The Story Of The Mustang: A Fable For Product Mangers

by drjim on January 16, 2009

The Ford Mustang Story Shows Both How To And How Not To Design A New Product

The Ford Mustang Story Shows Both How To And How Not To Design A New Product

Hopefully we all know about the Ford Mustang. This is the sports car that just about every male (and quite a few females) lust after in the heart at just about the same time that they are getting their driver’s license for the first time. It has been around in various forms since the 1960′s and yet it still can teach today’s product managers a great deal about how to design and price your next product…

This story really starts in the early 1960′s. Back then, America was in love with sports cars. We thought about them, wrote songs about, and basically lusted after them. THE sports cars to have back then came from either General Motors or from Europe.

The good folks at Ford realized that in order to survive as a company, they needed to create a sports car of their own. The question was how best to go about doing this?

The tradition way to design a new car was for Ford to ask its designers to build a sports car that would be more successful than the other sports cars on the market. Each designers would have studied existing sports cars and would have created individual parts for a Ford sports car such as the suspension, body, engine, and brakes.

Next a single design would have been picked and the marketing department would have asked focus groups if they liked the Ford sports car better than other sports cars. The price would have been set at a level that would have covered Ford’s costs and delivered the profit level.

It’s quite possible that this sports car would have won Ford much praise for how it looked and how it performed. However, very few people would have actually purchased it because it would have cost too much for most people to afford.

What makes the Mustang product management story different from so many other great products that went on to fail, is that Ford’s general manager at the time was a guy named Lee Iacocca. Unlike most of the folks at Ford, Iacocca was not a finance, accounting, or production guy. Instead, he was a marketer.

Iacocca didn’t start the design of the Mustang by going to Ford’s design department. Instead he started by researching what customers wanted. What he found out is that there were a lot of people who really wanted to own a sports car, but they couldn’t because they could not afford one.

What was really interesting was that most consumers didn’t really need very much of what makes a car a good “sports” car in order to meet their car lust. They didn’t really need the sports car performance – the things that really drove the price up: engine, drive train, and suspension. What they really wanted was sports car “excitement” which consisted of basically styling, bucket seats, vinyl trim, and fancy wheel covers.

The key to selling a successful sports car would be to provide a sports car a a price that most buyers could afford: less than $2,500 (remember, it was the early 1960′s!)

How did Ford create a sporty low cost car? Simple – they built sports car style on top of an low-priced existing car, the Falcon. Of course this offended lots of sports car buffs both inside and outside of Ford.

Ford was able to introduce the Mustang at base price of $2,368. They sold more Mustangs in the first year than any other car the Ford had ever built. In the first two years of selling the Mustang, Ford generated $1.1B in 1964 dollars.

As product managers we all like to talk about listening to the customers. However, Iacocca showed that finding out what your customers’ desires and challanges are is the real key to creating a great product.

Do you think that Iacocca was correct to bypass the standard product design process? Do you think that your company’s product design process works correctly? Do you think that Ford learned anything from this product design and launch? Leave me a comment and let me know what you are thinking.

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{ 8 comments… read them below or add one }

Jeff January 16, 2009 at 9:59 pm

Isn’t the product development process described above somewhat flawed? Shouldn’t the “voice of the customer” be heard before starting any design work?

Please correct me if I’m wrong, but what Mr. Iacocca did is a standard product development process.

This story reminds me of a video by Malcolm Gladwell on spaghetti sauce. (http://www.ted.com/index.php/talks/malcolm_gladwell_on_spaghetti_sauce.html) in both case, the customers were given what they really wanted, not what product developers thought customers wanted.

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Dr. Jim Anderson January 17, 2009 at 9:28 pm

Jeff: The story is sorta subtle, I probably should have been a bit more explicit. Ford had a standard product development process in place, the problem was that it was not working correctly. Iacocca went around a broken process and created a car that exactly matched what the customer wanted (even though the customer probably couldn’t have told a product manger what they were looking for).

The key take away here isn’t the process, but rather the ability to sense when the process that is in place has become too institutionalized and is no longer working correctly. Today we’d say that Ford’s product development process lacked “innovation”.

Gladwell gets it right – your customer doesn’t always know what they want!

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Saeed Khan January 18, 2009 at 9:16 am

Good story. Perhaps some of the same philosophy can be reinjected into Detroit today. The American automobile manufacturers are a great example of an entire industry (if that is the right word) that has completely lost touch with the market. There are probably a LOT of stories like the one above, both positive and negative, that, if published, would make excellent case studies for product managers and marketers alike.

Thanks

Saeed

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Dr. Jim Anderson January 18, 2009 at 4:08 pm

Saeed: Be careful! Yes, the auto industry appears to have once again lost touch with their customers; however, you can say the same about a lot of other companies. Dell is on the ropes because times changed and their business model didn’t, Circuit City is closing and yet Best Buy is doing well.

As product managers we are the CEO of our products so the ultimate responsibility for providing the right product at the right time belongs to us. Gosh, who ever said that this was going to be easy?

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Lou January 19, 2009 at 4:01 pm

Great case study. I like the comment in your post “Of course this offended lots of sports car buffs both inside and outside of Ford.” But, sports car buffs and engineers were not the target market for the Mustang. Ford listened to its target market and fulfilled their wants–those that were and were not articulated. Too often, the engineers of the company build to their own needs. And, it was good that a price point was determined before development. This is the challenge to be market driven and not engineering driven, or at least strike a good balance.

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Dr. Jim Anderson January 19, 2009 at 5:14 pm

Lou: ain’t that the secret to successful product management – know what your customer is willing to pay BEFORE you make the product. I can’t tell you how many times I’ve inherited a product that already has 100′s of hours of work sunk into it even before we know who’s going to buy it (or how much they are willing to pay)…

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Howard January 19, 2009 at 5:16 pm

Great story, especially with the correction about Iacocca used the process that should be used: listen to your customers. And, it opened the door for Shelby, who took the opportunity to take a successful product and then tailor it for a different market; those sports car enthusiasts and engineers that Iacocca didn’t focus on as th primary market. So the moral is; if you create something successful, you can then get the resources to expand it to alternate markets with some modifications and really get a great return on your initial investment.

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Dr. Jim Anderson January 19, 2009 at 5:39 pm

Howard: well said! I guess these days we use fancy words like “niche marketing” to describe what people have been doing all along…!

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