“The F-series is going to remain one of the cornerstones of the Ford franchise.” A notable quote from George Pipas, Ford’s sales analyst, in a Wall Street Journal by Matt Dolan yesterday. In the face of a national trend away from purchasing large vehicles Ford blanketed the airwaves in June with ads for the F150 pick-up truck. In May Ford’s monthly truck sales dropped 30 percent year-over-year to 42,973, and sales are down across the category. At the same time sales for smaller cars are up, including a 28 percent increase for the Honda Civic. The trend toward smaller cars is obvious, so why is Ford spending so much money advertising the Ford F150? The employee-pricing offer may save a buyer some money, but it will only compensate for about one year of the increased cost of gasoline. An F150 owner that drives 15,000 miles and hour and can manage to average 14 miles per gallon is still spending $4,300 annually on gas now, compared to $2,150 in 2004.
There are a few likely answers. One is simply that Ford needs to move inventory, and the assumption is that pick-up sales will be under much less pressure than SUV sales, because many pick-ups are sold as work trucks while most SUVs are not. Pressure from dealers to help them inventory is a likely factor. Another is probably habit. After so many years relying on pickups to drive margin and revenue Ford cannot change its behavior. They may believe that pouring money into more marketing may buy them back some sales and share, or at least soften the fall. Time will tell.
Ford has small cars, the Focus and Fusion, which are selling very well in the current climate. Why are they not spending their advertising dollars promoting these cars? Even the Ford Escape, the hybrid SUV, would seem to make sense. Perhaps these cars are low margin performers. Perhaps they don’t have an inventory problem with these models.
But what message is the advertising campaign sending to the marketplace about Ford as a brand, as a company? Americans have been saturated with messages in the last few months about the impact of gasoline prices on resale value and consumer choices. They know the American car companies are suffering from lower sales and that plant closures and layoffs are coming. An advertising blitz for a gas-guzzling truck in this climate reinforces the perception that Ford doesn’t understand the marketplace, that leadership is out of touch, and that the company got caught flat-footed and doesn’t know how to respond. And an ad that emphasizes employee pricing when layoffs are coming seems like bad timing. Even a balance of ads would act as a hedge against negative perceptions. Ads that emphasized the fuel-efficient models and their sales growth would send a very different message about the company.
No doubt there is conflict within the company. George Pipas was quoted in an AP story yesterday saying “our view (of pick-ups and SUVs ) is that gas prices aren’t likely to go down, and more importantly, many consumers have moved on. We believe that the segment has merit for certain consumers but is not likely to rebound at any point.” It seems that with so much of the production capacity committed to large vehicles, the company simply cannot turn the ship fast enough, even when it knows it is off-course. In June Ford announced it was cutting production of the F150 in the second half of the year and pushing back the launch of the next model by two months. Of the new model Matt Dolan wrote that “a redesigned F-150 will be launched in the fall, but in light of the truck slump, Ford is unlikely to sell the new version in the volumes it had originally planned. If that happens, Ford could be stuck with underused plants and more big losses, which would strain its liquidity and further delay its turnaround.”
I have seen this before. The successful big brand or product within a company will often win resources; including sales and marketing spending, at the expense of smaller brands and products that are performing better. So much self-image, prestige, existing budget, and behavior is tied to the iconic product – particularly if it has recently been the driver of performance – that companies will invest on the downhill slope at the exact moment they should be reallocating resources to emerging higher performers. It is certainly hard to measure the impact of perception in the short term, while moving more F150s off the lots in June and July is easy to measure. And you can be sure a lot of sweat equity has been invested in the 2009 F150. But now is a good time to be thinking about the long-term value of the Ford brand. Now is the right time to be repositioning Ford in the minds of consumers, at a time when attention spans are longer and awareness is higher.
The relentless barrage of F150 ads can only be undermining whatever perceived progress Ford made at the end of 2007 when they released a Blueprint for Sustainability at the Los Angeles Auto Show, and could be undermining them ahead of the expected launch of Ford’s EcoBoost 4 and 6-cylinder engine vehicles that are supposed to be coming into the marketplace at the end of 2008.
July 3rd, 2008 by David Lowey |
Everything changed on December 15, 2008, when all lanes of I-64/US40 between I-170 and Kingshighway Boulevard closed. Now just over 3 miles of my commute is on the highway, and the rest on stop-sign infested, crowded local streets. Now I am lucky to eke out 18 miles per gallon. My fuel efficiency has been cut in half.