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MKT650 Marketing Strategy CHEVROLET

CHEVROLET Case Analysis #2 | MKT 650

Case 9 Chevrolet: A Century of Product Innovation*

Synopsis: This case examines Chevrolet’s history of product innovation, branding strategy, and successful product mix in connection with its relationship to parent General Motors and its rivalry with Ford. Chevrolet has a long history of success in developing and marketing cars, trucks, and SUVs that are practical, sporty, and affordable. The brand’s relationship with General Motors is both a strength and a weakness, especially in the aftermath of the federal government’s financial bailout of General Motors in 2008. Government demands for improved fuel economy and ever-changing customer needs and preferences will be constant challenges as Chevrolet looks toward its next 100 years. Massive product recalls due to ignition issues and other problems have also created the need for GM to reestablish its reputation for customer safety.

Themes: Product innovation, product mix, branding, product strategy, competition, corporate reputation, evolving technology, customer loyalty, government regulation, international marketing

General Motors’ (GM)  Chevrolet brand celebrated its 100th anniversary in 2011. Throughout its history, Chevrolet has launched many different vehicle models, some of them widely successful and others deleted from the product mix shortly after introduction. Over the years, the company has transitioned from an American icon into a worldwide brand known for quality and durability. On the other hand, wide-scale recalls from GM, many of them involving Chevrolet brands, has somewhat tarnished the brand’s reputation. GM will have to work hard to reestablish confidence in its brands and reassure consumers that future vehicle models are safe to drive. Despite numerous successes and failures in its history, including the recent bankruptcy and bailout of parent company GM, Chevrolet is still going strong after more than a century of product innovation.

A HISTORY OF PRODUCT INNOVATION

Ironically, Chevrolet exists because of its top competitor, Ford Motor Company. William Durant founded Chevrolet in 1911 to compete head on with Ford’s popular Model T. Durant had formed GM in 1908 but was ousted from the company 3 years later. To compete against Ford’s single model of vehicle, Durant realized that GM would need to create several different models. He applied this idea to his new company, Chevrolet. The brand was named after Louis Chevrolet, a top racer who was hired to design the first Chevrolet. Chevrolet’s initial model cost $2,000. This was a high-priced vehicle at the time, which Durant disliked because he wanted to compete directly against Ford on price. A disagreement between the two men resulted in Chevrolet leaving the company, but the name of the brand stuck. In 1915, Chevrolet released a less expensive model priced at $490, the same price as a Ford Model T. The company was acquired by GM in 1918 after Durant gained controlling shares in both companies, and Chevrolet went on to become one of GM’s most popular brands. Durant once again became GM’s president but was ousted a final time in 1920.

With the Chevrolet brand, GM was able to give Ford a run for its money. In 1912, Chevrolet sold 2,999 vehicles, a mere 1 percent market share in the United States. By 1920, Chevrolet was selling over 100,000 vehicles, and in 1927, it surpassed Ford in number of cars sold. Five years later, one-third of cars sold in America were Chevrolets, although the Great Depression significantly weakened company sales. Over the ensuing decades, Chevrolet attempted to position its products as cutting-edge, equipping its vehicles with innovative technologies and even forming a joint venture with competitor  Toyota  in 1984 to learn more about Toyota’s famous production system (in turn, Toyota was able to gain entry into the U.S. market). The partnership, called New United Motor Manufacturing, Inc., lasted until 2010.

From its beginning with namesake Louis Chevrolet, the company had a penchant for racing. Chevrolet continued courting racecar drivers as endorsers, and racing greats Junior Johnson, Mark Donohue, Tony DeLorenzo, Dale Earnhardt, and Jeff Gordon all won races driving Chevrolet models. The Chevrolet Cruze, one of the company’s most popular models, won the Driver’s Championship and Manufacturer’s Championship in the 2010 World Touring Car Championship races. Chevrolet’s association with racecar driving has established many of its models as sporty, high-quality vehicles. Chevrolet also provided the engines for the 2012 Indy Racing League. In 2015, it sponsored the Chevy Indy Dual in Detroit. By reentering the Indy Racing League, Chevrolet has reinforced its racing heritage and brand image.

CHEVROLET’S PRODUCT MIX

(i.e., product portfolio, relates to Ch 6 – and brand, relates to Ch 7)

For more than 100 years, the Chevrolet brand has been associated with almost every type of vehicle on the road. The company has developed large trucks; delivery vans; full-size, mid-size, compact, and sub-compact automobiles; sports cars; and even racecars. This broad portfolio of products falls under the Chevrolet brand because of the strong brand equity that Chevrolet has developed over the last century. A vehicle’s brand provides many intangible attributes related to quality, design, utility, and self-image for the buyer. It is not uncommon for consumers to have extreme brand loyalty to either Chevrolet or Ford, especially in the purchase of light trucks. Therefore, most of the vehicles sold under the Chevrolet brand name start with a competitive advantage over many other existing brands of vehicles. This is why GM uses the Chevrolet brand name on a broader diversity of their vehicles than any other brand. For instance, Cadillac, Buick, and GMC have much narrower portfolios of vehicles and more distinct brand images. Consequently, the Chevrolet brand is an asset to the launch of a new vehicle such as the Volt, an electric vehicle (EV) in 2010. Comment by Ronald Christian: Note distinction of strategy – is this a product line extension (electric car), or a new product line (electric car)? It depends on positioning and strategy – Toyota launched PRIUS with its signature feature being hybrid/electric (new product line). Honda offered Civic, a proven winner, in hybrid/electric (product line extension). Toyota objective was clear: Launch the world’s 1st mass market hybrid passenger car (1997). New product, new target = new product line. Honda launched Insight hybrid in 1999 (new product line), but then focused on Civic hybrid in 2001 (product line extension) to tap quality, brand strength and current customers for this energy-efficient model.

