Brands in the Crosshairs: Pontiac

The loss of Pontiac, the iconic brand from General Motors is a terrible thing for the thousands of employees who'll see their paychecks disappear along with the stylized arrowhead logo. But from a brand perspective, it's the best possible move for GM - a company that long ago lost the capacity to effectively design/build/market so many different brands.

Alfred Sloan's brilliant strategy, to combine different brands under one roof, maximize synergies while meeting the needs for every conceivable market niche or category, has run its course. Pontiac for the sporty car enthusiast, Chevrolet for the working folks, Buick for those moving up, Cadillac for the truly upscale (and lately Saturn for those who'd rather own a Toyota). This brand management model helped the company to own over 50% market share - once.

But the drive for "synergy" led the company to use a very limited number of platforms and simply rebadge car models, add leather seats and call a Chevy a Buick or a Pontiac, or, gasp, a Cadillac. Simple-minded customers that we are, we eventually saw through the deception. We can't be fooled forever (Really, did some executive actually think that this strategy would be a good thing? That brands with whole different philosophical foundations could share models with no real differentiation. Really?)

The loss of Pontiac provides GM with a couple of opportunities. First, of course, it helps the company remain in business. Second, it can balance production to actual demand, and with fewer models, the company will be able to differentiate the remaining lineup better. Other benefits include reduction in the dealer force and saving millions on marketing the brand.

The lesson for the rest of us is simple. Don't phone it in. That's right, General Motors has absolutely been phoning it in for nearly forty years. If you're going to support a brand/product, then do it right from the ground up. Build your product to meet the needs of specific customers. Don't think that simple modifications to existing products shipped with a flashy new package will give you a pass into a new market segment. At best that thinking can get you into the game, but you'd better come with game changing products PDQ or you'll find yourself Pontiacked before you know what hit you. Are you listening Saturn?

Amazing how the largest company in America managed to completely fumble their advantage. If you've managed to develop a defensible competitive advantage, study it, understand it, defend it, then evolve it. But don't take it for granted.

Are You Clinging to an Outdated Distribution Strategy?

For many years I have been following the development of various distribution models. The advent of the internet has, over the last ten years, really made a significant dent in the business of distribution companies. The ease of reaching large numbers of customers, combined with a variety of automated systems for order generation and fulfillment, has undermined the industry in some startling ways. Manufacturers of products ranging from hard hats to snack foods and automobiles, always hesitant to give away margin, are looking very hard at how they are currently getting their products into the hands of customers.

And then many aren't. I'm baffled by those industries that continue to pour money into the old models with no revision. A good example is the bicycle business. Manufacturers, by and large, remain convinced that the model of 1990 is still the way to get product to customers today. Their commitment to independent bicycle dealers is commendable, but in light of new approaches to lean manufacturing, mass customization, and logistics, can it really make sense to require dealers to buy tons of inventory, in multiple sizes, months and months before the season?

Here are three signs you may be clinging to an outdated distribution strategy like our friends in the bike business:

1. Do you get rapid feedback on your products from user customers? Middlemen are touted as conduits of customer likes and dislikes. That is a part of their value to you as a manufacturer. Do your channel partners provide you with weekly summaries of customer information? If not, you may be a clinger.

2. Does your salesforce abide by the notion of "stacking deep and wide"? Moving output from your factory into the warehouses of your channel partners doesn't get the product into your customer's hands. Any step along the way where product sits and waits adds cost. Don't agree? How many calls do you take from distributors wanting to return stale merchandise? Damaged goods? Or to make room for fresher seasonal goods? If you think that you are exerting positive pressure on distributors to focus on your stuff when you've managed to fill their racks with record levels of your merchandise you are harming your own long-term ability to work productively with that distributor.

3. You are not seeing market share gains, in spite of your very hard work. Distributors act as buffers between you and the market. They absorb some of the pain when things are bad, but they also dampen your ability to reach out and directly impact your customers. The best promotions are just ideas unless your distributor executes with energy and intensity. The problem is that you can't control that - you might impact it by offering spiffs or incentives, but that's yet more money out of your pocket. If you're frustrated by your market impact, you may be a clinger!

Great distribution channel partners can be worth their weight in gold. But if you continue to use the channel in the same ways you did ten years ago you are losing money, market share, and time. Think of the connections between you and your customers as links in a value chain. Take the time to understand how the system as a whole can make money and reformat your programs to allow that to happen. Use technology to speed information up and own the chain, and engage your channel partners in an ongoing dialog about how to increase total system profits. We'll talk more about how to do that in our next post.