Wrangler Truck and Bronco's Return

This year is shaping up for an exciting time for utility vehicles as Fiat Chrysler of America (hereafter, FCA) and Ford will produce long rumored marketing offerings. Following the demise of the Scrambler, rumors bubbled up that Jeep's latest corporate owner would launch a fully formed truck on the Wrangler's platform. Meanwhile, Bronco's fans pined for a return of the first generation version of the iconic vehicle that was developed to blunt the Jeep and International Harvester's Scout. Indications point toward a formal launch of the Jeep Wrangler truck and a return of the Ford Bronco. Compact utility vehicle fans, rejoice.

FCA CEO Sergio Marchionne announced that the company will offer a truck variant of the Wrangler. The truck's launch will occur with the launch of a new (e.g., major refresh) Wrangler.

Compact utility truck fans rejoice. Your product is here.

The last Jeep truck was the Comanche (history here and discussion here), which was based on the Cherokee platform and was produced from 1985 to 1992.

Chrysler's desire to protect Dodge truck sales doomed the Comanche.

The Scrambler (history here) was produced from 1981 to 1986.

The ultimate sales niche. Everyone who wanted one bought it 3 years after launch.

Toyota and Nissan left the compact utility truck market to concentrate on bigger trucks that offer greater profits per vehicle. It could be argued that this market met its demise when Ford cancelled the Ranger.

The Bronco (history here and discussion here) began its product life as Ford's attempt to fight the AMC's Jeep CJ and International Harvester's Scout.

Back to the future for compact utility vehicles

At the time of its launch, Ford had found success with the Mustang, the small sports car. Donald Frey and Lee Iacocca, who were responsible for the Mustang, designed the initial Bronco to be smaller than the Scout and lighter than the CJ. Regardless of the standard V6 or the optional V8, the Bronco lived up to Ford's demand to produce a Mustang for the off-road set. Indeed, the Bronco appears as the first truly compact utility vehicle.

Proving that history does not repeat but merely rhymes, Ford is bringing back the Bronco because of the Jeep Wrangler's success. For nearly six years, Wrangler sales have increased. Competitors such as the Honda CR-V and the Toyota Rav4 have moved out of the market segment while Suzuki completely exited the American market.

Low gas prices, low-interest rate loans, lower production costs, and soaring truck sales support both companies' decisions. The time seems right for the launch of two iconic looking vehicles.

Fastlane Finally Closes

The public relations blog that everyone stopped carrying about finally stopped running. To be fair, Fastlane ran out of gas roughly five months after starting.

General Motors launched Fastlane in 2006 with little notice or fanfare. Initially, readers were treated to unfiltered comments from Maximum Bob Lutz. The Truth About Cars blog provides some of his greatest hits including one of my favorites:

This business isn’t all that complicated. Do the best product you can do, and if it looks better and drives better than the other guy’s, you win.

Good words for Marketing Management students participating in the StratSim Marketing competition.

All good things must come to an end. GM's corporate PR folk found the blog and immediately erected enough filters to clean water from the Flint River. No one was interested in reading a sanitized version of Maximum Bob. The links, the sharing, and the "oh, no, he didn't" came to a thudding stop. From that point, Fastlane suffered PR death because no one was talking about it.

When He Is Not That in to You

We have all been there. The relationship starts with all kind of promises of things to come. Filled with hope and these promises, we rush out to tell the world about our new relational partner. Then, nothing. The new relational partner never mentions us to friends. We are left wondering if we misheard all those promises and felt foolish for having hope. We all know this experience. Welcome to the group, Google.

Google brought a lot to the table. It spent years getting itself into dating shape by developing an autonomous vehicle. It cleared various regulatory hurdles, technological glitches, and many nay-sayers. The market offering actually seems viable.

Enter Ford, who wooed Google with promises of production facility in far-away North Carolina. On paper, the match between Detroit muscle and Silicon Valley brains seemed headed for a happily ever-after ending. Alas, relationships do not exist on paper; rather, in life. And, in life, Ford does not seem that into Google.