Over the years Chevrolet has had many models, and not all of those models are discussed in this case. Case Exhibit 9.1 shows the entire portfolio of Chevrolet vehicle models sold in the United States. Here, we look at a number of models that represent the diversity of the Chevrolet product mix that exists today.

Case Exhibit 9.1 Chevrolet Models Sold within the United States

Cars	SUVs/Crossovers	Trucks/Vans	Electric Vehicles
Sonic	Equinox	Colorado	Volt
Cruze	Traverse	City Express	Spark EV
Malibu	Tahoe	Silverado
Corvette	Suburban	Express
Camaro	Trax
Impala SS Sedan
Spark

Source: Based on Chevrolet website (http://www.chevrolet.com), accessed April 24, 2015.

Chevrolet is credited with being the first carmaker to create the idea of planned product obsolescence. Based on this concept, Chevrolet introduces a new car model each year, a type of product modification. This marketing strategy allowed  Chevrolet to overtake Ford  in sales. Many consumers look forward to each new model and are often encouraged to trade in cars every year.

Like all established companies, Chevrolet vehicles underwent several successes and failures. Some vehicles that Chevrolet thought would succeed failed miserably. The 1962 Chevy Corvair was a popular Chevy vehicle until Ralph Nader published Unsafe at Any Speed, which pointed out safety issues with the Corvair’s steering. The car was eventually deleted from Chevrolet’s product mix. The Chevy Vega was another product failure after complaints of the car’s poor quality and product recalls created negative publicity. On the other hand, many Chevrolet vehicles became immensely popular, and some, such as the sporty Corvette, still exist today. The following vehicles helped cement Chevrolet’s reputation as an icon.

Chevy Corvette

The Chevy Corvette is one of Chevrolet’s most important milestones. The Corvette, first revealed at a car show in 1953, was GM’s initial foray into the sports car world. Despite initial enthusiasm for the Corvette, the first ones were not very popular. The introduction of the small-block V8 engine in 1955 changed that. GM engineer Zora Arkus-Duntov began to work with the engine to turn the Corvette into a racing vehicle. One year later, Arkus-Duntov raced the revamped Corvette at the Pikes Peak Hill Climb race. Arkus-Duntov won the race for his class and set a new record for stock cars. The 1957 Corvette achieved a reputation for speed, achieving 60 miles per hour (mph) in 5.7 seconds. The Corvette had embarked upon its reputation as “America’s sports car.”

Chevrolet attempted to position the Corvette as a combination of sportiness and luxury. For instance, one of its early taglines was “looks like a sports car … feels like a sports car … performs like a sports car … how come it’s a luxury car?” The Corvette has gone through seven generations, with each successive model undergoing additional modifications in quality and style.

The Corvette has attracted many fans over the years, both on and off the racetrack. Corvette owners have included Alan Shepard (astronaut), Johnny Carson, Jeff Gordon, Jay Leno, and Vice President Joe Biden. The Corvette’s fame has made it into a prestigious product with models selling from $50,000 to over $100,000. To celebrate its 100th birthday in 2012, Chevrolet announced the release of the Corvette Centennial edition, available only in carbon flash metallic.

Although the Corvette is still going strong, it has reached the maturity stage due to product innovations on newer Chevrolet models and changing customer tastes. The maturity stage occurs when growth begins to slow. In the case of the Corvette, the average owner is in his or her fifties, which means that younger people are not purchasing them as much, perhaps because they perceive the Corvette as the car that their parents or grandparents drove. In 2009, Corvette sales were the lowest they had been since 1961, and Corvette sales had decreased 48.3 percent since the year before. Some speculated that interest in sports cars was waning. However, this does not necessarily mean the Corvette is going away anytime soon. In 2014, the seventh generation of the Corvette, the Corvette Stingray, was released. In an attempt to appeal to a younger market, the Stingray incorporates more modern features such as a digital instrument panel and leather interiors. Chevrolet also created a digitized version of the Corvette for the video game Gran Turismo. The Chevrolet Corvette Stingray was nominated as Car of the Year in 2014. Loyal fans and the Corvette’s reputation as America’s sports car could keep the Corvette going strong for many more years.

