General Motors: Total Recall

Image: General Motors is facing the largest auto industry recall crisis since Toyota’s controversy with stuck accelerators. GM has recently announced several different defects across multiple car lines, resulting in the recall of nearly 5 million vehicles. But the defect that sparked the crisis is the most striking for its seeming triviality: a tiny ignition switch in Chevy Cobalts and other GM models that could be deactivated by jostling key rings, causing the car to turn off. The consequences of the switch malfunction, however, are far from trivial: 13 deaths linked to loss of control when the cars shut down while in motion.

Damning reports reveal General Motors was aware of the switch problem for a decade, pursuing quiet, quick and incomplete fixes while deeming the defect to not be a safety problem. GM redesigned the switch without assigning a new part number to the new switch, obscuring the change and making it virtually impossible to isolate the previous generation of defective switches. Concurrently, the National Highway Traffic Safety Administration (NHTSA) failed to detect any trends in ignition switch malfunctions leading to accidents, creating a related PR crisis for the government agency.

General Motors’ “code of silence” and slowness to act mirror corporate behavior in other major automobile defect crises over several decades. The following descriptions of these crises include information I shared in my previous blog, “Release,” at the time of Toyota’s crisis in 2009.

Toyota, stuck accelerators–In 2009, reports surfaced that Toyotas were experiencing sudden, unexpected acceleration leading to accidents and deaths including those of Highway Patrolman Mark Saylor and his family. Toyota insisted the problems were due to either floor mats interfering with the accelerator pedals or driver error. The latter attempt to blame consumers rang particularly hollow in light of Mark Saylor’s deadly crash, as he was a trained driver. Additional reports revealed that Toyota concealed knowledge of accelerator defects. In March 2014, the U.S. government levied a $1.2 billion fine against Toyota for its misconduct.

Ford/Firestone, Explorer rollovers–In 2000, the NHTSA investigated the high incidence of rollovers for Ford’s trendsetting Explorer SUV. Tread separation on the stock Firestone tires was singled out as a cause. Soon, Ford and Firestone were in a fingerpointing war over shoddy tires and tippy SUVs with both corporate giants accused of insufficient empathy for accident victims. Subsequent reports showed that Ford had longstanding, internal concerns about the Explorer’s susceptibility to rollover.

Ford, Pinto gas tank ruptures–Perhaps the signature auto industry crisis, the 1970s subcompact was deemed vulnerable to fires and explosions from gas tanks rupturing in rear-end collisions. Mother Jones produced a “smoking gun” memo claiming Ford knew of the problem and had decided settling lawsuits would be cheaper than a redesign. Later investigation would cast doubt on the conspiracy theory and the Pinto’s actual deficiencies. Still perception is everything, including the lingering perception of Ford as a money-grubbing builder of dangerous cars.

The gold standard for dealing with product defects and executing crisis response comes not from the auto industry. Johnson & Johnson was universally lauded for its conduct during the Tylenol poisonings of the 1980s. While product tampering not corporate errors were the cause of deaths, J&J pulled Tylenol off the shelves, designed tamper-proof packaging, and eventually discontinued capsules in favor of one-piece caplets. They took full responsibility for public safety and kept lines of communication open. All of J&J’s choices were costly, yet invaluable. The Tylenol brand survived and flourished, J&J’s reputation grew, and the case study became standard reading for PR students and practitioners.

Instead of following Johnson & Johnson’s example, General Motors took the course chosen by several of its fellow automakers–submerging its problems until bad press arose. Like Ford and Toyota did after their crises erupted, GM is sending its CEO to Capitol Hill to face a congressional grilling. That chief executive, Mary Barra, is new to the position but has worked for GM since she was a teenager, following in her father’s footsteps.

The Ford and Toyota CEOs, Jacques Nasser and Akio Toyoda, performed poorly in their public questionings, intensifying the outrage against their companies. Will Ms. Barra reverse this history after General Motors failed to reverse the history of auto manufacturers compounding product defects with dismal crisis management?

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Repositioning Three Major Brands

The subtitle for Al Ries and Jack Trout’s landmark book Positioning is “The Battle for Your Mind.” When marketers find that battle is being lost, they will call for the obvious rematch known as repositioning. This involves a deliberate and difficult shift in marketing mix elements to win a new position in consumers’ minds, which always entails comparison with competitors. Repositioning is closely tied with managing the product life cycle (PLC), staving off the decline phase by modifying products and/or markets.

