HOW ALBERT SLOAN OF GENERAL MOTORS USED A PRODUCT MIX STRATEGY IN 1923 TO OVERCOME THE MODEL T INSUR

Published: 14th September 2011
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HOW ALBERT SLOAN OF GENERAL MOTORS USED A PRODUCT MIX STRATEGY TO OVERCOME FORDíS MARKET LEAD IN 1923



In 1923, Albert Sloan of General Motors used a product mix strategy to become the pre-eminent brand in cars. This is a bench mark case that every social media marketer should study. The Ford Model T is the most significant brand in American marketing history. At the time this happened, its lmarket lead seemed insurmountable. General Motors used the social media of the day to overcome this lead. This is why this case is so critical for a contemporary marketer to follow.

To be a successful social marketer, you must be humble. A marketer must realize that no matter how strong your brand is, it is vulnerable and can be easily overtaken with the proper strategy. Also, if you are an entry level brand, you must never feel ambivalent in confronting a major brand that is well- established. There are no perfect brands. In social media, any brand can be overtaken under the right kind of circumstances. Ford vs. GM in 1923 is a perfect example.

As 1923 began, the Ford Model T had a brand that seemed insurmountable for a competitor to overtake. Ford had 60% of the overall market. General Motors only possessed 12%. The Ford Model T comprised 90% of the entire American car market in 1923. No one thought that it was possible for GM to overtake Fordís lead. Albert Sloan used the social media of the day. This gave Mr. Sloan real-time knowledge of the American auto market. Through his experience with the social media of the day, Mr. Sloan knew that Fordís brand was very vulnerable. He realized that General Motors had an historic opportunity to overcome Ford.

A simple definition of social media is when the brand and the consumer engage one another. The two develop a close, almost human relationship. The two become "friends". This friendship creates many touch points between brand and the consumer. These multiple touch points create the consumer buying decision. When Alfred Sloan became head of General Motors, he traveled the country talking with customers. He engaged with them. In 1923, the General Motors brand created friendships with their market. This changed the entire paradigm.

Mr. Sloan realized that some very important things had occurred in the American society and this changed the entire makeup of the American car market.

In 1908, when Henry Ford first developed the Model T, the average American citizen did not make a middle class wage. Few people earned a middle class wage at their jobs. Henry Ford only paid $.39 an hour in his assembly plants. Henry Ford made an historic observation in 1908. He observed that the brand that developed a low cost car, a car for the masses, would become the pre-eminent brand in automobiles. Henry bet that low cost would be the key factor in purchasing a car. Ford developed the Model T and sales simply took off.

By 1923, in engaging people, Alfred Sloan realized that things had changed. There was now a middle class in America. "Morning had come to America". They had disposable income. The American market wanted something more than just cheap transportation. They wanted a car that was enjoyable and comfortable to ride. Driver comfort was a critical touch point in the consumer buying decision.

An important fact that Alfred Sloan discovered, through his social media engagement, was that people used a car to define their economic position in life. In the American society, there were entry level people, middle class people, and there were very successful people. People wanted a car that would reflect that. The Model T was now seen, in 1923, as a car "for farmers".

The difference between Henry Ford and Billy Durant, the creator of General Motors, in 1908 was that Henry thought that people only wanted low cost. Billy Durant thought that people wanted affordable cost and variety in their car products. This is the major difference in how Henry Ford and Billy Durant defined the original auto market in 1908. Billy Durant decided to have several brands under one big umbrella brand. Mr. Durant understood how the long-term car market would develop. He bought the Chevrolet, Pontiac, Oldsmobile, Buick, and Cadillac brands. He made available the tools that Albert Sloan would need in 1923 to compete.

Mr. Sloanís strategy was a "car for every purse". His strategy also revolved around the fact that General Motors "made money not cars". People would begin their lives by buying a Chevrolet. Once they were at a job for a while and had some pay raises, they traded the Chevy in for a Pontiac. As they developed in their job and began to move up in their career, they purchased an Oldsmobile. When they became supervisors, they bought a Buick. When they became a vice-President, when they were successful, people bought a Cadillac.

This was a brilliant strategy---a strategy that simply offset Ford. GMís product mix strategy left Ford with nowhere to go It was a strategy that Ford had no answer for because Ford had just one large entry for the entire market---the Model T. The Chevy could now compete against Ford in the low cost market. Besides a low cost, the Chevy had a self-starter, headlights, had a closed body, and had interior heating. It appealed to women who were just now entering the work force. Ford made a few Lincolns, but it had no major luxury brand in 1923 to compete with Cadillac. General Motors now owned the luxury market. This market created an intense brand for General Motors and created a strong revenue stream which supported the entire General Motor organization. This branding created an important touch point in the consumer buying decision

With this strategy, General Motors overcame Fordís once insurmountable lead. It took only 3 years, by using social media and engaging customers. It overcame Ford by 1926. From that time until now , Ford has lagged behind General Motor in market share. The lesson for contemporary marketers is this. In a social media age you must be humble. Irregardless of your market share, because of the size and scale of social media platforms, your market share can easily and quickly be overcome if your opponent has a compelling, competing product. In 1923, Ford had 90% of the car market.

By 1926, General Motors had the leading market share. Albert Sloan did not have Facebook, Twitter, and YouTube. If he had, he could have taken away Fordís 90% market share in a matter of months, or even weeks.



Dean Hambleton

dnhambleton@gmail.com


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