HOW DID GM USE THE MODEL CHANGE IN 1923 TO DEFEAT THE MODEL T BRAND?

HOW DID GM USE THE MODEL CHANGE IN 1923 TO DEFEAT THE MODEL T BRAND?

            Social Media creates great scale and this allows companies to develop competitive advantages that they wouldn’t ordinarily have. A case in point is General Motors. Their strength is social media gave GM a competitive advantage in defeating the Model T brand of 1923.

            It seems ironic that a brand of 1923 would be a benchmark for contemporary social marketers, but that is what happened. Alfred Sloan, the CEO of General Motors in 1923 is a marketer that contemporary marketers should study. General Motors overtaking of the Model T is one of the most exciting stories in American marketing history.  It was done through social media. In 1923, nine out of ten cars on the road was a Model T. Alfred Sloan realized that the only chance he had of overtaking Ford was to use the social media of the day.

            He did what a contemporary social marketer would do to overcome his disadvantage. Sloan created a “friendship” with customers. This friendship allowed him to have conversations with them. He learned that customers did not want just one kind of car, as the Model T was. Customers wanted variety in their cars. They wanted a car that was stylish and fashionable. Customers wanted a car that was “cool”.  Customers showed Sloan the way to defeat Ford.

            Customers wanted a change in the model appearance on a continuing basis. To do this, a company had to have the manufacturing technology to change lines over to different styles. General Motors had this technology and Ford didn’t. The ability to change over gave General Motors a strong competitive advantage over Ford. The yearly model change could only be handled by larger companies. In 1923 there were many niche car companies. The complexity of yearly changeovers ended the existence of tens of thousands of companies. This allowed General Motors to focus their competitive forces on Ford, the industry leader.

            The model change gave General Motors a true competitive advantage. The market of 1923 had changed. “Cool” was now an important issue in marketing cars. People wanted variety and fashion cars. This meant constant change. This was a big difference between General Motors and Ford. General Motors was orientated toward change and Ford was orientated toward continuity.

            The annual model change and diversity of product were incompatible to the way that Ford did business---to their very core as a company.  At Ford’s plants every machine tool and fixture was fitted specially for the production of a single product. Even small changes in the design of the Model T bottlenecked its production. The switch over to Model A production was chaotic. Machine tools highly specialized for Model T production could not be converted to multi model production as was the case at GM. The first model change happened in 1923. General Motors started getting buzz and traction in the market place with their variety model. Ford couldn’t make a changeover until 1927. The result of this was that 32,000 machines used to produce the Model T had to be redesigned and rebuilt and half of the remaining ones had to be scrapped. This cost Ford $250 million to change over. Ford was flatfooted and unable to adjust to GM’s repositioning.  

            Ford had to rearrange all their manufacturing plants to compete with GM’s model change. This cost Ford four years. No market leader lost their position so quickly. Ford has never, to this day, come close to getting even with General Motors in market share.

Dean Hambleton

dnhambleton@gmail.com

SOCIAL MEDIA BRANDING AND STRATEGY; HOW ALFRED SLOAN OF GM USED "COOL" TO OVERCOME THE FORD MODEL T IN 1923

            To create a successful social media brand it is imperative that new material is constantly being created and shared with customers. In creating a brand, image is critical. Brand has two sides. There is a functional side, and there is a side that conveys a symbol. In branding, there is a “cool” factor. Many times it is the “cool” factor that sets a product apart. One of the first C.E.Os to understand this was Albert Sloan. Albert Sloan, though he was leader General Motors in 1923, is an excellent bench mark for contemporary social marketers.

            In 1923, Albert Sloan faced a dilemma that seemed insurmountable. The Model T Ford possessed 60% of the American car market. In terms of numbers of cars, close 9 out of 10 cars that were on the road were Fords. Only 12% of the market belonged to General Motors. Many executives at General Motors in 1923 thought the chance of overtaking Ford impossible. Albert Sloan knew that Ford could be overtaken because he understood social media.

            Albert communicated with customers much like today’s social media world. This engagement was two-fold.   As is the case today on a Facebook Page, Albert learned what customers “liked” in cars.  Times had changed drastically from 1908. There was now a middle class. There were a large group of Americans who had disposable income. The type of car that was driven was the means by which people defined success. The type of car that you had told people what income you were in.

            People wanted variety. In addition, to just supplying a nice ride people also wanted something that looked nice. Style now became important in selecting and buying a car. Sloan understood that image was a deciding factor in the marketing of cars.

            How do you show off variety and style in cars? How do you create buzz?  Albert Sloan decided upon an annual model changeover, a staple in today’s car industry, but a radical new way in 1923.

            The annual model changeover is the means by which General Motors became a social media brand in 1923. Billy Durant, the original creator of General Motors, left Alfred with 5 brands. Alfred had variety built into the GM brand. To enlarge on variety further and to emphasis stylishness and fashion, Albert decided that each brands appearance would change each year---the model change.

            This created buzz and excitement, not only among customers but also among GM personnel. There was a feeling of extreme anticipation on what the new models would look like. This anticipation created important touch points for General Motors. People started talking about the cars. This gave GM advertising that they didn’t have to pay for. The new models created 5 new touch points for GM. If a person bought an entry level Chevrolet, and an Oldsmobile went by while talking to a friend, they would say to their friend, “Look at that Oldsmobile”. Even if the Oldsmobile brand wasn’t bought by the customer, it still got their attention. General Motors wasn’t just one product; it was many products, each creating interest for General Motors.

            The models, the stylishness, the fashion, the brand image, created a new brand for General Motors. The brand of General Motors was that “GM was cool”. General Motors of 1923 became to be seen as Apple is seen today---the company of “cool”.  People wanted to be seen driving a GM car because they were “cool”, just as many people buy Apple products today because they are “cool”, and if you have them you are “cool”.

            “Cool” created a brand for GM in 1923. Ford began to be seen as “old”.

Dean Hambleton

dnhambleton@gmail.com