improvement (well, at least GM and Ford, at any rate) and bringing to market solid, competitive entries in several different segments, the spike in gasoline prices has rocked the Detroit automakers to their core and left them reeling, because their SUV profit centers have been ripped to shreds in just three months.

An old friend of mine from Northern California (the anti-car, anti-Detroit Capitol of the Universe) called me Monday morning and asked a litany of questions that could have been culled right from the evening network news broadcasts. For instance, “Why did Detroit keep making those lumbering SUVs when they could see the writing on the wall?” “When are they going to get these high-mileage hybrids and electric cars on the road?” “What is taking so damn long?”

Just in case you’ve been away on vacation for a few years the answers to those questions are: 1. Because it was easier for the Detroit automakers to wallow in short-term, short-sighted SUV profits than it was to muster the cojones to stand up and say “We need to make dramatic moves for our future or we won’t have one.” 2. They’ll be making a lot of PR noise over the next eighteen months, but the reality is that you won’t see alternative propulsion vehicles on the road from a domestic manufacturer in any quantities until 2011. And 3. Developing advanced technology vehicles takes more than a “finger snap” to get the job done. Those last few years of clinging to the fading fortunes of the SUV market have proved to be costly for Detroit - and devastatingly so – because it is now lagging behind its two top Asian rivals by nothing less than a five-year swing.

For people far removed from the auto biz, especially in places populated by porkmeister lawmakers (Washington, D.C.), radical, one-dimensional environmentalists (California) and unbridled greed merchants (Wall Street), there was never any “perception gap” shrinkage to begin with. They never noticed that Detroit had made a huge leap in capability and credibility, and now that it’s all over the media that Detroit has been caught flat-footed yet again you can almost hear entire segments of the consumer buying public jettisoning Detroit from their thinking – permanently.

In other words, any chance of that “perception gap” being narrowed anytime soon was blown to smithereens by $5.00 per gallon gasoline prices.

Unfortunately for Detroit, the battle that went on over the last few years to close the “perception gap” has been rendered meaningless by going to the SUV profit well one too many times. In what can only be described as the last gasp from The Land of Short-Term Thinking, Detroit sealed its current turmoil in a hail of indecision, non-decisions and monumentally bone-headed decisions. Or as we like to say around here, the Trifecta of Not Good.

Now, instead of getting consumers to focus on the good news from Detroit – which is the fact that the domestic manufacturers are building products that can and do compete in every meaningful aspect with vehicles from the imported manufacturers, with many more on the way – the national consciousness has been focused on the fact that Detroit is out of touch with the times, and out of touch with the needs and wants of the American consumer.

It may not be fair, and it may not take into account what’s coming product-wise over the next 24-36 months, but for Detroit, this negative perception is now the new reality.

Thanks for listening, see you next Wednesday.