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The Art of Wealth Blog

The Japanese car market is murder for the Japanese car makers

The reason Japanese cars are fiercely competitive on the world market boils down to the fact that nowhere on the planet do they meet as much competition as they do at home, in Japan.

Their home market is so carefully balanced that any gain for one maker means an instant loss for another. The Japanese market hasn't been growing for years, it's actually been in decline with respect to number of vehicles sold, which is why competing for sales is crucial.
In 1990, automobile unit sales in Japan reached 7.8 million. Ever since 1998 sales have been under 6 million/year, and last year they reached 5.85 million.

What are the consequences? Fierce, cutthroat competition, that is resolved not through lower prices, but by addressing specific consumer needs and wants, while offering standard features that have yet to make it to the optionals list on Western car models. (The Toyota Fun-Car-Go (Yaris in the rest of the world) comes with a mains plug of 110v in the back, to make it possible to prepare a family hot dinner while you're out on a picnic, for instance).

We worked on a campaign together with representatives from the Hakuhodo agency, and were told that the car market is so competitive that every car account that Toyota has is served by two agencies, and that the agencies are competing against each other for the right to execute each expression of the account. On the project we were doing together, Hakuhodo was competing against Dentsu for everything connected with the advertising.

No wonder then, that the Japanese seem to have it all well connected when they go international - the cars they launch have been tried, tested and approved by some very tough customers, through an equally grueling process. Toyota's Scion bX car is one example in the West of how they want to address the particular needs of a particular segment. Since its launch in California it has become hugely popular. In the words of Toyota, it's not a car, it's a place for teenagers to hang out, that happens to have wheels and an engine, in case they want to move about.



Toyota and Honda are the only purely Japanese carmakers left of the large companies. Most other Japanese companies have entered into various forms of partnerships with foreign car makers, who probably wanted to have a touch of Japanese principles to their own operations. And in the case of Nissan, getting some of Ghosn's touches from Renault took that brand back up into where it wanted to be.

Competition is good, obviously. Cutthroat competition can also be very good, for consumers and for companies forced to adapt, instead of relying on protection. GM's and Ford's worries in the U.S. are a result of the companies relying on protection, through legislation and "car racism" - that protection has worn out, and consumers are no longer placing their money with GM and Ford.

In the words of Jeremy Clarkson, of BBC's Top Gear, when he was evaluating GM's Pontiac Solstice: "This car not only looks old, it is old, it is rubbish. It goes into the bin." And then he threw the picture of the Solstice into a rubbish bin marked "Not for U.K."
Sad thing is, the Solstice is supposed to be an expression of the best that Pontiac can offer ...

If the U.S. market had been truly competitive, the Solstice would have been able to meet Japan and Germany head-on.

Honda gets vindication at last - and big SUVs go off to die.

You'd be joining legions if you thought Toyota was the most innovative "green-oriented" of the large car makers, but it's actually Honda that leads the field in that category.
Years ago, company management decided that their inspiration would be to achieve the best mileage-to-fuel ratio of any carmaker, across its range of models. Thus Hondas were launched, one after another, that seemed out of touch with the "how many horsepowers can we fit under the bonnet?" mantra of other carmakers. And the other carmakers were "right" in the sense that customers weren't paying much attention to green issues and mileage. They wanted performance, size and brand cachet with which to show off.
However, things never stay the same, they are always in flux. As recently as in June of this year, Honda's chief engineer in the U.S., Charlie Baker, was expressing his frustration over the fact that Toyota was getting all the credit, while Honda was ranked below their rival, in spite of having better technology. (Honda has three hybrids on the road, with more coming, while Toyota only recently added the Lexus RX400h SUV to the Prius. Honda also has the best mileage bar none, across the range, and the best fuel emissions ratings overall.) As Charlie Baker saw it, Toyota had better PR, Honda had the better product.

Charlie Baker will be smiling now. It took two hurricanes, a rise in fuel prices and the slow realization that Honda were on to something. The 2005 Total Value Study conducted by Strategic Vision of California is providing ample vindication, as Honda is now the top-rated automaker. Strategic Vision surveyed buyers of model-year 2005 cars, and conducted 69,000 interviews. (Can't argue with that base). Customers were asked about both performance related and emotional issues, such as whether they felt confident and safe in their cars and sensed a pride of ownership. Fuel-efficiency, affordability, quality, ride performance and craftsmanship were also central to the study.

