Immersion Active presents Ageless Marketing

Who Will Turn out the Lights in Detroit When the Big 3 Leave?

The following is the conclusion of yesterday’s post carrying former Ford brand manager John Keilly’s take on the future of U.S. automakers:

__________________

David,

This is in response to your question about the odds of GM (and Ford) "being here" in 2010.

To paraphrase Bubba' Clinton, "It depends on what the meaning of "is" is!" In this case, it depends on what you mean by "being here."  Poor Terri Schaivo was "here" for the past 15 years, but no one would have traded places with her. Several of the Big 6 domestic airlines are still "here" – but only a shell of their former selves. New, more efficient competitors continue to sap their strength, while bankruptcy judges provide the "life support."  Similarly, how long did Eastern and Pan Am "linger?"   

That being said, I believe that Ford and GM will still both still "be here" in 2010 – but that five years from now both will be well on their way to the ICU and life support. Either or both of their parts maker step children (Delphi and Visteon) will be either gone – broken up/ sold off/ out of business – or otherwise virtually unrecognizable from today's form.  Moonbeams can no longer keep these ill-conceived entities propped up.

History is not on the side of the Big 3. You can no longer buy a TV made in the USA. Who cares? Everyone just wants the best value. If companies outside the US can provide it, then consumers will buy from them. The same is true of most textile products, nearly all shoes and a lot of steel. It's hard to think of a reason why autos should not follow TVs and other such industries overseas! 

If you move the horizon out to say 2025, Ford and GM are likely to be like American Motors, Packard, Desoto, and a host of other manufacturers and nameplates – only memories of America's "glory days."  Welcome to the 21st century and the age of Asian ascendance.

John Keilly
248-797-2439
[email protected]

_________________

See recent Reuter’s article on Ford's future prospects.

Could the company whose founder invented the modern auto industry disappear?

Could the company that invented the modern corporation be soon shuttering its doors?

Royal Dutch Shell conducted a now-famous survey in 1983 and discovered that life expectancy for large corporations was less than 40 years. Between 1970 and 1983, the year the survey was conducted, fully one-third of the Fortune 500 disappeared. Only 71 of the 500 companies that made the original Fortune 500 list in 1955 are still in business.

Anyone in business today who doesn’t realize that we're going through tumultuous times in which no company is immune to disappearing from the scene might consider packing it in and retreating to a monastery. This is not meant to depress anyone but to sober us all up enough to realize these aren’t your father’s times. During the next ten years we might see as few as 25-30 companies on the original Fortune 500 list still in business. After all, only one of the top 10 companies in the U.S. in 1900 is still in business today. Do you know what company that is?

Thanks, John Keilly, for you insights. John would be happy to hear from any reader. His email address and phone number appear above.

Detroit, Where Surviving is Job One

As it struggles to find “the right stuff” in these curious times, GM has been in the news quite a lot. I asked John Keilly, a former brand manager at Ford, for his views about the chances of Ford and GM surviving through this decade. His response:

GM has apparently come to terms that they will never again see the glory days of near 50% share of the US market. Hell, they are unlikely to ever see 30%!  So, they are starting the long painful process of trying to get the company down to the size that its revenues will support. All the "Big 3" are in decline and can't shed costs fast enough. Meanwhile, count on the UAW to continue to be exempted from the basic laws of economics and the marketplace. At the same time, count on management to be equally greedy. This long overdue process will see each side blaming the other. But, at least the discussions have begun.

In fact, time seems to be an enemy these days. The combined market share of the three "domestic" automakers - DCX, Ford and GM - fell below 60% of the US market last year and that decline has continued in CY 2005.

See March results. This is the latest step in their "ratcheting decline."  They go down, they come back up, but to a level below where they were before. This is deadly because manufacturing motor vehicles is an incredibly capital intensive business. Even a moderate freshening/ re-skin of an existing vehicle can cost over $ 1 billion – and that’s without any changes to the engine or transmission! Hell, the all-new 1985 Taurus/ Sable program cost Ford $ 3 billion and that was 20 years ago! With product development costs like these, the name of the game is revenue.  Despite what the bean counters say, you cannot "save your way into prosperity."