When it came time to the world the new-found partnership at the Consumer Electronic Show, Ford never mentioned Google. So, much for that announcement.

Google now claims they were never exclusive with Ford, who says that they talk up a variety of relational partners. Perhaps when Ford can afford that place in the Carolinas that it and Google talked dreamily about, these two crazy companies will commit to each other. Until then, Google will probably nurse its wounded pride by chatting with Nissan and Mercedes-Benz while Ford will continue to see Apple and Microsoft. All the while, they give furtive looks at each other from across the room

Google, Ford still listening to possible partners.

US Auto Market Sets New Sales Record

For 2015, 17.47 million new vehicles were sold in the United States. This mark eclipses the previous record of 17.4 million set in 2000. The sales volumes matches a patter started in 2013. AutoBlog's Chris Bruce provides the money quote:

The new record should put the final nail in the coffin of any lingering bad feelings about the Great Recession, and the industry has made an amazing turnaround. According to Automotive News, the dire times of 2009 saw a 30-year sales low of 10.4 million vehicles.

Consistent with signaling theory, the 34 million new vehicles sold over the last two years represent more than a nail; rather, optimism. American consumers feel confident about their long-term economic fortunes as well as market conditions. While cheap gas and easy credit help drive those sales, consumers needed confidence that today's economic good fortunes would exist not only today but for the life of a five, six, or seven-year loan life.

The new sales mark should also lead to decrease in used vehicles prices. In turn, more Americans will buy more vehicles. The increased sales activity should reduce the average length of vehicle ownership from its record of six years.

Based on the six-average ownership figure, 20014's and 2015's sales marks are not surprising because 2009 was a low point. That is, consumers were ready for a new vehicle.

Given that gas prices and interest rates are forecasted to remain at levels similar to as 2015, and 2010's sales mark was consistent with 2009's, the sales forecast for 2016 auto sales should be in the 16-million range.

Millions more vehicles ready for purchase.

Detroit 3 Put an End to Badge Engineering

Doug DeMuro wonders if rebadging among automobile manufacturers has died. The money observation:

...I chuckle when I hear people my age or younger talking about 'rebadges.' I heard the other day, for instance, that the Lexus ES is a “rebadged” Toyota Avalon. This is laughable. It’s like saying that central air conditioning is a rebadged ceiling fan.

Yes, the Avalon and the ES ride on the same platform and they share mechanicals. But my God, are these two cars not rebadged. Rebadging was when General Motors had four midsize sedans in the 1980s and literally slapped different badges on each one, while simultaneously changing things like the wheel covers and the shape of the head rests. The Avalon and ES are so different that even a small child could point them out in a parking lot. 'That’s grandma’s car!' he would say.

In modern times, automakers don’t really do the rebadge thing anymore because they’ve discovered that most people are just too smart for it.

The financial crash in 2009 appears to have been the death knell for badge engineering. Through its bankruptcy process, General Motors closed the Saturn and Pontiac brands. GM already closed Oldsmobile long before its bankruptcies. Chrysler jettisoned its Plymouth brand as part of its bankruptcy reorganization. Without benefit of bankruptcy, Ford brought the curtain down on its Mercury brand. All of these brands had morphed into recipients of badge engineered market offerings. In essence, the Detroit 3 received the message that consumers were no longer willing to spend a few thousands dollars more on a brand that offered only different tires.

At one point, the a rebadge vehicle appeared as a different product from its stable mate. Usually, the rebadged effort included a different, nicer interior, a few cosmetic exterior items, and better tires.

Pontiac 6000: The Ultimate Badge Engineering Machine.

The epitome of crass badge engineering could be General Motors' compact front wheel drive (FWD) X-body platform. The cars were badged as the Pontiac 6000, Buick Century, Chevrolet Celebrity, and Oldsmobile Cutlass Ciera. Body trims and options distinguished each market offering. At first glance, though, the distinguish characteristics were hard to spot.

By the mid-90s, these points of distinction between the original market offering and the rebadged market offering disappeared in a cloud of accounting ledger dust and a different set of tires. Consumers noticed the lack of similarities, leaving thousands of unsold Pontiacs, Mercurys, and Plymouths on dealers' lots.

