Ford eyes big marketing cuts as it drops most sedans from lineup
- Ford will stop selling sedans in North America except for the Mustang and a new offering called the Focus Active arriving in 2019, Ad Age reported. The automaker expects to reach an 8% global profit margin by 2020, two years earlier than forecast.
- Ford nearly doubled its cost-cutting goal to $25.5 billion from the $14 billion announced in October. About half of the projected cuts will be in sales and marketing, including through reduced advertising. In a call discussing the earnings, Ford executives pointed to several areas of its marketing strategy that need to be addressed, namely improving digital capabilities and ROI on media and better optimizing yield management in incentives programs through regionalization and personalization.
- As part of its move to cut its marketing budget and create more cost-effectiveness, Ford has identified $11.5 billion worth of cost and efficiency opportunities and plans to implement about one-third of those cost-saving measures by 2020. The decision to stop selling most sedans comes as consumers are opting for larger vehicles, like pickups, SUVs and crossovers, which are more profitable for the company. Ford reported a 9% increase in net income for Q1 2018 to $1.74 billion. About $100 million of its income can be attributed to a lower tax rate.
Ford's gameplan of enacting more significant cost-saving measures encapsulates how many legacy national brands continue to struggle to adjust to shifting consumer habits and often put marketing and advertising budgets on the chopping block first as they realign their strategies. The automaker weathered a particularly tumultuous quarter, with its former North American President Raj Nair stepping down abruptly in February for unspecified inappropriate behavior.
There have been other signs recently that the brand wants to peel back its marketing. Last week, it confirmed it had put parts of its advertising account up for review, dealing a blow to the embattled incumbent agency WPP. Company officials previously said Ford wanted to save $200 million annually on marketing and focus more on digital and data analytics. Ford spent $1.22 billion on U.S. media in 2017, not including social media, according to Kantar Media data.
The decision by Ford to stop selling sedans follows trends in car-buying habits, specifically among millennials, one of today's largest consumer cohorts. For years, automakers thought millennials didn't care much about cars, but they are driving the demand for SUVs, according to USA Today. Ford has also attempted to shift its brand to be less focused on vehicles and more on mobility as a concept, including through initiatives like self-driving cars, where it's been an early leader.