Out of the Box

Chrysler Had the Right Idea

By Menachem Lubinsky on May 17 2009

These are very unsettling times for the US auto industry. Last week, hundreds of dealerships were closed resulting in thousands of layoffs and impacting local economies all over the country. The bankrupt Chrysler is now very much at the mercy of its new European suitor, Fiat, and the US Treasury, which orchestrated the bankruptcy. As much as the picture looks bleak for the automaker as it pretty much is for General Motors as well, the company needs to find ways to survive and to sell cars.

Even in its current state, Chrysler wanted to spend $134 million on advertising in the nine weeks it is expected to be in bankruptcy. But the U.S. Treasury’s auto-industry task force, while indicating that it understands marketing is necessary, gave the automaker only half that amount. At least everyone understands that if Chrysler is to have any hope for the future, it certainly could use a revived US economy but it will need good and creative marketing.

The challenges for Chrysler even with its $67 million budget for advertising are formidable. The closure of hundreds of its dealerships only compounds the challenge. How do you convince Americans to buy a product from what many people believe is a dyeing enterprise? In many markets, how do you get buyers into showrooms that no longer exist? How do you sell cars that may not have spare parts in the future? How do offer a guarantee for a product that cannot be executed, if the company is not around?

We haven’t seen yet how Chrysler and its marketing team intends to address these challenges with the exception of the car guarantee that is now guaranteed, like your money in the bank, by the US government. Strange as it may seem, the US government is in the car business, much like the former Soviet Union used to manufacture Ladas in the days of the Communists. Well, maybe not exactly since the US Government is looking for a quick exit strategy.

Obviously price will play a major part in this recovery. One way to get the attention of some consumers is to lower the price while still convincing consumers of the quality of the cars. That is always a challenge when there is a need to discount a product without compromising on the quality. But quality has also not been a strong point for the auto manufacturer. It is no secret that Americans abandoned cars built in Detroit in droves largely because they were convinced that the European and Japanese cars were better. Chrysler has received its share of criticism of late for flaws in the manufacture of its cars. Chrysler will have to either perfect the quality or consider lowering the prices even further.

They will have to underpin the remaining dealers with cooperative advertising dollars so that they reach out to a broader geographic area. Most of the dealers that were recently terminated were said to be under-performing. One dealership sold only 35 cars all last year. But even the remaining dealers are struggling and without some assistance from Detroit may also be on the brink. Chrysler will also have to convince consumers that no matter what their cars will be serviced. Car buyers will be worried that the closed dealerships will mean fewer options for service. They will also wonder whether the dealer that they bought the car from will be around when they will need the service. Or, will Chrysler itself be around when they need the service? Service that is not guaranteed, of course.

As if the challenge of selling American cars weren’t enough, they face formidable competition from the Europeans who are probably responsible for bringing the American automakers to their knees in the first place. Thankfully, the Europeans are also having their problems since Americans are also cutting back on purchasing their cars, but they are for the moment in a stronger position as they were even before the recession.

Marketing experts say that Chrysler’s marketing will have to speak frankly with consumers. It will have to emphasize the government guarantees, speak of their own futures as being positive, and heavily promote those features on their automobiles that are not subject to criticism. They may have to reveal their plans for emerging quickly out of bankruptcy, develop new products to illustrate that they are a company with a future, and make an effort to show life in every respect.

The experts also say that they will have to re-connect with loyal customers who have been buying their cars. There are still many Chrysler loyalists who have always been buying their cars and looking for word of some stability so that they can go on buying the cars. Every company that has had success has a loyal base somewhere and if it needs to rebuild, that base becomes the ticket to the future.

Is there a lesson to be learnt? Yes. Make a better product. Do not take your market for granted and be loyal to your loyal customers.

Out of the Box is a collection of strategic marketing articles that Lubicom has published on various topics, trends and ideas in the marketing world. The articles have been published in the Hamodia weekly newspaper circulated on three continents to a readership of well over 100,000.

The name, "Out of the Box" is a term used frequently in business nowadays to describe creative thinking that is not the norm. It is meant to help a business pull away from the pack or separate oneself from the competition. It is to some extent fraught with risk, simply because it is not the run of the mill thinking, but it is at the same time the key to reaching the next opportunity.