Thankfully, rebadging seems headed to the auto graveyard along with fins, white wall tires, and manual transmissions.

Grim Humor of Radio Shack

John Oliver and the Onion provide a little comic relief at the expense of Radio Shack.

First, John Oliver examines the fall out from Radio Shack's demise.

[embed]https://www.youtube.com/watch?v=3FCioWz7aps[/embed]

Finally, in this Onion piece, Radio Shack's CEO failed to grasp the retailer's plan. Head man Julian Day provides the money merchandise quote:

There must be some sort of business model that enables this company to make money, but I'll be damned if I know what it is. You wouldn't think that people still buy enough strobe lights and extension cords to support an entire nationwide chain, but I guess they must, or I wouldn't have this desk to sit behind all day.

Apple's Role in Radio Shack's Demise

Radio Shack has officially declared bankruptcy. Now, a judge will determine who will get paid and how much. Everything including the name will be auctioned. The analysis have already begun with the ink barely dry on the bankruptcy petition, including:

  • Joshua Brustein provides a concise history of the retailer's slow, lengthy demise.
  • Knowledge@Wharton offers lessons for managers to learn from Radio Shack.
  • Jodi Xu Klein recounts the role of a small lender - suffering its own run of misfortune - in Radio Shack's collapse.

Mark Pelletier writes about his experience from working on the floor at Radio Shack. The money employee insult:

I had a customer come in to buy an iPod for her son’s birthday. After building rapport with this customer and spending some time with her, this customer eventually purchased the iPod (which was not the color or capacity she wanted, but she wanted to purchase it from me anyway), a $600 laptop, a neoprene case for the laptop, a Nikon digital camera, a memory card for the camera, a leather case for the camera, a $50 iTunes card, headphones for the iPod, external speakers for the iPod, a few more add-on items and service plans. The sale came to over $1500. The customer left happy that we had fulfilled her needs. The very next day I was told that if I didn’t sell a cell phone that day I would be “written up”.

Pelletier gives additional examples that boil down to one thing: the in-store experience matters. Brustein's story also alludes to issues with the in-store experience. Both recount anecdotes of store managers abusing the floor employees. An abuse floor employee will contribute to an awful in-store experience.

Radio Shack was also plagued by bad floor layouts, terrible plan-o-grams for shelving and displaying merchandise, and employees who knew little about the products.

Americans would have put up with this experience if not for Apple. The company, which was reviled for opening a retail store, showed what was new in store design, merchandise arrangement, and floor employee management. Consumers responded by buying enough merchandise and services from Apple to drive the company's sales-per-square-foot figure to more than $4,000.

Radio Shack's management struggled to learn from Apple. Its attempt to reduce the amount of merchandise under The Shack repositioning effort was too little, too late. As Brustein repeatedly illustrates, Radio Shack's management struggled to learn. In turn, management could not better allocate its resources including financial, organizational, human, and physical. Hence, Radio Shack remained stuck in a position of low value and high cost and, ultimately and continuously, achieved inferior financial performance.

After seeing Apple, Radio Shack could not keep consumers in its stores. The ultimate Radio Shack lesson for managers is: competence matters. The signs and signals of poor retail management.

A more inviting retail experience

Samsung Ignores HP's Misfortunes, Mistakes, Missteps

Given Samsung's current competitive disadvantage in the smart device market, the South Korean company learned nothing from Dell or Hewlett-Packard. The two former high-flying PC assemblers ultimately achieved inferior financial performance as customers kept moving toward lower price PCs. The lessons from Dell and H-P seem lost to Samsung's management. As Katie Benner discusses, Samsung wants to double down on HP's mistakes. The money management misstep:

Samsung has reportedly been in talks to buy BlackBerry, apparently because it's enthralled with the mobile operator's patents and a secure network that manages e-mail traffic for the U.S. government, military agencies, and, of course, major corporate customers.

