The General Motors Branding Lesson

Toyota passed General Motors' seven-decade reign earlier this year as the world's largest car producer by volume. That’s right 70 years of leadership came 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." What went went wrong with GM? Here’s a detailed analysis.

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 pushed one brand in many forms. All of 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 of the "Toyota" identity carefully eliminated. Also, they are quick to invest in new innovations such as the hybrid Prius.

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 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 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 try to sell more up-market products to compete with Target? 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 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 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.

Comments

[Mike Mirkil]

Great post from a branding purist point of view! I couldn't agree more. However, as just one example, I just don't see how Porsche resists leveraging it's heritage and name to sell highly profitable SUV's. If it damages the brand, it will be a long process that takes years. Their management will reap the rewards of the Cayenne now and in years to come. Damaging the brand? No immediate pain. That's the problem.

[Rahul Chowdhury]

I do appreciate your thought of trying to keep the brand within its core values. However I also believe that a legendary brand would have to know how to evolve along with the market. For example- Coca Cola and Marlboro both reacted to the way the market was moving. The market is evolving towards a 'Diet' Coke or 'Lights' market and it is very necessary for the Brands to understand and evolve.

I agree that in such cases, the execution of how the evolution takes place is very critical. But Brands and Markets have to be seen in tandem. Trying to stick to your values blindly can be very disasterous at times.

[Jack Daniels]

The ship has not sunk. Like any company at one time or another, GM has gone through a rough time. They were idling in neutral for the last 25 years. Now the giant has awoken and they are back with vengeance.

Watch out Toyota, you cannot compete with GM's technology. If GM can not get the upper hand by building cars just as good they will do it by using superior technology.

[Susan Gunelius]

I give you a standing ovation for this post. One of the things I say over and over on Brandcurve is how damaging over-saturating the market with a brand can be in terms of diluting the brand's power. General Motors is a great example of over-extending a brand for the wrong reasons and weakening the brand overall.

[Stephen Hughes]

Porsche does have a SUV and it is their largest selling model in the US with over 12,500 units sold in the US in 2007. By extending the brand they were able to grow the business as the SUV segment is highly profitable and pour those profits into sports models. Extending the brand's product offering does not have to tarnish the brand's soul. If you take the view that the brand lies in the flesh and blood, the SUV was a bad product offering. However if you view the Porsche brand to be linked to performance, then the SUV enhanced the brand. Here is a link to article on from this month's Automobile Mag discussing the SUV. http://www.automobilemag.com/new_and_future_cars/2008/0711_2008_porsche_cayenne_gts/index.html

[Derrick Daye]

We have a brand consulting offer for GM:

http://www.brandingstrategyinsider.com/2009/07/a-brand-consulting-offer-for-gm.html

Derrick

[Tamer]

I think poor branding is a huge factor in GM's downfall. Think of how much rests on image to the average car buyer. Add to that we are talking about the second or third largest purchase most of us make in our lives.
Yes, Porsche has offered an SUV. The Cayenne is also the companies first design to share a platform (Tourag). And yes it is a success today. But Porsche didn't tarnish its brand in the process. I am assuming the vehicle delivers what is promised.
How can you explain the sales of the Pontiac Vibe versus the Toyota Matrix? Toyota means reliable, Pontiac means GM and GM means clunky. I don't mean big...I just mean, well, cheap. The Malibu versus the Accord or Camry. Even when you talk to people who are not car freaks and can't necessarily identify any given car on the road. When you ask them - what is a Civic? What is a Corolla? What is a Cavalier? Which of the three names would they be most likely to recognize?