Subaru has a plan to end losses in its U.S. operations: Go upscale. The company intends to start selling more-expensive vehicles with sleeker styling and better interiors.
Subaru tried to go upscale in the late 1980s. The attempt flopped because Subaru's customers, folks who wanted reliable and capable transportation, weren't interested.
Subaru has a loyal core of customers. They responded enthusiastically when Subaru regained its senses and offered all-wheel drive and versatility.
The lesson is plain: Don't neglect your current customers as you seek new ones.
Oldsmobile learned that lesson painfully in the late 1990s. The brand had a substantial base of older customers. General Motors, trying to fight import brands, quickly came up with a new Oldsmobile lineup of products aimed at younger buyers. But the new cars failed to interest Oldsmobile's customers or enough younger buyers - a double whammy.
Strategists at Cadillac learned from Oldsmobile's mistakes. They created an edgy design for the CTS, which is selling well. But as Cadillac reaches out to new customers, it offers the DeVille - its best seller - for traditional luxury customers.
The redesigned Cadillac STS, which goes on sale this fall, has one foot in each camp. It adopts some of the CTS's edgy look, but its overall design remains understated for affluent fifty-somethings.
Jeep is wrestling with the same problem. The Chrysler group realizes it can wring more sales out of Jeep. But how to expand the lineup with sport wagons without watering down its rugged brand image?
Jeep has come up with an intriguing solution. It will create vehicles that won't be as capable off-road as those in its current lineup. But each new vehicle will be the most capable in its class. Jeep will find that strategy hard to communicate, but it is basically sound. It keeps old customers while seeking new ones.
Meanwhile, Subaru is evolving in search of new customers. Wherever Subaru goes, it should ensure that a good number of its owners follow.