Principles of Marketing

Group Assignment One

Case Study I
SATURN
Things are about to change at Saturn. The General Motors brand had only three iterations of the
same compact car for the entire decade of the 1990s. But Saturn ill soon introduce an all!ne
lineup of "ehicles that includes a midsi#ed sport sedan$ an eight!passenger crosso"er "ehicle$ a
to!seat roadster$ a ne compact$ and a hybrid S%&. 'a"ing anticipated the brand(s renaissance
for years$ Saturn e)ecuti"es$ employees$ and customers are beside themsel"es ith glee.
But ith all this change$ industry obser"ers are ondering hether Saturn ill be able to maintain
the "ery characteristics that ha"e distinguished the *brand since its inception. Gi"en that Saturn
established itself based on a "ery narro line of compact "ehicles$ many belie"e that the mo"e
from targeting one segment of customers to targeting multiple segments ill be challenging. +ill
Saturn still meet the needs of one of the most loyal cadres of customers in the automoti"e
orld,
A NEW KIND OF CAR COMAN!
-n 19.0$ GM recogni#ed its inferiority to the /apanese big three 0'onda$ Toyota$ and 1otson2 ith
respect to compact "ehicles. The /apanese had a loer cost structure$ yet built better cars. -n an
effort to offer a more competiti"e economy cat$ GM actually turned to the enemy. -t entered into a
3oint "enture ith Toyota to build small cars. Soon$ a Toyota plant in 4orthern 5alifornia as
turning out 5orollas on one assembly line hile making "ery similar 5he"y 4o"as on a second.
Meanhile$ in a long!term effort to make better small cars$ GM ga"e the green light to Group 99$
a secreti"e task force that resulted in formation of the Saturn 5orporation in 19.6.
7rom the beginning$ Saturn set out to break through t GM bureaucracy and become* 8 different
kind of car. 98 different kind of company.* 8s the single!most defining characteristic of the ne
company$ Saturn proclaimed that sole focus ould be people: customers$ employees$
communities. Saturn put significant resources into 5ustomer research and product de"elopment.
The first Saturn cars ere made *from scratch$* ithout any allegiance the GM parts bin or
suppliers. The goal as to produce n only a high!;uality "ehicle$ but one knon for safety al
inno"ati"e features
that ould *o* the customer.
Saturn(s focus on employees began ith an unprecedented contract ith %nited 8uto +orkers
0%8+2. The co * tract as so simple$ it fit in a shirt pocket. -t established progressi"e ork rules$
ith special emphasis gi"en benefits. ork teams$ and the concept of empoerment the retail end.
Saturn selected dealers based on careful crafted criteria. -t paid ser"ice personnel and sales
associates a salary rather than commission. This ould help create an en"ironment that ould
re"erse the common customer perception of the dealer as a nemesis.
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7inally$ in addition to customer and employee relation Saturn focused on social responsibility.
'uman resource policies ga"e e;ual opportunities to omen$ ethnic minor ties$ and people ith
disabilities. Saturn designed en"ironmentally responsible manufacturing processes$ e"en going
beyond legal re;uirements. The company also ga"e hea"y philanthropic support to "arious causes.
8ll of these action earned Saturn a number of aards recogni#ing its en"ironmentally and socially
responsible actions.
+hen the first Saturn "ehicles rolled off the assembly line on /uly <0$ 1990$ the company offered
a sedan$ a coupe$ and a agon in to trim le"els each$ all based on a single compact "ehicle
platform. -n spite of this minimal approach$ sales ;uickly e)ceeded e)pectations. By 199=$ Saturn
had sold 600$000 "ehicles. That same year$ the company achie"ed the highest ne!car sales per
retail outlet$ something that had not been done by a domestic car company for 16 years.
-ndeed$ customers ere dran to all the things that Saturn had hoped they ould be. They lo"ed
the inno"ations$ such as dent resistant body panels$ the high!tech paint 3ob designed to resist
o)idi#ation and chipping longer than any in the industry$ and safety features such as traction
control$ antilock brakes$ and unparalleled body reinforcements. They ere o"erhelmed by the
fresh sales approach that included no!haggle pricing$ a <0!day return policy$ and no hassle from
the sales associates. The noncommissioned associates spent as much time ith each customer as
they ished$ e"en going on e)tended test dri"es. 8bsent ere typical high!pressure tactics so
commonly used by automoti"e salespeople.
By 199>$ Saturn had de"eloped an unusually loyal customer base. .The depth of customer
relationships became apparent hen <.$000 Saturn loyalists made the trek to company
head;uarters in Tennessee to celebrate the first fi"e years at the company(s Spring 'ill
'omecoming. -t as *3ust like +oodstock ithout all the patchouli oil$* beamed one proud S?=
oner. The homecoming set the mold for many company!sponsored customer gatherings to
follo.
