114

Building a Brand: The Saturn Story

David A. Aaker

O n January 7 of 1985, Saturn Corporation was announced by GeneralMotors' Chairman Roger Smith, who called it "the key to GM'slong-term competitiveness, survival, and success as a domestic pro- ducer."' Its mission, in part, was to market compact vehicles "developed and manufactured in the U.S. that are world leaders in quality, cost, and customer satisfaction."^ Saturn was not only an ambitious undertaking for General Motors, but a critical one in light of the major inroads that imports had made, especially in compact vehicles. The import competitors, who had relentlessly increased their quality over time, represented a significant challenge to General Motors. The Saturn project was pursued at a time when many felt that U.S. manufacturers had no chance to make world-class compact cars and GM had itself aborted several efforts to do so.

After two years on the market, the initial results of the Saturn project are in. Saturn has built from scratch one of the strongest brands in the U.S., suggesting comparisons with the Ford Mustang of the 1960s, the Ford Pinto of the 1970s, and the Ford Taurus of the 1980s. However, building a brand may not be as difficult as maintaining its momentum tactically and man- aging it strategically. In Saturn's case, success creates its own problems and options.

Saturn: A Strong Brand?

There are no generally accepted measures of brand equity. However, several brand equity conceptualizations do have measurement implications. One is that a strong brand should demonstrate market leadership as measured by sales or market share. Two leading brand equity researchers, Jean-Noel Kaupferer in Europe and Larry Light in New York, both use market leader- ship as a basis of a brand strength definition.^ The editors of Brandweek

 

 

Building a Brand: The Saturn Story 115

support this perspective by using sales as the measure of brand strength in their annual SuperBrands analysis.

In terms of sales, it can be argued that Saturn achieved a leadership posi- tion. Saturn sold 196,126 cars during its second year, 1992, which made it the tenth highest selling brand out of some 200 plus brand names—the fourth highest if fleet and cash rebate sales are excluded. Sales would have been substantially higher had there not been production limitations. At the end of the 1992 model year, there was a five-day Saturn inventory in a market where virtually all other brands were awash with cars and shouting about deals and promotions. Further, because Satum sold substantially more cars per dealer in 1992 than competitors (Satum had 225 dealers vs. approximately 800 for Honda, 1,000 for Toyota, and many more for Ford and Chevrolet), it can be argued that Satum was the leading brand in regional and local markets.

A second common perspective on brand equity is that it reflects the price premium that people are prepared to pay for the brand name. Peter Farquhar is among several who have defined brand equity as the added value that a brand endows a product." One operationalization of this perspective is to estimate the price premium associated with the brand usually based upon some variant of conjoint analysis.' The issue is whether the brand is buying sales by discounting or is able to maintain a price premium with respect to its direct competitors.

There are several indicators that Satum was strong with regard to the price premium measure. First, first-year showroom visitors, intercepted before they saw the sticker price, estimated the Satum price would be three to five thousand more than it actually was.* Second, two studies found that Satum was either the most valued franchise in the industry or second only to Lexus.' This appraisal by dealers would have been unlikely if Satum had not achieved above average margins. Third, with a sticker price comparable to the competition, Satum successfully eliminated price haggling, dealing, discounts, and rebates—an incredible achievement given the times. Of course, this policy was one of the factors behind the Satum brand strength. However, the fact that the policy was successfully implemented was an indi- cator that Satum had developed a strong brand—the policy would not have been feasible otherwise.

To appreciate this achievement, it is useful to view it in perspective. In virtually every industry from airlines to pet food, brands—even strong brands with few competitors (e. g.. Coke and Pepsi)—have been unable to break out of a price-promotion, price-dealing environment. The automobile industry has long suffered from pervasive price haggling in the dealership, which has focused attention on price at the point of decision. During the past ten years, company-sponsored debilitating price discounts and rebates have worsened. In 1992, for example, over 60% of the Taurus sales were made with a cash discount or involved heavily discounted fleet sales. Only

 

 

116 CALIFORNIA MANAGEMENT REVIEW Winter 1994

a few years ago, nobody would have predicted that a major automobile brand would step away from this practice. Further, no one would have expected that the brand that did would not be a European or upscale brand. In fact, it was not Lexus, BMW, Acura, Lincoln, or Cadillac, but rather a General Motors compact.

In the book Managing Brand Equity, I have suggested that brand equity is based upon four sets of assets—perceived quality, brand loyalty, brand awareness, and brand associations (e.g., economical, for the young, a friend)—and that each needs to be measured in context.*

The J.D. Power measures of customer response to their new car purchase reflect both perceived quality and customer loyalty. Saturn was fourth (be- hind Lexus, Infinity, and Cadillac) in the 1992 J.D. Power Sales Satisfac- tion Index, which measures reactions to the salesperson, delivery activities, and initial product condition. Further, Saturn was third in the 1992 J.D. Power Customer Satisfaction Index, the CSI, which examines product quality and dealer service after one year of ownership. The two brands that exceeded Saturn on the 1992 CSI, Lexus and Infinity, had sticker prices substantially higher than that of Saturn.'

Another measure of perceived quality comes from the resale market. The suggested retail price of a 1991 Saturn in the Fall of 1993 averaged 5% above the original list price, whereas those of the Honda Civic averaged 5% below their original list price. The resale prices of the 1991 Toyota and Nissan models reflected substantially more depreciation.'"

In-house customer surveys provide more direct measures of loyalty. Over 95% of the Saturn buyers said they would enthusiastically recommend the car and the retailer to others, a percentage higher than that found for owners of Lexus, Mercedes, or Infinity." A similar percentage believed the car was superior or equal to the Japanese imports.