Honda placed number one among all automakers, with four of their models being segment winners. (The Acura RL luxury sedan, and the Honda Accord coupe, Honda Element small sport utility vehicle and Odyssey minivan.) Hondas also have the best perceived resale value, fuel economy and have the most standard technical innovations, as well as a slate of optional "check this out!" ideas. BMW's Mini Cooper was the highest-scoring vehicle in the study.

We read Charlie Baker's interview back in June and noticed a particular statement of his which had us smiling.

The point is not that customers demand it or don't demand it, because that's absolutely not the viewpoint of Honda. When you are a philosophy-driven company, you don't ask the customer if they agree with your philosophy.

Yesterday, GM stocks fell 10% on Wall Street, as investors shied away from the failing company. GM bet the farm on customers not bothering about the price of fuel. Delphi, GM's major parts supplier, filed for Chapter 11 bankruptcy protection last Friday, and it turns out that GM has a USD 11 billion commitment to Delphi that it can't get out of. The large automaker has a considerable cash warchest, but it's been cutting into it at a ferocious pace lately, just keeping things afloat. It's looking more and more likely that GM will be filing for bankruptcy soon, and that is going to send shockwaves through the world economy. The auto giant is hemorrhaging money and has been forced to offer ridiculous incentives to prospective buyers, cutting deeply into their profit margins on sales in the process.
GM didn't have a philosophy, and definitely didn't have any deep customer benefit in mind as they made their cars. Honda and Toyota did, as did BMW with its revamping of the Mini. In Honda's case, the benefit was clear - what we call the Directional Idea for the company was simply stated: The best mileage possible, across our range of models.
Honda stuck to their directional idea even when the market seemed to be wanting something else. They did a very simple calculation, of the "buy land, they're not making any more of it" kind: oil will be getting more expensive, not cheaper. That didn't take a genius, it just took foresight.
GM has been sorely lacking in foresight for the last ten years, and it's begun showing to the point that the world's largest auto maker will soon be forced to make dramatic changes to its operating structure simply to stay alive. The trouble with GM isn't that they are incapable of achieving good mileage - they have various models across their vast range that have excellent fuel economy. GM's problem is that they have their messages all mixed up, as they create gas guzzling trucks, sell Hummers and go flat out for an SUV in every single brand under their umbrella.
Al Ries, the father of positioning, recently stated that he'd been told there are eight different kinds of cars (Sedan, station wagon, truck, convertible, etc.) He also knew that GM had eight different brands. He showed to how GM had destroyed the Saturn by not fine tuning the original brand promise of that make (just a few models, to their ultimate expression). Instead, GM had worked long and hard to extend the Saturn brand into a "full range of models, from the smaller cars up to the larger". That was a huge mistake, according to Ries, and Saturn is practically dead in the water now. Back when Saturn was a philosophy driven brand, its directional idea was strong enought to have thousands of Saturn owners go to the Saturn plant to celebrate each year - that was the kind of brand energy that money can't buy, but which foresight will get you, and a lack of foresight will destroy.
So, Ries' suggestion was simple, to the point of ensuring that GM will never adopt it, though it makes perfect sense: GM should make eight different kinds of cars, each car under a separate brand. Cadillac should be their ultimate luxury car; Saab their ultimate quirky performance car; Chevrolet their ultimate truck; etc. And then the company should hone each of those platforms to their ultimate expression, in order to remain competitive.

Good idea. Too late.

Honda, meanwhile, kept plugging away at their mileage-focused Directional Idea, and now they are top-dog.
And the U.S. SUV market is taking a deep nosedive.
Bad news for latecomer Audi Q7. You can hear them in Ingolstadt now: "Whose stupid idea was it to sink a lot of money into an SUV?" Audi is known for its great mileage, and has had 4-wheel-drive since forever, they should have remained dismissive of the SUV trend. But with an eye to Porsche's apparent success with the Cayenne they simply couldn't stay out of the game any longer and had to join.
Way too late, and with a car that is not part of Audi's Directional Idea. The Q7 will be to Audi what the Phaeton is to VW, very expensive and a problem. The SUV segment is dead in the U.S. Sure, there will be SUVs sold, it's just that the volume isn't there any longer to keep the bonanza going (down from 750.000 to 400.000 this year), it just won't be economically feasible to have all those different SUVs looking for a dwindling number of customers any longer. And then there's the Social Responsibility angle (no, not the carmaker's). The average gasoline price in the U.S. (measured across 7.000 dealers yesterday) is now USD 2.91/gallon and rising. Just a few months ago, analysts were dreaming of the fuel price dipping below two dollars again, reboosting the SUV/Trucks segment. Not going to happen, the price will go above three dollars soon.

