Hummer Case Study

Case Study: GM: Downsizing the Hummer Course Title: Marketing Strategy Situation analysis: When you think power or tough, think hummer; when you see yourself as a giant or a knight, ride a Hummer. These two sentences can be summarized the essence of what AM general and General Motors Corporation worked for. Am general’s was created Humvee in 1979 which is an acronym for the formal designation “High Mobility Multipurpose Wheeled Vehicle (HMMWV). General Motors Corporation and its subsidiaries engage in the development, production, and marketing of cars, trucks, and parts worldwide. It offers small, midsize, sports, and luxury cars; and pickup, van, utilities, and medium duty trucks in Canada, Europe, Latin America, and Asia Pacific. In addition, the company offers after sale services, such as maintenance, light repairs, collision repairs, and vehicle accessories. General Motors markets its products through distributors and dealers, as well as through retail dealers. The contract between the two companies gives GM use of the Hummer brand name and responsibility for design, sourcing of components and tooling, production engineering, and marketing and distribution. AM General’s is responsible for manufacturing engineering, assembly and brand management. It also retains the right to market and distribute military vehicles such as the H1, known to the army as the "HUMVEE." From a demographic standpoint, Hummer's target market segment cannot be very large because of the high price of the vehicle, which can be in excess of $200,000. AM General’s targeted for elite road warriors and for the average age of 50 years. The problem of H1 is the size that is really disturbed its owners because it takes a lot of parking space. Based on the research of GM, it made an agreement with AM General giving its right to produce H2 which is SUV for GM. It is narrower and lighter than Hummer. As a result, the brand-new H2 is smaller than past models and based on GM's full-size pickup/sport utility vehicle design. Instead of seating four occupants like the current Hummer H1 does, the H2 holds five. In addition to a more civilized ride, the H2 promises what Hummer calls “more creature comforts.” It also costs about two-thirds as much as the big H1 model.

The H2 is a conventional SUV — if any Hummer can truly be called conventional, that is. H2 is designed for a younger; more mainstream group of buyers. It is designed for everyday use, as well as for the most demanding off-road conditions. Hummer's market segment consists of males between the ages of 25 and 44 who earn over $100,000 a year. This demographic group consists of Generation X'ers and some of the Baby Boom generation. From a psychographic standpoint, its target customers include rugged individualists, successful achievers, the realist, the discerner, the conqueror and the adventurer. The problem existed when the company saw that H2 was heavier than other SUV as well as more fuel consumption. Later on, the company was extended the line of H2 by producing sport utility truck and pick up tuck style cargo GM owns the “big freakin’ SUV” position in most consumers’ minds which makes their latest effort, the H3. This model from Hummer is not only significantly smaller than its predecessors; it is being marketed to attract women, but the problem is still the same: fuel consumption and pollution. Finally, Hummers are today sold with a large number of accessories and can be customized according to the individual customers need. For example on such customizations are bullet proof hummers. Moreover, there is adventure off-road academy; when you attend this academy, you will gain more than just driving skill. You will take with you a greater understanding of what it truly means to be an off-roader. Also, Hummer is a sponsor of the 2007 NFL draft.

TOWS analysis: Threats: Hummers produce greenhouse gas (GHG) emissions from its facilities. They damage the environment. GM tried to reduce it and until now it couldn’t. Also, offensive strategies from the competitors play a major role to reduce its intention to not produce more.. Opportunities: growth in the car industry especially SUV, fast growth in technology, growth in population, and many segmentation variables for consumer markets are opportunities for GM to continue producing Hummers. Good reputation for Hummers and its fast positioning gives

the opportunity to GM to produce more and more vehicles and make contracts with dealership. Weaknesses: Hummers are too much expensive that not all people can afford to buy. Second, they consume more fuel than other vehicles. Third, they are heavy (7100 pounds).They take a lot of spaces when parking one. Some people see them as military vehicles even if GM beautifies them. Strengths: Strong vehicles (195 horsepower, strong metal), most serious 4x4. You can ride them off-road as well drive up steep hills, rough terrain obstacles, and even drive it through shallow water. They have central tire inflation systems. Strong marketing (Excelling in print, outdoor, TV, online media and public relations in addition to being innovative in our creative thinking are what made GM campaign successful, and consequently taking home such prestigious awards. Also segmentation, targeting, positioning are strength you can rely on. Questions: 1. How has GM used the major segmentation variables for consumer markets in segmenting the SUV market? GM used several segmentation variables for consumer markets: I. Geographic segmentation: GM sold Hummer in most world region such as North America, Western Europe, Middle East, India, Canada, and Mexico…. .Moreover they are sold for urban, suburban and rural areas. II. Demographic segmentation: its target customers are beginning from 25 years old and above, used by both male and female, young or old, married or single , its income above $100,000, every person who afford to buy it regardless of nationality or race. III.

Psychographic segmentation: it divided into :

a) Social class: working class and upper uppers. b) Lifestyle: it included: 1. Rugged individualists: It will be more likely to take it off-road and exploit all capabilities. 2. Successful achievers: They are more likely to drive it on-road as a symbol of their daring and success. 3. The realist: The realist considers Hummer for its practical purposes, and will therefore make use of the vehicle's off-road prowess. 4. The discerner: It is a connoisseur for the finer things in life, who appreciates Hummer's status, but is unlikely to go off-roading. 5. The conqueror: It is a successful person who wants people to know it, who appreciates Hummer for its exclusivity and attention grabbing looks.

