Chrysler also went through significant analysis prior to developing the marketing plan for the Neon, its subcompact car. A brief summary of the key points is presented here, using the format from the chapters in Part II.
Background Analysis
The business assessment—the evaluation of Chrysler as a company—is the first part of the background analysis. Chrysler had both positive and negative points relative to marketing a subcompact car. First, it demonstrated stronger progress in improving its product development process than was true for the other American companies. This increased the likelihood of controlling development costs, thereby producing an affordable car. Second, it was committed to bringing out a successful small car and had, in fact, considered a joint deal with Fiat.
On the negative side, Chrysler had the worst quality record of the Big Three. Its prior attempts to enter the small-car market were dismal.
In 1992 the Dodge Shadow and Plymouth Sundance had 162 problems
and 137 problems, respectively, per 100 cars, according to J. D. Power.
The only car with a worse record was the Hyundai Excel.
The market analysis was favorable. Both the domestic and foreign markets represented growing potential for subcompacts. Marketing research among current subcompact owners showed they wanted a small car that felt like a big one yet was fun to drive, safe, and reliable. Young families viewed this type of car as a utility vehicle. In terms of features, customers indicated a willingness to forego power windows and a four- speed automatic transmission in exchange for a reasonable price (base price approximately $9,000). Nevertheless, safety was paramount.
There were several competitorson the market, but they were gen- erally higher-cost producers. Ford’s new Escort, developed with Mazda, took five years to develop at a cost of $2 billion. When it was intro- duced, it turned out to be a rough-riding car, causing Ford to start sell- ing it at $9,995 (a $500 loss per car according to analysts). Saturn was a formidable competitor, but with seven years of development the cost was estimated at $5 billion. Japanese subcompacts still had a high- quality image, but the average costs in 1993 were 13 percent more than in 1991, with a related market share drop from 52 percent to 49 percent. The competitive comparison as presented in Business Weekin early 1993 is shown in Figure 7.5.
Since the Neon had not yet been introduced, there were no sales, quality, or other performance measuresto track. However, prelaunch checks were extensive. Test drivers logged unprecedented hours, with several early prototypes achieving 250,000 miles.
Trendswere also favorable for the Neon. Federal mileage standards were expected to rise, forcing the automotive companies to increase their development of cars with good gas mileage. Also, the recession spurred more interest in smaller, affordable cars.
Synthesis
An examination of the background analysis yielded several problems and opportunities. A primary challenge to overcome was the American market’s perception that Chrysler products had low quality. This would need to be attacked by incorporating extra quality features into the car and using marketing communications effectively to combat the image. Chrysler also realized that they could attain their target price
and still be profitable only if sales approached their capacity of 300,000 cars per year. This figure was well above any competing subcompact sales figures, but the company had to shoot for this goal to make the project successful at the target price.
Based on that information, the Neon marketing objective was to sell 300,000 cars, of which 10 percent would be at base price. The domestic models would be available January 1994, with European models rolling out four months later in April. The positioning approach would be reminiscent of the Volkswagen Beetle positioning in the early 1960s. The Neon would be positioned as “youthful, lively, and a little bit huggable,” a functional car at a good price.
Action Program
The primary target market was “Generation X,” individuals in the eighteen-to-thirty-two-year-old range, earning in the mid-$20,000s;
college students were part of this segment. Boomers over thirty with income in the low $40,000s formed a secondary market. These groups were somewhat cynical and hard to sell to, but were consistent with the positioning of functional value.
The product, the Neon itself, was designed to appeal to the described target market, to attack the quality perception, and to achieve the target price. The Neon has a long wheelbase (seven inches
Base Weight
engine/ in Fuel Driver Passenger
Price horsepower pounds mpg air bags air bags Neon $8,600–$12,500 2 liter/130 2,300 30+(est) standard standard Honda Civic $8,950–$16,080 1.5 liter/102 2,300 38 standard optional Ford Escort $8,335–$11,923 1.9 liter/88 2,300 33 N/A N/A GM Saturn $9,395–$13,570 1.9 liter/85 2,300 36 standard N/A Nissan Sentra $8,995–$15,020 1.6 liter/110 2,400 35 optional N/A Toyota Tercel $7,998–$12,038 1.5 liter/82 2,000 29 standard N/A
Figure 7.5 Neon’s Competitive Features
longer than the Toyota Corolla) to allow more room in the rear seat.