Yet in an environment where revenue is king, pricing power is negligible. First, there are myriad competitors. Many have far better reputations for quality (the Japanese), value (the Koreans, and soon, perhaps, the Chinese) and prestige (the high end Europeans). It becomes easy to see why DCX, Ford and GM continue to lose share - and with it, top line revenue - to these "foreign" competitors. 

GM has the added problem of too many nondescript, "vanilla" brands. Only Cadillac - with its consistent emphasis on bold styling and power train technology – is distinctive. But despite their recent sales success, I wonder if they're making money on their huge investment in Cadillac?

As if GM didn't already have enough problems, they recently paid Fiat $2 billion to extricate themselves from the ill-conceived deal that could have required them to embrace that Italian tar baby!

Add to that the more than 20 million units of global excess capacity - of which 12 million+ units are aimed at the US market - and you have the makings of a real toad stew! No wonder almost everyone is incentivizing customers to buy their vehicles. However, for the reasons noted above, "domestics" typically have to spend far more on incentives. That further erodes their top line revenue. Now, their profitability fortress - trucks and SUV's - is under serious assault from the imports.   

GM led the post 9/11 market into 0% financing and heavy incentives. Interestingly, they are now talking about reducing prices to levels more in line with the true market value of their products - in effect permanently rolling their incentives into their pricing. I broached that subject when I was brand manager at Ford. I was told that fully 25% of Ford Division's buyers needed the incentive money as a down payment. I can't help thinking that a similar percentage of Chevy buyers are in the same boat. It will be interesting to see the extent to which GM is able to eliminate incentives by adopting more market-driven pricing.

To make matters worse, there is greedy management and equally greedy unions running - or perhaps ruining - Detroit. It’s easy to envision ugly futures. Hints about the future of Detroit can be gleaned from the way the Big 6 domestic airlines are devolving. Not pretty!  The airlines also suffer from excess capacity, little or no pricing power, commoditization of most if not all of their product offering, intransigent unions and incompetent management. When was the last time you thought flying was "fun," "special" or even a pleasant experience?

All of the traditional airlines remain burdened by the excess capacity of inefficient competitors who, propped up by bankruptcy courts, continue to sell seats at below market rates!  Many believe all this just delays the inevitable, while limiting/ destroying the pricing power and long-term viability of the remaining players. 

One could envision a future where one or more failing automakers are propped up by the bankruptcy courts. I think this country has a hard time allowing anything short of an Enron to happen - where thousands of people are put out of work overnight. 

It will be interesting to see how quickly the Chinese take hold in the US market and who they hurt the most if they do succeed here.  Meanwhile, any of the "big six" might also swallow up one or more smaller players. These 6 players will struggle in a rugby like "scrum" for a period of time. The length of that time will be affected, I believe, by the amount of governmental intervention - here and elsewhere - as it becomes increasingly evident that one or more players is on the brink of disaster. 

That being said, I do not envision any type of "bailout" such as we saw with Chrysler years ago. The country today lacks the political will. In addition, the congressmen and senators from all the states that today are delighted to be home to one or more "transplant" factories would almost certainly object to a government bailout of firms that compete with one of the largest employers in their respective states!
_____________
John Keilly is a life-long automotive enthusiast who spent nearly thirty years in executive positions in the US auto industry.  He held positions in engineering, product planning, sales and marketing. His international experience includes a three year posting in Germany and a stint as marketing manager for export operations.

[email protected]

248.347.7835

The Social Transformation of Capitalism

Reader Chuck Nyren sent me a link to a USA Today article about the new Google foundation that I found quite interesting because of the new book I’m working on.

Despite continuing investigations, indictments, trials and convictions for egregious behavior in the executive suites in Corporate America, my co-author Raj Sisodia and I have an optimistic view of corporate morality in the future. And it’s not just about execs getting better at resisting temptation, but about growing participation of companies in the nation’s social agenda.

