Chrysler's Wink-Wink, Nudge-Nudge Campaign

So far, its risqué new TV ads aren't adding up to car sales

When James C. Schroer jumped ship from Ford Motor Co. (F ) earlier this year to become Chrysler Group's executive vice-president for global sales and marketing, he vowed to pump new life into the auto maker's tired Chrysler, Dodge, and Jeep brands. His strategy called for provocative ads and innovative buzz marketing, the same approach he used at Ford to build youthful demand for the new Focus compact. Now, after seven months of work, Schroer and his team--many brought over from Ford--are showing the first fruits of their labors.

And provocative they are. In one commercial, which Chrysler (DCX ) later toned down after receiving complaints, a 12-year-old girl was horrified to learn her baby sister was conceived in the back seat of the family's Chrysler Concorde sedan. In another, a leering suburbanite asks his neighbor if he's into "swapping"--minivans, that is, not wives. In a third ad, a young man bounces suggestively in the backseat of a Dodge Neon--to test its suitability for a large dog. Schroer also inked an unusual product placement with Activision Inc. Now, Tony Hawk's Pro Skater 3, Activision's new video game that's popular with twentysomething guys, is chockablock with images of the Jeep Wrangler and Liberty.

HANGOVER CURE. Whether those efforts amount to the rethinking of car advertising that Schroer promised--or are just a weak attempt to get noticed by any means--is generating debate in marketing circles. More important for Chrysler, however, is whether any advertising, provocative or otherwise, matters when consumers are riveted mainly by offers of interest-free loans and hefty rebates. Schroer is attempting long-term brand building while the rest of the industry frantically trades profits for market share. "It's tempting to chase the share and the deal targets, but it's a terrible hangover you face when you come off of that," in brand image, used-car values, and profits, explains Gary Dilts, Chrysler's senior vice-president for sales.

So are risqué TV messages helping to sell vehicles? Not so far. Chrysler's problem is that its spicy new ads are being drowned out by the din from rivals offering free financing in the wake of the September 11 attacks. After lowering sticker prices on many vehicles in early September in a bid to wean customers off profit-sapping incentives, Chrysler was reluctant to follow General Motors Corp. and Ford into 0% financing. Even after it joined the fray, it didn't offer the financing deals on its most popular models, the PT Cruiser and Jeep Liberty. It added an extended-warranty offer in an attempt to divert attention from others' cheap deals.

The ploy doesn't seem to be working. Chrysler is missing the boom in U.S. auto sales. In November, while GM (GM ) and Ford enjoyed sales gains of 13% and 4%, Chrysler's sales fell 6%. Chrysler says its retail sales were actually up "a couple of points," but that its overall market share was hurt by lower fleet sales. Still, its 13% market share is 2 points below the level of a year ago. Chrysler dealers say the seven-year, 100,000-mile warranty has helped them close deals with customers already in the showroom but has done little to draw new traffic. Many dealers, though, seem willing to give Schroer a chance. "Dealers like instant gratification," admits Ron Jelling, who owns a Chrysler dealership in Paramus, N.J. "But [Chrysler's] philosophy is to get more brand recognition in a long-term campaign."

BAD TIMING. Adding to Chrysler's marketing woes, the launch of its much-anticipated 2002 Dodge Ram--the truck that CEO Dieter Zetsche calls one of the three pillars of the company, along with minivans and the Jeep Grand Cherokee--was interrupted by nonstop news coverage of the terrorist attacks. By the time the Ram's "Grab Life by the Horns" campaign resumed, featuring Aerosmith, the truck was smack in the middle of a pickup price war between GM and Ford. "When the big guys are screaming at each other, you can't make your voice heard," says analyst John Casesa of Merrill Lynch & Co. Indeed, the restyled Ram is off to a slow start.

The predicament leaves Chrysler, already in deep financial trouble, with few options. It can't afford to keep offering steep discounts on its cars and trucks. But if its market share slides any further, its entire three-year, $3.9 billion turnaround plan could collapse. "We are trying to walk a tightrope here between market share and earnings," says Schroer. As long as that's the case, Schroer's marketing gambits will remain just so much background noise.

By Joann Muller in Auburn Hills, Mich.

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