Good mileage, smaller cars, hybrids, alternative drive trains, electric cars for short hauls - it's all happening at ultraspeed, and a lot of carmakers will go hurting, while a few will be set to reap the benefit of their philosophies, as long as they have managed to stay true to them. Well done, Honda.


Last year's best commercial
"Hate something, change something, make something better."

Your SUV could soon be flat out tired ...

Yes, it's begun, a campaign to free the SUVs stuck in cities and help them get out into the countryside, where they belong.
In France, the dégonflé campaign is truly gaining traction.



What's happening here? It's a cadre of Dégonfleurs in action. They go through the well-to-do sections of Paris at night, looking for SUVs, and empty the wheels of air, while smearing the vehicle with mud. The owner of the car will find a sticker attached to the windshield, stating that the car has been attacked to make it clear to the owner that 4x4 vehicles do not belong in cities, they are too large, too threatening, too noisy and too polluting. Also, since the cars never get into the countryside, the countryside must come to them, hence the mud smeared all over the car.

In the U.S. the Dégonfleurs would probably be shot on sight. In France, they are becoming heroes. And they are, of course, right. Huge 4x4 SUVs do not belong in cities, and buying one for city driving is pretty silly.
We're reminded of how the Dufflocq brothers in Patagonia bought their 4x4s. They would go up to Santiago and get used cars, four or five years old, that had been used for "supermarket driving", buy them at far below the sticker price of a new one, and bring them 2000 km south, to their fly fishing ranch in the Andes, laughing at the stupidity of city dwellers who bought cars they didn't need, at a ridiculously inflated price. (No pun intended).

Well, the Dégonfleurs appear to be starting something, the campaign is spreading outside France, as activists in other European metropolitan centres go hunting for out of place SUVs.

If you should find your SUV just barely clearing the ground one morning, you know what's happened.



You could always go for a full press impact from the activists, by leaving an expensive fur coat in the passenger seat.

Time for a complete 180-degree change in POV

If you're a marketing professional chasing the latest "got to hit" target audience out there, we have news for you: Stop chasing the latest "got to hit" target audience out there.

Here's the crux: international marketing is spending gadzillions on market research, consumer studies, trend spotting and analyses galore. And once a likely fit has been found between you and a group of consumers out there, further studies are conducted to find out what this target audience likes and dislikes and on what terms to approach it.
And as you run from seminar to seminar, where the latest Generation Alpha-XYZ is launched as seminal to the future success of your brand, you wonder how on earth you are going to be able to fix anything down, in a world as confusingly adaptible and amorphous as the world of marketing has turned out to become.

The Holy Grails of this search are many, usually it devolves to marketchatter: urban professionals; polycapable cosmopolitans; career-kangaroos; Post-postmodern-modernists, and whatnot.
We have spent meetings with clients who complained that the swimming pool in an ad wasn't sufficiently post-modern for the target audience they were trying to appeal to, and could we please photoshop out the cap that a person was wearing, as that would probably not research well, since it wasn't aspirational to wear a cap.

Here's the kicker: this is not what it's all about. If you want to be succesful in brand building, this is not the arena you want to be in, for the very simple reason that you'll then be OUTSIDE yourself, chasing an identity that will be in flux, instead of being fixed.

We suspect there's a reason for this state of affairs, and it begins inside the walls of the company. Here, the various divisions have traditionally been segregated: product development, marketing communications and sales have been separate entitities, often with disparate agendae competing for available resources.
And marketing has been the stepchild of the organization, powerless within, because of the natural formation of the company hierarchies, where marketing is usually an afterthought, that follows product development.
It's taken decades for marketing management to be included in the executive managerial board, for instance. Usually marketing reports to this board, and has to accept whatever edict is passed down, which could be unrelated to the input from marketing.
It's only as CEOs and boards have come to understand the value that could be reflected on the balance sheet by Brand Equity that the marketing department has come to be taken seriously, and meanwhile it's managed to adopt a modus operandi that is completely unhealthy.

What did marketing departments do, when they weren't listened to internally and when they weren't a natural part of the product development process?
They went OUTSIDE the organization "looking" for answers that would give them influence INSIDE their own organization. They were, quite simply, too receptive to the creation of an "art of marketing" that depended upon research and investigations of factors beyond the company's control, in order to provide persuasive arguments that would give marketing power inside their own companies.

Just consider how the process takes place today. Once the product is in place, marketing "takes over", applying its market know-how to the communication of the product. Since marketing is considered not to be sufficiently insightful as to the production process itself, it achieves an upper hand by pointing to processes that production and management are insufficiently knowledgeable about: "THE MARKET OUT THERE".
This gives marketing leverage. It also adds complexity to the process - while also ramping up the loss of control that could have been avoided with another approach.

