Customization based on consumer preferences was
clearly not a part of Henry Ford?s thinking.
As legend has
it, when the founder of Ford Motor was
asked about varying his Model T just the tiniest bit,
Ford said gruffly, "They can have any color they want,
so long as it is black."
But that is not the way to survive now in the
automobile business, Ford
chief information officer James Yost said during a
Wharton e-commerce seminar Oct. 4. "Job one
is now the customer. It is the basis for shareholder
value. We used to be a manufacturing company which
made great products. Now we want to be known as
the consumer company in the automotive space."
To this end, Ford, like the other automotive
companies, is looking to e-commerce to expedite its
connection to consumers. Yost estimated that at least
60 percent of the people who come to a Ford showroom are
armed with information they have gotten from the
Internet. Some of that, of course, has come from Ford
or Ford dealership Web sites. But wherever it comes
from, it has changed the relationship of dealer and
"In the past, the dealer was the one who had all the
information. Now the dealer, instead of being the
information source, has to be the consumer?s helper,"
Yost said. "All through industry, knowledge assets are
going to be valued more than physical assets. Cisco is
one of the most valuable companies in the world, and it
has very few physical assets. It only owns two
Ford will never be that bare of assets. It intends to be
making cars for a long time. But the information that
consumers have access to has meant thinner margins
on auto sales. Consequently the main tactic now is to
create lasting relationships with customers.
"You can look to a company like Harley-Davidson to
see what I mean," Yost said. "They may or may not
make the best product, but they make a product that
inspires loyalty. People come to the showroom for an
experience. There are pool tables. There are
Harley-Davidson restaurants. There are clubs?This is
a consumer-loyalty business."
While consumers probably won?t encounter pool tables
or restaurants any time soon at their local Ford
dealerships, the mission for the company is to keep
the customer after he or she has purchased a car.
Yost said that the average customer now spends
$68,000 during the life of a car, with only about
$24,000 of that on the purchase itself.
"This is not a philanthropic business. We want that
other part of the spending," he said. "The service end
has higher margins and we have to put more resources
To that end, Ford is looking to the Internet to give
customers more information. It is launching a program
called Ford Direct this fall to coordinate dealership
Web sites with the main company sites. There will be
more informational Web sites for consumers and more
connections later to inform them of specials, updates
and service options.
On the business-to-business end, Ford has entered
into a Web-based parts-and-supplies consortium with
General Motors, Nissan, Daimler-Chrysler and Renault,
called Covisint. "The supply chain had too many
middlemen. This will make for great efficiencies,"
Yost said. Already, he added, Ford has seen an 18 percent drop
in prices for parts and supplies.
But the real test will come in the future, when
consumers start demanding virtually customized cars,
straight from the factory.
"The Internet may drive down the price of cars, but
more important, it will change the way people buy
them," Yost said. "They are going to want
personalization, not just something off the rack. It will
come down to how quickly we can provide that. The
end game is to be flexible enough in design and
engineering so each customer can have options in
Yost thinks there will always be dealerships, if only as
"Cars are an emotional purchase. People still want to
kick the tires, to drive the car. We may have fewer
models on the lot, which is actually a good thing, since
too much inventory there means selling cars for less of
"But all that will benefit the consumer, too. He won?t
be inclined to buy a car he doesn?t really want just
because it?s a few dollars off and it?s on the lot. In the
last analysis, we no longer just want to sell a car, but
to have a long-range customer for all the car services.
We intend to use e-commerce to accomplish that."
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