The cab-forward look allowed a high roof to be carried over the pas- senger compartment to provide more front and back headroom. These features provided the big-car “feel” the marketing research indicated was important to future customers. To attack the issue of safety, Neon became the first subcompact with standard dual air bags. It also incor- porated reinforced doors to meet the 1997 federal side-impact stan- dard, anti-lock brakes on all models, and height-adjustable front belts.
In terms of achieving the target price, the base Neon was designed with crank windows and similar spartan features, consistent with input from consumers.
The base price was approximately $9,457, ringing in at $850 less than the cheapest four-door Saturn. However, several option packages allowed a “nicely loaded” Neon to be available for $11,000 to $13,000.
A popularly equipped version would cost about $12,000, with a Sport model carrying a $13,000 price tag.
Early promotional strategies relied heavily on advance publicity.
News articles in business and consumer publications, test-drive reports from automotive journalists and industry analysts, and various feature stories provided credible support for Chrysler’s product development process and renewed control over quality. An estimated $80 million was budgeted for the marketing campaign. BBDO, the advertising agency for the product, broke the debut campaign on the Super Bowl.
A blizzard of billboard ads near dealers pictured the front of the car with the simple headline, “Hi,” to bring to life the desired positioning of “youthful, lively, and a little bit huggable.” Television, radio, and print advertising were consistent with and reinforced the message on the billboards. Care was taken to avoid pigeonholing the younger gen- eration. Instead of using MTV-style advertising or stereotyping Gen- eration X, the campaign focused on communicating product benefits while developing a huggable personality for the car.
The distribution strategy was to sell the Neon under the same brand name to both Dodge and Plymouth dealers. This tactic was intended to reinforce to the cynical target market that Chrysler wasn’t using superficial differentiation to sell the car through the two separate dealer networks. By creating a single model name, Neon, in effect, became the brand. This approach enabled the company to get more benefit from its advertising investment.
Product Skills
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and new products. For existing products, the product man- ager is expected to (1) maintain a database or fact book, (2) evaluate product performance, (3) add value, (4) increase market penetration, and (5) evaluate the product line.The ongoing product analysis, along with external input on the customers and competition, will trigger ideas for line extensions and totally new concepts. The process of turning these ideas into commer- cially viable products is often a company endeavor that is coordinated by the product manager. He or she can play a vital role in idea gener- ation, screening, concept development and testing, prototype testing, prelaunch, launch, and project evaluation.
Part III addresses the analytical skills a product manager needs to evaluate an existing product line, as well as to determine and implement new-product strategies.
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Much of aproduct manager’s time is spent evaluating and improving on existing products and on modifications of the product line. Even if the product is the same for a while, the marketing strategy might need to change. A routine examination of the product line should uncover the types of changes necessary for optimizing the company’s product position. If a product manager is responsible for a limited number of products, it might be possible to conduct thorough analyses of each.
However, the reality for most companies is that the Pareto rule applies:
80 percent of the sales and/or profits come from 20 percent of the products. These most important products should have constant atten- tion, with the rest receiving periodic attention.
There are five activities the product manager should perform rel- ative to evaluating the product portfolio (See Figure 8.1). First, the product manager must maintain (or establish) a database of relevant information on the product. Second, the products must be evaluated in terms of customer satisfaction, competition, and company expecta- tions. Third, the product manager must add value to existing products by improving features, adding an element of competitive superiority, and/or reducing costs. Fourth, the product manager should attempt to increase market penetration by appealing to more users or increasing the usage rate of existing customers. And, finally, the product man- ager must evaluate the product line to look for gaps where new prod- ucts need to be developed and/or to determine when to delete products.
Evaluating the Product Portfolio
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