A series of anecdotes suggests that some Saturn owners felt intense loy- alty toward their car. One dealer attached Polaroid pictures of car owners to the wall. Car owners who bought the car before the picture program began insisted that their picture be added to the rest. One couple got married in their Saturn. Saturn owners have volunteered their time to show Satums at car shows. There is a Saturn Groupies interest group on Prodigy. Such anecdotes are reminiscent of the VW Beetle phenomenon of the 1960s.

Saturn was successful at building awareness and associations. The aided awareness among the target segment started at under 1%, went to 40% a few months after launch and reached 79% a year later. Unaided awareness was at 14% at the end of 1992, just behind Dodge and Pontiac and ahead of Mazda, Mitsubishi, and Geo. After one year, the percentage reporting agreement that Saturn had one of five target associations among the target audience ranged from 30% to 40%. In mid-1993, the percentage that indi- cated that Saturn was a "friendly company" passed Toyota and exceeded

 

 

Building a Brand: The Saturn Story 117

the other Japanese brands by a comfortable margin. Considering that the image building began from zero in the face of a host of direct competitors and a cluttered media environment, these numbers should be considered healthy.

Thus, a wide range of perspectives and measures support the proposition that Satum succeeded in creating a strong brand during its initial two years. It should be noted that Satum was not profitable until 1993. However, it can be argued that the indicators discussed above better reflect brand strength than profitability which is infiuenced by product design, manufacturing, and production capacity. In particular, expanding the capacity would dramatically increase profitability.

How Saturn Built a Brand

There are seven areas of strategy that contributed to Satum's becoming a strong brand after only two years. However, it was the synergy of the total program, rather than the power of any single element, that led to its success.

The Mission: A World-Class Product—From the beginning, the driving concept behind Satum was to create a world-class compact car that could match or exceed the Japanese imports such as the Honda Civic and the Toyota Corolla. The car needed to have the reliability, safety, feel, appear- ance, and overall quality that people expected in the top imports while remaining price competitive. This quality imperative was one of the defining dimensions of the Satum corporate culture.

Too often there is the illusion that brands can be created by advertising, without a product and service that really deliver quality and value—that image is a "problem" of advertising. The reality is that the product drives the image. The Edsel of the 1950s would have been a symbol of quality today if Edsel had built quality products in that key first year. Some very good Edsel advertising and marketing were wasted because of a shoddy product. The Beetle phenomenon of the 1960s very likely could have been transferred to the Rabbit in the mid-1970s if it were not for the initial mechanical problems that plagued the Rabbit during its early years. These problems doomed the effort to use advertising and the rabbit symbolism to transform the Beetle equity to the Rabbit. In fact, VW has lived in the shadow of those days ever since.

Satum did not make the mistake of the Edsel or the Rabbit. The product was good from the outset. Reviews in car magazines provided objective judgments that the car was well designed and built and that there was sub- stance behind the customer surveys.

One visible example of the quality emphasis was the decision to offer a money-back guarantee. Within the first thirty days or 1,500 miles.

 

 

118 CALIFORNIA MANAGEMENT REVIEW Winter 1994

whichever comes first, the original purchaser may return their Satum for a full refund or for a replacement car. The guarantee not only reassures the buyer about the purchase decision, but also places a substantial economic penalty on reduced quality output and provides an intemal signal about the quality level that is needed and expected.

A graphic example of the quality culture was the way that a problem involving a defective coolant was handled. Because the coolant might have caused some unrepairable damage, the 1,800 involved cars were never recy- cled and became one of the symbols of the Satum quality commitment. Another example was a seat recall that was implemented for a customer in a remote Alaska island by having an engineer hand deliver a seat.

The Team Approach: A Different Kind of Company—The basic premise was that a world-class compact car with a supporting strong quality culture could not be created within the confines of an existing General Motors divi- sion. A new company was formed and given freedom to create not only a product, but a whole new organization free from the restrictive contract and confrontational culture of the UAW, free from the constraints caused by an existing brand family, and free from the inhibitions of an existing way of doing business. People who joined Satum broke ties with their prior GM unit and often moved to Spring Hill, Tennessee where a "green field" manufacturing facility was built. This new organization was integral not only to creating the product, but also to the broader challenge of creating a brand and communicating its identity.

A group of 99 people drawn from the ranks of labor and management throughout GM, now reverently called the "99 club," was charged with deciding what type of organization was needed. After visiting 60 bench- mark companies to see how successful organizations operated, they devel- oped a team/partnering approach to designing and manufacturing Satum, a very different approach from anything at General Motors. This partnering concept was ultimately extended to all elements of the business, from engineering to marketing to dealers to suppliers to the advertising agency.

There are now cross functional teams of people assigned to modules within Satum that stimulate change, maintain the standards, and provide the basic organizational structure. A team focus pervades the organization and provides a sense of empowerment. It is behind the partnering relation- ship with the UAW, unique within GM. The extensive training effort, 5% of work time, contains a heavy dose of team-building exercises. Objectives and rewards are based upon team and organizational goals. For example, manufacturing people have 20% of their compensation based upon quality and productivity of the plant. This team orientation is part of the "different kind of company" that emerged.

 

 

Building a Brand: The Saturn Story 119

Creating Perceptions by Selling the Company Not the Car—Having a world-class car is not enough to create a strong brand. It is customer per- ceptions that matter, and perceptions do not automatically follow reality. Audi, for example, has found that spending a billion dollars to create what may be the best car in its class is not enough to attract buyers who are skep- tical of the Audi name. The VW Rabbit was a quality car one or two years too late; the perceived damage to quality caused by the early problems could not be overcome. Schlitz beer, a strong number two brand in the mid- 1970s, shortened the production process and began using cheaper ingre- dients in order to reduce costs.'^ The resulting damage to perceived quality caused Schlitz to virtually disappear from the shelves by 1984 even though they had returned to the original way of making Schlitz within a year after the perception problem emerged.

