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August 17, 2005
Customers message to Detroit
News flash for Detroit: make better cars.
WSJ.com - Car Owners Value Quality Over Cost, Survey Suggests:
A survey to be released today of U.S. vehicle owners indicates that while this summer's "employee-pricing" deals may give auto makers short-term sales gains, improving quality is more important in the long run.
The survey referred to is the University of Michigan's American Customer Satisfaction Index - run by Professor Claes Fornell. His take on what Detroit needs to do:
Customer satisfaction with U.S. automobile nameplates has improved, but nevertheless falls further behind competition from Japan and Korea. Rebates, low cost financing, and employee discounts to the public have led to higher sales and ACSI scores for U.S. automakers, but they have also taken a toll on profits. In contrast, the rising satisfaction with foreign cars is due to improvements in quality and customization. Price promotions usually have a positive effect on customer satisfaction, but it is generally not large or sustainable. Some US nameplates have also increased advertising touting their superior customer satisfaction. It is difficult to see how Chevrolet (with an ACSI score near the bottom of the industry), for example, can benefit from such advertising: People know how satisfied/dissatisfied they are. It is unlikely that any amount of advertising will change their attitude. A better strategy would probably have been to move dollars from advertising to product improvement instead. It is still not clear that Detroit is taking customer satisfaction, or the lack thereof, seriously enough.
As the Wall Street Journal story points out "U.S. auto makers spent an average of $4,239 a vehicle on incentives in July, compared with $2,372 for European brands and $1,619 for Asian brands, according to Autodata Corp."
Deja vu, anyone? Didn't we go through this before? Detroit spends money on marketing; competitors spend money on product improvement. Detroit has even brought back Lee Iacocca as its corporate spokesperson ("You forget the most important part - the deal").
Why is it when we are supposedly moving into the I-Cubed economy, we keep re-fighting the battles of the 70s and 80s? Our public policy is stuck in that time period (see Going beyond math and science). And now it seems that the corporate strategy of a key US industry is stuck as well.
As Santayana said "Those who cannot remember the past are condemned to repeat it."
Posted by Ken Jarboe at August 17, 2005 8:25 AM
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