Lincoln Wants Back in Luxury Driver's Seat

Lincoln Wants Back in Luxury Driver's Seat

By Dale Buss May 9, 2011

C.J. O’Donnell was “the first man on the ground” in Ford’s plan to revive the Lincoln brand when the former marketing director for Jaguar came to Ford headquarters in Dearborn, Mich., nearly a year ago. And now, the brand’s group marketing director has been joined by about 85 other people who come to work every morning to do nothing but remake Lincoln.  “Our commitment is to build a world-class luxury brand and grow sales and increase the profit contribution that comes from the Lincoln portfolio,” O’Donnell said.

Will it really happen? There’s plenty of room for doubt. Lincoln’s persistently bad sales performance is becoming a bigger drag on Ford’s prospects overall, as underscored by Ford’s recent first-quarter financial report and by April sales results released last week. So far, the company hasn’t indicated that it is willing to place the kind of game-changing, expensive bet on overhauling Lincoln that rival General Motors made – essentially, successfully -- with Cadillac a decade ago. And there are doubts even internally whether the new products now in the works at Lincoln will mark enough of a departure from the old and form a significant enough basis for a truly new start by the brand.

O'Donnell (left) pointed to new gains by Lincoln's recently introduced products and the promise of a veritable fleet of more new vehicles over the next few years as reasons for optimism about the brand’s new direction. He also noted an infusion of new talent to the Lincoln team from outside Ford as well as within. And maybe most important of all, O’Donnell said, is that the company finally has cleared its ledger of other internal brands that used to distract its attention from Lincoln.

"Just a few years ago, we had the whole Premier Auto Group portfolio," including Land Rover, Aston Martin and Volvo as well as Jaguar, O’Donnell said -- not to mention the moribund Mercury brand. “We stand here today a much more focused company with only Ford and Lincoln as the core brands. We’re recognizing that we need to invest in people and products that will take us further on our way.” And top leadership, starting with CEO Alan Mulally, is  “now extremely committed to the success of the Lincoln brand,” O’Donnell reported. “We’re giving ourselves the best shot we ever have in the luxury category."

Side Burner
Outside experts are divided. Some believe that Ford may be on to something. “Ford has finally recognized that there are money and profits and share to be made in the luxury market, and they’ve never been a big player in it,” said George Cook, a marketing professor at the University of Rochester and a former Ford marketing executive. “The Town Car just wasn’t going to get it done.”

And Ford executives are doing their best to spin Lincoln positively even as it stands today. “Retail sales [in April] were up 12 percent” for Lincoln even as brand results declined, including fleet activity, noted George Pipas, Ford's head of U.S. industry analysis, earlier this week. “That was pretty much in line with the 14-percent increase for the Ford brand. [Lincoln] had a good month and exceeded sales objectives. We've got a long-term plan. Of course that's a journey to get [Lincoln] where we want.”

But Ford has nodded toward Lincoln revival before. Also, there is formidable competition from every direction in the re-awakening luxury segment of the U.S. market. Ford is understandably preoccupied with high-mileage small cars at the moment. And Lincoln is paring its dealership ranks at the same time that it plans to rely more heavily on dealers to make investments meant to ensure that the freshened brand doesn’t falter with shoppers on the last step toward purchase.

Besides, a sort of benign neglect has been a way of life for Lincoln for many years. When Ford assembled the Premier Automotive Group a decade ago, Lincoln got thrown in with the European luxury brands and they all relocated headquarters to Southern California for a few years. Understandably, Lincoln rather got lost being pulled from Ford’s historic home in Dearborn, Mich., and as   executives tried to figure out what to do with the even more needy European brands

After Mulally became CEO five years ago, and under Jim Farley as Ford’s chief marketing officer for the last three years, the Ford brand received nearly all of their attention. What they had left over, they applied toward surviving the Great Recession, deep-sixing the inside-rival Mercury division, and pioneering in infotainment technology and social media. And somewhere in the process they also dismantled the Premier Automotive Group and sold off every brand but Lincoln.

Yes, Lincoln got a fresh crop of sleek, sharply designed, technologically advanced new “MK”-badged products during that period, with fewer obvious sibling relationships with Ford makes than ever before. Zephyr came out in 2006 and then was renamed MKZ. The MKX two-row crossover debuted in 2007. Lincoln’s large flagship sedan, the MKS, bowed in 2008. The MKT three-row SUV was launched in 2009. And a new MKZ Hybrid (based on the Ford Fusion Hybrid) was just introduced a few months ago. “We’ve come a long way with the new MK products in building a solid base for the business,” O’Donnell maintained. “They’ve been accepted quite well by the marketplace."

