How To Save Ford
The Ford Motor Company is sick. Its stock price is struggling to reach $5.00. Google’s stock closed today at $445. Ford’s market capitalization is 11 Billion. Google’s market cap is more than 100 times Ford’s. The Ford Motor Company is in trouble because it is not in the business it thinks it’s in. The Ford Motor Company is not in the car business.
Like Google, Ford is in the information business. The downstream product we can, if we are gluttons for punishment, buy is a car. The car as a physical object, what philosopher Martin Heidegger called “the thing itself”, is the final and least important thing in the Ford conversion funnel. Upstream of a bunch of metal and tires is all the important stuff, the information and interaction that culminates in a customer buying a Ford. Ford is in love with metal, the thing itself. This is an easy mistake to make. Stock price for metal is currently set at $5.00 and falling. Stock price for Ford as an information company is 10x, 20x, 50x or 100x $5.00 a share.
Wrong People, Wrong Seats on Wrong Bus Headed To Wrong Place
How do we make a better car is a classic example of asking the wrong question. Answer the "better car" question and you chase your tail forever. Questions you ask usually determine strategies you create. Ford wants to make a better car. To accomplish this objective they hire “car” people. They meet with car suppliers. They talk to car customers. They inspect car competitors. They call in the usual suspects and Toyota waxes them to $5.00 a share. They go on CNBC to explain how they missed the market's signal to change to small cars from massively profitable SUV’s and trucks. There is a bigger signal Ford missed. FORD IS NOT IN THE CAR BUSINESS ANYMORE.
September 7, 1998
The last day the Ford Motor Company made cars was 9.7.1998. On September 7th Ford became an information company. Ford continued to think they sold metal and rubber. They think that today. Their stock price in 1997 was over $25, five times what it is today. Imagine a large balloon with a tiny hole. Watch such a mortally wounded balloon and, at first, nothing changes. The balloon is as it has always been. Life is good. Slowly and imperceptibly the balloon shrinks. You hear the balloon's tipping point when air rushes out making that distinctive high pitched sound as the hole triples in size and "balloon" becomes a rubber carcass.
Two Stanford graduate students decided to change their search engines name from “Back Rub” to “Google” on September 7th 1998. On the next day Mark McGwire hit his 62nd home run breaking an "unbreakable" record. On September 9th the UN elected Didier Opertiri of Uruguay as President. Which of these accomplishments changed the world and put Ford out of the car business?
Right People, Right Seats on the Bus Headed To The Right Place
Cars are so seductive. Ford and other car companies banked billions connecting cars to our most secret primal fantasies. We were taught to see cars as a source of power and freedom. Ozone burning money pits is a tough slogan to sell. Power fantasies easily form to any shape. The Mustang could appeal to rebels while a Taurus appealed to mom and dad. Both cars but one as distinct from another as monkeys from tigers.
Car marketing tapped unconscious desires long suppressed by Organization Man. Somewhere along the journey, car makers began drinking their Kool-Aid. They believed their ads. They became the cars they made and dreams they sold. In Built To Last author Jim Collins tells the story of a young Hewlett and Packard. One of the first commercial products HP made was a lane alarm for bowling alleys. Throw the ball past the lane line and the HP alarm would sound. Bill Hewlett and Dave Packard knew they wouldn’t make it selling bowling alley alarms, but that didn’t matter. HP wasn’t in the bowling alley alarm business. They were in the innovation business and that vision drove decision-making, hiring and strategy development. Asking the “what business are we in” question and correctly answering “innovation” is how you get featured in a Jim Collins book.
Ford needs the right people in the right seats on the bus quickly. The right people in the right seats on the bus is a point made in Collin's best know business book Good to Great. If Ford is, as of September 7, 1998, an information company then they need different people. Hiring current CEO Alan Mulally was smart. As a Boeing executive he comes from outside the Detroit car bubble, but, from interviews I’ve seen, he still thinks he has a car problem. He has a business model problem. He will never find solutions to the business model problem until he blows up all assumptions and starts again (good luck with that).
I am not a car guy. I am a natural presumptive meddler. Writing an email to our CFO today about how our company isn’t in the business we think we are in it occurred to me this is a common sin. If I could work on the Ford problem it might help me hone in on our problem. Here is what I mean by Ford is really in the information business:
- Google Search “Cars” nets 912,000,000 pages in .09 of a second
- Ford Site not listed on first page
- Google Search “Ford Mustang” nets 21,000,000 pages in .09 of a second
- Ford is buying PPC and is organic #1
- Google Search “Fords Suck” nets 4,140,000 pages in .21 seconds
- Ford’s corporate sites or forums are not on the page nor is Ford buying PPC
You will never see a better example of a site talking to itself about itself than the Ford Motor Company web site. Ford’s web efforts remind me of Gertrude Stein's quote about Oakland, her birthplace. She famously said, “there is no there there.” Ford’s web site is hollow, one sided and a failure. Toyota’s site, while still bad, is worlds better than Ford. Judge Ford's site against great information sites such as Google, Amazon, CNET and Wikipedia and it falls woefully short. Ford is a slow student in a dumb row and they should get out of the car rat race as soon as possible.