Chevrolet Camaro

The Camaro is the story of a car model that would not be conquered. GM released the Camaro in 1967 to directly compete against the Ford Mustang. The competitive intent behind the Camaro was soon clear; when asked what the name of the small sportster meant, product managers stated that it was the name of an animal that ate mustangs. The model has gone through five generations and many ups and downs in popularity over its 35-year run. Toward the turn of the century, it became clear that GM was considering discontinuing the Camaro, as new lineups did not have significant changes in design from previous ones. In 2002, the Camaro line was officially discontinued. Eight years later, due to the pressure from dedicated fans, GM resurrected the Camaro with the release of the 2010 model. The new Camaro blended design elements from the 1960s with modern features, including Bluetooth connectivity, USB connectivity, and OnStar. It also took advantage of car lovers’ demands for speed. The car went on to win the 2010 World Car Design of the Year award. In fact, the Camaro was attributed to keeping the sports car industry from floundering. The car sold well even during the Great Recession, with sales of over 60,000 vehicles.

When the new Camaro was announced in 2009, demand was so high that GM strived to create enough supply. Enthusiasts were paying $500 to $2,500 above the sticker price. Although demand has stabilized somewhat, the Camaro seems to be in the growth stage of the product life cycle. In 2009, when convertible sales were at a low, the Chevy Camaro sold well. Two years later it outsold the Ford Mustang. Resurrecting the Camaro appears to be a smart move on Chevrolet’s part, but growing competition from the Mustang and rapidly changing consumer tastes will require the company to modify its product to maintain its competitive advantage.

Chevrolet Impala

The Chevrolet Impala was introduced in 1958 and went on to become one of Chevrolet’s best-known brand names. As a full-size family sedan, the Impala is one of Chevrolet’s larger car models. The Impala experienced extreme growth during the 1960s. Its 1963 model, with its small-block V8 engine and front bucket seats, is now considered to be a collector’s item. The Impala’s best-selling year occurred in 1965 with sales of 1 million vehicles. Its popularity continued throughout the 1970s, and it was named the best-selling car in 1973.

The Chevy Impala has undergone 10 generations of new models. Its 1994–1996 models have also become collector’s items largely due to their luxurious design and strong horsepower. The Impala is a common sight in the NASCAR races after it replaced the Monte Carlo, a car model discontinued by GM. However, the Impala has encountered a number of challenges during its long life span. The Impala began losing sales to mid-sized cars in the 1980s and continues to contend with its smaller rivals to this day. In addition, a suspension problem in Impala vehicles sold in 2007 and 2008 caused a class-action lawsuit to be filed against GM.

Despite these challenges, the Impala remains an industry leader in its segment. The amount of space the Impala offers and its better fuel efficiency gives it a competitive advantage. Yet its 2012 model received lackluster reviews and was criticized for using “cheap interior materials and construction.” Its 2014 model, however, sported a redesigned logo and sleeker look. It was nominated as number one among the top family cars for 2015. The 2015 version was released as a micro hybrid with a stop-start system that saves gas. Whether consumers perceive this newer vehicle more positively will determine if sales of the Chevy Impala will grow or stagnate.

Chevrolet Cruze

The Chevrolet Cruze was a risk that paid off for Chevrolet. This five-seat sedan designed to replace the unpopular Chevy Cobalt jumped almost immediately from the introductory to the growth stage. The success of the Cruze shocked industry experts. Within its first year of sales, the Cruze ranked as the 10th most popular vehicle within the United States. In June 2011, it became the nation’s best-selling car. It continued to be ranked among the top 20 best-selling vehicle 3 years later.

The Cruze was released as a global vehicle. It was introduced in Europe in 2009 and has since expanded to the United States, India, China, Mexico, Egypt, South Korea, and South America. The sedan combines safety, technology, speed, and greater fuel efficiency. The Chevrolet Cruze can get 42 mpg on the highway. Improved fuel economy is particularly important in light of impending federal legislation mandating that vehicles get better mileage. Chevrolet claims that its Cruze Clean Turbo Diesel released in 2015 gets 46 mpg due to its clean diesel technology. It also emits 90 percent less nitrogen oxide and particulate emissions.

In its initial promotion of the Cruze, Chevrolet released a series of advertisements voiced by actor Tim Allen that told viewers to “get used to more” while touting the Cruze’s technological advances and price tag of $17,000. The company chose to take an adversarial approach to the competition; its “Dear Corolla” advertisements subtly criticized the Toyota Corolla for not offering the latest technology in its vehicles. Such an approach recognizes the highly competitive industry the Chevy Cruze occupies.

In spite of its initial success, the Ford Focus and Hyundai Sonata are giving the Cruze a run for its money. In many ways, the increasingly competitive nature of the auto industry has shortened the life cycles of many vehicle brands; whereas vehicles such as the Corvette have experienced long periods of growth, a competitive environment and increased government regulation could significantly shorten the Cruze’s growth period to a small number of years. It remains to be seen whether Chevrolet will be able to maintain the Cruze’s growth over the long-term or quickly lose to better-adapted rivals.

