Mitsubishi’s Turnaround Strategy: Rebuilding Trust and Attracting New Investors

Mitsubishi launched, in 1998, an incentives based business strategy. It has later developed into the triple zero deals (no down payment, no financing costs, no payments for a year), striving to appeal to young demographics. The results, however, were negative. Owners returned their cars when payments came due. This led to a constant downfall of the automotive company, both in terms of sales and image.

Apparently, there were some problems with the product. Mitsubishi’s Japan executives have been arrested for allegedly hiding defects to prevent vehicle recalls. The automaker struggled to recover from a scandal that had caused sales free fall. Ian Beavis, a brilliant turnaround agent, and Finbarr O’Neill, former Hyundai CEO who helped revive the almost dead company, were brought in to meet the bold objectives of rebuilding public trust and attracting new investors.

They formed a turnaround team based in Cypress, California, and developed a three-year turnaround plan that started in April 2003.

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The previous advertising campaigns have been focused entirely on the emotional side. This led to an exclusion of the older consumers, appealing exclusively to young people. The ads relied solely on music and image, communicating emotions and no rational benefits. The approach was the challenged by the new senior VP.

It is true that advertising is, today, in the emotional era. After an initial period of purely rational argumetation, followed by the USP (unique selling proposition) and the need to establish a point of difference, the present is dominated by the ESP (emotional selling proposition) or the unique selling persona. The technological progress has made physical product differences almost insignificant, leading to a need to differentiate on another level.

Functional benefits are easiest for competitors to copy. Mitsubishi needed a convincing positioning statement to generate market haul. Mr. Beavis has attempted to move Mitsubishi’s advertising from all-emotional to offering consumers a rational reason to buy. The theme of the new approach is “Best-Backed Cars in the World”.

The message that the campaign sends is that of longevity, product quality and worry free maintenance. This is, on one hand, supported by good warranties and provided services for new cars (five year/60,000 mile warranty, ten year power train warranty, free oil changes an tire rotations up to 45,000 miles). A similar measure saved Hyudai from near death, and Mr. O’Neill tried a second win. "Mitsubishi Motors' message of 'best-backed cars in the world' is a fundamental underpinning of our brand that extends far beyond our warranty and sales," said Ian Beavis, senior vice president, marketing. "We know consumers react both rationally and emotionally when buying a vehicle," Beavis explained. "The rational side of them will hear Mitsubishi's best-backed commitment, while the energy and music in these spots will provide an emotional link to the brand." (http://www.theautochannel.com, 2006)

Nevertheless, the greatest advertising efforts will prospectively be a waste without investment in upgrading product quality. As long as product quality is considered to be a risk, the advertising message of the Mitsubishi campaign may soon devolve to this: “The warranty is a band-aid to compensate for product deficiency.” (http://www.whisperbrand.com, 2006) Experts question whether Mitsubishi Motor Corp. has the capital for new product development and marketing. The big question on everybody’s lips is will the company slowly die or will it find strength to come back in an explosion. In a radical move to revive its marketing, Mitsubishi said last April that it would move about $260 million from TV advertising to other media.

Internet is one preferred medium. The “see what happens campaign” launched in February 2004 was considered a great success. It featured ads that finished unexpectedly with the message “go online and see what happens”. Analysts have embraced the approach: “what you’ve witnessed is the end of one chapter and the beginning of another in the great book of integrated marketing. When an interactive client takes on integrated responsibility; when a risk-inclined company embraces change; when an innovative brand communicates with confidence, clarity and creativity, we really see what can happen: the convergence of form and function; TV and the Web; idea and execution; brand and business” (Jaffe, 2004).

In November 2004 Ian Beavis abruptly resigned just a day after Mitsubishi named Bob Martin as head of brand marketing and after only a year within the company. This move leaves the manufacturer in a delicate situation. Seeking a successor might be a difficult task in the context of very specific and hard to meet job requirements. The three-year turnaround plan may be imperiled by the new management change. New strategies have to be developed and Mitsubishi is running out of time.

The manufacturer’s image is already blurry in the consumer’s mind. What do Mitsubishi cars represent? An emotional promise, an attitude, a rational claim? Who are they for? Young people, middle-aged people? Further changes in strategy may trigger a branding disaster. The person who will take the wheel this time has to get the job done (or die trying). There is no room for error.

The early incentives policy boost 2002 sales up to 350,000 units in the U.S., encouraging executives to predict a growth to 600,000 units by 2007. The poor 256,810 sales figure of 2003 market a 25% drop, leading to a cutback of estimations (185,000 for the next year). The great fluctuations stressed the harm done by the years of giveaways. This is a major error when thinking long term and trying to build a brand. The incentives policies appeal only to undecided customers who choose all the products by their bargain potential. Thus, they have no loyalties. Companies that concentrate on this target cannot make accurate future predictions. As shown also by this case. The only way to assure future success is to create loyal customers by being relevant to their needs and desires.

This poses the question of challenges to be faced in the future. Mitsubishi has to fight hard to win back customer trust after its image was affected by scandals over coverups of auto defects. To have a chance of becoming a competitor in the United States automobile market, Mitsubishi Motors first needs a brand strategy makeover.

