Assessing the Automakers
When was the last time the auto business was this cutthroat? It's tough out there on the car lots, many of which are choked with acres of sheet metal. This Special Report is devoted to a group of experts' unvarnished appraisals of how six top carmakers are doing, along with a look at two up-and-comers.
However, one grave problem afflicts the automaker: Chrysler Group.
Chrysler Group built more cars and trucks than the market would bear last year. The misstep helped cast uncertainty on the future of marketer and was a prime factor as Advertising Age's panel of experts slapped DaimlerChrysler with an overall grade of C for 2006.
Not even the return of "Employee Pricing for Everyone" last summer and the appearance of top DaimlerChrysler executive Dieter Zetsche as Chrysler pitchman could move vehicles quickly enough and keep Chrysler Group from losing $1.4 billion in 2006. A dealer revolt led to the abrupt departure last December of Joe Eberhardt, exec VP-sales and marketing of Chrysler Group.
From a marketing standpoint, Chrysler Group will continue to have its hands full staying focused on brand message.
DaimlerChrysler AG's board said this month that selling off the Chrysler unit is an option, but no timetable was given. Selling the unit would undo the 1998 merger between Daimler-Benz AG and Chrysler Corp. Among the suitors: financier Kirk Kerkorian, whose offer this month was dramatically lower than his failed 1995 bid of $22.8 billion. Chrysler Group also faces potentially make-or-break union negotiations this summer.
Meanwhile, upscale sibling Mercedes-Benz roared through 2006 with record U.S. sales of 247,934, up 11%, thanks in part to a redesigned flagship S-Class sedan and the all-new GL-Class sport utility vehicle. However, there's widespread concern about Mercedes' quality reputation -- for instance, a recent Consumer Reports reader survey ranked Mercedes last in predicted reliability. The company countered that its owner loyalty is the best in the luxury segment.
The bad news for DaimlerChrysler was that despite Mercedes' record, Toyota Motor Sales USA outsold DaimlerChrysler for the first time in 2006 to become No. 3 in U.S. sales, at about 2.5 million.
DaimlerChrysler spent $1.4 billion on measured media in 2006, down 10.6% from '05, according to TNS Media Intelligence. The company sold 2.4 million vehicles, down 5.5% from '05. Sales fell for all three Chrysler Group brands -- Chrysler, down 7%; Dodge, down 9%; and Jeep, down 4%. This represented lost market share.
Chrysler responded to Jeep's problems this month by switching its brand advertising to start-up agency Cutwater, San Francisco, from Omnicom Group sibling BBDO Worldwide, which handles the bulk of Chrysler advertising. For first-quarter 2007, DaimlerChrysler's unit sales are down 3.3% from a year ago, to 593,291.
Marketing not faulted
Ad Age's panel of auto experts avoided blaming the 2006 falloff specifically on Chrysler Group's marketing.
"With the exception of the Chrysler brand itself, they have a clear understanding of the brands, and they are pretty focused on that," says Charlie Hughes, president of Brand Rules. "The people who are winning in the marketplace have that focus." New products are key to maintaining consumer interest, says Jeremy Anwyl, president of Edmunds.com.
"In the marketplace today, if there's one thing that's true for everybody, it's that product ages frighteningly fast," he says. "The [Chrysler] PT Cruiser and the Chrysler 300 were hot not too long ago, but it just doesn't last."
New products provided a bit of good news in 2006; the panel gave DaimlerChrysler a C+ in that area.
Chrysler Group launches included the Jeep Compass, Dodge Nitro and Caliber, and redesigned Jeep Wrangler and Chrysler Sebring.
Compass hits Madison Ave. pothole
Each launch had its own marketing challenges, but the Jeep Compass may have been toughest.
The Compass is built for the street, not the woods. Few people actually do a lot of off-roading in their Jeeps, but saying it out loud is a departure from Jeep's traditional image.
The target market for the station-wagon-like Compass was another challenge -- 22- to 30-year-olds vs. Jeep owners' average of 52; more urban; and more ethnically diverse.
"Compass is for people who don't need all that [off-road] capability, who want a little softer ride. ... Some of the advertising focus has to show that different capability," says George Murphy, senior VP-global brand marketing for Chrysler Group.
Showcased un-Jeep-like product features
The Compass campaign employed bobblehead figures driving downtown instead of on trails and showcased un-Jeep-like product features such as gas mileage, cargo capacity and a sound system with flip-down liftgate speakers.
Ad Age's experts were lukewarm to the ads and questioned whether the Compass fits the Jeep brand.
Mr. Murphy says 80% of Compass buyers are new to the Jeep brand, "which was one objective of the brand."
Creating some controversy was advertising for the new Dodge Caliber. The idea was to pitch the Caliber as "anything but cute," unlike the Honda Civic and Toyota Corolla -- or the model the Caliber replaced, the Dodge Neon. But a commercial featuring a magical pixie and the line "Silly little fairy" sparked charges of homophobia, including from Ad Age's Bob Garfield, who awarded the spot zero stars.
Chrysler denied the charges at the time, and Mr. Murphy says: "That one broke through the clutter, big-time."
Dr. Z campaign flop
For Chrysler, the bigger ad disappointment was probably the Dr. Z campaign starring Mr. Zetsche, chairman of DaimlerChrysler AG's management board, trying to follow in the footsteps of Lee Iacocca. Mr. Zetsche appeared as himself and as a cartoon character in the $100 million campaign.
Redefining the Chrysler brand was part of what the Dr. Z campaign was supposed to accomplish, but Chrysler pulled the plug on the commercials before the end of the summer as sales continued to slump.
Mr. Murphy says the campaign effectively communicated a key aspect of Mr. Zetsche's message, which was that Chrysler Group delivers "the best of German and American engineering."
But in retrospect, even Mr. Murphy says it was too much to ask for a single campaign to raise brand awareness, introduce the customer benefits of the DaimlerChrysler merger and push employee pricing all at the same time.
"The Dr. Z campaign, as a sales driver, did not do the job," he says. "Vs. the prior year, it was not a good summer, but it wasn't a bad summer. But the sales results were not what we were looking for."
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Car mavens sharpen their pencils
The automakers' grades are based on individual assessments offered by automotive analysts Jeremy Anwyl, president of Edmunds.com; Wes Brown, partner at consultant Iceology; Charlie Hughes, president of Brand Rules; Doug Scott, senior VP at GfK Automotive; Art Spinella, president of CNW Marketing Research; and Todd Turner, president of Car Concepts.
The grades refer to the automotive marketers' 2006 performance. The advertising/communications category includes the effectiveness of traditional, measured-media advertising as well as nontraditional marketing, with particular emphasis on the use of new media. Actual-sales grades are based on percentage change in 2006 vs. 2005, but they also take into account the particular challenges each carmaker faces.