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 well-
dressed 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