Title: MARKET ANALYSIS OF CADILLACS CURRENT MARKET POSITION, STRATEGY, AND TACTICS BENGAL WILD MARKETING AS
1MARKET ANALYSIS OF CADILLACS CURRENT MARKET
POSITION, STRATEGY, AND TACTICSBENGAL WILD
MARKETING ASSOCIATES INC.Marc AlexanderJesse
BedollaDaniel LewisMark PustelakJames
StansburryMarch 30, 2002
2Studys Goal
- The objective of this study is to analyze and
critique Cadillacs current market position,
strategy, and tactics. For comparison purposes,
we benchmarked against Lexus.
3Cadillacs Five Objectives
- Profitably grow volume while improving Cadillacs
imagery - Make Cadillac respected and aspirational to a
broader customer base - Sustain a focused premium dealer network
- Protect and strengthen residual values
- Maintain customer satisfaction levels as Cadillac
expands its owner base
4Strategy
- A bold, new direction for styling that will
result in a unique look in the crowded luxury
market - Goal is to connect with a broader range of luxury
buyers by entering into and creating new luxury
segments - Enhancing the dealer experience
- Expand global market share
5Luxury Car Sales North America
2001 Vehicle Sales
2000 Vehicle Sales
-3.8 Decline
Cad. 189,154 Lexus 206,037 Tot. Mkt 1,385,318
Cad. 172,083 Lexus 223,983 Tot. Mkt 1,334,533
6Luxury Car Segments 2001
Entry Level Luxury Cars
Mid, Large, Ultra Luxury Cars
Mid Large Sport Utility Luxury
Cadillac. 31,816 Lexus 86,746 Total Market
503,289
Cadillac 130,503 Lexus 69,904 Total Market
627,713
Cadillac 9,764 Lexus 67,333 Total. Market
647,756
7Luxury Market Global Sales Distribution
8Cadillac Then and Now
- In 1978 Cadillac was the undisputed leader in the
luxury market - Lexus debut in 1989 with LS400 introduction
- Cadillac had several large gaffes including the
Cimarron and Allante - Cadillac was slow to develop models for new
segments- Luxury SUV, Entry-level Sedan, and high
performance convertible.
9Trading Places
10Environmental Trends
Positive
Negative
- Market recession
- Cost cutting
- Loss of market share to Euro and Japanese Luxury
brands - Perceived lower quality
- Lower price- less importance for the target
consumer - CAFÉ Requirements
- Strong US Dollar / weak Yen
- Growing luxury market
- New product Czar Bob Lutz has positive market
image as a car guy - American brand- nationalism may be on the rise
due to rise in sense of patriotism - Cadillac heritage
- Quality has improved
- Lower price- easier entry
11Luxury Market Demographics
12 Perceptual Map
Initial Quality Map 2001
IQS Lexus 85
1 (2)
Bentley
- Chrysler LHS/300M 12 (18)
Plain Image
Sophisticated Image
IQS Avg 147
Lincoln
14 (20)
Low Quality
13Luxury Segments
- Entry the largest segment and growing in both
North America and globally - Prestige the second largest currently and
vitally important for premium imagery, a real
global segment - Mid Luxury Utility has been one of Americas
fastest growing luxury segments (this segment may
transition to luxury crossovers)
14Luxury Segments (cont.)
- Full-size primarily North American and vitally
important for volume and profits (not growing,
but Cadillac is dominant here with the DeVille
and DTS - Large Luxury Utility primarily North American,
small in size but growing and very important - Ultra Luxury low volume, high image
15Product Line
16Cadillac Model Sales Volumes
17Lexus Model Sales Volumes
18Entry Level Luxury Comparison
- Cadillac CTS - 29,350
- Rear wheel drive
- 5 speed manual or auto.
- 3.2L V6 220 horsepower
- Lexus ES 300 - 31,505
- Front wheel drive
- 5 speed automatic trans.
- 3.0L V6 210 horsepower
19Large Luxury Utility Comparison
- Cadillac Escalade AWD - 52,230
- All wheel drive
- 4 speed automatic trans.