Getting Out Of The Car Business
I recommend junking the dealer network yesterday. You can’t own “cars” in people’s minds when there is so much padding between Ford and their customers. The dealer network is dead under its own weight. No one likes to buy a car because no one wants to visit a dealer. Let’s compare notes. As a normal American you buy a car about once every four or five years. The dealer sitting across from you in that cramped office sold ten today. Who wins that negotiation? Even when you win you lose. Walking out of the office you are sure you got taken. Ford should kill the dealer network as soon as contractually possible.
Free Car Parks
If there are four dealers in a town Ford should reduce down to a single store, pick the smallest showroom and largest service bay. Create a promotion called “Fords for Free”. Use the single remaining Ford Store in a town as where you give qualified customers keys, service their cars and gladly allow customers to take cars on test drives (alone if requested). Move all qualification online. Look to qualify two types of customers for "Free Fords". Move every other piece of the relationship with Ford's customers online. Even further, turn over the keys to the Ford web site to motivated customers and potential buyers.
One customer, let’s call him Frank, has spent hours and hours providing feedback, comments and links on the new Ford web site. Frank gets a Mustang (or whatever) for a month as THANKS for the $100,000 worth of content he helped create. Frank can buy his Mustang at the end of the month or turn it in to be handed over to the next Frank.
Our second Free Ford customer is Helen. She wants a Mustang because she loved them in high school and, at fifty; she wants to be cool again. You give Helen a Mustang free for a month too. She signs up, profiles herself on the new Ford site, submits her credit application and agrees to roll into a payment plan if she keep the car after 30 days (all online). The car is free until the 31st day. Create up sale during qualification for service packs, road side assistance and other products. The idea is to change the transaction from car only to ongoing revenue. Move from transaction to relationship. Lock and load Helen when she "buys" the "free" car online. As she buys more give her more.
You don't always have to give customers money. For many, time is worth more than my money. If I want to pay for special time saving services then price them out and offer them. If I want to finance through you let me. You may make more from loaning me money than selling the car. If I want a special "club" websites for a nominal fee to join build them. If I hit some hidden unpublished trigger send me a free something (new mats, a gas card, an email about how you acted on recent feedback).
Surprise is great creator of customer loyalty. I owned 10 shares of Pixar at one time. One October Pixar sent me Buzz Light Year posters as an unannounced thank for owning the shares. I will always love Pixar for the price of a poster. Ford should learn the Pixar lesson. In fact, Pixar wold be a GREAT strategic partner to help save Ford. Give everyone who works at Pixar new Mustangs for a year just because you can. Bet you get some cool feedback and drawings from such a gift.
Examine what we did with these suggestions. We gave a $5,000 car (Ford’s estiamted hard cost) to Frank for $100,000 worth of User Generated Content. Ford should define this “crowd sourcing” and limit their downside, but it could work and quickly. The Ford’s site needs about 1,000 Franks working hard for a free car. Put a call out on PRWeb and Ford would get 20,000 volunteers banging away on their site in no time. Set the bar correctly and Ford may end up giving away 1,000 cars. Ford spends $5,000,000 in steel and rubber(1,000 cars X $5,000 estimated cost), much less than a single Super Bowl ad. Return is an estimated $50,000,000 in content created by 1,000 Franks.
The bonus free PR Ford would receive for the "Free Fords" campaign. If Mullaly doesn't get long sessions on Letterman and Leno for the "Free Fords" campaign I would be very surprised. Conservative estimate for the value of that kind of free PR would be another $50,000,000. Spend $5,000,000 (give or take) to make $100,000,000. A $20 to $1 return works pretty good. Ford is a huge company, about six billion in annual sales, so it is easy to get bunged up in the zeroes. The logic works no matter what numbers you plug in.
Once the Ford site has been crowd sourced by 1,000 Frank’s Ford will start looking more like an information company. Ford would become relevant to the “car” conversation instead of looking like an out-of-touch oil burner. The really cool part about the Free Ford promotion is Ford paid $5,000,000 for content that they couldn’t create in this lifetime with all the money in the world. 1,000 Franks employs the power of large numbers brings wisdom of crowds to what is currently a dead site. The speed and instant relevancy of this level of crowd sourcing means time shrinks. You get ten years work done in one. You also create a viral node. One thing those 1,000 Franks will do is tell everyone about their efforts on Ford's behalf. Franks of the world tend to work for connection not money. Ford goes from out-of-touch phony to relevant and authentic in an instant by seeding control of a key marketing assest, their web site, to the intelligence of crowds.