8s Saturn(s customer base gre$ it became apparent that the Saturn brand as attracting customers
ho ould not ha"e otherise purchased a GM "ehicle. -nterestingly$ the Saturn buyer did not
appear to be all that different from a 5he"rolet buyer. +ith respect to household income$ age$
gender$ and education$ typical Saturn buyers appeared to represent the same 5he"y!like cross
section of middle!class 8merica$ But +isconsin mega dealer /ohn Bergstrom said his netork of
== GM dealerships dras different types of customers to the to brands. +ith trucks accounting
for @6 percent of his 5he"rolet sales$ he described the 5he"y oner as *a true!blue$ bo!tie
8merica consumer.* 'oe"er$ *the Saturn guest is a little different guest. They might buy an
8sian car or a Aorean car or a Saturn. They are "ery much into safety and "alue$ and ho they(re
treated is critically important. - don(t think e(d get those kinds of people in our 5he"y stores if
e didn(t ha"e the Saturn brand.*
1uring Saturn(s first years of operations$ the accolades rolled in. The list included *Best 5ar* picks
from numerous maga#ines and organi#ations$ along ith aards for ;uality$ engineering$ safety$
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and ease of maintenance. But the croning achie"ement occurred in 1996$ as the 1$000$00Bth
Saturn took to the road. That year$ Saturn ranked number one out of all automoti"e nameplates on
the /.1. Poer and 8ssociates Sales Satisfaction -nde) Study$ achie"ing the highest score e"er
gi"en by the organi#ation. -t ould be the only company e"er to achie"e the highest marks in all
three categories ranked by the satisfaction inde) 0salesperson per. Performance$ deli"ery acti"ities$
and initial product ;uality2
Saturn earned that honor for an astounding four consecuti"e years$ and it as the only non!lu)ury
brand to be at B/ near the top of /.1. Poer(s scores for the better part of 1 decade.
T"E "ONE!MOON ENDS
1espite the initially strong sales le"els$ o"erall Saturn re"enues tapered off ;uickly 0sales peaked
in 199> at =.@$ BB5 settling in at an a"erage of about =60$000 units per year2. This may ha"e
been due partly to the fact that Saturn released n ne models in the 1990s. 7inally$ in the =000
model yea: Saturn introduced its long!aaited mid!si#ed ?!series it an optional &@ engine. But
unlike the S!series$ the ?!series as re"ieed as a generally bland and forgettable car.
-n =00=$ Saturn broadened the lineup ith the &ue$ compact S%& model. -n /anuary of =00<$ it
replaced the S!series ith the lon$ a totally ne compact that offered more options than before.
But although these ne "ehicle addressed the issue of a lack of model options$ they brought
ith them a ne concern. Saturn(s history of high ;uality and its long!cherished /.1. Poer
ratings began to slide. : the early part of the ne millennium$ not only as Saturn /.1. Poer
initial!;uality rating not near the top$ it fell belo the industry a"erage.
C"en ith the ne models$ Saturn(s sales didnDt impro"e. -n fact$ they declined. This as partly
due to E industry!ide donturn in sales rought by a recession Still$ ?!series production ended in
=00>$ only fi"e eeks after it began. -n =006$ Saturn sales fell to a lo of =1<$0 units$ only about
1 percent of the o"erall market. -t seem that sales of the ?!series and &ue ere coming almost
Cntirely from loyal Saturn customers ho ere trading to something different$ something bigger$
and$ unfortunately$ something not as good.
?ooking back$ Saturn un;uestionably defied the odds launch an all!ne automoti"e company in
such a fierce competiti"e and barrier!entrenched industry is one thing To achie"e the le"el of sales$
the customer base and aards that Saturn achie"ed in such a short period time is truly remarkable.
But as GM and Saturn e)ecuti"es faced the reality of declining ;uality$ plummeting sales$ 1
annual losses of up to F1 billion$ they kne they had to do something dramatic. -n =00@$ Saturn
general manager ?a3d#iak said$ *Saturn(s initial image as a smart inno"ation small!car company
as blurred by bumps in ;uality slo model turno"er. +e didn(t gro the portfolio enough$ and
this year e(re groing in a huge ay.*
A NEW KIND OF SATURN
+ith all that Saturn has done rong$ the fact that def still mo"ed =1<$000 "ehicles in =006 against
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Principles of Marketing
competition ith better reputations and better cars testifies to the things it has done right. +ith its
rock!solid dealer netork$ high purchase process satisfaction ratings$ and loyal customer base$
Saturn has "aluable assets to build upon.
8nd GM plans to do 3ust that as it addresses product ;uality and model selection problems. GM is
currently in"esting hea"ily in a Saturn turnaround. Shoering F< billion on SaturnE it hopes to
perform a makeo"er beteen =00@ and =00. that is similar to the one achie"ed ith 5adillac
earlier this decade. GM$ the orld(s biggest carmaker$ lost F10.@ billion in =006. -t(s clearly
putting some faith in one of its smallest brands to help turn the tide. GM ants to raise Saturn(s
sales to >00$000 units by the end of =00G. -f all goes as planned$ sales could reach 600$000 not
long after that. +ith higher prices and margins$ this ould represent an e"en greater groth in
re"enues and profits.