Given that you have created a world-class car, how do you convince people of that fact? The obvious tactic, used by all car makers, would be simply to tell them why it is world class—the relentless pursuit of perfec- tion or the ultimate driving machine. The story would build upon specifics such as safety features, exterior design, fuel economy, acceleration per- formance, comfort, road tests, endorsements by car magazines, guarantees, how nimble and quick it handles, and its finish. The focus would be on the car, using unrelenting logic and mind-numbing facts. In fact, plenty of facts existed had that option been exercised.

A logical, product-oriented approach would have been almost surely doomed to fail in part because others had already been there in ways that had been loud and/or convincing. Ford had been "Quality is Job 1" for over a decade. Buick was the "symbol of quality." Honda owned the J.D. Power index. For at least half a decade. Lee Iacocca has been saying that Chrysler cars are just as good as Japanese cars. Consider the task of claiming that a U.S. compact car made by General Motors is world class. People would find it difficult to believe such a claim even assuming that the advertising, which would surely look like a dozen others, would be noticed. Further, price would quickly become a focus.

The solution was to sell the company—its values and culture, its employees and its customers—not the car. The initial advertising showed the employees as people with personalities and deep commitment to Satum quality and its teamwork approach. The advertising of Hal Riney provided consumers with a window into the emotional attachment of employees to the car and to the company. One commercial, for example, described the role of cars in their childhood. Another showed the sacrifice and risk of moving to a new area and beginning with a new company; and a third showed the pride in seeing the first car come off the line. A print ad telling the story of a powertrain technician at Satum began with a scene of a Spring Hill farm house on a misty moming with the line "I remember

 

 

120 CALIFORNIA MANAGEMENT REVIEW Winter 1994

Standing here in the middle of nowhere, no sign of an automobile plant in sight and thinking, 'What the heck am I doing here?'" During year two, much of the advertising focused upon customers and their experience with the car and the Satum retailer, still a departure from product-oriented advertising.

Prospective car buyers were made to feel that Satum and its employees would not design and build anything less that a world-class car. The percep- tion was not based upon facts or logic, but on getting to know and understand the people involved in Satum. Further, the story was told in a believable, true-to-life style. This believability undoubtedly was transferred to the implicit product claims. In contrast, a prime problem of most product- oriented car advertising is a believability gap based in part by conflicting claims, all of which simply cannot be true. The judgment that some ads are puffery or false casts a shadow over all. Further, the fact that Satum took a very different tack was helpful in breaking through the clutter of automobile advertising.

The visual imagery of the employees, teamwork in action, and the Spring Hill plant helped to support the whole concept of a new kind of American company. The company obviously started fresh with a new plant in the middle of a border state not associated with automobile manufacturing. Clearly, the Spring Hill plant had the potential to be different, to start over from scratch and to do things the right way. It was literally a breath of fresh air. The employees also provided strong imagery. Think of Pontiac and your mind might visualize a car that generally looks like any other car. However, when you mention Satum, the picture is more likely to be of people, either employees or customers.

Two important name decisions are noteworthy. First, the Satum was dis- tanced from GM. Early concept research made it clear that cueing the GM name resulted in a substantially lower quality perception and credibility whereas cueing an Asian name such as Sony did the reverse. Further, the whole concept of Satum is that it was a fresh start at building an organiza- tion and car. Linking the effort to GM would have undercut it.

Second, the option of naming models like the Honda Civic, Prelude, and Accord was resisted. The focus was to be on Satum the company and the product. A model can provide a useful sub-brand when it distinguishes something very different like the Mazda Miata or when it offers something completely different such as the Ford Taurus. However, in this case models would have drawn attention to relatively unimportant variations and away from the main story.

The Retailer Strategy—Automobile customers are used to high-pressure salesmen pouncing on them as they arrive at the showroom and immedi- ately pressuring them into a test drive and a purchase decision. The classic line is "If I can get this car to you for x dollars, would you buy it?" Focus

 

 

Building a Brand: The Saturn Story 121

groups, simple logic, and a dealer-involved team told Saturn that such an approach is intensely disliked by customers.

Saturn chose to sell their product very differently. The customer would not be pressured by a commission salesperson as they enter the showroom of the retailer (not a "dealer"). A salaried salesperson, called a "sales con- sultant" at Saturn, is likely to wander over and ask if the browser has any questions. Further, the consultant is trained not only to answer questions, but to explain in detail the design philosophy of the car and company, as well as point out features. And most importantly, the hated price haggling was eliminated. A price is set (by the retailer) that allows for a comfortable but not excessive margin (around $1,400 per car) and that's that.

Several aspects of the retail program made it successful. Going outside the industry for sales consultants—so that old habits would not get in the way—was helpful, as was the extensive sales consultant training involving the car, the company philosophy of treating the customer intelligently, team-building skills, and linking the retailer to factory teams was another. The most important ingredient, however, was the market area concept. Early in the development phase, dealer team members pointed out the debilitating effect of having competing dealers nearby that would have every incentive to reduce price. The suggestion, perhaps self-serving at the time but brilliant in retrospect, was to find retailers who would take responsi- bility for a broad market area and open up to six dealerships in that area. Thus, price competition among adjacent dealers, a driving force behind price competition, was eliminated.

Team-building and empowerment were a key to the development of the retailer concept and systems. At the outset, a small group of hand- picked retailers wrote their own franchise agreements and set up extensive screening programs for new retailers wanting to join so as to maximize the probability that all would be marching to the same drummer. They devel- oped a set of objectives which provided team incentives and priorities so that sales consultants would not focus on meeting a monthly quota.

