GM’s Demise and the Rise of CRM Culture

Business schools have been discussing General Motor’s loss of market shar for decades already, and the added denouement of the company’s bankruptcy filing will no doubt drive many academic papers for decades to come.

The roots of GM’s fall from grace are numerous, and it would be incorrect to attribute the fall to any single factor. Like Rome’s fall, there were many root causes, and it took so long that when the end came, life as people knew it simply continued. Far more traumatic and catastrophic was the instantaneous obliteration of the city of Pompeii.

At least part of the fall can be attributed to GM’s being out of touch with its customers, which has been documented for many years, including in a wonderful 1984 book by David Halberstam, The Reckoning. Thought the book is mostly a comparison of the No. 2 car companies in America and Japan (at the time, Ford and Nissan, respectively), there is ample discussion of GM as well.

The Pepsi Generation of Customers

In the book, Halberstam tells an illuminating story of how company executives were all given company cars that were kept in heated garages and scrupulously maintained during the workday. These pampered cars never hiccupped, and the executives who drove them never had the same experiences with the product as their customers.

For a long time, GM, Ford and Chrysler all dealt with the customer in ways that were appropriate to their times. They were manufacturers running large factories, and in order to get the economies of scale needed to make their complex products affordable, they found ways to make customers want the relatively undifferentiated things they mass-produced. It was a 20th century mindset, and it worked brilliantly — so well, in fact, that GM actually made money every year during the Great Depression.

Everything changed with the Pepsi Generation. People like you and I decided we were individuals and wanted to be treated that way. Manufacturers tried to catch on, and car makers were a prime example, offering every conceivable option a la carte down to five or six engine choices. Lead times lengthened, quality was never high but it declined too, and production runs overshot and undershot demand. Car dealers nonetheless found ways — through discounting and sales — to fit round customers into square cars.

Japanese and other foreign manufacturers took a different approach to the American car market. With long shipping distances and no dealer network to speak of, they realized that they would either have to build to very high quality standards (Honda, Toyota and Nissan, for example) or not play in the market. Remember Yugo and Sterling? Foreign car makers took a Zen approach to selling cars. Simplify the process, reduce the number of choices, make the most popular options standard. There would be less haggling and animosity as a result.

Marketing on Value vs. Marketing on Price

You already know this, but there is a point.

CRM entered the picture around this time, though even today both American and foreign dealerships are among the least well-penetrated CRM markets. However, CRM is more than the technology; it is a way of doing business. Car dealers need to move units, there’s no way round it — but look at how they do it.

A typical American car company ad on TV positions the product as secondary to the great deals now being offered. Discounts, reduced or eliminated interest rates and free options are what we hear about from Detroit. In marked contrast, foreign vendors talk about higher values like reliability and security. They have taken the lead in vouching for the reliability of their products and have taken the radical step of even guaranteeing the security of your job. If you lose your income, they say, bring the car back with no penalty. Some will even make your payments for a short time.

Detroit’s troubles and their mirror images in foreign fenders are emblematic of the failure to implement CRM concepts. A mature market like autos should not be a late adopter of the ideas — if not the tools — of CRM, but that is exactly what has happened in Detroit. The bankruptcies of GM and Chrysler point to that failure, but there is also reason for optimism.

It won’t be a sale that gets Detroit back to full strength. It will take many months and probably years of carefully listening to customers and ditching once and for all the 20th century mindset of mass production and huckstering. In my view, I don’t see a lot of alternatives for Detroit other than for the automakers to embrace CRM and social networking. There are proven things they can do that will result in better products and finer-tuned messages to a public that still needs reliable transportation.

If they go more in a CRM direction, I expect that the car companies will give CRM a new boost at a time when this market could use it. You might say that what’s good for GM is good for CRM, and vise-versa.