Ever wonder how Ford managed to avoid crashing during the great recession? It was certainly no picnic, but Ford fared much better than any of its domestic rivals and made important strides forward during that period and the one following.
Certainly, Alan Mulally’s focus on cash and strengthening the balance sheet (that began long before the crisis) did a great deal to protect the company against the storm. But Ford did better than just weather the storm. During that period and shortly after, Ford introduced new models like the Focus, Edge, Flex, and Fusion. Around this time, Chevrolet shrunk its lineup.
Ford began a customer driven Revenue Management Program led by Lloyd Hansen, Vice President, Revenue Management. This program traced its roots all the way back to 2001. It takes a long time to change an organization as large as Ford. In 2003 Hansen spoke publicly about the program which is already producing results.
The stakes are high. Ford’s revenue-management strategy is a vital part of the troubled company’s turnaround plans. “It has played a major role in our profit improvement in North America, especially compared with our domestic competitors,” says Lloyd Hansen, vice president of revenue management. “Our success comes from an intense focus on providing value to our customers.”
Source: CFO Magazine October 1, 2003
Key tenets of the program are getting the right product to the customer and pricing it properly. The point was made in 2004 that a one cent increase in price for every dollar sold improves the bottom line by 33 percent!
While it’s easy to sit in the middle market and shake our heads at Ford’s bloat, it would be a mistake. A significant portion of their opportunity lies in the area of consistency. We see the same thing: leadership and managers that know how to price and negotiate; but some organizations that don’t do it consistently.
I’ll be writing some more about Ford’s Revenue Management Program and what we can learn from it so stay tuned.