US Auto Market Share Brawl

If Toyota is correct and the US auto market has peaked, meaning that total sales by all industry participants combined will barely budge in 2017, then market share is the name of the game. The only way for one company or brand to show growth is by taking share away from a different company or brand (including cannibalizing a brand in the parent's portfolio).

This situation will have a major influence on automaker's US marketing plans for the coming 18-24 months. So far, the signs point to a plateau.

For starters, consumers will likely benefit from increased financial incentives (rebates, for instance) as dealers and brands court switchers or try to hold onto usually brand-loyal customers. Dealers are also benefiting from manufacturers' financial incentives, which they may or may not pass along to consumers in the form of reduced effective pricing.

A table on the Wall Street Journal site shows that sales of light trucks are picking up speed vs sales of passenger cars. Gas prices are low, so even though SUVs and pickups don't deliver fuel efficiency equivalent to cars, buyers are returning to their truck-buying habits.

As a result, the market share brawl is not just a matter of, say, GM vs Toyota, but also cars vs SUVs and pickups, plus gas vs hybrids vs electric. How to stand out? For example, for differentiation and to appeal to targeted segments, Volvo is going all electric by 2019. What complicates this brawl is the aggressive entry of Tesla and its popularly-priced electric car (image at top). The market share brawl is underway!

P&G's Line Extensions for Faster Cleanup

Few US consumers have the time or inclination to work long hours deep-cleaning their homes every week. Procter & Gamble has been updating products and packaging to give today's customers what they need for speedier spot-cleaning, based on studies showing how cleaning habits have changed.

"When we were kids, the majority of the country used to drop in some dish liquid, fill up the sink with water, soak all of their dishes and then after a bit of time clean them, rinse and place them in a drying rack," remembers the head of marketing for Procter & Gamble's Cascade and Dawn cleaning brands. "Today, consumers just don't have time for batch-processing."

Having observed customers up close and personal, P&G recently launched Dawn Platinum Power Clean dishwashing liquid, designed to soak foods off dishes in minutes, not hours.

Another P&G introduction is Bounty DuraTowel, designed to deliver the benefit of more absorbancy and making it easier to rip one hefty sheet off the roll in a hurry. The idea is that a busy consumer doesn't want to fuss with the roll; he or she just wants to snap a single sheet off when needed to deal with a cleaning project or an unexpected spill--and do it right the first time with one towel, not a handful.

Line extensions like these can potentially cannibalize sales within the existing product line but also have great potential to attract new customers--or at least retain current customers who might otherwise defect to another brand.

Yet the more choices consumers have, the more confused they may become. The challenge for marketers is to simplify the choice, clarify points of differentiation, and sharpen the focus on what's really relevant to the target audience.

Line extensions are only part of P&G's marketing plan for higher sales and profits. The firm is also reinforcing the connection between its many individual brands (Bounty, Cascade, etc.) and the corporate parent. If customers like and trust one P&G brand, they might try another P&G brand. Last month, P&G held a one-day sampling event in which it distributed 40,000 free samples in one day in the heart of New York City. Why choose Manhattan for this massive sales promotion? "It's the world's biggest stage," explains a P&G executive.

Should You Cannibalize Your Own Products?

Not so long ago, cannibalization was generally a no-no. When planning a new product, you tried not to take sales away from your current products (think of it as "a bird in the hand" marketing).

These days, the mandate to go ahead and cannibalize comes from the top, as a way to preempt competitors from stealing sales away.

• John Donahoe, CEO of eBay, says yes: "In technology, either you cannibalize yourself or someone else is going to do it." So eBay made changes, including pushing into mobile marketing for autos, among other big-ticket items. Today, eBay says it sells 8,000 cars a week via its mobile app. Ka-ching.

• Tim Cook, CEO of Apple, says yes: "I see cannibalization as a huge opportunity for us." Witness the iPad Mini, which is sure to cannibalize some of the iPad's sales. But if the Mini prevents rivals from getting Apple's customers, it's worthwhile to accept lower revenue/margins rather than lose the entire sale. Let's see how Apple reacts to Samsung's strong competition on the smartphone side.

• Toyota's Prius may have cannibalized some of the Camry's sales, yet it also became the frontrunning pioneer (and category prototype) of hybrid gas-electric cars. In fact, the exec who championed the Prius is in line to become Toyota's next CEO.

The equation will be different for every product and company. Look at how cannibalization is likely to impact your product lines, overall sales, customer loyalty, and market share. Sometimes the answer may be in the timing of something new.

Cannibalize Yourself

Quick--before a competitor comes along to eat your lunch, be the first to cannibalize your own products. If customers are going to move on in search of the new new thing, be sure it's your new thing.

That's the philosophy of successful marketers like Gillette and Apple. Reading "5 Reasons Gillette Is the Best a Brand Can Get" reminded me of this important principle. Gillette brings out improved razors every few years and then communicates the benefits of the new model over and over again to drive buyers to the new. Take a look at the Gillette Fusion Power Phenom page, featuring all the flavors of Fusion. Naturally the new product is priced higher than the old product--and buyers need to buy new blades for years and years, a steady source of revenue that stretches to the horizon and beyond.

Consumer packaged goods and high-tech products have entirely different lifecycles, yet the cannibalization principle is the same. Apple has prospered launching new, improved iPods in quick succession, prompting many current customers to trade up to the latest models. The company is relentless in its cannibalization of its own products, beating competitors to the punch time after time. And Apple beats back competition with its App Store secret weapon, another steady source of revenue that stretches to the horizon and beyond.

In Poland, Tesco introduced a range of "Discounter" products at lower prices to cannibalize its own grocery merchandise as competitors such as Aldi and Lidl were drawing interest from bargain-hunting consumers. The message to shoppers was: "No reason to go to discounters."

So go ahead and cannibalize before your competitor eats your lunch. Just be sure you know your customers well enough to introduce something with extra value they can't resist and can't get anywhere else.