General Motors, Blacksmiths, and the Relevance of Brand Marketing. Classic Jack from 1993

The following commentary is reprinted from my 1993 book Adbashing: Surviving the Attacks on Advertising. The insights and recommendations are, in many ways, even more relevant today.

Too often in the past, corporate strategies have been determined without the input of marketing trends and marketplace realities.

There's the story of the blacksmith who prided himself on molding the finest horseshoes and having the fastest service. Upon the introduction of the automobile, he set his strategy to produce more horseshoes and speed up his service even more to assure that he could capture the lion's share of the smithing business. He hired more blacksmiths and increased his space. One day, a young auto mechanic walked in and asked for some free space to fix autos. In return, he would give 50% of his business to the blacksmith. But the blacksmith said no, because the loss of space would be counter to his strategy of improving his turn-around time on shoeing horses.

This apocryphal story is indicative of the many counter-productive actions taken by business caused by blind adherence to strategies that are not based upon marketplace realities and are not responsive to tactical marketplace opportunities. In the 1980s, General Motors' strategy was to become more cost-competitive and profitable by merging the manufacturing and design of its divisions. During this period, it became obvious that the greatest tactical opportunity was to clearly differentiate their product lines and serve various market fragments. Yet the engineering division manufactured products that were clones of each other. Japanese competitors were marketing clearly differentiated and well targeted products. Marketing executives from American auto manufacturers became the old-fashioned elixir salesmen trying to sell their cure-all products in a modern drug store.

A major issue for big business in the 1990s is how effectively it can adjust and restructure organizationally to take advantage of new business realities. Most major companies have had significant staff cuts in recent years. Marketing and research departments have been especially hard hit. Brand and product management have focused heavily on their short-term business needs, spending the majority of their time and efforts on distribution and promotional efforts.

Several studies have tracked the disintegration of brand loyalty during the 1980s. Brand equity, which took years to build, has eroded as corporations have concentrated their marketing efforts on short-term promotional activities and simultaneously cut back on the percentage of their marketing budgets devoted to establishing brand equity.

Companies generated brand loyalty for their products at a time of minimal competition and when mass media were available at comparatively low costs. They aggressively promoted their brand image and identity through mass media advertising.

As consumers became less homogeneous in their tastes and the numbers or products increased, competition became fiercer. Manufacturers shifted strategies away from mass media and toward targeted marketing and promotional couponing efforts, attempting to incent customers to purchase their products. Ultimately, the marketing process has imploded on itself; companies have emphasized price cutting, promotions and trade allowances. The more price cutting and couponing they do, the more consumers expect them and base their buying decisions solely on price. The more trade allowances offered by marketers, the more demands retailers make in return. As marketers have placed more emphasis on short-term promotion, the equity value of their brands have collapsed. Now companies are faced with the challenge of rebuilding brand loyalty and rebuilding profits at a time of intense competition and fragmented media.

To respond to this challenge, business requires a new set of paradigms. Whereas corporate marketing executives have been operating under financially restrictive parameters, future corporate directions must entitle them to act aggressively and creatively.

Jack Myers is available to speak and consult on emerging media and advertising industry trends, patterns and economics. Contact Jack at jm@jackmyers.com.