- 6.0L V8 345 horsepower
- Lexus LX 470 - 61,855
- All wheel drive
- 4 speed automatic trans.
- 4.7L V8 230 horsepower
20Full-Size Luxury Comparison
- Cadillac DeVille DTS - 47,520
- Front wheel drive
- 4 speed automatic trans.
- 4.6L V8 300 horsepower
- Lexus LS 430 - 54,405
- Rear wheel drive
- 5 speed automatic trans.
- 4.3L V8 290 horsepower
21Full-Size Luxury Comparison
- Cadillac Seville SLS - 44,039
- Front wheel drive
- 4 speed automatic
- 4.6L V8 275 horsepower
- Lexus GS 430 - 47,405
- Rear wheel drive
- 5 speed automatic
- 4.3L V8 300 horsepower
22Pre-owned Vehicles
- Both Cadillac and Lexus offer a certified
pre-owned program -
- Vehicle inspections
- Lexus offers a 128 point vehicle inspection
- Cadillac offers a 100 point vehicle inspection
- Warranties
- Lexus offers a 3 year/100,000 mile limited
warranty from date the new owner drives the car
off the lot - Cadillac offers a 6 year/100,000 mile limited
warranty from original vehicle delivery date
23Pre-owned Vehicles
- Both Cadillac and Lexus offer a certified
pre-owned program -
- Additional Services
- Lexus additional offers
- a free loaner car for warranty repairs,
- 24-hour roadside assistance,
- complementary first oil and filter change, and
- up to 200 per night for 3 nights provided for
meals lodging if stranded out of town - Cadillac additional offers
- 24-hour customer service
- 24-hour roadside service
24Pre-owned Vehicles
Retained value over a three year period
- 2001 JD Power Associates Awards
- Customer service index (CSI)
- 1 - Lexus
- 3 - Cadillac
- Vehicle dependability study
- 1 - Lexus
- 8 - Cadillac
- Top vehicle award in Initial Quality for the
- Lexus ES 300
- Lexus LS 430
- Lexus RX 300
Source Kelly Bluebook.com Based on fully loaded
automobiles
25200
261400
27(No Transcript)
28Dealership Network
- Total USA dealership networks
- 200 Lexus dealers
- 1,400 Cadillac dealers
- New Cadillac dealership initiative implemented in
2002 - Cost of implementation is projected to reach 1
billion over a 10 year period - Cost per dealership is projected to be
approximately 1 mm per location - Renovations planned for stand-alone dealerships
worldwide to form a - uniform elegant look
- Reasons for Cadillac dealership improvements
- combining a strong dealer brand with a strong
product brand makes a lot of marketing sense -
Dallas Business Journal - New Cadillac dealership image program launched
by GM is very sleek, very modern, and very
appealing - Automotive News - No one satisfies their customers as does Lexus
unequivocally, owners are given service that is
consistently outstanding. Lexus provides
exceptional treatment in making it easy to obtain
appointments, vehicles are almost always serviced
the first visit, and they provide amenities that
delight and please their customers - JD Power
and Associates
29Product Decisions
- Replace the Catera with the new CTS
- Eliminate the Eldorado after this model year
- Extending the range of the Escalade brand with
the EXT and others to follow - Moving to the all new Sigma platform rear wheel
and all wheel drive with a world class chassis - Enter the growing mid luxury utility (SRX) and
ultra luxury global segments (XLR)
30Product Differentiation
- New rear wheel drive models
- CTS is available with a manual transmission
- The Escalade EXT has the unique mid-gate
technology - Generally have more horsepower than comparable
Lexus models
31Product Innovations
- Cadillac has several product innovations
- Magnetic ride control
- XM radio
- Stabilitrak
- Northstar engine
- Night vision
- OnStar
- Utility enhancement system
32New Cadillac Vehicles
- 2002 Escalade EXT sport-utility pickup
- 2003 CTS entry luxury sedan
- 2003 XLR new ultra luxury roadster
- 2004 SRX new luxury crossover to compete in the
mid luxury segment
33Marketing Methodology
- In mid-90s, GM unleashed brand-management
- Goal to sell cars the way Proctor Gamble sells
soap - In practice, often meant focusing the marketing
effort on innovative new models rather than the
division that spawned them (Escalade vs.
