Ford Motor Company has just enjoyed their best first quarter on record. They’re leading the way as America’s auto industry inches its way toward recovery, outperforming their closest domestic competitors, Chevy and GM, significantly.
When asked to share the reasons why Ford is doing so well, CEO Alan Mulally cited, among other factors, the decision to simplify the company’s product mix. Ford needed to focus on its core offerings, producing a complete line in every size: small, midrange, and large. Gone from the picture? The numerous luxurious European brands that Ford had acquired over the years.
So far it appears to have been a good decision. Good enough, in fact, that we should step back and examine the thinking that went into it. How did Ford’s leadership know which of its many lines to embrace and develop further, and which ones to let go?
It’s easy to see where divesting of Jaguar, Land Rover, and Volvo clarified Ford’s brand message. But was that clarity achieved by needlessly sacrificing profitability?
Brand Modeling as a Decision Making Tool
The greatest challenge any business leadership team faces is one of uncertainty. The automobile industry was hit particularly hard by the economic downturn. Consumer confidence was in a near free-fall for many critical months, tightening the supply of cash and making mistakes a luxury no brand—including Ford—could afford.
The goal is to eliminate uncertainty. The ability to predict, with a reasonable degree of accuracy, how an organization’s customer base will react to any change is a tool that provides a real competitive advantage. Brand Modeling provides this forecasting ability, based on the behavioral and psychological traits of the most profitable portion of a company’s market.
Brand Modeling: Focus on Ford
If we were going to consider Ford’s choices from a Brand Modeling perspective, we’d want to know a few things. First and foremost, we’d need to have a concrete understanding of how Ford’s best customers connect with the brand, psychologically and emotionally.
When there’s a strong relationship in place, we see multiple points of connection between customer and brand. Some of these connections are more vital and important than others. Listening to Mulally, we hear him discuss Ford’s dependability and value. These are two traits that the CEO believes make the brand most appealing to Ford’s market. Ford’s customers buy Taurus and Focus and the F-series pickup truck line because they believe in that message of dependability and value. They’re critical components of the relationship.
Making any type of change to Ford’s operation that changes that customer belief in the brand’s dependability and value is a non-starter. On the other hand, changes that reinforce the customer’s perception of Ford vehicles as reliable and affordable will strengthen the brand.
Using this lens provided by Brand Modeling, we can see one possible route Ford’s leadership took when choosing to slash the luxury lines. While Volvo and Land Rover are certainly dependable, they’re not cars that appeal to Ford’s target market. Their connection to the Ford company did nothing to reinforce the message of durability and value. At best, they were irrelevant. In the case of the Jaguar, one could argue that there was at least a little cognitive dissonance involved: no one buys a Jaguar because they’re dependable. Brand Modeling uses historic data and in-depth psychological analysis of the customer base to create a level of parameters and filters that simplifies the decision making process.
So far, the numbers seem to support Mullaly’s decision. The impact of the hurricane, tsunami, and nuclear disaster related events in Japan are having an across-the-board effect on the auto industry, and so some softening is to be expected as unavoidable. That being said, if Ford’s confidence in their customers is well placed, the rest of the year could turn out pretty well for the auto manufacturer.