The idea of companies becoming directly involved with social agendas would sorely bother Adam Smith who laid the foundations of capitalism in An Inquiry into the Nature and Causes of the Wealth of Nations. He wrote in his famous “invisible hand in the marketplace” discussion, “By pursuing his own interest he (the business owner) frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.”

In 1963, before he became a Nobel Laureate in economics, Milton Friedman famously proclaimed, "There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game." Many in business still swear by Friedman’s proclamation. However, and perhaps surprising to some, GE’s former charismatic head, Jack Welch, puts forth a contrary view: "These times will not allow companies to remain aloof and prosperous while the surrounding communities decline and decay."

Here and around the world, shifting demographics are reducing the ratio between taxpaying workers and entitlement-drawing retirees. This is forcing governments everywhere to cut back on their spending for social welfare purposes.

Raj and I see companies becoming increasingly involved in picking up some of the slack. One of the companies we examine in Firms of Endearment is Patagonia. Workers can get a paid leave of absence for up to two months to work on some worthy cause. That is a substantial contribution to the social agenda by just one company. Imaging the fortuitous outcome of 5,000 companies following suit.

From the USA Today article cited above: “Google, whose founders Larry Page and Sergey Brin are each worth about $8 billion, has until recently said little about the foundation since announcing last year that it might ‘eclipse Google itself’ in world impact.”

Google is another company we examine in our book. The firm is an excellent example of the social transformation that is taking place in capitalism. Sorry Adam and Milton – wherever you are – the new capitalism is not your father’s capitalism.

These are yeasty times we live in, no?

My New Book

Sorry. I didn’t forget you over the past week and a half or so. I’ve been buried getting my next book started. I’m doing it with an old friend, Raj Sisodia who is a trustee professor at Bentley College in Lexington, MA. Gotta tell ya, it’s really great having a co-author who has a lot of grad students to do research!

The name of the book is Firms of Endearment. It will be released under the imprint of Prentice-Hall in Spring, 2006. The central theme of the book is that companies that will be the big winners in the future will be those that proactively seek to gain the genuine affection of their stakeholders – consumers, employees, suppliers, corporate partners, the community, public bodies with an interest – and of course, shareholders.

We want to shoot down the cliché that came out of the 1990s, “Go for share of wallet, not share of market.” Raj and I believe that going for share of heart increasingly is the better way to go, and we say why in detail in our book.

We buttress our case with examples of companies that already are Firms of Endearment (FoE) who outperform in their categories. In fact, the some 30 companies in our research – well, the grad students’ research – have all out performed the Dow and Nasdaq, but also have outperformed the “good to great” companies in Jim Collins’ book From Good to Great.

The companies in our FoE list include Whole Foods, Starbucks, Commerce Bank, The Body Shop, IKEA, Costco, Tweeter, Southwest Airlines, Patagonia and New Balance.

Raj and I would love to hear from any of you who have had Wow! experiences with any of the companies I named above or with any other company. Please, we could use your help.

Thanks!

Bob Garfield's Vision of Chaos

Advertising Age’s media biz raconteur Bob Garfield has stirred the pot on Madison Ave like no one since P & G chairman/CEO Ed Artzt did much the same in 1994 in charging that the for-hire marketing community was at asleep at the wheel as the Internet began breaking over the horizon.

Garfield has written a 5,100-word wakeup manifesto entitled “A Look at the Marketing Industry's Coming Disaster” that appeared in April 13^th’s issue of Advertising Age. You can also listen to Garfield reading the essay at NPR’s All Things Considered archives. Take time out to read/hear Garfield. I t could lead to changes in how you anticipate the future and conduct your business.

Already, many think that in predicting major chaos in marketing that will adversely affect the economy, Garfield is playing Chicken Little. But I for one believe he’s spot on. You can see my orientation in this abstract from the draft introduction to my new book Firms of Endearment:

"Perhaps not since the mid-1400s when the world learned of Copernicus's ideas about a heliocentric earth and Gutenberg printed his first Bible has the collective mind of humankind been faced with changes on such a scale as now. Like sperm and egg merging to form a new life, these two events were the zygote that evolved into the modern world. Copernicus sowed the seeds of a new conception of human life by removing earth from the center of the universe, thus inviting challenge to the Church's view of man's cosmic centrality while the movable type printing press spread word of that concept across the Western world to ordinary people whose views of themselves, their rulers, the universe and God Himself began to radically change.

