There’s been an interesting discussion going on between some former Saab employees on one of the professional social networking sites. The discussion has focused one the things Saab could do to improve itself
if/when the company is purchased and re-launched some time in the future.
My main contribution was concerned with better utilisation of the talent within the company. Personally, I felt that we made too much use of agencies to do work that we could or should have done ourselves. It might have meant hiring some more specialist staff, but done wisely, I think it would have centered our work/thought processes, produced some more consistent results and ultimately, I think it would have saved us money.
A recent contribution to the discussion has mentioned the need for Saab to build better product and the challenges Saab will face in doing so now that many key staff have gone to other companies. I agree that the staffing issue is a big one – people are usually a company’s greatest resource and that was definitely the case at Saab.
Ignoring the staffing side of this problem for a moment, the product side does warrant some discussion because I think, and fear to some degree, that Saab’s demographic and product offering are going to have to shift upwards if the company is to become profitable and build a sustainable market for the future.
Under Spyker’s ownership, Saab reportedly had a business plan that could see the company become profitable with sales of as few as 100,000 to 120,000 vehicles. We never got to test that plan and Saab never got their breakeven point that low prior to December’s bankruptcy, so it’s hard to comment on the plan’s viability.
But what of the future?
GM have come out as recently as this week and said, once again, that they do not plan to cooperate with a new Saab ownership group. That means the task facing a new owner is going to be all the more difficult with a minimal product offering over the first few years of Saab’s re-emergence. This is going to put incredible strain on the cashflows of the operation in what is a very capital intensive industry. A new owner will have a very narrow window of opportunity to make the right market decisions.
What product should the company develop?
Which market segment should they appeal to?
What price/product package can they afford to offer, or perhaps more importantly, what package will he cold hard facts of business compel them to offer? My view on the car industry tells me that a company can compete on either one of two levels – price, or value.
To many, those alternatives might come across as meaning the same thing, but they don’t. This might be the reason why such companies tend to use price sensitivity tools like Conjointly’s Van Westendorp PSM or other tools that can determine what the customer needs and the adequate price an average customer can pay. Competing on price means offering a product that people will shop around based on price rather than on product. Competing on price means offering a product that people will shop around based on price rather than on product. This buyer will compare some features of a vehicle with other vehicles in class but they’re driven primarily by the bottom line – how much can I afford to spend on buying and running this vehicle?
Value-oriented customers, on the other hand, exist within all segments of the market. They are people who compare the product more than the price. Saab’s former suitors, Koenigsegg, admit that their cars cost a lot of money, but argue that they represent very good value – and they’re right. Value-packaging means that you offer the customer a product that compels them to buy at the price you’re asking. You pick your segment and you provide a fantastic offering that includes styling, driving dynamics, safety, utility, equipment, refinement, and reliability.
It’s an old cliche, but it’s true – you have to build up to a standard rather than down to a price. It’s going to be critical for a new Saab to get this positioning correct as it re-emerges under new ownership.
Saab will not be able to compete based on volume pricing with General Motors, Ford, Volkswagen, Toyota, Honda or others in the segment. Saab will not have the economies of scale to compete with them, nor the dealership network to bring such a volume of vehicles to market.
Saab will need to distinguish itself on something other than base level affordability, and that will have to be value. The company will have to design and build cars that overwhelm, which is going to be a challenge for a brand that has hung its hat on understatement for decades, a brand formed in the same country that by its nature, lives for the most part according to a philosophy of lagom.
In considering this, nothing should be off the table. Even something that would seem completely contrary to Saab’s philosophy – something like rear wheel drive, for example – should be weighed, measured, and either ruled in or out. As I hinted earlier in this article, I do not believe that Saab can sustain a product/price mix like the one they carried in 2010/11. I think the company is going to have to move upmarket in terms of price, which will mean a definite and significant shift upmarket in terms of product.
Saab will be fortunate to get another chance at life. If they can get the right people (back) into the company, if they can get excellent new product developed within a reasonable time, and if they can recruit a dealer network in enough big-spending markets….. if they can do all of that then they might have a decent shot of making the right marketing decisions, the mix of product, position and price, to help them survive.