Is It Worth the Cost?

I haven’t been in the market for a new car for some time now, and as a result I was only vaguely aware of Ford repositioning its product line. I don’t recall seeing ads for the Fusion or Taurus sedans for some time now, and it has been a while since the company has allocated any marketing resources for the Fiesta or Focus lines, at least on any channel where I would have seen them. It’s not as if this is a particularly radical action anyway; every large company that makes consumer products has to reposition at least some of its products from time to time as customer preferences change and the economy fluctuates. But apparently these most recent moves are raising the prospect of reduced sales going forward…

You can pick up the article from the Automotive News site if you want to, but what they’re talking about is a survey that indicates that at least some percentage of Ford owners will purchase their next vehicle from another company if their preferred model of sedan isn’t available. The findings aren’t conclusive – the sample size isn’t big enough, for one thing – but it suggests that the company’s plan to replace sedan models with SUVs and crossovers offered at a similar sticker price may have failed to take into account the fact that some people don’t like SUV body types, or that some people are more loyal to the kind of car they want to drive than they are to the brand identity…

What is really odd about these findings is that they are almost directly contradicted by trends in purchasing decisions in recent years. Whether SUV types really have higher profit margins than sedans or not depends on whom you ask, but the market has definitely been trending toward them for some time now, and it’s hardly surprising that Ford would try to produce more products in the categories in which they sell the most units. From a strategic viewpoint, the real question is whether Ford can achieve enough additional sales – or, failing that, secure enough additional revenue – through this change in their product mix to make up for whatever they lose by discontinuing the sedan models…

Now, I don’t mean to imply that this kind of forecasting is easy, or that the consumer preference analysis that drives it is something that anyone can just throw together on the spot. One could argue that eliminating products with lower purchase prices and higher gas mileage (e.g. lower operational costs) might be viewed negatively by people in some market segments; one could also argue that if you alienate buyers at the entry levels of your product line you have dramatically reduced the possibility that they will ever graduate to the more lucrative levels. On the other hand, there may also be savings that can be realized by producing a smaller number of models, requiring a more limited variety of parts, which are not obvious from the published information. At least, that seems to be the way Ford is placing its bets…

I’m going to try to keep an eye on this one as the next few model years hit the market. It’s possible that the Forward Planning team at the Ford Motor Company knows more about the way their market is developing than the folks at Automotive News (or various scruffy bloggers) do. But it’s important to remember that they’ve been wrong before, too…