Poor Comparisons
But actually, the new products have only propelled Lincoln so far. As an industry and luxury-segment recovery began taking hold last year, Lincoln sales advanced by less than 4 percent over the Great Recession year of 2009. That compared with a 35-percent gain by Cadillac and a 28-percent increase for Infiniti.  Lexus, BMW and Mercedes-Benz battled  for luxury-segment  leadership for the year at volume levels nearly three times the 85,828 vehicles Lincoln moved in 2010. “There are some extremely solid competitors in the luxury marketplace,” O’Donnell allowed.

And the contrast with its competitors at the moment remains Lincoln’s biggest problem. Take Cadillac: When GM’s old management determined more than a decade ago that the only way to save Cadillac was to abandon its traditional “badge”engineering as the differentiator among brands, and to invest mightily to engineer for the failing luxury marque unique new  mechanical platforms and independent new design language, they invested about $4 billion in their decision over the next several years. And today, while it’s easy to argue that Cadillac could perform still better and field even better vehicles, there’s no denying that GM’s efforts to forge a new Cadillac largely have paid off in what has become a much more formidable long-term competitor in the luxury derby.

Or consider Audi for another successful approach to the challenge of luxury-brand autonomy within a larger corporate framework. Audi has achieved record U.S. and global sales and market-share gains lately in large part not because consumers can readily identify it as the upscale brand division of Volkswagen AG – but because they can’t. So while the parent company is able to enjoy certain economies of scale and other benefits of having both Volkswagen and Audi under its wing – as well as several other brands, of course – Volkswagen executives have given Audi wide berth when it comes to developing distinct products.

The biggest differentiator: Audi’s platforms generally feature longitudinally placed engines and almost invariably offer the brand’s signature Quattro all-wheel-drive, while VW models tend to rely on transversely based, front-wheel-drive underpinnings. . Even discerning consumers who don’t know that Audi, effectively, is a division of VW might be hard-pressed to prove it.

Meanwhile, incrementalism in product development has ruled the day for decades at Lincoln, and there isn’t any explicit new sign at the moment that part of Mulally’s plan is to explode this ineffective old paradigm and give Lincoln a real infusion of fresh – and expensive – engineering.  Essentially, for instance, the Lincoln MKS is a re-badged Ford Taurus; won’t Lincoln’s new fleet need to trash that approach to have any chance of persuading finicky American luxury consumers that this really is a “new” Lincoln?

Some Lincoln designers are said to harbor doubts already about whether Lincoln’s new direction is the right one, noting skeptically that the next-generation  MKS features a “space-age” interior that, among other new features, offers a push-button “shifting lever” similar to the push-button ignitions that have become de rigueur in upscale vehicles. Is that kind of gratuitous bit of high tech really going to play with Lincoln’s audience, even the younger one it wants?

“They still haven’t hit the right mix in terms of design, technology and powertrains ,” asserted Cook. Besides, two of Lincoln’s foundation models   remain the ancient Town Car, and the old-school, truck-based Navigator SUV. And the brand has run through a handful of marketing campaigns and advertising tag lines that seem to add up to a technology-based push, but not even that has been clear.

New Strategy Necessary
Analysis of online cross-shopping and consideration data on Edmunds.com underscores the problem that Lincoln has had generating buyer interest despite a considerably freshened lineup. In March, 37 percent of consumers gathering information about the Lincoln brand and vehicles on Edmunds.com were also cross-shopping Ford, while only 3 percent of those shopping Ford also were checking out Lincoln.

“That means 37 percent of consumers realize that the Lincoln they’re shopping is just a ‘fancier’ Ford, and they’re curious about what they might be paying extra to get in a Lincoln over a Ford,” said Ivan Drury, a senior U.S. sales analyst for Edmunds.com. “But apparently Ford shoppers aren’t even worried that they’re missing out on something Lincoln might have to offer. This is a huge disparity.”

Meanwhile, Drury noted, big numbers of Lincoln shoppers also look at Lexus, Audi, Mercedes-Benz and other luxury brands, but relatively few shoppers of these brands take a gander at Lincoln products or the brand. The only approach that seems to make sense for a true Lincoln revolution would be to emulate what Ford has done in coming up with a completely new and non-derivative lineup of vehicles for its Ford brand.

While Lincoln has continued to slump, Ford brand sales in 2010 surged by 21 percent over a year earlier. And while Ford brand sales to date this year rose by 25 percent through April, over a year earlier -- and likely would have climbed even higher were it not for supply constraints on some small cars – Lincoln  registered  a pallid 8-percent sales decline for the period. In April, nine individual Ford models each outsold the entirety of the Lincoln brand, including the Mustang – 8,180 units to just 7,236 for Lincoln. Based on the number of Lincoln dealers, the average outlet sold only about seven vehicles for the entire month of April.