The leverage that marketing gains, by engaging in focus groups, studies, research, analysis and a full spectrum of marketing services, comes at the expense of confusion, misdirection and the potential that the result of the analysis is wrong, or simply too bland to have a differentiating effect.
The greatest price paid by this approach is the similarity we see in the communication that results, regardless of which company within a category that is doing the marketing. (Notwithstanding the cliché "we also have to cover the needs of this target group, while not offending our core audience").

What's the solution?
Stop looking OUTSIDE the company. Spend your resources INSIDE. That's the 180-degree change of perspective required.

Apply the absolute majority of your resources in talent, time, money and energy on joining your various divisions - product development, marketing communication and sales - into an effective whole dedicated to working with the product, through directional ideas that are unique to your company. (And if you can't find anything that is unique to your company then you have no business doing business in today's brutally competitive markets).
Work on finding the absolutely best expression of your company's identity, through your products - and rest assured that these products will then attract an audience filled with prospective consumers.

You'll save a lot of time in the process, your efforts will be honed towards making the whole company become more effective, and you will have reduced the uncertainty that drags you down today significantly. (You will also have made a lot of the marketing industry, as we know it today, irrelevant. There are umpteen services feeding off The Big Client that have sprung up to help marketers find consumers, without contributing to the process in a decisive manner).

For more information on the possible rewards of following this approach, we'd recommend that you commission a study of what Motorola has achieved, in just 18 months, under Warrior.

The Salmon-Forty-Salmon

Alaska Airlines and the marketing board for fish products from Alaska have joined in an effort to spread some smiles around the USA. A team of airbrush painters worked with airbrush artist Chris Coakley to create a flying salmon that will get up any river.

Conclusive, decisive, inclusive or exclusive?

Here's a quandary for any newspaper or other medium that earns a living from getting paid for its work:

The internet is making information available in manners undreamt of just a few years ago. Again, just a few years ago, it was much easier for someone providing information to ensure they got properly remunerated. A television station could sell a portion of the total audience to interested advertisers; a newspaper measured its value according to a set circulation and an estimated readership, and earned revenue both from sales of the paper, and the sale of space inside the publication. Then the Internet came along, and papers all over the world were faced with a paradox: they wanted to enter the new medium, while doing so destroyed the barrier to access that the physical paper created. Simply put: why pay for the words on paper, when they were freely available online?

Various models were attempted. Some failed spectacularly. Publishers everywhere ended up pretending not to notice that they were undermining the very basis of their economic foundations by making their content generally available.

One could argue that the end result will probably be beneficial to all: newspapers will simply have to get better, more involving, more relevant, more specific, in order to gain a public, and thus ensure both their continued survival, and their value as a channel for those seeking attention, whether public figures or advertisers looking for consumers.
And the good newspapers are finding that advertising revenue from online activities are helping compensate for the loss of same in the paper versions, now that ads online is an established medium.


We find many approaches. The Economist make some articles freely available, and require you to join to get full access to everything on their pages. Likewise, The Independent lets you read nearly everything for free, but you must pay for particular articles and columnists.
Trouble is, you can probably find those same columnists through other publications, since many are syndicated, and not all papers that carry them require payment for access. Thus we find that it is very difficult to completely restrict access - and the restriction of access, on your terms, is actually the "secret" of building a brand and ensuring you get properly paid for the effort.

The writer Robert Fisk is generally considered to be an insightful, interesting, well-informed and forceful voice - to the extent that The Independent wants you to pay for the privilege of reading him. Yet it's our experience that his articles become available through the Internet just a few hours after having been posted in the the online version of The Independent. That undermines the restriction of access, and makes getting paid "properly" near impossible. It's as if shops stopped bothering about shoplifting, or locking up at night.

Newspapers find themselves in a quandary. They want to take part in public debate, spreading their point-of-view to interested readers everywhere, and they also want to be a part of the new medium, and damn the consequences. For The Independent, it's obviously a problem that The Guardian is freely available, they'll post all their content on the web, and are assuming that the advertising revenue they get will compensate for any drop in circulation of the physical newspaper. And since The Independent and The Guardian are overlapping publications, that creates a lot of trouble for The Independent's online business model, regardless of whether illoyal subscribers are cutting and pasting restricted content and making it available to others.