Per Kerin, Hartley and Rudelius, four factors drive the need for repositioning:

  1. Reacting to a competitor’s position.
  2. Reaching a new market.
  3. Catching a rising trend.
  4. Changing the value offered.

Three major brands are in the midst of repositioning, using enormous marketing resources to assert their relevance and claim new customers.

GoDaddy. The web services company gained notoriety with racy ads run during a succession of Super Bowls, featuring scantily clad women, ample double entendres, and uncensored web versions of the TV spots. “Racy” took on additional meaning as race car driver Danica Patrick became the company’s spokeswoman. “Notoriety” took on its deepest meaning with GoDaddy widely criticized for sexist and sexual content.

GoDaddy is repositioning the brand based on factors 2 and 3 above: reaching a new market and catching a rising trend. The new market is women, primarily small business owners who can benefit from the company’s wide array of services such as website development and ecommerce platforms. The relevant trend may be new to GoDaddy but it predates the Internet: demand for gender equality. GoDaddy’s CEO Blake Irving acknowledged the public pressure against the company for its risque commercials.

GoDaddy moved from raunchy to simply irreverant with ads starring retro action movie hero Jean-Claude Van Damme. Danica Patrick has not been lost in the transition from women’s curves to men’s muscles as she appears in an ad with a squad of shirtless bodybuilders. The company’s repositioning is most apparent in ads featuring female small business owners giving testimonials about GoDaddy’s services. Irreverence combined with this theme as GoDaddy featured a woman who told her boss “I quit” during a 2014 Super Bowl ad so she could start her own business.

To reposition itself, GoDaddy has to modify only one element of its marketing mix: promotion. Underscoring its strength in the remaining 4 Ps–product, price, and place–GoDaddy remains the leading provider of domain names, the gateway service that introduces customers to its other offerings.

Radio Shack. The venerable personal electronics retailer made its own Super Bowl splash with a commercial that matched GoDaddy’s irreverence and recent nostalgia casting. A stunned salesperson hangs up the phone to announce: “The ’80s called. They want their store back.” Stars from that decade ransack the dated Radio Shack to the sounds of Loverboy.

By confessing shortcomings, Radio Shack takes a page from Domino’s acclaimed turnaround campaign “Oh Yes We Did,” which publicly acknowledged and updated subpar product. Radio Shack’s challenge comes in having to address each of the four factors that prompt repositioning. The first one, reacting to a competitor’s position, is the most formidable as the competition includes online retailers led by Amazon. The one-time juggernaut of personal electronics retail, Best Buy, has staggered with this market shift, making the outlook for also-ran Radio Shack that much more precarious.

Adding to the challenge, Radio Shack’s repositioning requires an ongoing overhaul of all four marketing Ps. It sells top brand products but competes directly with many of the brands themselves in retail such as Apple and Verizon, pitting its product, place and price strategies against theirs. Although its new promotion strategy garnered attention, years of declining sales show that it will take more than a great ad to reposition the brand.

JCPenney. The one-time leading retailer does not have to reposition so much as reclaim  previous positioning. A company overhaul by ousted CEO Ron Johnson, former head of the Apple Stores, was a disastrous attempt to reinvent JCP as a trendy emporium where popular sales and discounts were discontinued.

JCP brought back Johnson’s predecessor, Myron Ullman, in a hopeful return to the “good old days.” Per GoDaddy and Radio Shack, the company attempted irreverence during the 2014 Super Bowl, not with a big TV commercial but with a stunt Twitter stream full of strange spellings eventually “blamed” on tweeters wearing mittens going on sale at the stores. Confusion led to condemnation among many observers.

New ads showcase JCP’s sales promotion, exemplifying the high-low pricing strategy that has been a company trademark. The latest tagline “When it fits, you feel it,” tries to combine fashion cues with personal satisfaction and expression. Like Radio Shack, JCPenney must not only revamp its promotion but the other three Ps of the marketing mix. And like Radio Shack, there are serious doubts that its retail segment–the traditional department store–can endure. As JCP continues to decline, department store icon Sears is facing similar losses and store closings.

Al Ries’ daughter and partner Laura Ries reminds us that positioning is up to the customer. Repositioning is a bold attempt to change a mind already made up. Any new position must be unoccupied, viable and profitable. GoDaddy is a proven leader in a vibrant segment. Radio Shack and JCPenney hold neither advantage. In seeking new positioning, GoDaddy is asking far less of the market.

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My Son Earns His Bachelor’s Degree

 

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