As they seek to revive the Lincoln brand once and for all, O’Donnell and other Ford executives aren’t sharing many peeks behind the curtain that might demonstrate  how big a departure the new products and positioning really will be. But Lincoln executives will tout a number of things they believe they have going for them:

Product rescue: Ford has committed to providing Lincoln with seven new or substantially overhauled new products, many of them within the existing MK product and brand structure, over the next four years. A completely new C-segment sedan (a replacement for the midsize MKZ) will be part of that roster, O’Donnell said. “You’re going to see an enhanced, freshened, stronger and more competitive MK range as well as a few new entries,” he promised.

O’Donnell said that Lincoln also must double down in product development on two things that have emerged as clear attributes of the first generation of MK products: design, and technology. “With the MK range we already have a distinctive and stunning design language that we need to leverage more,” he argued. “It is eye-catching, and its appeal is giving customers reason to pay attention to what we’re doing. In the luxury category, design is the entrée to telling your broader story.”

Farley said the company “must execute on the [Lincoln] product with a really specific point of view. It can’t be just design; it’s every element of the product.” For Lincoln, promotable technology elements include better-mileage powertrains leveraging Ford’s recently developed EcoBoost downsized and turbocharged engines,  new hybrids, and MyLincoln Touch infotainment systems. “We’ve had a lot of resonance with the in-car technology that we’re delivering in our product now, especially recently,”

Farley told AutoObserver.com early this year. And Mulally told auto-securities analysts at the North American International Auto Show in January that Lincoln developers will “take the platform to the next level” with innovations in areas such as electronic controls. The MKZ Hybrid is showing O’Donnell some of what new products and technology might be able to accomplish for Lincoln in the months and years ahead. When it was introduced at the beginning of the year with the same $34,600 sticker as the conventional MKZ, Ford expected the hybrid to account for about 15 percent of sales.

But during the first quarter, MKZ Hybrid (below) tracked at 20 percent of sales instead, promoted as the most fuel-efficient luxury sedan in the U.S. market at an ideal time as gasoline prices began to climb. Customers “just love the performance” and the “quietness, comfort and power” of the MKZ Hybrid, said Ed Witt, a Lincoln dealer in San Diego, who has sold more of the vehicles than any other dealer so far. What’s more, 70 percent of MKZ Hybrid buyers are new Lincoln owners, and more than half migrated to the brand from imports, O’Donnell said. Overall, MKZ sold 40 percent more units in April than a year earlier, and MKZ sales as a whole were up 23 percent year-to-date, just about the only single-model bright spot for Lincoln.

But O’Donnell maintained that Lincoln’s already-improving product picture isn’t confined to just the MKZ Hybrid. He also cited the MKX crossover, whose sales jumped 17 percent in April (though they were flat for the year to date) compared with 2010. “The craftsmanship in the interior of that car has moved on significantly,” he said. “And we’ve made technology messaging a core part of the communications for that car, which is clear in the new advertising campaign. This product continues to retain Lincoln loyalists; but at the same time, half of MKX customers are new to the brand.”

One more thing should help Lincoln add to these bursts of product momentum: the brand recently received the highest score for durability of three-year-old vehicles in the latest closely watched J.D. Power survey, vaulting past premium marques Porsche, Lexus and Jaguar for the top spot.

Internal priority: Nowadays, Ford leadership is saying all the right things about their renewed zeal about Lincoln. “Eight or nine years ago,” Mulally remarked at NAIAS, “Lincoln was the No. 1 luxury brand” in the U.S. market. And now once again, he said, “We can have a laser focus on creating a true premium brand with Lincoln.”

O’Donnell is a veteran Lincoln hand but spent the six years previous to his new assignment working for the Jaguar brand. And as Lincoln has built a stable of people to work on the brand’s revival, Ford has brought in people from other luxury brands, including Lexus, Cadillac and Audi – in all, outsiders comprise about half the growing Lincoln team. The other half are from inside Ford “to ensure seamless integration of the organization,” as Lincoln spokesman Chris Bokich put it.

“This is a departure from past practice, when Ford typically grew such things from within,” O’Donnell said. “There’s a unique aspect to luxury and to understanding the luxury buyer that a few people at Ford had, but not everyone. By looking outside, we’re finding people who already come with that insight as part of their DNA. And it’s critical to get a fast start on our new initiatives.”