Chevrolet Silverado

Chevrolet’s pickup trucks are even more popular than its cars. After introducing its first truck in 1918, sales of Chevrolet pickup trucks surpassed car sales in 1989. Chevrolet positions its trucks as strong and durable. It used the successful ad slogan “Like a Rock” in all its truck commercials for a decade. Its most popular truck is the Silverado. According to USA Today, sales of the Silverado surpass the gross domestic product of several countries. Successive models of the Silverado have been manufactured to ensure a smoother ride, increased towing capacity, and improved fuel economy. For instance, the Silverado HD increased fuel efficiency by 11 percent. Improvements to the Chevrolet Silverado pickup have appealed to consumers.

The Silverado is available as three different types of pickup truck: light duty, heavy duty, and hybrid. The Silverado was the second best-selling vehicle and won the Truck of the Year award in 2014. For those who love big trucks but hate the large amounts of emissions they generate, the Silverado HD comes equipped with a system that reduces nitrogen oxide emissions.

Chevrolet is trying to discover the right blend between America’s love for big trucks (the two best-selling vehicles in 2014 were trucks) and being environmentally friendly. As a result, it began manufacturing a hybrid Silverado. The hybrid Silverado has many of the same characteristics of a traditional Silverado, including high torque and horsepower, yet it can get 18 mpg in the city and 24 mpg on the highway with its 5.3 L EcoTec3 engines. By making the Silverado greener, Chevrolet is not only preparing itself for tougher emissions regulations but also appealing to the market’s demand for less-polluting trucks.

Chevrolet SUV/Crossover Vehicles

SUVs, or sports-utility vehicles, became a hit during the 1990s as they provided owners with a sense of prestige and power. To meet this demand, GM created several SUV lines such as the Hummer. However, because SUVs require so much fuel, rising gas prices and greater concern for the environment contributed to their decline. As a result, GM discontinued its Hummer line along with several of its Chevrolet SUVs.

Although SUVs seemed to be on the decline, they appear to be gaining in popularity once more. In 2008, when fuel prices were high, many consumers began switching to hybrid vehicles and smaller cars with greater fuel efficiency. However, when gas prices dropped to under $4 a gallon, SUVs made a comeback—with some slight modifications. Auto companies such as GM began manufacturing SUVs with better fuel efficiency. The safety of SUVs has also improved. Thanks to the addition of stability control within SUV models, studies indicate that drivers of SUVs are less likely to die in a crash than those driving smaller cars; the death rate for SUV drivers dropped 66 percent after newer models were introduced.

This is good news for Chevrolet’s SUVs, which include the Suburban and the Tahoe. First emerging in 1936, the Suburban is the oldest surviving vehicle model in the United States. Today the Suburban appears to be in the growth stage as a favorite among families. One likely reason is due to its safety features, which include up to seven airbags and OnStar Automatic Crash Response. The Tahoe is targeted more toward those who need lots of space and who travel in more rugged terrain. The Tahoe has been one of the most popular SUV models since the 1990s and was nominated as one of the best family cars of 2015. To attract eco-conscious consumers, the Tahoe model gets 23 mpg on the highway.

Chevrolet also combines features of smaller cars with those of SUVs through its crossover vehicles. One of its more recent successes is the Chevrolet Traverse. Released in 2008, the Chevrolet Traverse is targeted toward families. The Traverse seats eight and received high scores in crash safety from the National Highway Traffic Safety Administration. The Chevrolet Equinox crossover vehicle is unique as it is powered by hydrogen fuel cells, making it more fuel-efficient than its contemporaries. The Equinox is Chevrolet’s second best-selling model after the Silverado. A newer high-tech model was released in 2016.

Chevrolet Volt

Chevrolet’s product mix would not be complete without venturing into the EV industry. Its Chevrolet Volt, unleashed in 2010, runs on a battery but also uses gasoline once the electrical charge is depleted. The Volt’s battery allows the vehicle to travel 38 miles on battery, and it has a total range of 380 miles.

Initial reviews of the Volt seemed positive. In 2011, it was named as the winner of the World’s Green Car award. However, the Volt may take longer than anticipated to go from the introductory to the growth stage of the product life cycle. GM initially sold fewer vehicles than originally anticipated. Many Chevrolet dealers were hesitant to sell the Volt due to a perceived lack of local demand. Such obstacles are not uncommon with new products, as both dealers and consumers need to learn more about the product before making a commitment to purchase it. The high price tag of $41,000 also increased the risk of purchase. While the current interest in EVs is high, demand may take longer to catch up due to the high level of perceived purchase risk. Comment by Ronald Christian: Discusses reasons for low sales – keep in mind dealer factors as well as consumer factors.

The Volt faced a more serious challenge when its lithium-ion battery proved to be problematic in crashes. The battery caught on fire after three government crash tests, but the fires themselves would not occur until days or weeks after the crashes. Further investigations revealed that the coolant line got damaged during the crash tests. Coolant leaked onto the battery wires, eventually causing a fire. Comment by Ronald Christian: Perceived quality problems; and subsequent image problems.