Problems regard firstly finance. The new chief in Japan secured a four billion bailout, but it has to be used wisely. Research & Development is essential for assuring a competitive advantage.  Management and management disfunctions led to a fragile present situation. Scandals regarding the Japonese executives have damaged the company’s image considerably. A new marketing director has to be instated as soon as possible in order to assure communication coherence.  Also actions have to be taken to make sure that the promised extra services are provided for (free oil changes, warranty claims etc.).

In terms of marketing the major factors that harm the Mitsubishi position are related to product quality and image inconsistency. All these in the context of a market characterized by cut-throat competition. The strengths of the company? Virtually none at the moment. Opportunities are represented by technological innovations, a must in the automotive field. Threats include future product related scandals.

The first thing to do in the current situation is setting up realistic goals and objectives (both short and long term) to guide future strategies. These should include:

·   Maintaining a coherent communication plan;

·   Reaching good rates in the quantifiable advertising objectives: awareness, recall, preference;

·   Associating the brand with the communicated values: longevity, service and product quality;

·   Carving a better market share, increasing sales to at least equal the results of the previous years (2002, 2003);

·   Resolving the product problems;

·   To develop a pricing plan adapted to the target;

·   Investing in research and development;

In order to ensure success it is very important to target a clear consumer segment (not the entire market). No company can sell to everybody, or communicate to everybody. This would be a total waste of resources, and these are the one thing Mitsubishi is short of. Precise targeting is, hence, an important aspect of a good start.

In the present situation it is difficult build a campaign around product quality. The shift from the previous all emotional campaign has to be softer, claiming product quality indirectly. The warranty theme is a valid option. It has to be developed also in other areas like point-of-sale materials or demonstrations. This message appeals to young and older people alike, making a connection with an individual need for safety. The target is represented by those people who value safety above other values.

Mitsubishi is dealing with a complex problem. The most pressing issues concern the image and the product. Both aspects have to be taken care of simultaneously. One without the other is not sufficient to ensure good results. Furthermore, by dealing with them separately they lose their strength. For a turnaround process to succeed it has to bring a quality vault compared to the initial situation.

Combining the emotional and the rational in effective ads is a difficult task. The objective set by Mr. Beavis to make emotional advertising with rational underpinning should be kept in mind in all future communication. This has to be a principle on which to build the following campaigns, in order to assure coherence.

Consistency also has to be a primary concern. All actions should transmit the same ideas. Image is made up of messages, both intentional and unintentional. While the marketing department is responsible only for the intentional messages, the branding department should coordinate efforts of all departments to control as well as possible the flux of unintentional messages (everything about the company, from employee behavior to how the points of sale look or the way other Mitsubishi products are perceived etc.).

To prevent future product related scandals the company should create a special 0-800 number and email for any suggestions or complaints. This will assure real-time feedback and the possibility to remedy any situation before if becomes a crisis. Risk management must be an important part of the business approach aimed at saving Mitsubishi. Other preventive measures could include: careful analysis of possible risks, creating contingency plans, investing in product testing, even stimulating employees to be responsible of their work (positive or negative motivations).

As far as promotion is concerned money have to be spent wisely, but generously. Advertising is only one way to get the message throught to the target. To determine more points of contact an analysis of the car buying  process is needed. How does a person decide which car to buy? There are, firstly, a few criteria that relate directly to the product: price, performance, aesthetics, quality. These have to respond to the person’s needs. Secondly, there are social criteria: what status a car implies, how are generally perceived the people driving a certain brand of car etc. These have to match mostly people’s desires, aspirations. And thirdly there are sources of information for the auto market: friends, specialized media, auto shows. Advertising communicates information on one of the first two cathegories, or both (rational advertising usually refers to physical criteria while emotional advertising relates to the lifestyle and status aspirations).

Public relations is the other main field of corporate communication. It is of vital importance to maintain a good relationship with the specialized media. Auto magazines are an important source of information on the criteria that relate directly to the product. Sometimes the editor analyses a certain car category and grades the different cars, making reccomandations. Furthermore, there are also lifestyle sections, a very efficient channel for brand-building. Media is represented also by auto TV shows. The format is similar to the one in the magazines, but it has the advantage of a visual, more appealing, approach.

Events can be another way to meet the target, regardless they are auto shows or events organised by the company itself or any other occasion where the target is present. The people who come to auto shows, for example, contemplate buying a car. This means they are receptive to the messages, they show interest in the products. It is easier to communicate to them.

Although opinions vary, the optimistic view is always the one to have in mind. The example of Hyundai is eloquent. From being almost extinct, the South Korean importer has been saved by none other than the current Mitsubishi CEO, Mr. O’Neill. “It’s premature to give up on Mitsubishi” says an auto expert.

References:

2006, http://www.whisperbrand.com/blog/2004/10/mitsubishi-emotional-branding/

2006, ‘Mitsubishi Motors and Deutsch Launch New Advertising Campaign’, Theautochannel Site, Retrieved: 18/02/2006, from

http://www.theautochannel.com/news/2004/10/11/248635.html

Bland, M., Theaker, A. & Wragg, D. 2005, Effective Media Relations, How to get results, Third Edition, Kogan Page, London.

Jaffe, J. 2004, ‘See What Happens’, Imediaconnection Site, 18 February, 2004, Retrieved: 18/02/2006, from http://www.imediaconnection.com/content/2821.asp

Regester, M. & Larkin, J. 2001, Risk Issues and Crisis Management, First Edition, Kogan Page, London

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