Myth of Advertising
Why does Ford spend millions in advertising? Sure they have a brand to support, but the bulk of ad money is to assuage a greedy dealer network. Dealers are Ford's customers not you and me. Ever read the Ancient Mariner? The Ford Dealer Network is the ultimate Albatross choking the life right out of the brand. Remove the biggest strain on Ford's brand - the manipulative, stupid good-ole-boy dealer network - and Ford reduces ad cost. Ford can now afford to use ads the way they should be used today – in support of their web marketing efforts.
Thanks to the 1,000 Franks Ford, in a short time, creates years of riffable material. Ford should only produce every 4th ad they think they should. This will put a forced filter on this kind of one-way spend. It is hard to stop being an ad junkie. The other benefit to reducing one way conversations in favor of two way involvement is Ford clearly signals there is a new Ford in town. Ford should produce great spots but run them on their retooled site, YouTube and Google until they have a clear winner. Clear winners are those ads that get the most feedback, involvement and then $$. Valuing feedback and involvement over money places the car where it belongs – downstream in the relationship building life cycle. First build a relationship, THEN sell your customers one of the largest purchases they will make. Any other approach to marketing in this day and age just seems rude.
Price & Transparency
Free is always good.
Ford and the other car companies built their cars perceived value so high that free would be a real shocker (at least at first). If Ford gave away 1,000 cars to the Franks who helped build their site Ford should look to do 10 times as many in their "Helen" subscription plan. The conerstone of both plans is the car is free for 30 days. Guess what, in most states any car is free for 30 days because the law mandates a 30 day return. Buyers in most states can return a car for a full refund, by law, within the first thirty days. Most dealers don’t tell you about that law.
What are they afraid of? The new Ford fully qualifies Fran's and Helen's finances online. Once their application (not loan) is approved then they get to test drive whatever they want at the Free Car Park (the old Ford showroom). Customers enter the new “free car park” store after money is handled online. Like the Apple store, customers now go to Ford's Free Car Parts because they want to talk to a Ford Car Geek (sort of like the Apple Geniuses) about features, benefits and take a drive. If customers want to transact at the Free Car Park and haven't filled out their application there should be web kiosks where they could easily log into or create an account and submit their applicaiton. BTW, they should also be able to use Google to check whatever they want.
When I accept the car in 30 days what price do I pay? No one bemoans any business a fair return. If a corporate profit insures a cherished company all the better. Does anyone think the iPhone is too expensive? Maybe, but they don’t begrudge Apple a profit. They are glad to play a role in Apple’s success. People are smart. They know that Apple must make profits to keep making cool stuff. Once Ford revamps their site, company and philosophy no one will be upset about a reasonable profit. They are likely to participate, become a brand evangelists, tell their friends and help Ford in many many ways thus also increasing profits. The days when a company could manipulate it way to higher profits is over. Everyone knows everything now (another good reason why the dealer manipulation just seems really stupid now), so Ford shouldn't fight information relevations. Ford should lead and open their books, explain their plans and be honest.
Note how much the Ford experience has changed. From pain and drudgery we’ve moved to fun, word-of-mouth and participation. We’ve removed one-sided dialog replacing it with active conversation. Customer conversations will help Ford plan better thus reducing costs. If Ford were in an active dialog with customers they never would have missed the SUV to compact car shift. If Ford was in the information business their site would gather relevant trend data from forums, comments and blogs. Analysis of this kind of customer information predicts changes before market demands them. I only ever created one site, my first, after that I did what customers told me (for the most part). I still fire new creative ideas into the dark, but, these days, I am much more likely to test and then roll a modified version based on what works best with PEOPLE. Junking the dealer network means Ford is plugged in and listening. Listening has to be worth a 20% cost reduction almost immediately.
I could go on and on. I could explain how Ford should include its 250,000 employees in any change process. I could describe the Apple-like showroom I see in my head or the iPod like ads touting “Free Cars”. I could explain how Ford could be honest about burning fossil fuels and what they are doing to change to a better future. Every one of those conversations is impossible until Ford realizes one undeniable fact. FORD IS NOT IN THE CAR BUSINESS ANYMORE.
Ideas Stolen From...
I lifted many of these ideas from an excellent Wired Magazine article by Chris Andersen entitled Free. Here is
Anderson is also author of The Long Tail - one of the most influential web marketing books ever written.
Also stole a bunch of stuff from Jim Collins for this post.