Automakers: Brand Building or Brand Wrecking? Part II

“Would you spend $65,000 for a VW?”

by Michael Cooney

In contrast to BMW and Mercedes, American automakers took a different route toward weakening their brands, by intentionally eliminating differences between them.

Through the 1970s, '80s and '90s, various models under the Big Three’s umbrella first looked similar, then practically identical. Examples: The Ford Crown Victoria and Mercury Grand Marquis. Plymouth Breeze and Dodge Stratus. And could you tell the difference between a Plymouth Neon and a Dodge Neon?

This was long-term, negligent brand dilution. Sharing platforms and some components in order to save design, development and production costs were sound business decisions. But sharing sheet metal, combined with quality problems through the 1970s and ‘80s, contributed to killing two of the bland brands, and damaging others.

The last Plymouths were produced in 2001. Once the brand’s uniqueness vanished, there was nothing special about its cars. And without any special reason to buy them, people didn’t.

Soon after celebrating Oldsmobile’s 100th birthday, GM announced that Olds production would be cut, model by model, finishing with its demise in 2004. Contrast that to the mid-1970s, when the Olds Cutlass was the hottest selling car in America. That is the negative power of brand dilution. The car-buying public noticed that “they all look the same” as they yawned their way out of Big Three showrooms.

Next, look at Volkswagen. Besides the “Beetle,” VW successfully added sedans and wagons to its product mix. Volkswagen is about to take a risky step, however.

To first set the stage, in the mid-1980s when Honda wanted to move up-market, it realized people wouldn’t spend, at that time, $25,000 for a Honda. So the Acura division was created to market the 1986 Acura Legend. Same with Toyota, which formed the Lexus brand to bring out its $30,000 1989 Lexus LS400. Likewise Nissan with Infiniti.

Now Volkswagen is about to ask the question: ‘Would you spend $65,000 for a VW?’ Volkswagen decided against creating a separate upscale division to market its new luxury car, the Phaeton. It will be interesting to see how many people will put down $65,000 for a very fine VW when they could buy a very fine Mercedes Benz for the same price.

Although opposite of the downward move by BMW and Mercedes Benz, this upward move by VW is equally questionable, since it adds a product that is priced far outside its traditional market.

Will people buy $65,000 VWs? Sure, some will. But that’s not the question. The real question is how many more sales would VW earn if it sold its luxury cars under a different brand name at separate, upscale dealerships? Those spending $65,000 on a new car expect a certain level of refinement in their surroundings. Will they be content conducting their business in the same showrooms where college kids are buying $18,000 “Beetles”?

This is a double negative for VW. It confuses the traditional VW brand image. And, it weakens the potential power of an upscale brand by lumping the Phaeton in with VW.

So what do we have? Porsche selling trucks based on a Volkswagen platform. BMW and Mercedes placing their logos on inexpensive cars. The American Big Three sharing not just platforms, but even bodies, so that product from brand to brand looked nearly identical. Volkswagen selling a car priced far outside its traditional market. These are brand management errors that will likely weaken the image of these leading manufacturers in the decades ahead, and may take decades more to remedy.

What can we learn from these branding errors?

First, you must define your core market, determine what your brand should stand for in their minds, then make sure every marketing activity you engage in strengthens that brand identity.

Next, if you develop products outside your brand’s primary market, consider forming a new brand. Better to expand your number of brands, than to expand your established brand into too wide a market. The wider a brand’s expansion, the weaker it becomes and the less brand loyalty it generates. Compare the narrow focus of Ferrari with the broad focus of General Motors. Which company generates fierce loyalty?

If you create different brands whose products all look the same, it will bring boredom to your market. To state the obvious: each brand needs a distinct identity.

Finally, in higher-end markets, the more people who want your product but can’t afford it, the greater the value and prestige of your brand. The converse is also true -- once everyone can afford it, fewer will want it. Even if your name is BMW or Mercedes.