Saturn developed several assets and skills, but the retail system is prob- ably the most sustainable advantage in the Saturn arsenal. Ironically, the car itself, which in terms of investment may have been the most difficult asset to create, was probably the easiest to copy by competitors. Quality perceptions are undoubtedly more long lasting. The focus of the advertising on the company and Spring Hill was unique. However, it is the retail strategy that will be most difficult to duplicate.

The Saturn system of low-pressure selling by salaried sales consultants is based upon the total organization—its people, systems, structure, and culture. In particular, there was a mix of sales consultants from outside the industry, a very different compensation and incentive system based more upon group efforts to satisfy customers than individual sales results, a cul- ture that emphasizes treating customers intelligently, and links to the rest

 

 

122 CALIFORNIA MANAGEMENT REVIEW Winter 1994

of the organization. At Ford, Chevrolet, and Toyota, the whole organization is set up to push cars through the system. Copying the Satum selling system without changing the whole organization will not be successful. And changing the organization is most difficult.

Nordstrom is an example of a firm that has shaken up the retail market in several major markets. Upscale department stores, in particular, have attempted to respond by copying the "Nordstrom style" of doing business. However, they have largely been unsuccessful because the elements of the organization, especially employees used to another approach, are simply not capable of adapting. Competitors of Satum will find similar problems.

Further, it will be virtually impossible for competitors of Satum to dupli- cate the market area dealer network, a critical ingredient behind the no- haggling price policy. Other brands are committed to a set of dealers who cannot be terminated without cause and lawsuits. There are some 50 Chev- rolet dealers in the Detroit area, for example. Thus, other brands, stuck with the old dealer concept put into place in different times, will find it virtually impossible to implement the area-wide dealer network.

Creating a Relationship between Saturn and Its Customer—Most brands, particularly car brands, focus upon attributes such as safety, econ- omy, handling, or comfort in developing a brand identity. Such positioning strategies are weak bases for loyalty because they are relatively easy to copy or surpass. Strong brands often move beyond attributes to a brand identity based upon a brand personality and a relationship with customers. Satum is in that category. An important part of its brand identity is the concept that its customers be treated intelligently, with respect and like a friend. This relationship—and the brand personality that underlies it—have the potential when properly implemented to create brand loyalty with intensity and endurance.

Along with the quality imperative and the team orientation, treating cus- tomers intelligently—with respect and like a friend—is a defining dimen- sion of the Satum corporate culture. The retail experience, for example, follows from this relationship. Haggling over price and playing negotiation games is not compatible with the Satum customer relationship. It seems incredible that nearly 50 years after the marketing concept appeared on the scene, treating the customer intelligently was a breakthrough in the automo- bile industry. But it was.

To understand the nature of a brand-customer relationship, it is useful to consider the metaphor of a brand as a person, with a personality and with interpersonal relationships (with customers). For example, Volvo personi- fied might be perceived as a dependable and reliable man with a European accent, but somewhat stodgy and lacking a sense of humor. The customer relationship might be characterized by feelings of being secure and comfort- able. In sharp contrast, "Mercedes" as a person might be elegant, upscale.

 

 

Building a Brand: The Saturn Story 123

The 1993 Recall

In June of 1993, Saturn identified tiiat a repair was needed on all 350,000 cars made before April, 1993 to insure that a wire was prop- erly grounded. The initial publicity was negative but was gradually replaced by more positive reports as more news emerged. First, the recall was voluntary, not mandated by the government. Second, the recall was handled expeditiously. After two weeks, 50% of the cars had been repaired, in part because of the contact that retailers had with their car owners. In contrast, a major recall of a competitor man- dated by the government was only 33% complete after 12 months. Third, retailers handled the event positively One chartered a bus to a baseball game. When the bus returned, the cars had been repaired and washed. Another had a barbecue that customers could attend while their car was being fixed. A third offered theater tickets.

In all, the Saturn customer relationship was reflected in the way that the recall was handled. Tracking studies indicated that the Saturn image on the "takes care of customers" dimension was not affected and it actually improved on the "good dealer" dimension.

successful, formal, and perhaps a bit stuffy and aloof. Its customer relation- ship might then be based on the customer aspiring to become associated with the status of belonging to the "Mercedes" group.

Satum personified might be viewed as young, humorous, and lively but also as down-to-earth and reliable and as someone who cares about indi- viduals (whether they may be clients, patients, or customers) and treats them intelligently, with good taste, with respect, and like a friend. The brand-customer relationship would be based upon a perception of mutual respect, a lively humorous interchange, intelligent, honest discourse, and, most of all, friendship. The head of the Satum engineering team talks of perceiving Satum as a person who is "thoughtful and friendly" and who "won't let you down and won't outshine you."'' The personalized Satum would not speak about safety with an accent, would not speak condescend- ingly to you (as might a VW who thinks you don't get the Fahrvergnugen concept), but would speak with respect and as a friend. The task, of course, is not only to conceptualize such a relationship but to consistently imple- ment it.

Another aspect of the brand-customer relationship, according to Satum dealers, is a sense of pride that is different than the product centered pride felt by many new car buyers. It involves pride in Satum (a U.S. company which has beaten the Japanese firms at their own game), pride in the employ- ees for their commitment and achievement, and the customers' own pride in themselves for being part of it all by not buying a Japanese car. The

 

 

124 CALIFORNIA MANAGEMENT REVIEW Winter 1994

purchase and use of a Satum becomes a way to express a customer's values and personality. Customers are buying more than functional characteristics. A key to the pride are the U.S. symbols that have been associated with Satum, notably the plant at Spring Hill, Tennessee and the American em- ployees with their intense loyalty to Satum. Ironically, Satum was not the "Heartbeat of America." If it had been, the pride level may not have been as strong because it would have had less chance to emanate from within. From that perspective, Satum probably was right in deciding to appeal to quality rather than patriotism during the height of anti-Japan sentiment.

