Divide And Conquer

IMAGINE YOU'RE IN THE market for a family car. Stop by a Toyota dealership and watch the salesman steer you toward the Camry, the only midsize car Toyota sells. Over at Honda they'll show off the Accord, its one- size-fits-all family hauler. Then visit the folks at General Motors, and prepare for an automotive smorgasbord. Where Ford sells the Taurus and Sable, GM offers a veritable fleet of cars, from the Grand Prix to the Lumina, the Intrigue to the Century, and even more. GM hopes shoppers find the variety appealing, but most observers see only confusion. ""There are so many choices it's overwhelming,'' says Kevin Clancy, a marketing consultant to several German and Japanese carmakers. ""You need to have a lot of time on your hands to figure it out.''

It's an all-too-familiar criticism. Last month marked the fifth anniversary of the boardroom coup that installed Jack Smith as GM's chief executive. Since taking over a nearly bankrupt carmaker, Smith's team has slashed costs, boosted profits and expanded overseas. But one fact remains: GM still sells more brands of cars than Ford, Chrysler and Toyota combined. It's the strategy Wall Street loves to hate, since it adds millions in advertising and engineering expenses with little visible benefit. ""GM doesn't have enough volume to justify all its individual models,'' says veteran analyst Maryann Keller. ""They're diluting their presence in the marketplace.'' GM execs say critics just don't understand their complex marketing strategy. Although Jack Smith has placed a big bet on the plan, the theory behind it was dreamed up by a nearly anonymous researcher down the organization chart. His name: Vincent P. Barabba.

In a world of faceless corporate bureaucrats, Barabba stands apart. While his colleagues toil in a bleak Detroit suburb, Barabba telecommutes from a home office a few blocks from the Pacific Ocean; after work he writes books on marketing theory. A former political pollster who ran the U.S. Census under three presidents, Barabba is GM's market-research guru and the man behind its controversial strategy to sell dozens of different models where competitors sell just a handful. While observers remain skeptical, admirers warn against counting him out. Says Gerald Zaltman, a Harvard Business School professor and close friend: ""I don't know anyone who's more innovative in how he taps into the minds of customers, or more creative in using that information.''

Barabba's theories are a throwback to GM's glory days. In the 1920s GM president Alfred Sloan first conceived the notion of selling the company's models in a ""price ladder,'' from affordable Chevrolets up to the priciest Cadillacs. The strategy moved GM into high gear; by the 1950s it owned half the car market. But the advent of small cars and the influx of Japanese models in the '70s shattered GM's selling scheme, and its market share began a free fall. When Barabba arrived in 1985 after stints at Kodak and Xerox, GM's models looked too similar and its market-research department was a backwater. Top execs planned new models based on intuition; they shrugged off research predicting a boom in the sport-utility market or warnings that GM's early minivans would flop. (Both predictions came true, costing GM billions.) ""We had no game plan,'' says Mike DiGiovanni, Barabba's key deputy for the last decade. ""We had the wrong cars in the wrong places and we had too many of them.''

By the early 1990s sales had fallen so far that Barabba's team began considering whether to forsake GM's history of selling ""a car for every purse and purpose'' and instead pursue a one-car-fits-all strategy like Honda's. The team studied interviews with thousands of car buyers and spent months crunching data. Their conclusion: if GM's quality improved and its vehicles were better differentiated, its bevy of nameplates would become an advantage by aiming more precisely at small groups of buyers. While competitors blast bazookas, GM's marketers would aim high-powered rifles. When Smith took over as CEO in 1992, he agreed to hear a pitch from Barabba's team, who'd been largely ignored by the old management. They spent two days explaining their theory, called ""needs segmentation.'' Participants say Smith was impressed. ""If we'd had this plan in place 10 years ago, we wouldn't be in the mess we're in today,'' he said solemnly. Within months GM was reorganizing to put the plan into action.

Secrecy is the watchword inside GM's market- research office. Paper shredders sit outside conference rooms; GM CONFIDENTIAL adorns every document. Staffers consider the needs-segmentation model GM's crown jewel, and they're loath to divulge their formulas. But during a four-hour interview, Barabba sketched out the basics of the marketing theory driving the world's largest carmaker. Designers, led by research-savvy vice president Wayne Cherry, now aim vehicles at one of roughly 30 ""needs segments'' based on a statistical model using car buyers' demographics, attitudes and desired car features. It's a drastic change from a decade ago, when designers relied on top management's ""golden gut.'' Today circles on wall charts represent the different segments; vehicles that match buyers' needs are said to ""hit the dots.'' Where competitors see a homogeneous minivan or sport-utility buyer, GM sees four distinctly different customers.

Consider the midsize-car market, the industry's biggest segment and home to competitors like Taurus and Accord. Under GM's scheme, the Basic Transportation and Family Affordability needs segments aim at buyers who are conservative, older and price-conscious; they differ mainly in how often they carry passengers. GM aims the Chevrolet Malibu at the first segment, and the Buick Century at the second. Folks who'll spend more for a car and like a sportier design fit in the Family Fun or Upscale Sports niches. GM hopes to sell them models like the Oldsmobile Intrigue and Pontiac Grand Prix, respectively. That divide-and-conquer approach should trump competitors, the theory predicts, because a Honda Accord is too boring for Sporty buyers and a Ford Taurus is too pricey for Basic buyers. ""It's very hard for competitors to find one car that sells well to all four types of buyers,'' Barabba says. If a GM vehicle hits its dot, he says, ""there's no way buyers in that segment won't pick that car.'' Says his boss, marketing VP Ron Zarrella: ""We're pretty confident our approach is the right one.''

Analysts say the model sounds great on paper but breaks down in practice. Differentiating the Basic model from its Sporty cousin costs big in design and manufacturing; advertising all the models so buyers understand the differences costs more. Even Barabba says that until customers perceive GM products to be as reliable as Honda's or Toyota's, some will choose competitors' cars no matter how well GM meets their needs. Tougher critics say the theory is really just a rationalization for a political reality: killing off lots of models would infuriate GM dealers and cost too much, both financially and emotionally. ""Everyone, including Barabba, went in with the assumption you had to find a place for all the brands,'' says one former GM staffer. (GM disputes this.) But even some observers who think GM sells too many models still credit Barabba with bringing positive changes. A decade ago ""the guys running GM built the cars they liked,'' says Schroder & Co. analyst John Casesa. ""Now they're obsessed with developing products based on customer needs. Vince is the guy most responsible.''

It will be years before the auto industry's longest-running marketing controversy is settled. The first models designed under Barabba's theories--sedans like the Oldsmobile Intrigue and minivans like the Chevrolet Venture--have hit dealerships only in the last year. Though competitors say GM is playing statistical shenanigans, the company boasts that sales and market share in those segments have risen consistently this year (chart). The changes are more apparent inside GM's studios, where craftsmen scrape clay from mockups of the next century's models. Designers who once loathed market research say they've embraced Barabba's concepts. ""It's exactly the tool we needed,'' says Bill Davis, chief designer of GM's next-generation sport-utility vehicles. Barabba's 63, and his days with GM are dwindling; it will be up to designers like Davis, GM's team of hotshot brand managers and younger researchers like DiGiovanni to implement the grand theories. Years from now Barabba may be just a footnote to the story of America's largest corporate turnaround. But no one is rooting harder for a happy ending.

DO NEW MODELS SIGNAL A REBOUND?

GM's market share has been sliding for years. but its internal numbers--which rivals dispute--show a turnaround in midsize cars and minivans, with models like the Intrigue (below) and Venture (bottom).