Cadillac) - Hasnt worked the way intended due to different
type of consumer decision making - Soap/consumables- habit/routine- products are the
brand- most dont know which products are PG - Cars- complex- manufacturer has a large part in
decision- I drive a Lexus vs. I drive a LS400
34Marketing Methodology
- Now, GMs focus back to the Divisions
- See more emotional Cadillac marketing efforts
- Still run new product promotions (CTS), but also
draw in Cadillac themes - "All of our advertising will stress the clear
brand benefit of Cadillac - namely, breakthrough
leadership in bold design and product
innovation." M. LaNeve - CTS ability to wrest buyers away from competitors
will be first test of this new methodology - Need to be cognizant of existing customers who
enjoy todays Cadillac
35Marketing Methodology
- Now, GMs focus back to the Divisions
- Still run new product promotions (CTS), but also
draw in Cadillac themes - "All of our advertising will stress the clear
brand benefit of Cadillac - namely, breakthrough
leadership in bold design and product
innovation." M. LaNeve - CTS ability to wrest buyers away from competitors
will be first test of this new methodology - Need to be cognizant of existing customers who
enjoy todays Cadillac
36Marketing Tactics
- Back into racing on an international scale
- Mercedes, Lexus, Jaguar, BMW and Audit already in
the racing environment on a global scale - Win on Sunday, sell on Monday
- The name game (DeVille to DTS)
- Encouraging dealers to upgrade
- Created high performance group to compete with
AMG, M-Series, etc..
37Marketing Players
- Mark LaNeve, Cadillac Brand General Manager
- Relatively new (one year), came from Volvo
- Is working with a 4B commitment by GM to
revitalize the brand - Kim Kosak, Director of Cadillac Advertising
- Chris Fraleigh, Exec. Dir.GM Ad Marketing
- Media and Creative Leader of 3B ad budget
- Wouldnt have come to GM if it wasnt for
Cadillac. - Each vehicle has its own brand manager (e.g.,
Susan Docherty, Escalade Brand Manager)
38Marketing Players
- Cadillacs Ad Agency is DArcy Masius Benton
Bowles, based in Troy, MI - Thomas Kearns, Cadillacs top designer
- In general, tactical functions such as media
buying (e.g., GM works), eGM, research and
womens/diversity marketing and research are
centralized and support divisional/vehicle
strategy - Research- GM employs internal experts (mainly in
Detroit) to perform primary and secondary
research- are they really in touch with the rest
of the world? The cost of this research is
estimated over 100M for GM. But historically,
lost in the Accounting Department.
39Advertising Promotion
- Cadillac will spend about 240M in 2002- about
10 more than 2001 - Super Bowl alone was 10M- contract through 04
- Breakthrough campaign replaces 1999 campaign
using the taglines - The Fusion of Design Technology
- Art Science
- The Power of
- This program was widely criticized as confusing
and too ambiguous, even by Cadillac Dealers
40Advertising Promotion
- Cadillac will use other high-profile events
- Winter Olympics
- Academy Awards
- Wimbledon tennis
- Ryder Cup golf
- New ads will be emotional and focus on edgy
designs and cutting-edge technology- is that
value to the customer? Product vs. product
comparison? - Emphasis on product placement in media, including
movies such as Matrix II and Sopranos - MTV and major league sports
41Advertising Promotion
- Cadillac changes ad agency compensation
- Cadillac continues to push gimmicks
- Video game for 50k vehicle- Escalade- gaming
is popular among our target demographic. - !!!The average age of an Escalade buyer is 51,
with a household income of 160K. 35 are
women.!!! - Escalade billboard radio station, palm pilot
advertising, B actor product pitches - Also dealer spending on the rise- more local ads
42Current Ads
- CTS commercials with Led Zepplin-
- Highway Escape from 50s traffic, shows
classic 59 Eldorado, CTS, XLR and EXT - Glow as car performs, body panels heat up like
the Space Shuttle, then cool as car stops - Test Track Silver CTS drives opposite
direction on track as competitors - EXT- Parking Space Battle for space is
resolved as small car placed in EXT bed - Escalade- Crossing Rather than the SUV
stopping for the train, trains stop for the
Escalade
43Cadillac On-Line Marketing
Cadillacs information on the main menu is
clearly labeled and easy to navigate
44Lexus On-Line Marketing
Lexus information on the main menu is clearly
labeled and easy to navigate
45Cadillac On-Line Financing
Cadillacs financing leasing information is
still in development
Site is in development
462002 Auto Show - Detroit
Cadillacs Theme Breakthrough Design
Technology Cadillac Cien won the Best
Concept Car Award from AutoWeek
Lexus Theme Quality J.D. Powers Awards
47Then and Now
- Then
- Cadillachas pushed marketing slogans without
the products to back them up. You dont sell
brand. You sell product. - Up to now theyve had a brilliant strategy.
