SOCIAL MEDIA BRANDING AND STRATEGY: HOW HENRY FORD MISSED THE PARADIGM SHIFT IN THE AUTO MARKET IN 1923
The great fact of social media marketing is that the markets move so quickly. To be a great social media marketer you must be humble. A social media marketer must understand that the great scale that social media creates also causes markets to be repositioned quickly. This repositioning sometimes happens overnight. A social marketer must understand what Yogi Berra said, “It ain’t over to its over…and then it ain’t over”. Henry Ford was probably the greatest social media marketer that ever lived but his brand failed because he failed to see how quickly the car market and the American society was changing in 1923. It is a sad tale. Perhaps by reliving it, contemporary social media strategists can avoid the terrible fate that fell upon Henry Ford.
The Model T automobile is one of the greatest brands of all time. The reason why this brand was so successful is because Henry Ford made key observations about the car market in 1908. It was through social media that Henry was able to do this. Social media is about brands and customers engaging. Henry did this. Because of this engagement with customers, Henry knew that America was thirsty for a car that all could afford. The market of 1908 revolved around price. By 1923, the paradigm had changed. It was Alfred Sloan of GM who used social media of the day to grasp the paradigm shift.
As 1923 dawned the prospects dId not bode well for Mr. Sloan and GM. His story is an example for social media marketers. The analytics were absolutely in favor of Ford. In 1923, 13 Model Ts were sold for each Chevrolet. This did not phase Mr. Sloan. Why? Through the social media that Mr. Sloan had available to him, Mr. Sloan knew that he had a great opportunity available to him.
Mr. Sloan’s social media was engaging with customers. Mr. Sloan traveled extensively. He talked with many customers about cars. Through this engagement, which is what social marketers do today on greater scale through social media networks, Mr. Sloan knew that GM, by leveraging their strengths and by being creative, could overtake Ford. Sloan’s greatest asset was Henry Ford’s arrogance.
Ford didn’t see that the engineering improvements and the innovations of his competition were inevitably eroding the Model T’s appeal. These created real paradigm shifts in the auto market. Ford was an expert in driving costs down low, but this was not now an asset in 1923. The paradigm shifts in the market off set this. Mr. Ford could not grasp this. Mr. Sloan did. Mr. Sloan grasped this because he expertly used the social media of the day---which was talking to customers and to car dealers.
The Ford story of 1923 was a sad story because Henry Ford was a tragic victim to his own success. In 1913, Ford instituted the $5 a day wage. This act revolutionized American society. Other industries had to follow suit, and by 1923 there was a strong middle class who had much disposal income. In 1923 people wanted more from a car than just transportation. They wanted a car in more colors than black.
By 1923, most people had already owned a car. This changed the dynamic of the car market. Because there were so many cars around, the market at the lower end could be satisfied with used cars. In 1923, used car purchases started becoming a significant market dynamic. There was strong competition now at the lower end, which is the space that the Model T occupied.
The big change was the development of the middle class. Dealers would now accept the trade in of a used car to be discounted for purchase of a new one from a higher price bracket. The higher bracket cars had more appearance, performance, and comfort than the Model T. By 1923, people were using the car to define their place in society. If a person were successful, he wanted to communicate that. He did this communication through the car that he drove. The car market had changed. The Model T was seen as an entry level car for people from the lower levels of society. Sloan grasped this.
A new dynamic that was coming into play was development of loans to purchase cars. In 1908, seldom did people take out loans to buy a car. With more disposable income, car buyers were more confident in taking out loans. In this area, General Motors was a pioneer.
General Motors created their own financing arm in 1919---the General Motors Acceptance Corporation (GMAC). Ford refused to help dealers by creating their own financing arm. Financing became major paradigm shift car marketing. It happened because of the countless conversations that Mr. Sloan had with customers that he met at the many dealerships that he visited around the country. By 1926, thanks to GMAC, three out of every four cars in the United States were bought on credit. In 1926 only 13 of the more than 130,000 banks in the country had more money available to lend than GMAC.
Financing also changed something else involving the purchase of a car. Because people now had disposable income, a small monthly payment allowed people to feel that they could “move up” in their choice of a car. Installment credit allowed individuals to purchase cars that were beyond their means in years past. They could now afford to purchase 2 or 3 cars for a family, instead of just one. Most of the time, those 2 or 3 were GMs and not Fords.
Dean Hambleton
dnhambleton@gmail.com
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