Satum has much in common with other charismatic brands such as Apple, Harley, and the VW Bug, which have developed relationships that are the basis of intense loyalty levels. Each is an underdog to a larger com- petitor, each has a strong user group with an identity of its own, each has users who encourage others to buy, and each has strong symbols.

A Different Kind of Company, A Different Kind of Car—A slogan can capture the essence of a brand and become an important part of the brand equity. If a brand is "packaged meaning," the slogan can be a tie and ribbon that seals the package and provides an extra touch. Consider the famous Avis slogan: "We're Number 2. We try harder." It clearly positions the brand with respect to the competition (e.g., the leader Hertz) and captures the thrust of the strategy. Addressed to the employees as much as the cus- tomers, it helps to crystallize the values and culture of the firm. Finally, it provides an umbrella concept which provides a constmct to organize and communicate specific features and programs that otherwise would be dis- jointed and confused.

The slogan, "A different kind of company, a different kind of car," pro- vides the same kind of functions for Satum and is an important part of its brand equity. It serves to position the car against the other U.S. cars and suggests that, unlike other Detroit cars (and especially unlike GM cars), Satum is a world-class car comparable to the best Japanese imports. The "different company" position captures the differentiation based upon the fact that Satum operates and interacts with its customers in a new way that is unique in the automobile industry. However, it also lends credence to the different car position—only because the company is different could the car be different. If Satum would have claimed directly a world-class car, it is highly unlikely that they would have achieved the desired perceptions.

The slogan provides a core meaning while allowing a host of specific features and programs to be introduced without becoming lost or creating confusion. A prospective customer may not recall exactly how the company and its car are different, but the impression of being different remains. The slogan also provides a center of gravity for the employees, suppliers, and retailers. An important part of the culture, it helps people enforce norms by saying: "That is not done here, we are different."

 

 

Building a Brand: The Saturn Story 125

Gateway 2000

Gateway 2000, a mail order computer firm from North Sioux City, South Dakota is remarkably similar to Saturn. It might be caiied a different kind of company, a different kind of computer. Like Saturn, they have been concerned about delivering a product that is reliable backed by a service organization that is imbued with a strong, com- mitted customer culture. Also like Saturn, they have taken a very differ- ent tack with respect to communicating themselves to their customers.

Ads for mail order computers all look the same. They show product and specifications and shout price: "We've pumped up the power and cut the price!" "Lightweight convenience, heavyweight savings!" "Price, the new PC revolution!" "What's a good computer go for these days? Usually a lot more." Even the industry leader Dell runs ads claiming that their price is "news for you."

In contrast, the first Gateway ads in 1988 ran a picture of a Gateway engineer sitting at a desk with cows seen out the window talking to a customer. In between are snaps of their boys, both in Junior High. The headline "You've got a Friend in the business" has become the company slogan. These ads were followed by a campaign in which Gateway customers and applications were profiled. Gne showed a computer helping a Gape Smythe Air Service accountant in Barrow, Alaska. "You got to know those customers and their link to Gateway" These ads were followed by a host of offbeat ads completely different from those of its competitors. Gne had a picture of Gateway employ- ees playing poker in a Deadwood bar. Another had a picture of an Elk and a Walrus. Gthers had themes around Robin Hood, magic carpets, a 1950s caf6, a zoo, and apple orchards.

Gateway's approach is to be perceived as a different kind of mail order computer company, one with a distinct personality Their image is of a solid, reliable South Dakota friend, someone who keeps over- head low, puts energy and resources into products and people, and is willing to do things differently A prominent Gateway visual is their distinctive black and white pattern (inspired by the Holsteins from a local cattle ranch) that appears on all the packages and printed materials.

In 1992, Gateway was the nation's No. 7 personal computer com- pany (with sales of 1.1 billion) and the No. 1 direct marketing company (outselling Dell).'" Their success bred problems as their customer support fell behind, a serious problem for someone who is a friend rather then a vendor. In retrospect, they probably should have charged more for the equity they had created and had more con- trolled growth so that their capabilities would have kept up with the demand. However, the signs are that the problem was addressed in part by investing heavily in technical support before it had serious consequences.

 

 

126 CALIFORNIA MANAGEMENT REVIEW Winter 1994

Integrated Communication—One practical problem in building and main- taining brand equity is the development of effective communication that is consistent over different media and over time. The automobile industry has been characterized by: product-focused Detroit advertising that has a same- ness to it; a temptation to react to price appeals; dealer advertising that is usually off-strategy; and the involvement of a host of communication organ- izations. The result too often has been ineffective and inconsistent communication.

At Satum, a very different approach was taken. A West Coast agency, Hal Riney, was selected as a "communications partner." It was charged with being involved in all the Satum communications efforts—including brochures, retailer advertising, and the design of the retail showroom— in order to make sure that the message was consistent across media and through time. The Riney shop was experienced with a broader scope. They had created the life-size story display for the Bartles & Jaymes wine cooler spokesmen Frank and Ed, a logo for Mirage Resorts, a package design for Stroh Brewery, and a 7-minute entertainment film for Alamo Rent-A-Car customers to watch while waiting in line.

Early on, Riney produced a 26-minute film, "Spring, in Spring Hill," a documentary in which Satum team members explained the excitement and challenge of being part of Satum. The piece captured the emotion and feeling of Satum, it was shown to employees, suppliers, the press, local banks, and zoning boards and, eventually, was even broadcast as an infomercial.

