Automotive Marketing Methods and Practice : Final Report
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HF 1R.S 0. D0T-TSC-NHTSA-79-31 HS 804-522 •A 34 NO. , hot- ,, AUTOMOTIVE MARKETING METHODS AND PRACTICE Patricia L. Braden Seymour Marshak Robert P. Whorf GILBERT R. GREEN & COMPANY, INC. Natick Office Park Natick MA 01760 SEPTEMBER 1979 DEPARTMENT OF FINAL REPORT transportation OCT 1 3 19/9 / DOCUMtNT IS AVAILABLE TO THE PUBLIC. THROUGH fHt NATIONAL TECHNICAL LIBRARY INFORMATION SERVICE, SPRINGFIELD, VIRGINIA 22161 Prepared for ,U.S. DEPARTMENT OF TRANSPORTATION NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION Office of Research and Development Washington DC 20590 NOTICE This document is disseminated under the sponsorship of the Department of Transportation in the interest of information exchange. The United States Govern- ment assumes no liability for its contents or use thereof. NOTICE The United States Government does not endorse pro- ducts or manufacturers. Trade or manufacturers' names appear herein solely because they are con- sidered essential to the object of this report. Technical Report Documentation Page 4. 1. Report No. 2. Government Accession No. 3. Recipient's Cotolog No. 6. HS 804-522 TifU and Subtitle S. Report Data September 1979 AUTOMOTIVE MARKETING Performing METHODS AND PRACTICE Orgonizotion Code JA 8. Performing Orgonizotion Report No. 7. Authors) Patricia Braden, Seymour Marshak, Robert Whorf DOT-TSC-NHTSA-79-31 9. Performing Organization Name and Address 10. Work Unit No. (TRAIS) Gilbert R. Green & Company, Inc.* HS927/R9404 Natick Office Park 11. Contract or Grant No. Natick MA 01760 DOT-TSC 1322 13. Type of Report and Period Covered 12. Sponsoring Agency Name and Address Final Report U.S. Department of Transportation March 1977-Sept. 1977 National Highway Traffic Safety Administration Office of Research and Development 14. Sponsoring Agency Code Washington DC 20590 15. Supplementary Notes U.S. Department of Transportation *Under contract to: Research and Special Development Administration Transportation Systems Center Cambridge MA 02142 16. Abstract This report is a comprehensive examination of the current marketing practices, marketing methodologies, and decision-making processes utilized by the domestic automotive industry. The various marketing elements, such as products, consumer behavior, sales, promotion, distribution, advertising, and regulatory constraints are reviewed as they pertain to the automotive industry. Specifically, the report's seven chapters include (1) a review of industry competitive relationships, (2) practical constraints on automotive decision-making, (3) corporate organization for decision-making, (4) understanding the consumer, (5) marketing decision-making, (6) assessment of current problems and issues, and (7) state-of-the-art summary. Four appendices focus on (1) the organization of General Motors Corporation, (2) the organization of Ford Motor Company, (3) the product and market planning process graphics, and (4) an example of a forward product strategy document. Where appro- priate, the report highlights the differences in marketing approaches employed by the four automotive manufacturers and some of the adjustments and prob manufacturers in their marketing pursuits. by these DEPARTMENT Cl)F TRANSPORTATION OCT t 3 19/9 LIBRARY 17. Key Word* 18. Dittribution Statement Automobile and Automobile Industry, DOcUMbMI IS AVAIl. ABI C I'D IhfcPUtsLIC Consumer, Consumer Behavior, Decision- THROUGH rut NATIONAL T ECHNICA1 IN FORM A LION SERVICE, SPRINGE lEI O, Making, Marketing, Marketing Methods and VIRGINIA 22161 Practices, Market Analysis 19. Security Cloaslf. (of this report) 20. Security Cloieif. (of thie page) 21* No. of Page* 22. Pr Unclassif ied Unclassif ied 188 Form DOT F 1700.7 (8-72) Reproduction of completed page authorized ' ... •/ *v*" > V; : ; PREFACE The present report was prepared in support of the Department of Trans- portation's (DOT) need, under the Energy Policy and Conservation Act, to implement average fuel economy standards for passneger automobiles. An impor- tant ingredient of DOT'S Automotive Fuel Economy Research (AFER) analysis program is the development of a better understanding of current automotive marketing methods and, in particular, of the potential impacts of the stand- ards on the marketing and marketability of passenger cars. The present report represents