After these safety issues came to light, GM took quick action to address the problem. It created a plan to increase the reinforcement surrounding the battery pack and issued a voluntary recall on more than 7,000 Volts already sold as well as more than 4,000 in its showrooms. It also provided loaner cars for consumers to use until their Volts were modified and offered to buy Volts back from customers who no longer wanted them. Although this quick action might have saved the Volt from an early demise, the initial safety challenges still had a significant effect on demand.

The safety issues have also provided threats and opportunities for the Chevy Volt’s prime competitor, the Nissan Leaf. Although both the Leaf and the Volt are EVs, they are positioned differently. The Nissan is a truly electric car, whereas the Volt will run on gasoline if needed. GM’s VP of marketing saw this as a major advantage, using it to position the Volt as “a car first and electric second” and claimed that the Volt can give drivers the peace of mind that they will not become stranded if they use up the electricity reserves. However, the battery fires reduced faith in the Volt and cast doubt on the EV industry as a whole. Nissan was quick to respond to these safety concerns by detailing the triple layer safety structure of its batteries. The Nissan Leaf appears to be in the lead in number of EVs sold, experiencing a sales record in 2014. With analysts predicting that only one will win in grabbing the majority of the U.S. market share, the stakes are high.

CHEVROLET’S BRANDING STRATEGY

Although the Chevrolet brand has evolved over the years, it maintains many of the same themes it started out with a century ago: a quality vehicle with deep roots in America’s past. When Durant first envisioned Chevrolet, his desire was to create a low-priced vehicle that could compete head on with Ford. Therefore, one of its first slogans, “Quality at low cost,” comes as no surprise. As Chevrolet vehicles became more popular with Americans, minus a dip during the Great Depression, the company wanted to firmly entrench the brand as a key part of American culture. It found part of this solution by associating itself with American sporting events. In 1935, Chevrolet started sponsoring the All-American Soap Box Derby, which it would continue to support for the next decade. Chevrolet vehicles driven by drivers such as Jeff Gordon and Jimmie Johnson would go on to become a common sight in racing circuits.

On the promotional side, Chevrolet adopted a patriotic theme with taglines such as “America’s Best Seller, America’s Best Buy” and “Baseball, hot dogs, apple pie and Chevrolet.” One of its most popular taglines “Like a Rock” began in 1991 to describe its Chevrolet pickup truck. The tagline imbued the brand with a sense of strength and durability. Chevrolet would continue its American theme with its “An American Revolution” tagline adopted in 1994, “Chevy Runs Deep,” and its most recent “Find New Roads.”

The Chevrolet brand resonates with consumers, so much so that the company’s marketers must exert caution when implementing changes. For instance, in 2010 GM decided the company would stop using the popular American nickname Chevy and only use Chevrolet in corporate communications and advertising. Although American consumers were encouraged to still use the popular nickname, employees were not to use Chevy internally. The reasoning behind this was that international buyers of Chevrolet tended to get “Chevy” and “Chevrolet” confused, believing that they were different cars. However, consumer backlash and managerial changes convinced GM to drop this plan.

Changing the tagline to “Chevy Runs Deep” was not free from criticism either. Chevrolet fans did not feel that the slogan was as strong as previous ones, and others were unsure about what it meant. This confusion caused GM to begin overhauling its marketing to clear up the confusion. It dropped the tagline in favor of “Find New Roads” to emphasize a more global perspective. Comment by Ronald Christian: Consider the changes through the years and consumer response as you consider whether the brand identity currently sits a strength or a weakness … what do you think? Is more clarity needed for brand identity?

While Chevrolet modifies its taglines to fit certain countries, many of its taglines are used for multiple countries to create strong brand cohesiveness. Globally, the company positions its vehicles along four values: durability, value, practicality, and friendliness. In South Africa, Chevrolet commercials have emphasized familial values as well as excitement. Taglines include “Captiva. Made for Memories.” and “Where Will Chevrolet Take You?” Although Chevrolet has adopted more of a global brand strategy, it still customizes its branding to appeal to certain markets.

General Motors’ Rivalry with Ford

General Motors is one of the “Big Three” carmakers in the United States, along with Ford and Chrysler. Although Ford and Chrysler are formidable competitors to Chevrolet, most view Ford as being the more serious rival. Ford and Chevy vehicles are both considered to be practical and affordable cars, and although Chevy is generally viewed as being sportier than Ford, Ford’s sports vehicles like the Mustang are direct competitors to Chevy’s sports cars. While Chrysler came onto the scene later during the 1920s, Ford and Chevrolet are closer in age and have been competing since the inception of Chevrolet. Comment by Ronald Christian: Think about how this might be relevant for positioning strategy and messaging

This highly competitive rivalry has challenged many of Chevrolet’s branding strategies. For instance, Ford is also deeply entrenched in American culture. Many view the Model T as the first American car, although it would be more accurate to say it was the first one produced for the masses. The unproven statement by founder Henry Ford regarding the Model T, “You can paint it any color, so long as it’s black,” is remembered nearly a century later. Ford also claims that its Ford Aerospace engineers and technicians helped place a man on the moon by helping to design and provide services for NASA’s Mission Control Center. Supporters of Ford are more likely to view Ford as a greater part of America’s heritage than Chevrolet.