Design cars for dead people, and let the deadest
ad agency make the ads. - In 2000, Cadillac was nowhere to be seen in the
top 15 brands for future consideration (Lexus was
sixth) - Late to the luxury SUV and roadster segments
48Then and Now
- Now
- The product is rolling out- new CTS, roadster,
SUVs, updated STS and DTS - Face a much tougher market than 10 years ago-
competitors have few weaknesses - Cadillac battles Lexus as the brand with the
highest level of owner satisfaction - (Lexus LS430 was the highest nameplate, followed
closely by Cadillac Deville) - Commercials to emphasize Cadillac, not just car
49Lexus Moves
- Toyota always had luxury products- in Japan. They
were called Toyotas. The same approach wouldnt
cut it in U.S. as Toyota not known for luxury,
but practicality - LS 400 was partially successful as it was a
styling coup and had Toyota quality at a time
when a Cadillac had poor styling and quality - Timing is everything- Lexus rolled out at the
beginning of the longest economic growth period
in history - Lexus could sell their cars without any
marketing. How often do you hear about incentives
on a Lexus? Never. Theyre just that good. Motor
Trend
50Recommendations
- PRODUCT, PRODUCT, PRODUCT- need a world-class
product in every major segment- world class or
CUT - world class must be measured by external experts
(e.g., trade magazines/Consumer Reports/Edmunds) - promotion only has proven ineffective
- Increase price/perceived value- you dont want to
be the low price leader in the luxury market. - Reevaluate differentiation strategy- less
reliance on gadgets More emphasis on quality
and performance - Advertising is in the right direction, it was a
good roll-out (got a lot of attention), but its
time to move the next phase of advertising that
clearly describes differentiation i.e., style,
performance
51Recommendations
- Cadillac needs to complete their home web page
(e.g., www.cadillac.com) with up-to-date product
information - Expand the Cadillac home page dealership
information to include mapping software (e.g.,
home to dealer) - Standardize network-wide Cadillac dealership
home pages including - dealership home page layouts
- model pictures
- section for testimonials of happy customers
52Recommendations
- Link all standardized dealership home pages to
and from the Cadillac home page (e.g.,
www.cadillac.com) - The updated format for the Cadillac dealerships
is a solid move in the right directions.
Cadillac also needs to begin converting higher
volume dealerships into a stand-alone more
exclusive format with a goal of eliminating lower
volume multi-brand dealerships from the Cadillac
network.
53Recommendations
- An exclusive dealership program needs to be
developed for the top dealerships based on sales,
customer service, compliance with programs, etc. - Cadillac needs to begin emphasizing their
existing dealership network in their
advertisement campaigns (e.g., with a Cadillac
dealer within 15 minutes of 85 of the US
population were just around the corner)
54Tactical Recommendations
- Expand/shift demographic- must attract younger
affluent consumer - Final Four- office pool
- Led Zepplin (narrow demo)-need Dave Mathews,
Indigo Girls, etc.. - Use Oprah to attract women
- High Performance Group/Products is needed to
improve image. - Safety and social responsibility to attract women
- Halle Berry (Sexy/Sophisticated)