a "first step" toward DOT'S goal. The subject report was prepared in 1977 by three consultants to the Gilbert R. Green & Company: Dr. Seymour Marshak, Dr. Patricia L. Braden and Mr. Robert P. Whorf. Dr. Marshak, now Dean of the School of Business, California State Univer- sity-Long Beach, was recently Professor of marketing at New Mexico State Uni- versity, Las Cruces. Dr. Marshak has a long and distinguished career in automotive marketing, his most recent positions being Director, Marketing Plans and Analysis at the Chrysler Corporation, Marketing Research Manager, Marketing Staff, Ford Motor Company, and Advertising and Distribution Research Manager, Ford Motor Company. Dr. Braden is a member of the Division of research and Professor of Marketing, Graduate School of Business Administration at the University of Michigan. For 10 years, Dr. Braden has conducted research on consumer behavior and a wide range of marketing problems. She has also undertaken major research and consulting assignments for automobile manufacturers and the Motor Vehicle Manufacturers Association. Mr. Whorf heads his own consulting firm, concentrating on policy research and analysis in transportation and energy sectors. For eight years he was with the Ford Motor Company, principally in the Transportation Research and Planning Office where he concentrated on the analysis and modeling of changes in use, ownership, and sales of automobiles. For more than 12 years prior, Mr. Whorf was consultant in product and marketing planning, much of which was for automotive and allied industries. The three authors worked closely on all aspects of the preparation and writing of this report and share responsibility for all views and opinions presented herein. 1 1! = * * “sVi o S If 11 Hit! ill! in liliii u • J M HI «* « 1 * * «•» r * 1 S 8 S S5> Is »> S '35 O O N -* »si te o o n » o d - © ^ d •? s'; O ©5 1« S €«> GC s &IdJ E f 0- * 1 *i 1 • 8 2 a S J * to £ as 1 1 ill! * I • ® si o W *• III if o 1 1 4 a i § I 15 ill fE A> • ml i ? 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PRACTICAL CONSTRAINTS ON AUTOMOTIVE MARKETING DECISION MAKING 13 2.1 General 13 2.2 Business as Usual Constraints 16 2.3 Government Regulatory Constraints 28 References For Chapter 2 33 3. CORPORATE ORGANIZATION FOR DECISION MAKING 34 3.1 General 34 3.2 Division of Marketing and Product Planning Responsibilities 36 3.3 Organizational Implications of the Energy Policy and Conservation Act of 1975 38 3.4 Organization Charts 39 References for Chapter 3 40 4. UNDERSTANDING THE CONSUMER 41 4.1 General 41 4.2 Internal Sources of Data 45 4.3 External Sources of Data 48 4.4 Special Planning Studies 56 4.5 Buyer Studies 58 4.6 Studies Among Prospects 61 4.7 Studies Among Dealers 62 4.8 Marketing Information Systems 63 4.9 Systems Approach to Marketing Decision Making 65 References for Chapter 4 68 5. MARKETING DECISION MAKING 69 5 . 1 General 69 5.2 Forecasting and the Development of Planning Volume. 72 v TABLE OF CONTENTS (CQNT'D) Chapter Page 5.2.1 Trend Analysis - Annual Forecasts 77 5.2.2 Source of Sales Model - Annual Segment Forecasting - 10 Years Out 77 5.2.3 Age Segment Purchase Rate Model - Annual Segment Forecasting - 10 Years Out 77 5.2.4 Wharton Model Translator - Quarterly Forecasts Two Years Out 78 5.2.5 Small Car Model - Quarterly Forecast Two Years Out for Small Cars 78 5.2.6 Leading Indicator Model - Monthly Annual Rates for Six Months 79 5.2.7 Box-Jenkins Estimation - Monthly Forecasting - Six Months Out 79 5.2.8 Exponential Smoothing - Monthly Forecasting - Three Months Out 79 5.3 New Product Marketing Research... 80 5.4 Pricing. 97 5.5 Advertising 103 5.5.1 Media Data 108 5.5.2 Advertising Research 109 5.5.3 Directional Research 112 5.5.4 Development Research 113 5.5.5 Decision Research 113 5.5.6 Performance Measurements 114 5.6 Distribution 115 References for Chapter 5 122 6. ASSESSMENT OF CURRENT PROBLEMS AND ISSUES 123 7. STATE OF ART SUMMARY 132 APPENDIX A - ORGANIZATION OF GENERAL MOTORS CORPORATION A-l APPENDIX B - ORGANIZATION OF FORD MOTOR COMPANY B-l APPENDIX C - PRODUCT AND MARKET PLANNING PROCESS GRAPHICS C-l APPENDIX D - EXAMPLE OF FORWARD PRODUCT STRATEGY DOCUMENT D-l vi LIST OF ILLUSTRATIONS Figure Page 1 Marketing Planning System 44 2 Marketing Analysis and Retrieval System 64 3 Sales Trend Volume Development 76 4 Wharton Forecast for Auto Consumption 81 5 Chase New Car Sales Forecast 82 6 D.R.I.