THE AUTOEXTREMIST

August 29, 2012

Three thoughts.

By Peter M. De Lorenzo

(Posted 8/29, 7:30 a.m.) Detroit. That the automobile business has become a pressure cooker is not news, it’s just that the relentlessness of it is ratcheting up by the minute and the Sturm und Drang of it all shows no signs of abating any time soon. The competition for every bit of market share is now a global pursuit, with vast auto conglomerates using everything at their disposal in an attempt at capturing more of it than the others. (Witness the VW Group’s pricing strategy in Europe, which is causing industry players like Fiat-Chrysler’s Sergio Marchionne to cry foul, to no avail.)

Amidst this swirling maelstrom of braggadocio and the gut-wrenching, pivotal decisions that have come to define this business, the idea of cut-throat competition has not only been redefined and intensified – with every move anticipated, dissected and countered – it has become a frantic pursuit unto itself just to keep up with it all.

It used to be that a company was only as good as its last product hit. Now, with product hits becoming the price of admission to gain entry to the arena to begin with, the game has shifted to anticipating competitors’ moves that haven’t even been made yet. And even though it’s quite possible that those conclusions arrived at could in fact be dead wrong, it has become part and parcel of the automobile business circa 2012.

There are no guarantees to any of this, however, as economic calamities, blown strategies and product executions off by just a bit can send auto company fortunes into a frightful tailspin in no time. It reminds me of trying to anticipate a severe weather front while planning and strategizing everything around its inevitable arrival, only to find it take an unexpected turn in a different direction.

With all of this in mind then, what are the overriding issues keeping everyone awake at night in the business?

Here are three thoughts to consider.

Sticking to The Plan. Yes, it may be a quaintly Old School notion but before a car company can understand where it wants to go, it first must have an appreciation for where it has been. Similarly, before a car company can compete effectively, it has to understand its own real strengths (and weaknesses) and it has to have a realistic grasp of the kind of talent and resources at its disposal. With this in mind then, it behooves these car companies engaged in the competitive arena to first and foremost stick to The Plan they own while not spending too much time anticipating their competitors every move, which can be the industry equivalent of chasing one’s tail. The leading car companies know what this means and are adept at it. As in very.

Product Launches Rule. It doesn’t matter how good your strategy or product is, if you botch the launch even a little bit you’re coming out of the gate at a huge disadvantage. This is a key essence of this business right now. Once upon a time car manufacturers had a 24-month window to seed a product into the market. Now, if you can’t capture the car-buying public’s fancy in just twelve months, you’re dead. One key dimension to a product launch means making sure the advertising and marketing thrusts line up with the arrival of product at the dealers, so that everything is in sync. That should be an obvious given, right? It is, but to this day it is an extraordinarily difficult task for manufacturers to get right, and it is still being mishandled a frighteningly high percentage of the time.

The amount of planning that goes into a new product launch has grown exponentially with each passing year and the variables that need to be addressed – especially given the wide range of new forms of social media at hand – have grown as well. And there is so much riding on these launches now and it has become such a crucial part of the business that hand-wringing over it is not only encouraged, it has become standard operating procedure.

The critical launches on deck right now? The new Cadillac ATS and the XTS are as big as they get for GM. The new Fusion launch in the fall is pivotal for Ford. Or how about the new Ram truck for Fiat-Chrysler? Or the new Honda Accord? And there are countless other entries from the import manufacturers that need to happen without a hitch too. But the single most crucial product launch over the next six months is for the Lincoln MKZ, because it is not only a new car, it represents pressing the reset button for the brand itself.

The Emotional Connection is Everything. Wow, what a revelation. It only took the car companies about a decade to figure this out. Except for the Aston Martins, Bentleys, Ferraris, Porsches and other manufacturers of exclusive high-end cars of the world that have it going in, car companies are just figuring out that there has to be a fundamental raison d’etre in order to justify why they even exist in the first place.

The democratization of technology has made the game even more complicated, because manufacturers considered to be on the Second Tier are now putting features in their cars that up until a few years ago were limited to the luxury-performance cars of note. That not only pushes the established luxury-performance automakers to jam more and more content into their entries in order to maintain a significant degree of differentiation from the rest (while justifying their ever increasing prices), it makes consumers sit up and take notice as to the value being offered by the more mainstream brands.

For the established players – meaning those with a carefully crafted brand image – having an emotional connection with consumers is almost a given. No, it can’t be taken lightly or for granted, but it’s much easier to convince consumers of the efficacy of spending money on a BMW than it is for them to spend it on a top-of-the-line Hyundai. Is Hyundai bringing excellent cars to market? Absolutely, and they will continue to do so. But will the Korean automaker be automatically accepted into the top tier of luxury-performance automakers overnight? No, of course not, it’s going to be a long haul proposition. Remember, it has taken Audi a good 20 years to claw their way to the top tier, it will take Hyundai a chunk of time as well.

Do car companies have to be worried about this emotional connection business at all times? Not necessarily. If they’re just providing transportation that meets the needs of a particular segment where price is paramount then no, consumers becoming emotionally attached to a deal don’t matter. But there are a lot of brands like Jaguar, for instance, or Alfa Romeo (if the brand ever gets off of the dime in the U.S.) that absolutely must have that emotional connection with consumers in order to survive, let alone thrive.

This emotional connection thing is hard to explain at times, especially to the financial types questioning a request for an extra $5 per car for a piece that can make or break the final execution of an interior. But if getting the launch right is the essence of the business to the car companies now and for the foreseeable future, then the whole emotional connection thing will become the essence of the business from the consumer perspective going forward as well.

Establishing an emotional connection with an automobile’s image is wrapped-up in a series of provocative questions like, is the design pleasing to look at and does it connect with you on some level? Does the brand image resonate with you through that design and is it consistent throughout the details of the product? Is the interior environment what you’d expect from the brand? And perhaps most important, does it feel good and is it fun to drive?

Considering these parameters is oddly like discussing the concept of vague preciseness, however, because a lot of consumers know it when they see it and feel it, but only a few of them know how to convey to the manufacturers exactly what they’re looking for.

This isn’t an indictment of consumers (especially enthusiast consumers) in the least, it’s more of an acknowledgement that the manufacturers have to understand who they are in order to best interpret their brand image at street level.

I’m a firm believer in auto companies doing their jobs, and that means they have to be way out front of the consumer in developing a look, a feel, a texture, a tone and a driving experience that the consumer hasn’t even imagined yet.

In other words that means these car companies have to lead with a purpose and a conviction that helps forge a brand image that’s not only desirable, but will become burnished in consumers’ minds for years to come.

That’s the magic part of this business that’s still valid and it rarely emerges from a clinic, no matter how earnest or well intended.

And that’s the High-Octane Truth for this week.