Enter The New York Times.
They have recently done something we can only conclude is monumentally stupid. They created Times Select. After years of making everything freely available, after an initial registration, the publishers have now decided to cull what they consider the most interesting material and make it "subscribers only". There are a lot of things we find troublesome, or ill considered, about the manner in which the New York Times has gone about charging for their online content.
First of all, The Washington Post, LA Times, Philadelphia Enquirer, Boston Globe, San Francisco Examiner, Chicago Tribune and Miami Herald (to name just a few) are free. Moreover, the best newspaper outfit in the U.S., The Knight Ridder Corporation, also make all their content freely available on the Internet. Knight Ridder being "the best" is a subjective judgment, of course, but we find them continuously interesting, well informed, engaged, peripatetic and challenging - as well as morally robust against any kind of PC or political influence.
So what were the New York Times thinking? Are they assuming that their "brand cachet" is such that they'll get away with it, in spite of the apparent parity and even superiority of some of the freely available content out there? Possibly, we will probably never be able to tell. The NY Times announced Times Select a few months ago, kept reminding online readers of the fact that restriction would be imposed shortly, and went ahead "and did it" three weeks ago.
The other day, we noticed that they offered "A Free Trial" for those interested. That's because sign-up has been catastrophically low, compared to the projections they based their decision upon - and now they are forced by pride to refrain from conceding that their judgment was flawed when they introduced Times Select.

Who knows? Maybe it'll turn into a success. But here's the reason why we have arrived at the conclusion that Times Select is monumentally stupid.
Some of the best known columnists in the world write for the NY Times. Dowd, Brooks, Tierney, Friedman, Rich, Herbert, Kristof, and Krugman have made the Op-Ed pages of the NY Times agenda setters of inestimable value, and they have helped ensure that the NY Times remains relevant, is placed in the middle of events, and is the arbiter of what is worthy of attention and discussion.
What happens when you place them behind a "firewall" of subscription? Well, first of all, since the columnists cover a spectrum from "far left" to "far right" views, it gets easier not to read the ones you dislike. Secondly, their share-of-voice in the theatre of opinion is reduced significantly, since people tend to read them online, instead of in the paper. This means that their ability to influence events, and thereby to make the NY Times influential, is seriously reduced.

How do we know this for a fact? Until a few weeks ago, you'd find the Op-Ed columnists in the top-5 ranking of "articles most e-mailed" every single day, without fail. People would go online, read an opinion they agreed or disagreed with, and send it on to their acquaintances, friends or antagonists. Without fail, you'd find the day's two columnists in the top-5 list, or at the least among the top-10.
What's happened since the introduction of Times Select? It's a rare day that you find one of the columnists in the top-20 list, and it's a more frequent occurence to find none of them there. And it definitely strengthens our argument that they are rarely found in the top-5 anymore.

What's the consequence? The NY Times has managed to reduce its importance as an influencer of events and opinions. That's probably not very good for the brand, and we'll make a prediction here, by really going out on a limb: it won't be long before those columnists are freely available again.

Brandright behavior is hard at times, but you'd think that the publishers and editors of the NY Times knew better.

"My conscience can be bought clean!"

If you're feeling guilty about the cost to the environment of your lifestyle, you should be advised that there are various things you can do to balance things out.
The best avenue of approach is ceasing what gave you that tinge of guilt in the first place. Like getting rid of your Hummer, which is just sitting in your driveway shouting "Bad judgment, sorry!"

If you insist on hanging on to your habits, but want to make a difference, then there's help on the way. For instance, you can contribute money to various organisations, such as NewWind Energy, which uses your money to make wind energy available to energy utilities. Or you can pay Terrapass to help you get your angel's wings back. They take your money and spend it on activities that reduce harmful emissions - which means you can keep tooling along with your car.


Well, what we should actually take out from these activities is a surge in a movement we have been expecting for a while. The world will start taking a long, hard look at its energy consumption habits, and anyone seen to be particularly wasteful will be socially censored for his or her actions. With energy prices rising, and the environmental costs mounting, social behavior will be modified, in order to meet new social expectations.
The cars we are presently driving are not engineered in accordance with these new social mores, which means that we are going to have to make reparations to society, for the bad judgment and lack of foresight we showed when we acquired that monster car in the first place.
TerraPass has seen this, and are offering a way out. You get a membership card, and a decal that you place on your car, which shows others that you are making amends. You may not have to make a trek to Canossa, but it's the same thing, isn't it?

We predict that we'll be seeing a lot of this in the years to come, as already purchased cars are driven through their useful lifetime, before being replaced with the new generation of energy efficient vehicles that will transform the automotive industry in the next few years.

(Source: Slate)