Automakers: Brand Building or Brand Wrecking? Part I

“Could I interest you in a Porsche truck?”

by Michael Cooney

Plymouth is dead. Oldsmobile is next. What’s going on with automakers? More importantly, what can we learn from their mistakes? From a marketing standpoint, decisions are being made that may seem like great ideas now, but will come back to haunt some respected brands in the years to come. Let’s go first to Germany.

What comes to mind when you think of Porsche? Sports cars, right? Since shortly after World War II, Porsche has done one thing, and done it well—build high performance sports cars, and a rock-solid brand identity. Now comes 2003. Could I interest you in a Porsche truck?

I can hear Porsche purists groaning now. Yes, soon you can drive off in your own SUV with the Porsche crest on it. The new Cayenne is based on a Volkswagen concept pickup truck, and shares its platform with a new VW SUV.

What does this do to the Porsche image and brand identity? This is an example of brand dilution. The single-mindedness Porsche is renown for has been cast aside. And it was that single-mindedness of purpose and product that made Porsche a legendary sports car marque.

How about BMW? It touts each of its models as the “ultimate driving machine.” For 25 years that one slogan has identified the brand, and the factory has done well in living up to the slogan. People who buy BMWs do so partly for the performance, but also partly for the prestige in owning a car that is priced so not every garage has one. Not everyone, for example, can afford the $40,000+ price tag of a BMW 330i that is no bigger than a Honda Civic. That, in turn, creates the elusive quality of exclusivity that contributes to this brand’s identity and desirability.

Now it appears BMW will soon introduce its new 1 Series: a 4-cylinder, 4-seat sub-$20,000 run-about for entry-level buyers. The theory is that when you grab ‘em early, then brand loyalty will keep them moving up through the product line as age and income increase.

BMW seems to have forgotten that its brand is so strong that many thousands of people every year finally flee—with glee!—from their old brands so they can move up to a BMW. How will those who paid $40,000 for a 330i, or $60,000 for a 540i, feel, when they realize anyone who can afford a Honda Civic can now join the BMW club? Prestige? Exclusivity? Market position? All significantly weakened.

Mercedes Benz has done the same, except its lapse is not quite as egregious as BMW’s. Its 2002 C230 2-door hatchback, at $24,950, is another step in the wrong direction, moving away from its long-standing market of buyers who value prestige and exclusivity, and are willing to pay for it.

What does the BMW spinning propeller, or the Mercedes Benz tri-star stand for? Are they just symbols that can be stuck on anything, or do those symbols convey value and prestige? Should these companies lower their product’s prestige value in exchange for a temporary sales increase? I would argue against it.

In contrast, let’s look at a company carefully continuing to build its brand strength—Toyota. When Toyota wanted to enter the luxury market in 1989, did it just add a bigger, more luxurious Toyota to its lineup? No, management understood Toyota’s market and its customers. They knew Toyota meant reliable, well-built cars at affordable prices in the public’s mind. They also understood that Americans probably would resist spending $30,000 for a Toyota (in 1989). So, as Honda had done with Acura, they created the separate Lexus division. Separate showrooms, separate advertising, separate brand identity.

Now that Toyota plans to create a line of “hip” new cars with more adventurous styling and low prices aimed at the youth market, they have again created a new division with its own separate identity—Scion. This is a smarter way to market a new product line while preserving the value of an existing brand. Even if Scion doesn’t do well, the Toyota name is still protected.

If BMW and Mercedes want to build and sell inexpensive cars, there’s nothing wrong with that. But they should create separate divisions so as to not dilute the long-held value of their core brands. Their short-term gain in sales from low-cost autos will, in the long run, serve to undermine their powerful brand names. Once anyone can afford a BMW, will the name “BMW” still be seen as special, prestigious, exclusive and desirable?