From the beginning, Ford has also made a name for itself in racing history, starting with founder Henry Ford’s 1901 win against professional driver Alexander Winton in a vehicle he manufactured himself. Ever since racing has become an important part of Ford’s DNA. The car company has had a notable presence in the Indy 500, Formula One, and NASCAR series, with drivers like Tom Kendall, Jacques Villeneuve, John Force, and even Paul Newman choosing to race Ford vehicles. Creating solid connections to America’s past is an important part of Ford’s branding strategy.

Ford and GM also take different approaches toward marketing. For instance, Ford takes a family branding approach to its vehicles, placing the Ford name along with the brand of the vehicle on the car. GM, however, began embracing invisible brand architecture beginning in 2009. Prior to this time, GM was placing its “Mark of Excellence” logo on its vehicles to connect them with the parent company. But in 2009, GM expressed its intention of allowing its vehicles to stand on their own. New Chevrolet vehicles did not have visible affiliation with GM, nor did GM’s other brands. This branding strategy has both advantages and disadvantages. Family branding informs consumers when the same company offers a slate of different vehicles. If the consumer has a favorable impression of the company or even an individual model, then he or she is likely to carry that perception over to another company model. On the other hand, family branding risks contaminating the entire family if one product in the mix is perceived to be inferior. In the case of GM, the company’s bankruptcy and subsequent bailout had the ability to contaminate its brands of vehicles, in spite of their individual merits. By adopting invisible brand architecture, GM is reducing the risk of brand contamination. Comment by Ronald Christian: A lot to reflect on here … overall, how would you analyze and categorize in your SWOT? How would this information inform your strategy moving forward?

INTERNATIONAL MARKETING

Chevrolet sold nearly 10 million vehicles worldwide in 2014, its second year for record global sales. While Chevrolet has tried to create a consistent brand image across the world, its products differ by market. For instance, South Africa Chevrolet’s product line includes the Chevrolet Spark, Spark Lite, Aveo Sedan, Aveo Hatch, Utility, Cruze, Orlando, Sonic, Captiva, and Trailblazer. In Brazil Chevrolet’s product line includes the Camaro as well as the Chevrolet Cruze, Prisma, Cruze Sport6, Celta, Cobalt, Onix, and Classic. The different models appeal to the differing tastes of Chevrolet’s various target markets.

Although for years Chevrolet has portrayed itself as an American brand, in reality the brand has become truly globalized. In fact, marketers at Chevrolet are now trying to embed the Chevrolet brand into other cultures just as they set off to make it a core part of American culture. In an attempt to create greater brand awareness, GM rebranded Daewoo—a South Korean brand that GM acquired in the early 2000s—as Chevrolet. Despite the fact that sales of Daewoo vehicles had increased in recent years, GM recognized that many South Koreans lacked awareness of the Chevrolet brand. It hopes that recasting Daewoo as Chevrolet will increase awareness and allow Chevrolet to compete against competitors.

Chevrolet’s sales are still highest in the United States, followed by China. China is now the second largest market for Chevrolet and is the largest market in the world for vehicles. Chevrolet sells a variety of vehicles in China, including the Volt, Camaro, Malibu, Trax, Epica, Cruze, Aveo, and Sail 3. GM has entered into several joint ventures with Chinese companies in order to sell Chevrolet vehicles within the country. China is also a lucrative market for EVs, and Chevrolet is optimistic about how the Chevy Volt will fare. Yet the company also faces many challenges in its plans to introduce EVs into China. The Chinese government has mandated that foreign EV automakers enter into joint ventures with domestic companies to produce EVs in China. Such joint ventures offer many advantages but also require Chevrolet to share some of its trade secrets with its partners. For this reason, GM has decided to import the Chevy Volt, forgoing certain benefits rather than sharing the Volt’s technologies. However, manufacturing within the country is still a future possibility.

Another challenge for Chevrolet relates to customization. Customizing vehicles to different markets takes time, and GM managers want to increase production and decrease the commercialization process. This has led GM to consider a new design for its vehicles that incorporates “global core architecture.” Such a move would enable GM brands to create a more standardized design with slight adaptations for different markets. This would save GM both time and money, but because cultural tastes can significantly differ, a globalized design is not without risks. It is uncertain whether Chevrolet can create a standardized vehicle that will be accepted by several different cultures.

CHALLENGES AND RECOVERY

After nearly a century in business, Chevrolet faced its greatest threat with GM’s bankruptcy in 2008. The company required a massive $50 billion government bailout, and although GM has rebounded, its reputation took a while to recover. According to former GM CEO Dan Akerson, the company “failed because we failed to innovate.” Ford, the only one of the Big Three automakers that did not accept a government bailout, took a combative approach against its competitors in its advertising. The company filmed one ad of a customer who had just bought a new Ford pickup truck as saying, “I wasn’t going to buy another car that was bailed out by our government. I was going to buy from a manufacturer that’s standing on their own: win, lose, or draw.” Although the commercial was later pulled from the air (Ford stated that it had run its course), this viewpoint represented the sentiments of many Americans who felt that GM and Chrysler had overextended themselves and then depended upon taxpayers to bail them out for their mistakes.