Riney worked to ensure that the retailer effort was on-strategy. Print ads for retailers were designed that were very different from local automobile newspaper advertising. With a large picture of the car and considerable white space, the series of ads captured the spirit of Satum. One asked: "Gosh, what if we all came back as cars?" Riney had to resist the inclina- tion of retailers to fill the white space with used-car prices or maps showing directions to the retailer.

Perhaps the most telling example of consistency occurred when a group of retailers was considering a car give-away to generate store traffic when awareness and interest was at a low point. Riney insisted that such a promo- tion would damage the huge investment in brand equity and would be espe- cially damaging to those relatively new to the Satum concept. When the retailers persisted, Riney designed a promotion that would enhance the equity rather than damage it. In the resulting promotion, winners went to Spring Hill and participated in building their car. The focus was then on Spring Hill and the committed employees building quality cars and not simply on giving away cars to entice people to a retailer.

In the same spirit, a 1994 Satum "homecoming" is planned. All 700,000 Satum car owners are to be invited to a festival at the Satum Tennessee plant to partake in a barbecue, plant tours, and other entertaining activities. This "Satumstock" event is modeled after the festival that Harley-Davidson

 

 

Building a Brand: The Saturn Story 127

held for its products' owners that drew over 100,000 bikers to Milwaukee. Again, the focus is on Spring Hill and the people there and the tone of the event is very Satum.

Creating Brand Equity—Figure 1 summarizes how brand equity was created at Satum. The figure shows five dimensions of brand equity; the retail system is added to the four conceptualized in the book. Managing Brand Equity.'^ Also shown are the principal drivers of each of the brand equity dimensions. (Note that some eighteen different decisions and programs are mentioned as drivers and that the list is not meant to be comprehensive.)

There was not one driver of the Satum results. Rather, it seems clear that it was the totality of the effort and the synergy and fit of the various pieces that combined to create the brand. However, four elements of the strategy stand out as being cmcial: the ability to design and build a quality car; the relationship-based brand identity; the decision to focus on the company and its employees and customers rather than the car; and the retail experience based upon the brand identity values and the market area concept. The last three represent a real difference in automobile brand management.

Challenges Facing Saturn and General Motors

Several questions surface. Can Satum keep it going? What should General Motors do with its market success? It is a bit like the dog who chased the truck and caught it. What now? There are several issues and problems facing both General Motors and Satum.

Keeping It Going—One set of issues facing GM involve managing the beast. In some respects, it is actually easier to create Satum than to keep it going and maintain the intensity of the culture. The excitement of inventing something from the ground up and of being involved in an aggressive new strategy, and the excitement and reinforcement of pulling it off, provide considerable motivation and momentum.

What happens when competitors copy or appear to copy some of Satum's key aspects, such as no price haggling? When the marriage with the UAW (United Auto Workers) falters? When the product gets old and the heady days of no backlog are gone? When the product quality gets surpassed by competitors who are taking dead aim at Satum? When Satum fails to get priority for GM resources? There is a real management challenge in keeping it going when adversity sets in, managing the norms of behavior, communicating values, and creating and nurturing symbols and role mod-

, els. It will not be easy for Satum. Figure 1 summarizes some of the key operational challenges facing Satum.

First, Satum must maintain awareness levels. As the brand matures, there

 

 

128 CALIFORNIA MANAGEMENT REVIEW Winter 1994

Figure 1: Saturn Brand Equity, Drivers and Chaiienges

Primary Drivers of Brand Equity

Advertising Retail Presence Publicity, Word of Mouth

Brand Equity Dimensions

Awareness

Brand Associations Employees Real People Customers Springhill Plant Different Company/Car Retail Experience Liking/Friend U.S. Car in Civic Class

Advertising Slogan/Position Spring Hill Plant Retail Experience Integrated Communication Relationship Based Brand Identity

Product Design Manufacturing Commitment New Organization/Culture Perceived Empathy with Employees Quaiity Empathy with Customers Slogan/Position Money-Back Guarantee

Friendship Relationship Retail Experience Loyaity Pride in U.S. Company

Market Area Concept Retaii Corporate Culture System

Chaiienges to iViaintain Equity

Maintain awareness in the face of reduced news value and competitive clutter

Need to communicate the Saturn message to those new to the brand in the face of pressures to talk product not company

Maintaining actual quality after the initial excitement is over and in the face of competitive efforts to improve their position

Keep relationship strong over time

Keep the retail culture in place in the face of slow sales and imitation.

will be a tendency for the brand to fade into the clutter of the marketplace. A real challenge will be to keep the brand fresh, interesting, and visible.

A second challenge will be to continue to communicate the message of Satum as a "different kind of company." Unfortunately, the intr-oductory phase lacked a strong visual image capturing the company spirit and commit- ment. There is no lingering image with the potential of a Marlboro country, a lonesome Maytag repairman, a Michelin man, or even the Apple logo. (The Satum logo and name was stimulated by the Satum rocket and is hardly helpful in this regard.) A clear visual image that represented Spring Hill, for example, could be used to cue efficiently much of what Satum stands for as an organization. A glimpse of the Maytag repairman cues the whole Maytag philosophy. In the absence of such a visual image, Satum must find ways to provide the Satum feel to the market, particularly to new- comers who were not exposed to or have forgotten the early advertising.

 

 

Building a Brand: The Saturn Story 129

Maintaining perceived quality is perhaps the most important task facing Satum. The excitement in the factory will fade and the team concept will come under pressure as it has elsewhere. Keeping the faith, either under prolonged success or under downtums and setbacks, is not easy. In addi- tion, Satum must also manage quality signals, most especially the J.D. Power index. The elements that drive the key indexes (such as initial cus- tomer satisfaction with the car, satisfaction with the dealer experience) require constant focus. A host of competitors will be targeting the lofty Power index Satum scores and it may be unrealistic to assume that they can be maintained. Yet the J.D. Power numbers represent the key quality cue.