"The information explosion triggered by the printing press realigned the behavior-shaping forces of culture. The most influential result was democratization of information. This led to the dissolution of ecclesiastical hegemony over the thought realms of theology, philosophy and science, and eroded monarchical hegemony over polity. The way was cleared for the emergence of liberal democracies. Neither Rome nor throne benefited from the minds and works of Nicolaus Copernicus and Johannes Gutenberg. But the masses did.

We are now slogging our way through first light in the dawn of a new era. What lies ahead is not all that clear. However, one thing seems certain: once again humankind is confronted by new realities that are as belief changing as Copernicus's ideas proved to be.”

 

Let those who cannot see the scale of change Bob Garfield sees step aside and make room for the visionaries who will show us how to adapt to the epochal challenges arising from these time when “almost everything you thought you knew is wrong.”

In predicting a period of great chaos, Garfield could well be right for we’ve arrived at what physicists call a bifurcation point as an old order fights for continuation against a new order whose emergence cannot be thwarted. Chaos attends the period prior to the new order’s ascendance.

Boomer Quest for Legacy: "I Am What Survives Me"

A letter from one of our readers:

We’re a small agency that has studied Ageless Marketing and embraced your approach to marketing to people in the Fall and Winter seasons of their lives. We look forward to your blogs and use them for rich internal discussions. Many thanks for the insight and, for us, proven value in developing relevant marketing strategies.

One issue that has prompted discussion here has to do with boomers’ attitudes toward death and, more specifically, their views regarding their legacies. Can you comment on how do their values and pending transfer of wealth correspond with those characteristics that motivate them – their pursuit of internal exploration, meaningful experiences, and what they want to “pass on?”

Tim Braun
Vice President , Director of Account Service
Schwener Design Group, Inc.

Dear Tim,

First, generalizations about boomers usually don’t make a lot of sense because of the 18-year spread in age. For instance, boomers’ attitudes toward death vary greatly due to the spread in age. Those in their early 40s are likelier to suffer greater angst about death than those in their late 50s, hence are more inclined to push it out of their minds.

Nevertheless, many people first begin thinking about their legacies in their 40s, probably quite often in response to the great midlife issue of “what’s the meaning of my life?” Many newly minted middle agers add volunteer activities to their schedules in pursuit of the answer to that question. The financially comfortable commonly begin giving more money they to causes they deem worthy.

While people don’t psychologically evolve in lockstep toward more giving, altruistic behavior, the realization that “I am what survives me” is a prominent midlife trait as observed in depth by Erik Erikson who coined the term generativity to stand for giving service to the next generation.

Dan McAdams, co-editor of Generativity and Adult Development, a book of essays on “giving back” behavior in midlife, points to the common midlife shift from a primary focus on agency (service to self) to greater emphasis on communion (service to the group). In his book, Stories We Live By (cited in “Must Reads” in left column) McAdams says this shift reflects an innate need to round out one’s identity out with an improved balance between serving self-interests and serving group interests.

McAdams – and other developmental specialists – believe that this shift is animated by elevated awareness of a person’s mortality. He writes in Generativity and Adult Development, “We suggest that generativity draws … from the agentic desire to expand the self infinitely in time (i.e., immortality) and the communal desire to care for that which one has created, to nurture and sustain it until it is ready to be on its own.”

My answer to your question has perhaps been shorter on specifics than you perhaps wished, but given my desire to generally keep my posts at no more than 500 words prevents more in this post. However I would gladly write more on the topic – oops, exactly 500 words there. Where would you like me to take it? BTW, you might check out my posts Legacy Aspirations Marketing and Patek Phillippe: An Exemplar in Brand Resonance

The Age of Aquarius II

(Last in an 11-part series: Belief Follows Need)

Tell me your age and I will describe the general character of your worldview (how you cognitively connect to the world, not the specifics of your beliefs), the general nature of your needs, the likely central theme around which your life unfolds, and how you mentally process information. The odds that I will be right are better than chance.