The BlackBerry offer stands at $7.5 billion, and should increase as other companies such as Google, Motorola, etc. start to kick the tires. The parallel is not perfect. As the saying goes, history does not repeat itself; it merely rhymes.

In this case, the rhyme stems from HP's ill-fated purchase of the Palm OS for $1.2 billion in 2010.

In the smart device market, Hewlett-Packard found itself struggling to extend its brand from the PC market to the smart device market. The company needed the extension to improve it financial performance as HP's PC sales volume continued to slide and its PC operating profits shrunk.

Hewlett-Packard tried selling handsets with the Microsoft CE operating system and licensed the iPod for resale. The Palm purchase marked the American company's effort at changing its competitive advantage.

The company acquired information and legal resources through the Palm purchase in the guise of the OS and patents. However, HP could not better allocate its organizational resource as the company could not develop a handset that met the needs of a market segment. Currently, HP is licensing webOS (nee Palm OS) to any firm willing to pay the fee including Samsung.

At one point, Samsung held the most market share among smart device manufacturers similar to how HP and Dell held top spots among PC manufacturers. HP and Dell like Samsung did not control the OS that powered its devices. All three companies watched customers buy cheaper, competing products that offered similar designs and the same OS.

The bigger threat for Samsung appears from the Internet of Things, and not from Google or Apple.The Internet of Things is about chips, operating systems, and networks. Three market offerings that Samsung lacks in its product portfolio. Given how hardware companies have struggled to reverse their fortunes (see Commodore, Dell, HP, IBM, Motorola, Nokia, etc.), Samsung's $63 billion cash will only buy it time.

Samsung goes on an acquisition spree.

Friday Fun Question

Most Fridays, I usually answer a question or questions from Principles of Marketing students about marketing. This Friday, though, I am breaking from that pattern to answer a question from a Retail Management student. This week’s question: When dealing with competitors or when examining competitors, we talked about any business located near our client as a possible competitor. This view seems too broad because not every business competes against our client. How do you know who your competitors are?

Several approaches exist to classify or determine your competitors including cluster analysis and multidimensional scaling. The below typology fits well when dealing with service firm such as a food retailer. This website provides additional discussion while this blog post gives an example drawn from higher education. The typology classifies competitors into six forms based on buyer needs and competitors' processes to fill those needs, including:

  1. Direct competitors: Those competitors that fill the same buyer needs you fill in the same way that you fill them;
  2. Alternative use competitors: Those competitors that fill different buyer needs but do so in the same way that you fill your buyers’ needs;
  3. Substitute competitors: Those competitors that fill the same buyer needs you fill but fill them in a different way;
  4. Economic competitors: Those competitors that fill neither the same buyer needs you fill nor use the same ways but do compete for the same buyer budgets;
  5. Complements: Those sellers with which you cooperate to fill buyer needs but then compete for the larger proportion of buyer expenditures;
  6. Buyers: The propensity and ability of buyers to fill their own needs

This classification system should involve over time, consistent with R-A theory. Also, it could be extended to other service providers in the fast casual market, financial services market, or the vending/grocery market.

Bauer Highlights Move Toward Experiential Shopping

Shoppertainment has long been a staple of large malls. Many malls offer roller coasters or ice rinks. The idea of experiential shopping, though, could provide a better approach to build foot traffic. The idea is not new. For example, Bass Pro Shops includes a fishing pond to tryout fishing equipment. Jeep dealers offer an off-road testing ground. Bauer's new footprint feels different though.

The retailer will open eight to 10 stores that will feature a regulation ice rink. Shoppers can take a few shots, crash some boards, and spray ice before buying the equipment. The effort marks Bauer's attempt to get more people interested in ice hockey.

Bauer CEO Kevin Davis supplies the money quote:

We are not opening outlets and selling discounted things, we are opening a apace for consumers to really experience (the brand) and give then a really premium experience, which would be good for all retailers. When kids leave that store more enamored with the Bauer brand, they may buy it at that location or they may go back to their local retailer and search out the brand.

Perhaps more retailers will consider how to incorporate experiential shopping into the store environment to build foot traffic.

A pond for hockey would make a Bauer's store wicked fun.