Aey to the Saturn makeo"er ill be an infusion of Curopean styling from GM(s German di"ision$
Bpel. -n fact$ some of the ne cars already hitting shorooms are largely rebadged Bpels. -n the
future$ ne!product de"elopment ill be carried out in a 3oint!"enture fashion beteen the
to di"isions. 7or a company that in the past has been knon as making the *car for people ho
hate cars$* this is a 1.0!degree turnaround. Saturn clearly hopes to change its humdrum image to
boost profits ith higher!priced "ehicles.
-f the first of four ne Saturn models is any indication$ Saturn is mo"ing in the right direction.
The Sky to!seat roadster hit shoroom floors in early =00@ ith long aiting lists. Based on the
Bpel GT$ the Sky is a head!turning performance "ehicle$ dubbed by one obser"er as the
*cub&ette.* 7or dealer /ohn Bergstrom$ this ne model presented an une)pected but elcome
dilemma. *Sky is 3ust a flat!out home run$* said *Bergstrom$ referring to the aiting lists that he
has started at all si) of his dealerships. *-("e ne"er had that before$* he says$ noting that those on
the aiting lists are people ho ha"e ne"er e"en considered a Saturn before.
-n the fall of =00@$ Saturn launched =00G models of the mid!si#ed 8ura sport sedan 0based on the
Bpel &ectra2 and the eight!passenger Butlook crosso"er "ehicle 0based on GM(s ?ambda platform
being sold by 5he"rolet$ Buick$ and GM52. 7or =00.$ after a year ithout a compact
car$ Saturn ill replace the -on ith a mildly changed Bpel 8stra$ already a Curopean hit in its
fifth generation. The ne lineup ill also include the Green ?ine$ hich ill add hybrid
technology to multiple models$ starting ith the =00G &ue. The Green ?ine promises to make full!
hybrid technology a"ailable at a price much loer than any other hybrid offering.
*The biggest ad"antage to re!branding Bpel "ehicles as Saturn is it doesn(t mean additional costs
to GM$* said Guido &ildo#o$ a senior market analyst and industry fore caster at Global -nsight -nc.
*8nd since Bpel is a kind of sporty Curopean brand$ Saturn ill adopt this image too$ or at least
that is hat they hope to happen.* Some industry analysts suggest that because Saturn is such a
ne company$ it can reposition itself more easily than other brands.
GM makes it clear that ith Saturn$ it(s not trying to make another 5he"rolet. 5he"rolet ill
remain the only GM brand positioned as *all things to all people.* 8long ith the other GM
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brands$ Saturn ill playa niche role and target a specific segment of the market. -n fact$ GM says -
that it(s 3ust trying to help Saturn do more of hat it has been doing all along!reach the type of
import!buying customer it can(t reach ith any of its other brands. -ndeed$ top e)ecuti"es at GM
acknoledge that many Saturn oners already belie"e their car is an 8sian brand$ not a domestic
one. *Saturn has alays been the one brand in the GM lineup suitable for attracting import!
intenders$* says a GM e)ecuti"e.
'oe"er$ some ;uestions remain as to hat segment Saturn ill actually target. 8fter seeing the
ne Saturn lineup at the 4e Hork auto sho$ Tom ?ibby of Poer -nformation 4etork says
he(s confused about hat the brand is trying to do. 'e(s orried that Saturn ill stop focusing on
the retail e)perience and shift to emphasi#ing styling. *+hat(s the message they(re trying to get
out,* he asks. *-(m 3ust pu##led by the hole thing.* -s Saturn losing focus$ or is it simply adding
style to its current image of pro"iding a good "alue and an honest dealer e)perience, Many
analysts belie"e that because Saturn(s current image is only loosely based on the actual car$ the
company has plenty of room to add style to the formula.
#uestions $or Dis%ussion
1. %sing the full spectrum of segmentation "ariables$ describe ho GM has segmented the
automobile market.
1. +hat segment0s2 is Saturn no targeting, 'o is GM no positioning Saturn, 'o do
these strategies differ from those employed ith the original Saturn S!series,
=. 1escribe the role that social responsibility plays in SaturnDs targeting strategy.
<. 1o you think that GM ill accomplish its goals ith the Ine Saturn9, +hy or hy not,
>. +hat segmentation$ targeting$ and positioning recommendations ould you make to GM
for future Saturn models,
Re&uirement' !ou are re&uired to read t(e %ase %are$u))y and dis%uss it in your group* and
you +or your group representati,es- (a,e $i,e minutes to present your understanding in
%)ass. )ease read t(e te/t 0oo1 %are$u))y $rom C(apter 2 to 3* 0ut $o%us on C(apter 3. !ou
4i)) ana)y5e t(e %ase and ans4er t(e &uestions I gi,e you* 0ut not on)y t(e ans4er.
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