I have no rare talent for outperforming the garden-variety palmist. Anyone who has studied adult development can do the same because like travelers headed to New York from a common starting point, most of us follow pretty much the same routes on our journeys through life, notwithstanding considerable diversity in traveling styles and pace of progress.

This should not be a surprise, given the human genome project’s determination that we are genetically 99.9997 percent alike – the most alike of all mammals.

Knowledge of adult development enabled me to write the following for my book Serving the Ageless Market 17 years ago (edited for brevity):

Fifteen to twenty years ago [remember, this was written in 1988], the oldest of the Boomer cohort trimmed their hair, shaved their beards, removed their funny jewelry, and put their bras back on and joined the establishment to fulfill the urges of the first experiential lifestyle stage of adulthood – the Possession Experience years. Many, succeeded beyond their expectations despite their earlier negative views of materialism.

Now, two decades or so after redefining social decorum with the caricatured behavior of youthful excess while espousing noble ideals, many Boomers are revisiting those ideals. They are asking themselves the perennial midlife question, "Is this all there is?" Many are saying, "The values of that matter most are still those we marched for in our youth." They see glimmers of great new possibilities in a new life, a new society, based upon their "old values."

Boomers are taking us back to "basics" after they led society away from them in the Age of Aquarius. We may now be in the beginning stages of its sequel, the Age of Aquarius II.

Daniel Pink’s new book Whole New Mind echoes what I had in mind when I predicted the coming of the Age of Aquarius II nearly a generation ago. It was an easy prediction to make because it was clear in 1988 that in midlife boomers would remain the dominant adult consumer group. Accordingly, the source of leading worldviews, values, needs and behavior in the marketplace would be those of people in midlife.

A lot of what the Yankelovich Monitor (among other consumer trends reports)say about consumer behavior in general today sound like readings from adult development psychology. If marketing reflected greater respect for that branch of behavioral science, we’d see a remarkable improvement in marketing performance.

______________________

This thread began with the tenet belief follows need. Along the way I’ve pointed out how people’s needs change as they leave one season of life and enter another. Knowing the characteristic needs of each season takes you deeper into the consumer psyche than conventional research can take you.

A recent article in U.S. News and World Report hints at why. It noted that 95 percent of decision making activities are unconscious. This means that consumers can’t tell you most of what’s in their minds because much of the meaty stuff you want lies hidden behind the curtains of consciousness. Knowledge of needs by season of life gives you access to those silent corners of the brain and keen insight into people’s belief systems as they evolve across the life span.

The Later Life Need for a Reconciled Soul

(Part 10 of an 11-part series: Belief follows need)

Ah, we now near the end of this thread that has examined the idea that belief follows need. Our discussion now takes us into the winter of life – the season I’m journeying through, at age 72.

“So,” you ask, “what needs do you have that have contributed to defining your beliefs?”

My answer begins with citing the primary life focus in winter: reconciliation. I have a profound need to achieve a state of reconciliation between the light and dark, between the sweet and the bitter in life. I have a need to purge from my soul all regret, anger, and disappointment.

I want to leave this earth feeling that I’ve left no loose ends and that my corner of the world is a little bit better for having taken up my place there and toiled with honest intent even though I made many mistakes along the way.

My beliefs are more tempered than they once were because my need for reconciliation cannot be satisfied if I maintain the more extreme positions I had earlier in life.

I do not want to be a fundamentalist in anything as I draw my last breath. Fervent in my beliefs, yes! – but not weighed down by the self-centered notion that everyone whose beliefs don’t coincide with mine is wrong.

I will not die a fundamentalist in any system of belief! Whether uncompromisingly vested in social, political or religious beliefs the rock-bound fundamentalist is barred from achieving a reconciled state of being because such a state is nonjudgmental, inclusionary, and infinitely forgiving – like a child.

