The Titanic of the Auto Industry - A Lesson in Market Research

Date:
March 24, 2021
The Titanic of the Auto Industry - A Lesson in Market Research
The Titanic of the Auto Industry - A Lesson in Market Research
Date:
March 24, 2021
Table of Contents (click to visit the section)

Marketing research agencies extract valuable data that will help brands build effective marketing strategies by combining up-to-date data with creative thinkers and a talented cast.

Ford applied market research when launching its new product in 1958. But it failed. The company’s disastrous introduction of its new luxury class model soon became a case study taught in business schools.

Ford Edsel, named after the first name of Henry Ford’s son, became a big bust despite hiring professional business people and running brand auditing and market research.

What went wrong with Ford Edsel?

In 1948, Henry Ford I retired. Taking his place was Henry Ford II.

In a move to change the corporate structure and to lead the company in a new direction, Henry Ford II assembled a professional team.

To understand the level of talent involved, the team consisted of individuals such as,

  • J. Edward Lundy, the future CFO of Ford.
  • Robert McNamara, the future secretary of defense under J.F Kennedy, also went on to serve as president of the World Bank from 1968–1981.

The men had no experience in the Auto Industry. It was considered a good thing since they would provide a fresh perspective to the company. But that wasn’t the case with Edsel.

Henry worked with the team to conduct corporate restructuring by introducing a division called “ Special Products,” dedicated to managing and producing luxury cars.

They decided to conduct market research for the division. The goal was to understand what consumers wanted and talk them into wanting a product that they have not considered before. Ford’s Management took this idea from a phrase that is often associated with Henry Ford I,

“If I had asked people what they had wanted, they would have said a faster horse”

The Research Process

David Wallace was hired to conduct market research and to come up with a name for their new luxury-class model, which was in production. Wallace, like the other team members, had no previous industry experience. However, he was hired due to his ability to offer a fresh perspective.

After reviewing the 10,000+ submissions from the public and internal Ford staff, the team filtered the name suggestions to around seven: Citation, Corsair, Pacer, Ranger, Phoenix, Altair, and Simplex.

They still weren’t satisfied. Everyone resorted back to the name Edsel, despite the research showing people hardly liked it.

The car didn’t perform as everyone expected. The following are the two significant reasons why Ford Edsel failed when it launched in the market

1. Bad timing

The Ford Edsel had many problems. One of them is bad timing. It conducted a market analysis in 1955 and launched Edsel in late 1957. The market analysis failed to forecast the future; Edsel was first introduced to the market just as the Eisenhower recession struck the country in 1957. Sales were down across the automotive industry. Carmaker sales were at an all-time low. Ford’s Mercury sales declined by 48%, Chrysler’s Dodge by 47%, GM’s Pontiac by 28%, and their Oldsmobile declined by 18%.

The recession started from late 1957 till early 1958, which caused the unemployment rate & oil prices to increase. Due to the downturn, purchasing behavior has changed since then. Many people looked for cheaper, smaller, and fuel-efficient models. The market was acting against Ford and other carmakers.

2. Ford disregarded the data from the research

The company sided with the study, which found that each car brand had a different effect on the buyer’s personality. One interesting comparison was between Ford Automobile and GM’s Buick,

Buick is seen as the car for successful people moving upward…. Ford retains from its tin-lizzie past…. which values it…. for rugged wear, a plain farm car. It is intensely attractive to youngsters.

Wallace decided to assess the “personalities” of all mid-priced cars on the market and some of the lower-priced models. Ford surveyed more than 1600 recent car buyers in two states in the USA. The results led Wallace to create a statement of who will Ford’s new luxury car be for.

“ The most advantageous personality for the E car might well be the smart car for the younger executive or professional family on its way up.”

Smart car: Recognition by others of the owner’s good style and taste.

Younger: Appealing to spirited but responsible adventurers.

Executive or Professional: Millions pretend to have this status, whether they can attain it or not.

Family: Not exclusively masculine; a wholesome “good” role.

On its way up: “The E car has faith in you, son; we’ll help you make it!“

Although the personality test was a good approach, Wallace targeted too many groups at once. He mentioned “Younger”, “executive or professional” and “family,” which hardly go together. His goal was to target more people to gain more sales. But in the pursuit of targeting everyone, they ended up targeting no one. Consumers didn’t know who the car is for and had no real reason to buy it.

The market research only tested the car’s styling and what consumers wanted to see in a car. But it didn’t test the initial concepts of the Edsel, its functionality, or its design. Instead, the company decided to keep Edsel hidden and tease the audience for a year as part of their marketing strategy.

The company ignored the important discoveries from the market research they conducted. A perfect example of such discoveries, in 1954, ford performed research which has proved to be successful in coming up with the name Ford Thunderbird. People loved the name and the car. So it was not the fault of market research. The problem was within the market research: the goals, objectives, KPIs, and other metrics that were important to understand to truly gauge consumer behavior and aid in forming a good product.

For Ford Edsel, The Lehman Brothers were hired to audit the company and conduct market research. The following were the results they found,

The company meant to position the Edsel above the Mercury, which meant it’ll be a mid-range priced automobile. The decision to do so is out of the concern that GM is taking the med-priced auto market’s significant share. But this further confused the end consumers who thought whether I should buy a decent mid-range car such as Mercury or give a shot at a new and far-fetched designed automobile such as Edsel? The better choice seemed to be Mercury.

Conclusion

Market Research is one of the most helpful business tools. It will help organizations find out about their current and potential customer's needs, wants, and care, as executing such research shall be essential to discover valuable insights.

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