Automakers bring the future into focus
What makes a potential car buyer tick?
That question is on the minds of auto company executives more than ever as they try to sell vehicles in the midst of the recession that has been particularly hard on the industry.
To create the "next big thing on wheels," car companies rely heavily on market research, which allows them to screen products and get feedback before committing fully to producing a new vehicle. But some company executives swear by intuition and "going with their gut" when deciding what to produce.
"The obvious plus [to market research] is that you get customer feedback, which is crucial. You're taking a major risk if you don't have that," said Tom Libby, a Detroit-based auto analyst. "You don't want to go to market with no feedback from customers.
"The other side of the coin on focus groups and other market research tools is that you are essentially following, not leading," Mr. Libby said. "One of the comments made to me about focus groups is that if Henry Ford had used them, he would never have come out with the Model T."
Jack Nerad, editorial director of Kelley Blue Book, agreed that market research tools such as focus groups have had mixed results. "Sometimes a lot of great information is learned, but sometimes they are used to reinforce preconceived notions that the car companies already have."
Another criticism of market research is that potential customers don't always tell researchers what they really believe. "There are a lot of dynamics in focus groups, for example, that can cause distorted results or market research complications that can lead to incorrect conclusions," Mr. Libby said.
One auto executive with a known dislike of market research is General Motors Vice Chairman Bob Lutz. He could not be reached for comment.
"Bob's extremely self-confident," Mr. Libby said. "I remember asking him about the Chrysler PT Cruiser that was designed when he was at Chrysler.
"He said the designers kept coming back to him with designs. He said no, and then they'd do something else and he would say no again. Then a designer came in with a design and Bob said he told them, 'That's it.'
"And that was it. It was very successful. I don't know if any customers were involved at all (in the design)," Mr. Libby said.
Still, given development time -- about three or four years from idea to production -- fickle customers and fast changing markets, it's dicey to rely solely on instinct in the automotive business.
Mistakes can be very expensive -- even fatal -- since it can cost hundreds of millions of dollars to design and produce a new car.
One striking example of what can go wrong is the Pontiac Aztek, almost uniformly considered one of GM's biggest flops. It was produced from 2001 to 2005.
When the concept car on which the Aztek was to be based was introduced, auto show audiences reportedly liked it but when it came to market, sales stagnated with people calling it the ugliest car ever made.
"My understanding is that the Aztek did not go through the normal customer feedback process. General Motors needed to have something innovative.
GM quickly pushed it through because it was different," Mr. Libby said.
"It's hard for me to believe that potential customers would have approved of it. They would have had to be in a coma to approve of that style."
An example of a daring risk that paid off was the original Ford Taurus, which was the result of turning designers loose to produce a car they really liked.
The model was considered ahead of its time.
"Jack Telnak, who was the head of design, said that as a car company, you had to come out and be in front. You have to lead," Mr. Libby said.
As gutsy as such designs can be, market research has sometimes kept car makers from making missteps.
Nissan officials say they were ready to launch a new Sentra back in 2004, but got some strongly negative reactions from marketing research efforts.
"Nissan stopped the program and redesigned it because of the extremely negative customer feedback," Mr. Libby said.
Today, the Sentra is a good seller for Nissan, with attractive styling that fits with the other products in the automaker's line.
"There has to be a happy medium between going with your gut and going with overreliance on market research," said Carol Gstalder, senior vice president and sector leader for the business and industrial team at Rochester, N.Y.-based Harris Interactive.
Market researchers have a wealth of tools at their disposal to try to ascertain what customers want.
If a car company wants to know why people keep buying its brand so it can protect its sales advantage, it needs to understand "what the brand says to its owners and why they are repurchasing it," said Clay Dethloff, senior vice president and sector leader for Harris Interactive's business and industrial team.
To find out how to get people to switch brands, the target respondents for the research will be owners of the client brand who already switched from another brand.
If a company wants to know why a brand isn't selling, market research will target those who considered the brand but didn't buy it.
The tool that most people associate with automotive market research is the focus group but another tool has become more popular recently: ethnography.
With this, market researchers go into people's homes to see how they live, what they do with leisure time, how they use their vehicles and how they define themselves by what products they use.
Two new cars from Detroit for 2010 were developed partly based on ethnography: the Ford Taurus and Buick LaCrosse.
"We had a research firm find people owning competitive vehicles -- in this case, the Lexus ES," Buick spokesman Dayna Hart said. "We said to them, 'We'd like to talk to you about what you like about your car.'"
The researchers wouldn't reveal what company they were working for.
"We would bring them sandwiches and meet them at their homes, and then we would go out to their garage and sit in their car with them. They would show us what features they liked or didn't like."
For the Taurus, Ford headed to Atlanta for its research -- two- to three-hour meetings with consumers who were either new full-sized sedan owners or who intended to buy one soon.
"There's just a difference in going to somebody's home," said Earl Lucas, exterior design manager for the new Taurus. "When there's a marketing event with your target customers, you sometimes feel they are trying to tell you the right answer or the answer they think you are looking for."
With ethnography, he said, "You experience people as they really are."
First Published August 13, 2009 12:00 am