Another challenge is to nurture and foster the pride factor and the charis- matic brand characteristics that drive the loyalty levels achieved by Satum. Nintendo, Harley, Apple, and the fabled VW Beetle all sustained high loy- alty levels over time by maintaining strong personalities and by providing a sense of group involvement. Some Satum retailers have arranged group events for the owners and have provided other mechanisms for involvement. However, the Satum loyalty is based largely on the concept that the product and the organization are different. Thus, maintaining that reality as well as finding ways to express it will be critical.

The retail experience involves a strong culture that will be challenged. A strong culture works best when there is frequent success and reinforcement. When an organization goes through the inevitable hard times, it is more difficult to sustain the culture. Further, there will be many competitors who will attempt to imitate Satum. Some of these imitators will involve dealers who are also Satum retailers and will thus have first hand experience at the Satum approach. Even the unsuccessful will confuse the positioning of Satum, making it harder for Satum to stand out.

The Saturn Relationship to GM—A second set of issues surround the relationship of General Motors to Satum. General Motors must make some enormous and difficult decisions. Most basic, should Satum be supported by investing in additional production capacity? The current plant will pro- duce at most 300,000 vehicles and it is estimated that Satum should sell over 500,000 cars to be a real profit asset to GM. The original plant cost approximately $1.9 billion, so the investment will not be trivial to a firm with many demands on its resources.'* A less expensive altemative might be to convert another GM plant, but there is the real risk that the Satum methods, culture, and relationship with its union cannot be transferred to another plant. Perhaps even more momentous is the decision as to whether to provide Satum with a midsize competitor to cars such as the Honda Accord and Ford Taurus.

In many respects, it seems like a no-brainer. The project worked. General Motors took on Honda, Toyota, and Nissan and won. In the process, they developed some advantages that are likely, given proper management and

 

 

130 CALIFORNIA MANAGEMENT REVIEW Winter 1994

investment, to be sustainable. The obvious course is to back the winner and run with it. The result could be long-term success over Toyota, Honda, and Nissan. If GM were to back away, the likely result is that the Japanese juggernaut will regain its growth trajectory and relegate GM and perhaps the other U.S. firms to niche players in the U.S. automobile market.

However, it is not so simple for General Motors. Satum has been slow to turn the profit comer in part because it is competing in an inherently low margin business area, in part because its volume is still inadequate, and in part because it is still low on the experience curve. Although 1993 was pro- fitable for Satum, there is still a long road before a satisfactory retum on the Satum will be achieved. With a relatively weak profit picture, it is diffi- cult to fight tough intemal battles for resources and new products within General Motors.

Further, there is Chevrolet, long positioned as the entry level car for GM, to consider. With its car sales falling in the early 1990s, Chevrolet was des- perate for new products and resentful of the investment that went into Satum. Chevrolet management naturally believed that Satum should have had a Chevrolet nameplate. The consensus of more objective observers, however, is that the Satum miracle simply would not have happened at Chevrolet. Chevrolet is intemally powerful and important to General Motors. It needs to be a healthy survivor and receive investment especially in the midsize car area. Its presence casts a large shadow over Satum's future. Of course, Satum was developed to fight the imports and has been successful. Surveys indicated that over 70% of the sales came from buyers who otherwise would not have bought GM products and over half from those who otherwise would have bought imports."

Another GM strategy could be to exploit Satum not by expanding it, but by transferring the "Satum approach" to other GM divisions in keeping with its mission to "transfer knowledge, technology, and experience throughout General Motors." Indeed, Oldsmobile's strategy is to "Satum- ize" itself to capture the appeal of the Satum brand and to become the choice of the Satum owner who wants a bigger car. Satumizing other GM divisions is on the drawing board but will not be easy and may in some cases be impossible. The problem is that the Satum magic will be difficult to transfer because it is not based strictly on programs, which can be easy to duplicate, but on the whole organization, systems, structure, people, and culture. The other divisions would have to change everything. For example, it is instructive to note how futile it was for the many retailers who attempted to imitate Nordstrom's service levels without changing their total organization.

The ingrown, insular General Motors organization would need to change dramatically and that seems difficult if not impossible. The labor manage- ment contracts and confrontational style seem firmly in place. GM could not transfer the Satum market area dealer system to other brands for at least

 

 

Building a Brand: The Saturn Story 131

a generation because getting dealers to sell or combine would be difficult and prohibitively expensive. Efforts to export the manufacturing methods used at the highly successful NUMMI plant run with Toyota in Califomia have been disappointing and there is no reason to think that the Satum style would be any more acceptable. Even generating the motivation to Satumize other divisions will not come easily. There is considerable resentment within General Motors that Satum has received resources that were needed elsewhere and there is a tendency to attribute the Satum success to money rather than to how that money was spent.

It is not easy for any organization to change, and General Motors is not just any organization. There is a real question as to whether they can develop the motivation and ability to change. Ironically, it may be the Japanese companies who will be best at Satumizing themselves, with Ford and Chrysler ahead of General Motors in the parade.

Central to how GM handles Satum is the definition of success that is applied to Satum. If success is defined as retum on the $5 billion invest- ment that GM made in the Honda Civic class Satum, the project may be doomed. By the same measure, incidentally, Honda would be classified a failure during the whole of the 1970s despite its sales success during that period. However, there are other perspectives. Satum could be viewed as the brand platform to take on not only the compact Honda Civic and com- parable imports but the higher margin midsize Honda Accord. It could be the vehicle to revitalize GM. Regis McKenna talks about silver bullets, products within a product line that create a reputation for the company which then makes its money on the rest of the line.'* A lesson for GM?

