Any casual observer to the auto industry can sense that brand loyalty has been declining. But the following graphic, posted in today’s NY Times (http://www.nytimes.com/2009/10/21/business/21auto.html) illustrates how dramatic the decline has been:
So what does this mean for strategy? Clearly, this has interesting implications for marketing (does it mean you have to do more advertising or less?). But it also has interesting implications for operations. Logic suggests that if brand loyalty decreases, market shares should be more volatile – customers will move quickly to products they like and then just as fast they will move away to another brand’s products. It would seem that this places an extra premium on flexibility – it should become (or has become) harder to predict a model’s market share, and so flexible capacity is needed to manage the unavoidable demand-supply mismatches. Throw in uncertainty in the economy, fuel prices, and the diffusion rate of green transportation and you have a very challenging environment ahead – as if we didn’t know that.