HOW ALBERT SLOAN OF GENERAL MOTORS USED A PRODUCT MIX STRATEGY IN 1923 TO OVERCOME FORD’S INSURMONTABLE LEAD
In 1923, Albert Sloan of General Motors used a product mix strategy to become the preeminent brand in cars. This is a case that every social media marketer should follow. At the time this happened the Ford Model T was the most significant and successful brand that has ever been created. Using the Social Media of the day, General Motors was able to quickly overcome Ford’s seeming overwhelming market lead. Studying the 1923 General Motors brand and social media strategy is important for two reasons.
To be a successful social marketer, you must be humble. You must realize that no matter how strong your brand is, it is vulnerable and can be easily overtaken with the proper strategy. On the other hand, if you are an entry level brand, you must never feel ambivalent in confronting a major brand that is well- established. There are no perfect brands. In social media, any brand can be overtaken under the right kind of circumstances. Ford vs. GM in 1923 is a perfect example.
As 1923 began, the Ford Model T had a brand that seemed insurmountable for a competitor to overtake. Ford had 60% of the overall market. Ford only possessed 12%. In the entire auto market for the U.S. at the beginning of 1923, 90% of the cars that were on the road, belonged to Ford. No one thought that it was possible for GM to overtake Ford’s lead. Albert Sloan used the social media of the day. Because he did he knew that Ford was a very vulnerable brand.
Social media is when the brand and the consumer engage one another. The two develop a close, almost human relationship. The two become “friends”. This friendship creates many touch points between brand and the consumer. These multiple touch points create the consumer buying decision. When Alfred became head of GM, he traveled the country talking with customers. He realized that some very important things had occurred in the American society and this changed the entire makeup of the American car market.
In 1908, when Henry Ford first developed the Model T, the average American citizen did not make a middle class wage. Few people made good money at their jobs. Even Henry Ford only paid $.39 @ hour. Henry made an historic observation. He observed that the brand that developed a low cost car, a car for the masses, would become the pre-eminent brand in cars. Henry bet that low cost would be the key factor in purchasing a car. Ford developed the Model T and sales simply took off.
By 1923, in engaging people, Alfred Sloan realized that things had changed. There was now a middle class in America. “Morning had come to America”. They had disposable income. The American market wanted something more than just cheap transportation. They wanted a car that was enjoyable and comfortable to ride. Driver comfort was a critical touch point in the consumer buying decision.
An important fact that Alfred discovered, through his social media, was that people used a car to define their economic position in life. In the American society, there were entry level people, middle class people, and there were very successful people. People wanted a car that would reflect that. The Model T was now seen, in 1923, as a car “for farmers”.
The difference between Henry Ford and Billy Durant, the creator of General Motors, in 1908 was that Henry thought that people only wanted low cost. Billy thought that people wanted affordable cost, but variety in their car products. Billy Durant decided to have several brands under one big umbrella brand. Billy understood how the long-term car market would develop. He made available the tools that Albert Sloan would need in 1923.
Albert’s strategy was a “car for every purse”. His strategy also revolved around the fact that GM “made money not cars”. People would begin their lives by buying a Chevrolet. Once they were at a job for a while and had some pay raises, they traded the Chevy in for a Pontiac. As they developed in their job and began to move up, they moved up to an Oldsmobile. When they became supervisors, they bought a Buick. When they became a vice-President, when they were successful, people bought a Cadillac.
This was a brilliant strategy---a strategy that simply offset Ford. GM’s product mix strategy left Ford with nowhere to go It was a strategy that Ford had no answer for because Ford had just one large entry for the entire market---the Model T. The Chevy could now compete against Ford in the low cost market. Besides a low cost, the Chevy had a self-starter, headlights, had a closed body, and had interior heating. It appealed to women who were just now entering the work force. Ford made a few Lincolns, but it had no major luxury brand in 1923 to compete with Cadillac. GM now owned the luxury market.. This market created an intense brand for GM and created a strong revenue stream which supported the entire General Motor organization. This branding created an important touch point in the consumer buying decision
With this strategy, GM did the unthinkable. It overcame Ford by 1926. To this day, Ford has always lagged behind GM. The lesson for contemporary marketers is this. In a social media age you must be humble. Irregardless of your market share, because of the size of social media platforms, your market share can easily and quickly be overcome if your opponent has a compelling competing product. In 1923, Ford had 90% of the car market. By 1926, General Motors had the leading market share. Albert Sloan did not have Facebook, Twitter, and YouTube. If he had, he could have taken away Ford’s 90% market share in a matter of months, or even weeks.
Dean Hambleton
dnhambleton@gmail.com
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