Despite these dark times for GM, company leaders viewed Chevrolet as an innovation powerhouse and believed the brand would bring GM back from the brink of collapse. The recovery, however, was painful for GM. The company dropped half its brands from its product mix, including Pontiac, Hummer, Saturn, and Saab. Although this gives customers fewer vehicle brands from which to choose, it might benefit Chevrolet in the long run as GM can now focus more upon modifying its remaining brands.

Such modifications will be important as environmental conditions in the market continue to change. For instance, new and impending regulations require automakers to create vehicles that are more fuel efficient. By 2025 vehicles must be able to reach 54.5 mpg. Such changes will be costly and demand that GM take action now. Thus, new Chevrolet vehicles are likely to be lighter and possess more energy saving technologies. Such modifications are essential to ensuring that Chevrolet meets both consumer demands and the regulatory demands of the government.

2014 PRODUCT RECALLS

Despite GM’s recovery from the recession, the year 2014 dealt another major blow to GM’s reputation. In January 2014, Dan Akerson stepped down as CEO of GM. He was replaced by Mary Barra, who had served as GM’s Executive Vice President of Global Product Development, Purchasing and Supply Chain. Mary Barra became the first female CEO of GM as well as the first female to lead any major automobile company.

Shortly after Barra assumed leadership, GM issued a recall of 2.6 million Chevy Cobalts. The problem involved a flaw with the ignition that could cause it to inadvertently switch to the accessory position. This could cause the vehicle to stall suddenly, disabling safety features such as the airbag, power steering, and braking. The initial recalls were just the beginning. More recalls were issued on other models for similar reasons. Estimated deaths attributed toward accidents caused by ignition switch malfunctions vary between 13 and 31. Many of these recalls involved Chevy vehicles. Case Exhibit 9.2 describes the vehicles and the reasons behind their recall.

Although recalls are a serious issue, the situation became more problematic when evidence surfaced that employees had known about the defective components since 2004. Despite this knowledge, a decade passed before any sort of recall was issued. This seriously jeopardized driver safety, and GM faced a resulting maelstrom of criticism. The company had developed a snap-on cover to prevent the switches from inadvertently switching to the accessory position but failed to issue a recall. Instead, it told its dealers to install the covers if customers complained. Car owners were not informed of the potential dangers.

This knowledge changed the recall from a product quality issue into a case of wide-scale misconduct that harmed the well-being of consumers. CEO Mary Barra was called before Congress to testify about how much GM knew about the issue and why a recall was not issued until 10 years after the defects were first discovered. More than 80 lawsuits were filed against GM.

GM conducted an internal investigation and found that the company had been negligent in its duties toward consumers. The culture of GM had taken an indifferent attitude toward safety issues and even dissuaded employees from bringing bad news to the attention of management. One whistleblower claimed that he was demoted after he pressed for recalls due to vehicle defects. Other employees indicated they feared retaliation for bringing up product quality issues. About 15 employees were dismissed for their failure to take action after becoming aware of the defects.

The recalls have come at a bad time for GM. While it faces strong demand in overseas markets, its market share in the United States is at historic lows, and the company has weaker profit margins than rivals. News of the recalls caused GM stock to decrease 14.6 percent during the year, while Ford’s rose 0.5 percent. Perhaps most damaging is the blow to GM’s reputation. Controversy continues to surround how much top management knew about the issue. According to Mary Barra, top management executives issued the recall as soon as they learned about the product defects in early January 2014. She also explained that in the early 2000s people had different views of stalling and believed that a car without power steering could still be steered. It was not until later that the real dangers were finally realized. She reassured the public that the company’s crisis management team was taking steps to respond more quickly to problems and would prevent similar defects from reoccurring.

In the beginning of 2015, GM again issued three vehicle recalls due to ignition switch problems. More than 2,200 claims have been filed against GM, and it was listed as number 13 on America’s Most Hated Companies list, according to a Harris poll. However, despite the massive negative publicity, the company has also been admired for its leadership during the crisis. Mary Barra was praised for how she handled the situation, and many members of the public believe she reacted with honesty and compassion for those who were affected. Under her leadership, it is entirely possible that GM can weather the storm and restore confidence in the Chevrolet brand.

CONCLUSION

The Chevrolet brand is a model to which marketers aspire. Unlike so many other brands, it has lasted for more than a century due to its innovative product modifications and ability to rebound from failures. Despite the recent setbacks with vehicle recalls, strong leadership is helping GM navigate through the crisis. It must continue to seize market opportunities, constantly modify its products, and adapt its brand to changing customer tastes—all while assuming its responsibility for driver safety and a quality product. Successfully meeting these criteria could enable the Chevrolet brand to succeed for another century.

*Jennifer Sawayda, University of New Mexico, prepared this case under the direction of O.C. Ferrell for classroom discussion rather than to illustrate effective or ineffective handling of an administrative situation.

