Alfred P. Sloan, an MIT trained engineer and business visionary, ran General Motors from 1923 to 1956, creating a new way to cater to customer desires that propelled GM to the top of the American business pyramid. At its 1953 peak, GM revenues accounted for 3% of US GDP.
According to Tony Costa, Principal Analyst at Forrester Research, Sloan’s secret was the “Ladder to Success,” a branding concept that created life-long customers for GM’s five automotive brands: Chevrolet (the car for the masses), Pontiac (for the middle class), Buick (for the upper middle class), Oldsmobile (for the management class) and Cadillac (for the highly successful). Americans bought into this schema in mass. Everyone knew, simply by his auto brand, whose career was on the rise, and who wasn’t achieving. Nothing illustrates the concept better than the scene in “Mad Men” in which Sterling Cooper urges Don Draper to buy a Cadillac in recognition of his new partnership in the agency and a reward for achieving the American dream.
The Ladder model produced a miracle for GM, which in 1920 had but a 12% market share. By 1930, GM passed Ford and owned 30% of the auto market. By 1956, GM brands had an amazing 50% market share, and held it for the next decade, however, serious flaws in the Ladder model began to emerge as customers’ needs and desires began to change in the Sixties.
As America entered a cultural revolution, traditional values, aspirations, and desires were challenged by a new value set. Assumptions that GM made about customers were becoming outdated. People began to move away from identifying themselves by socio-economics and “keeping up with the Joneses” began to lose its appeal by the late ’60s.
A Cultural Revolution
As the 70s opened up, people began to identity more by lifestyle, and new factors became influential in the marketplace. People began to desire cars that no longer fit the old model. And, as sportier German and small, fuel-efficient Japanese imports arrived in growing numbers; people’s tastes began to radically change. New ideas of quality, style, and performance challenged, and quickly defeated, the old standards. While customers’ desires evolved, GM was locked into outdated thinking, and saw its’ market share begin a long and continuing decline to 17% today, just about where it stood 100 years ago.
While GM cites many reasons for the declining market share, the underlying truth is that brand management had lost sight of, and found itself out of touch with, the new set of consumer wants and desires. That fundamental problem can be traced to the assumptions GM management had made about its business; the very assumptions that had led to the creation of its fantastically successful Ladder to Success.
Over time, as the company’s success increased year after year, the Ladder became a pillar of the GM business model and of the brand’s very essence. GM forgot the core reasons for its existence. This was simply the “GM way,” how things had always been done and that had delivered unparalleled success. However, over time, these assumptions became blind spots, which management could not see nor question.
The key question for businesses today, is how to expose such marketing blind spots and remain relevant in the face of an evolving marketplace? It begins with understanding customers at a deep level. Understanding them as individuals, not demographic segments, but as social beings and the irrational actors that we are.
This can only be accomplished by deep-diving customer research. But when one reviews the research that customer experience professionals conduct, the focus is on thin data sets that illuminate only a narrow sliver of human existence and lack context to illuminate what it all means in the scope of people’s lives. Surveys, focus groups, digital analytics, etc., are all important tools for CX professionals, but ultimately they don’t reveal much about fundamental human behavior.
Enter Ethnography
When it comes to gaining a deeper understanding, ethnographic research is needed, but only 16% of marketers today conduct such ethnographic studies, and just 5% conduct diary studies. This is the kind of research is necessary to fundamentally understand the contemporary consumer.
By way of example, Adidas is among those companies employing ethnographic research to reframe a vision of their customers. Adidas was founded in 1948 with a focus on ‘competitive advantage’ – on gear to help you run faster, jump higher, kick further. However, management began to recognize this position was limiting the brand’s potential as lifestyles evolved beyond the need for competitive gear. They were jogging, working out, taking yoga and spinning classes, but not to compete. Something else was going on and Adidas wanted to know why.
So Adidas invested in ethnographic research. They spent 24 hours with customers, had breakfast with them, went running with them, visited their gyms, and questioned them endlessly. They gave 30 women cameras and asked them to photograph the reason they engage in these activities. Surprisingly, twenty-five women took photos of the same thing – a little black dress – which shocked Adidas. As it turns out women did not engage in these activities for competition or for glory but for their own personal well-being, the desire for a healthy lifestyle, to look good, and feel good about themselves.
The research made Adidas rethink its mission and the values it was presenting to customers. In doing so, it opened up entirely new categories of products, including yoga wear. Because such activities take place outside the gym, people want to look good doing them, which has made aesthetics a major focus of Adidas product development. As a result the company has formed new business partnerships, such as one with Stella McCartney for a new fashion line, and continues to explore the expanding lifestyle space.
To turn back to another automotive aphorism, one most look under the hood to understand the inner workings of the machine. In this case, marketers must dive below the surface answers provided by rational questionnaire surveys if they hope to bond their offerings to people’s real emotional needs and desires.
Source: Forrester CX Conference, NYC, June 21, 2016