Marketing focus: Lincoln has yet to break through into a cluttered media marketplace with a fetching new marketing campaign like the Fiesta Movement, Ford’s social-media effort of two years ago, or Doug the Orange Puppet, the “mascot” that is promoting the new Ford Focus online. Fortunately for the brand, few other luxury marques have done so either. But O’Donnell firmly believes there is the opportunity for Lincoln to gain some traction with its marketing, and quickly. Naturally, the chance starts with improving products. “A lot of positioning today really does focus on the core attributes that qualify us as a luxury brand: design, driving dynamics including the powertrain  and vehicle handling. Those are core to being in the luxury category, and you have to be exceptional in those attributes to be considered by any luxury buyer. Then the differentiator is innovation.”

Lincoln is attempting to boost its credibility for innovation in the eyes of luxury buyers with an ad campaign, “Smarter than luxury,” that it launched several months ago. “It is getting excellent results,” O’Donnell said, despite a decided lack of evidence so far in actual sales figures. “Memorability scores and impressions of the brand are tracking upward rather aggressively.”

But Farley believes that “experiential marketing” also is especially important with Lincoln’s segment. “If they’re going to spend $45,000 or $50,000 on a vehicle, they want to hear from, and meet, the manufacturer, and they want to learn more about the products,” Farley explained. “The real meat-and-potatoes will have to be things like auto shows and in-person, experiential marketing.” That’s especially true on the coasts, where such events “are easy to find,” Farley said.

“The brand needs to be there, and needs to be there in person. Or we need to create events that are just around the brand. And we are starting to have very serious conversations” – Farley said in January – “about what categories of experiential marketing we want to get into – travel, food, fashion. They’re pretty predictable.”

One new Lincoln marketing campaign that combines experiential marketing with the brand’s technology emphasis is called the Smart Company tour. Lincoln visits the campuses of leading technology companies around the nation and provides test drives, interactive games and contests “where they get to live, eat and breathe the Lincoln brand for a while, as well as our products,” O’Donnell said. “When people come into contact with our brands and products like this, their opinion and consideration scores [of Lincoln] go way up; and now their purchasing patterns are changing as well.”

Dealer dedication: Ford is attempting to partner with Lincoln dealers as never before in creating a fresh and winning new brand. But while the company promises a raft of new models and effective new marketing, it wants a couple of big things from dealers: fewer of them selling the cars, and big investments in facilities, people and processes by those Lincoln dealers that remain. Ford wants to eliminate at least 200 Lincoln franchises in the top 130 markets out of about 1,100 remaining U.S. dealers. And from those that are left, it is demanding substantial upgrades across the customer experience at Lincoln dealerships.

“Our dealers already rank relatively well on sales and customer-satisfaction scores,” O’Donnell said. “So we’ve got a good base to build from in those areas. But in the area of luxury, we know the customer relies on their experiences to help choose what products and brands they want to be associated with. And we need to advance in that game; actually the whole industry does. “Luxury customers expect us to keep pace with the luxury experience they have in any category. It doesn’t take anyone long to figure out that if people have stayed at the Four Seasons or shopped at a good boutique on Rodeo Drive, we can do better – and we will do better.”

From dealers, Lincoln is asking for commitments to improve hiring and training of brand staff as well as software and other digital aspects of their operations and handling of customers. “These are some of the intangibles that make a difference for the luxury customer,” O’Donnell said. “We will make sure we get that right. Then we’ll get into owner privileges and services that come with Lincoln, and finally into the environment of the facility.”

For example, Lincoln is improving its complimentary 4-year/50,000-mile scheduled-maintenance service program for customers and launching new training programs for dealership personnel that it will be rolling out in increments over the next few years. And dealers have begun offering overnight test drives “so customers can have a day and a night with Lincoln products,” O’Donnell said.

Naturally, such improvements at the dealership level demand significant financial investments, and Lincoln has boosted dealer profit margins to help compensate and to encourage dealership participation. George Gainer is willing to invest the $1 million or more he believes will be required to meet Lincoln’s new standards for his dealership in Panama City, Fla. “We dealers are kind of being asked to step up in the luxury market with the image of our dealerships and the service inside the dealership,” said Gainer, who also operates Chrysler, Dodge, Ford and Hyundai outlets. “I don’t think that is unreasonable. We’ve all got to buy in if we want to have the success that we all want to have with the brand.”

But Gainer does have one request: enough inventory to sell. Consumer demand for Lincoln’s product line is growing, he said, but not the supplies from Ford’s factories. Lincoln representatives have told him they’re addressing the problem that some dealers have in obtaining enough vehicles. “They’re making the right products,” Gainer said. “I just need to get assurances – if I do what I’m supposed to do – that I’m going to get the cars I’m supposed to get."

Dale Buss:  is a frequent contributor to AutoObserver.com.