Whether one is Christian or not, the meaning of Jesus’s words, “You must become as little children to enter the kingdom of heaven,” is clear and poignant. Little children are nonjudgmental, inclusionary, and infinitely forgiving. I want to become more childlike in my affect as I grow even older.

Throughout my life, my worldview – how I connect to the world beyond my skin – has been continuously evolving. The central theme of my first worldview was fantasy. In the summer of my life, my worldview morphed into a romantic, heroic theme. With fall, my worldview evolved into a down-to-earth theme of reality – an acknowledgement of limitations that in my romantic, heroic worldview I was unwilling to admit to having.

Then came the winter of my life – the season in which I’ve had the most satisfying moments of my life. Why? Because, my quest for reconciliation has dissolved my former need to control things – especially other people. I now understand “going with the flow” better than ever before. Yet, ironically while I go with the flow more gracefully than ever before, I’m more independent of the influence of others than ever before. In other words, I am more my own person than I ever was in my earlier years.

To be continued….

Why Every Marketer Needs to Understand the Midlife Psyche

(Part 9 of an 11-part series: Belief Follows Need)

My last post dealt primarily with the fall of life, with a particular emphasis on the fifth decade of life that I often refer to as the “Change of Life Decade”.

Personality changes typically experienced during this decade may in fact begin as early as upper 30s. In fact, Carl Jung, who was preoccupied with midlife personality changes that lead to self-realization (essentially, what Maslow called self-actualization), spoke of having a number of patients in the upper 30s entering this phase of personality development.

By "personality changes" I’m not referring to changes in temperament and core values. Rather, I’m referring to changes that represent personal growth, that is, changes that take a person to higher and more complex levels on the psychological maturation scale.

I fervently believe that every person in marketing today should have intimate knowledge of what takes place during the Change of Life Decade. I believe that for two reasons – no, three reasons. That third reason is that one’s own journey through what can be a particularly rocky period in life can be made more successful by knowing why certain things happen in the psyche and how to steer a surer course through these years.

Not the least of midlife challenges is revisiting a prime topic of adolescence: determining who one is. That task is poignantly described in Sam Keen's book Fire in the Belly when he talks about the metaphysical journey of men through midlife:

"One day out of nowhere you realize that you don't know who you are, and none of the cards in your wallet provide the slightest clue to your real identity."

Nothing is more important to any of us than our identity. Yet, it seems that for most of us, nothing is so illusive than the task of shaping an identity that we're satisfied with. But doing just that is the central maturational task in the second half of life that begins during the Change of Life Decade.

The other two reasons every marketer should have intimate knowledge of the fall of life:

First Reason – The largest 20-year age cohort of adults is the 40 to 60 cohort – the Change of Life cohort. This is also the wealthiest age cohort and that age cohort that spends the most money per capita. The numbers say this is where most marketing dollars should be spent, though we're still a long way from that happening. One reason is, marketing to this age group is significantly more complicated than marketing two tweens, teens and young adults.

Middle age (and older) adults are more individuated (less like their age peers), more introspective (more comfortable going with intuition or “gut feelings’), and more autonomous (more resistant to attempts by others to persuade them to a course of action).

While quantitative research has long enabled marketers to anticipate the needs and correct responses to pre-middle age consumers, it is a decidedly less effective tool for predicting the behavior of middle age and older consumers. Thus, the surer way to predict their behavior is to understand what shapes their needs, behavior – and beliefs. 

Second Reason – Adults in the second half of life are so numerous (over 130 million strong) in comparison with those under the age of 40 (86 million) that the older age group is strongly influencing the behavior of the younger age group. It’s a simple matter of the majority ruling. For more detailed discussion on this see the discussion on the psychological center of gravity that ran September 12, 13 and 14. Even if you're seeling snow boards and skateboards you will still benefit from understanding midlife values and behavior.

Finally, I suggest that you visit Tom Peters' blog to see what he says about his own journey to self-realization. It is a statement that is candid, vulnerable and poignant.

To be continued...