Thought Questions (not required to complete, but may help spark ideas for Step 1)

1. Evaluate the diversity of vehicle types and sizes that are sold under the Chevrolet brand name. What strengths and weaknesses are evident in Chevy’s product mix?
2. How has Chevrolet strategically managed its brand and reputation over the last 100 years? What opportunities and threats will affect Chevy’s branding and reputation in the future?

KT 650 Marketing Strategy

Employers have consistently stressed the importance of great communication skills and the ability to work well within a team dynamic. To that end, the Case Analyses are designed to refine analytical skills, communication skills, and your ability to collaborate with others to achieve a common goal. Your next case involves Chevrolet.

Complete only the highlighted parts of the 7-Step Framework (i.e., Steps 1, 3, 5, 7, 8). Part 8 (Executive Summary) will have a separate upload window in Blackboard.

7-Step Case Analysis Framework:

Situation Analysis (25%)

• Provide mission and brief background. If there is not a clear mission statement available on Chevrolet official materials or annual report, you will develop a mission statement using the guidelines in Chapter 2 (i.e., customer-focused theme – see Starbuck’s example).
• Produce a SWOT analysis (see p.98, exhibit 4.4 as a guide – NOTE: complete Table 1.a provided in this document)
• Produce a Customer analysis using the 5W model (see p.64, exhibit 3.4 as a guide – NOTE: complete Table 1.b provided in this document)
• Produce a Competitor analysis (see p.71, exhibit 3.6 as a guide – NOTE: complete Table 1.c provided in this document)

Assumptions and Missing Information – NOT REQUIRED FOR THIS CASE

• Source provided in this document

Statement of the Problem (15%)

• See examples in “How to Analyze a Case” document on Blackboard)

Development of Alternatives – NOT REQUIRED FOR THIS CASE

Evaluation of Alternatives & Recommendations (25%)

• Select what you believe to be the best alternative from above for strategy moving forward. Then develop at least 3 goals with 2 objectives under each goal.
• Goals & Objectives (see examples in “How to Analyze a Case” document on Blackboard). Goals are broad, objectives become more specific and aid in implementation.

EXAMPLE ALTERNATIVE from Home Depot: For an alternative strategy such as “Develop Home Depot brand as the optimal destination for all home and building projects”, the following goal and objectives might look like this …

EXAMPLE GOAL for Home Depot: “have lower prices than the competition”

EXAMPLE OBJECTIVE for Home Depot: “all sales associates are authorized to offer a price guarantee that matches and then beats competitors’ prices by 10%”

Implementation – NOT REQUIRED FOR THIS CASE

Evaluation and Control – provide one measure

• As the firm is implementing the selected alternative, it must constantly monitor the results achieved. As a result, clear measures for the objectives must be set. Listed below is a sequence that links goal, objective, and measure.
• EXAMPLE MEASURE for Home Depot: “achieve 95% customer satisfaction rating for pricing and value”
• You will notice that the measure is consistent with the goal and objective listed in Step 5, and provides insight as to whether the strategy is effective.

Executive Summary (20%) (upload to separate window on Blackboard)

The Executive Summary is a synopsis of the case analysis and consists of 400 words or less (about 1 page with a header). The Executive Summary does not necessarily include detailed information, but provides an overview of the following:

• general background and mission/vision statement for the company; 
• statement of the problem; 
• brief overview of the situation analysis (i.e., key points); 
• recommendations and strategic objectives moving forward.

Step 1: Situation Analysis – CHEVROLET

Mission (from official Chevrolet materials, or develop your own):

Table 1.b Customer Analysis

Who are our current and potential customers?	What do our customers do with our products?	Where do customers consume our products?	When do customers consume our products?	Why (how) do customers select our products?
Demographic (focus on one product type): (1) passenger car (2) truck (3) electric/ hybrid	Consider Frequency and describe lifestyle/characteristics for “light” vs. “heavy” user:   EXAMPLE: a “heavy user” might own more than one Chevrolet, utilizes Chevrolet service, etc. A “light” user may have purchased one Chevrolet, but has had little or no contact since the purchase.	Do more customers prefer online or dealership?	How does innovation impact consumption (i.e., hybrid, advances in technology like rear cross traffic alert)?	Basic features that appeal to consumers? (i.e., what features drive sales? What role does the brand play?)
Psychographic: (focus on one product type): (1) passenger car (2) truck (3) electric/ hybrid				How are primary consumer needs fulfilled (i.e., is it affordability, reliability, technology advancements, hybrid)?
				Relational or transactional exchange with consumer? (i.e., how can we strengthen relationship?)

 

Table 1.c Competitor Analysis – take a “top of category” approach focusing on top 2 vehicles in each category

Brand Competitor	Top 2 Passenger Cars	Top 2 SUV/ Crossover	Top 2 Truck	Top 2 Electric/ Hybrid	Benefits/Value Proposition	Price Ranges
Chevrolet
Ford
Chrysler
Toyota (add another brand outside top 3)

Step 3: Statement of the Problem

Step 5: Evaluation of Alternatives

• Based on your overall analysis, select what you believe is the best alternative for marketing strategy.
• Provide at least 2 directional Goals with 2-3 detailed Objectives for each goal