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HOT Ford to focus on being more consumer friendly - CEO
March 12, 1999 03:40 PM
DEARBORN, Mich., March 12 (Reuters) - The world's second- largest automaker, Ford Motor Co. F , needs to become more consumer friendly and better able to predict buyer trends if it wants to cement customer loyalty and post stronger sales.
An internal memo from Ford's new president, Jac Nasser, obtained by the Detroit News said the automaker should build closer ties with consumers and anticipate their needs better.
Nasser cited such non-automotive companies as beverage group Coca-Cola Co. KO , delivery firm Federal Express Corp. FDX and computer maker Dell Computer Corp. DELL as as role models because of their high customer loyalty, short product cycles and strong brand names, according to the newspaper.
Ford spokesman John Spelich declined to elaborate on the memo on Friday.
Nasser said last week that the auto industry has done a poor job of building relationships with customers and that must change.
"We grew up in an industry that operated along these lines: the ideal situation is that you conceived of a product that the customer wanted. You engineered it, manufactured it in a defect-free manner, the dealer sold it and you never wanted to hear from the customer again," he said while being honored as executive of the year by Automotive Industries magazine.
Automakers historically have loyalty rates of about 50 percent, compared with 80-90 percent for consumer product companies, Credit Suisse First Boston analyst Nicholas Colas said.
If higher loyalty can be achieved, advertising spending and discounting can be cut and sales will grow, he said. That translates to higher valuations for the stock.
"Fully half the people choose not to be a user of your product after they've tried it," Colas said of automakers. "That's a huge problem and it's why Detroit in aggregate is the biggest advertising industry in this country.
"You can't watch a half hour of TV in the country without getting an ad for a car of some kind. (Automakers) know you're very susceptible to switching."
The ultimate in brand loyalty is when a consumer is willing to pay more for a company's product even though a similar product at a lower cost is available, Colas said.
"Toyota , for example, can charge 10 percent more for a small car than GM even though both cars are built in the same plant by the same people on the same day," he said, referring to the automakers' joint-venture plant in Fremont, Calif., where the Chevrolet Prizm and Toyota Corolla are made.
Nasser sent the message to employees in a recent internal memo that spells out his new edict of tapping the minds of consumers and building vehicles that meet their needs.
He has moved quickly to stamp the company with his image since he assumed leadership on Jan. 1, naming four outsiders from consumer companies to top positions and closing the deal this week to buy Sweden company AB Volvo's car operations for $6.45 billion.
His strategy builds on the Ford 2000 initiative championed retired Chairman Alex Trotman, Colas said. Under that program, Ford merged worldwide research and engineering efforts, cutting vehicle development time and saving billions of dollars in a move others like General Motors Corp. GM are copying.
Nasser said during an auto supplier conference earlier this month that Ford must keep its seven brands relevant to consumers of all ages and lifestyles. In the memo, he said a consumer company must translate consumer needs into breakthrough products, stronger customer relationships and greater shareholder value.
He said leading consumer companies have stock prices trading at 30 times their per-share earnings or more, compared with 11 times at Ford. Colas said the idea is valid, although comparing cars and Coca-Cola is apples and oranges.
To gain a better understanding of consumers, Ford has been sending executives to several successful consumer companies to study how they develop products and communicate with the public, the newspaper said. These companies included 3M, American Express, Wal-Mart and Proctor & Gamble.
((--Detroit Newsroom, 313-870-0200)) REUTERS
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