Satum could also be viewed as a vehicle to create a new way of com- peting for General Motors. In that respect, the financial retum performance of the compact line would not become so central.

When, if ever, should General Motors attach its name to Satum? There is a temptation to move too quickly in order to transfer the Satum equity to General Motors and thus to the other divisions. However, there will come a time when Satum can lend its equity to GM. Two conditions are necessary. First, Satum needs to be firmly established in its own right as a distinct brand and organization. Second, the other divisions need to be capable of actually delivering Satum-level quality. At that point, an association of Satum with GM might help the other divisions without harming Satum. However, if such a move is made prematurely there is a risk that the Satum name will be damaged and GM will receive little benefit. The familiar and strong GM image might drown out the Satum image.

In Conclusion

The Satum story is thus not only about how GM created a strong brand under adverse circumstances, but, strangely, about how to handle success.

 

 

132 CALIFORNIA MANAGEMENT REVIEW Winter 1994

How can Satum keep maintaining the Satum equity past the initial thrust and success? How should GM manage the strategic fit of Satum with the rest of the GM family?

Postscript—1994

In early 1994, Satum was still delivering customer satisfaction (trailing only Lexus and Infinity according to J.D. Power) and had the lowest defect rates of any U.S. brand. However, sales since September of 1993 were averaging 15,000 per month, sharply down from the peak of 25,000 in June 1993.

The problem can in large part be attributed to a decision by a cash-short GM to cut back on Satum. In 1993, they cut advertising in half—virtually eliminating it during the boom time. In addition, plans to add dealers were scaled back (Satum has only 285 outlets serving about 60% of the U.S. market) and a new face-lift including passenger air bags was delayed from the 1994 model year to 1995. As a result, Satum was at a disadvantage to rival Toyotas, Hondas, and Neons on which dual air bags are standard. GM further pushed back a major makeover with a quieter engine to 1996. An aggressive lease program, a renewed dealer expansion, and new advertising with a greater focus on price is part of Satum's program to recover sales.

These events graphically underline the challenges facing Satum and GM. Will the Satum culture, retail system, and relationship with its customers survive in the face of the market softness, active competitors, and a more price-oriented posture? Will GM, with many demands on its limited resources, provide the needed support so that Satum can compete?

References

1. Roger B. Smith, Statement at the Satum News Conference, January 8, 1985. Thanks are due to Bob Ellis of Hal Riney, Tom Shaver now at Volkswagen, and Roberto Alvarez who all made helpful comments on earlier drafts. The material for this article was drawn in part from discussions with Satum executives, retailers, and agency people and from secondary sources such as Richard LeFauve, "One More Chance," MrT Management (Spring 1992), pp. 2-7; David Woodruff, "Satum," Business Week, August 17, 1992, pp. 85-91; Richard G. Lefauve and Amoldo C. Hax, "Managerial and Technological Inno- vations at Satum Corporation," MIT Management (Spring 1992), pp. 8-19; Raymond Serafin, "The Satum Story" Advertising Age, November 16, 1992, pp. 1, 13; Alice Z. Cuneo and Raymond Serafin, "With Satum, Riney Rings Up a Winner," Advertising Age, April 14, 1993, pp. 2-3; T. W. Shaver, Remarks to San Diego Advertising Club, November 6, 1991; Don Hudler, Address to the Adcraft Club of Detroit, January 17, 1992; 1991 Brochure introducing the Satum.

2. Lefauve and Hax, op cit. 3. Jean-Noel Kaupferer, "How Global are Global Brands?" The Challenge of Branding

Today and in the Future, Brussels, Belgium, ESOMAR, p. 209; Larry Light, "At the Center of It All Is the Brand," Advertising Age, March 29, 1993, p. 22.

 

 

Building a Brand: The Saturn Story 133

4. Peter H. Farquhar, "Managing Brand Equity," Journal of Advertising Research (August/ September 1990), p. RC-7-12.

5. See, for example, Joel Axelrod who describes how and why price premiums are meas- ured in Joel Axelrod, "The Use of Experimental Design in Monitoring Brand Equity," The Challenge of Branding Today and in the Future, Brussels, Belgium, ESOMAR, pp. 13-26.

6. Hudler, op. cit. 7. One by the NADA (National Automobile Dealers Association) and the other by the J.D.

Power Company. See Don Hudler, op. cit. 8. David A. Aaker, Managing Brand Equity (New York, NY: The Free Press, 1991). These

dimensions are reflected in the major efforts to measure brand equity across brands by, for example, Landor's ImagePower which uses awareness and perceived quality to measure brand equity and Total Research's EquiTrend which uses measures of aware- ness, perceived quality and loyalty. Stewart Owen, "The Landor ImagePower Survey: A Global Assessment of Brand Strength," in David A. Aaker and Alexander L. Biel, eds., Brand Equity & Advertising (Hillsdale, NJ: Lawrence Erlbaum Associates, 1993), pp. 11-30; "Wave II EquiTrend Findings," unpublished paper. Total Research, 1992.

9. Lefauve and Hax, op. cit. 10. 1993 Kelley Blue Book Official Price Guide, Western Edition September-October 1993. 11. Hudler, op. cit. 12. Aaker, op. cit., Chapter 4. 13. Charles J. Murray, "Engineer on a Mission," Design News, February 22, 1993, pp.

102-111. 14. Brandley Johnson, "PC service problems plague Gateway 2000," Advertising Age,

February 22, 1993, p. 4. 15. Aaker, op. cit. 16. Shaver, op. cit. 17. Hudler, op. cit. 18. Regis McKenna, The Regis Touch (Reading, MA: Addison-Wesley, 1985), p. 93.