6. The adventurer: The fourth type of buyer is the adventurer, who wants to take the Hummer off-road. By analyzing the percentage of the population that has these qualities. 2. What target-market decisions has GM made in selecting targets for the HummerH2? How those decisions are different from AM general’s target for the Original Hummer? In selecting targets for the Hummer H2, GM introduced the H2 in the luxury SUV market. As a result, the H2 is smaller than past models and based on GM’s full-size pickup/ SUV design. Instead of seating four people like the current Hummer H1 does, the H2 holds five. In addition to a more civilized ride, the H2 promises what Hummer calls “more creature comforts.” It also costs about two thirds as much as the big H1 model. GM focused on wealthy baby boomers and successful achievers. H2 competes successfully with Lincoln Navigator or Cadillac Escalade. In addition, GM charted production plans that called for AM General to build a new manufacturing facility in Indiana and for GM to launch the H2 at a base sticker price. Furthermore, GM hired a marketing firm, Modernista that made a campaign using the tag line,”Hummer. Like nothing else”. Those decisions are different from AM General’s target for the Original Hummer because to build a manufacturing facility, you need to hire new management for this program. It is unfortunate that plans for the new plant were well underway before GMS was considered because some things are less than optimized. For example, the paint shop went in a bit too early for GMS to have any impact on its footprint or flexibility. Also, GM wasn't able to use its "virtual factory" model for the plant, which would undoubtedly have helped in process engineering and material handling. AM General’s analysis helped reduce the amount of materials in the plant. Also, the company had input on body build and general assembly, and identified opportunities for capital reduction and reallocated the capital for other needed things. 3. How has GM attempted to position the H2? GM attempted to position the H2 by: • Introducing the H2 as sport utility vehicle (SUV) in the market. H2 is smaller and narrower than H1; the H2 holds five. In addition, the H2 promises what Hummer calls “more creature comforts.” It also costs about two-thirds as much as the big H1 model. H2 is designed for a younger; more mainstream group of buyers. • Promoting on:  A campaign: Modernista made a campaign in mid-2001 using the tag line,”Hummer. Like nothing else”.

 TV ads: “Threaten Men in a New Way” that featured a welldressed woman driving the H2. A later ad featured young boy who builds a soap box like a small Hummer  Newspapers ads: placements in the Wall Street Journal, Business Week, Cigar Aficianado and Esquire used four different headline: 4. Why do you think some consumers will pay $40,000 or more for an off-road vehicle that 90 percent of them will never take off-road? Some consumers pay that amount because of their behavioral attitude toward these vehicles. Some people feel that they have power, authority and complete control. There are two distinct groups of people who purchase Hummers: those who use it for practical purposes and those who drive the vehicle as a status symbol. Therefore, a segment of the Hummer enthusiast population are the type of people that enjoy driving these vehicles off road, as well enjoy the power the vehicle provides to drive up steep hills, rough terrain obstacles, and even drive it through shallow water. The second group of people is those that drive the vehicle as a status symbol. For example, the rugged individualist will be more likely to take it off-road and exploit capabilities. The successful achievers are more likely to drive it on-road as a symbol of their daring and success Finally, some consumers explain that after the attacks on the World Trade Centre, Hummers became an overconfident symbol of American greatness”. 5. What segmentation, targeting, and positioning recommendations would you make to GM for the H3? My recommendations to GM are that the HUMMER H3 should take the brand into new destinations around the world, expand its distribution channels and should attract new customers.(researchers said that in fact, the HUMMER brand has the highest conquest rate in the corporation – approximately 60 percent of buyers are new to GM). H3 should appeal to a slightly younger and more diverse group of customers with a base price starting at $29,500 and a size that puts it in the heart of the midsize utility segment. GM should study the possibility of reducing the fuel consumption and eliminate the pollution that has. In addition, GM should study the possibility reducing the price of its accessories because it is expensive. H3 should be really “Hummer. Like Nothing Else”. 6. What other marketing recommendations would you make? My marketing recommendations are built on both marketing mix and my point of view: I. Product: H3 should be designed as smaller as other SUV. It should have more features than others (more seats, airbags…). H3 should consume less fuel and less pollution than SUV. GM should have

after sales service around the world that fixes the problem fast. Hummer should be guaranteed (full car insurance). II. Price: H3 should be lower as other SUV. GM should make discounts, credits terms or allowances. GM could make bargaining or dealings (buy your car, and sell H3). III. Promotion: GM should make public relation as well as make many ads on TV, magazines, enter many exhibitions, make direct marketing. IV. Place: GM should expand around the world and maintain its distribution channels Finally, on my point of view, I’m afraid that going with a smaller Hummer will ultimately dilute the brand positioning of the Hummer, and hurt overall sales. I don’t want to be too much optimistic because in the consumer minds Hummer is Hummer. It is a heavy car although if they make all efforts to launch it. Moreover, although they make study for the fuel consumption, it still consumes more than any of SUV cars as well as for the pollution, they cannot until now eliminate the pollution that it produces. Furthermore, the line extensions give short-term sales, in exchange for diluting the brand’s equity, long-term. A new Hummer that is smaller and aimed at women and new families may appeal to this new market, but will it alienate the core market that the Hummer has built its brand name on? Finally, I prefer closing the company because of high price in oil and fuel, and it is a threat for