Revving up auto branding

Abstract

Why do two almost identical cars experience radically different fates in the marketplace? Think brand equity. US car companies spent more than $50 billion on marketing in 2000--more than any other US industry and upward of 200 percent of the total global net income of the top five automakers. Yet from 1996 to 2000, while the marketing costs per vehicle of the Big Three auto companies increased by 87 percent (to an average of $2,900 per car sold), their combined market share dropped by more than four percentage points, representing $15 billion in lost revenue for 2000 alone. More spending is not the answer. The industry cannot turn the tide until it addresses a deeper problem: the loss of brand identity. In recent years, the number of car makes and models has grown in every product segment. At the same time, the once vast gaps in quality, performance, safety, fuel efficiency, and amenities have all closed significantly. Although variations in quality and performance persist, the remaining possibilities for differentiating products, and thus achieving competitive advantage, revolve around styling and other intangibles and the emotional benefits they confer on the customer. But instead of attempting to convey these benefits, carmakers spend 55 percent of their marketing budgets--$24 billion a year--on rebates and incentives. Price has become, in many cases, the main reason for choosing one brand over another--the classic trap of a commoditizing industry and the destroyer of healthy profit margins. What sets brands apart? The industry itself has proved the dollar value of a great brand. Consider the fate of badge-engineered vehicles--cars and light trucks sold into the same market by two different car companies, often with little but a nameplate to differentiate the products. Such vehicles can meet dramatically different fortunes. Workers at the General Motors and Toyota joint venture NUMMI (New United Motor Manufacturing Incorporated) plant in California build the Toyota Corolla and the Chevrolet Prizm side by side, for example. Toyota designed both models, and the differences in their components and trim are minor. Both vehicles receive high marks from Consumer Reports, and comparably equipped midrange models have similar price tags. Yet the Prizm requires up to $750 more in buyer incentives to support its sales. Even so, only one-quarter as many Prizms are sold, and their trade-in value depreciates much more quickly (Exhibit 1). Toyota's name on the Corolla attracts customers, while the Prizm is lost among the offerings on a Chevy dealer's lot. What accounts for such preferences? Marketers have long understood that consumers are influenced by the emotional connections they form with products-and with manufacturers, dealers, and other owners. Our study (1) confirms the idea that consumers attach significantly greater importance to relationship and emotional benefits than to a car's functional attributes, at least when they meet minimum standards or don't fall far short of the competition's. Nevertheless, those intangible benefits are the weakest links in the automakers' performance ratings. Companies that act on all of the elements of brand affiliation-that is, the emotional relationship, the purchase process, and product attributes-build an advantage that competitors find hard to duplicate. To tap these wellsprings of brand attachment, the auto industry must move from traditional product-based marketing to a conscious and organized brand-based strategy. Once, the product was the brand (think of the Ford Model T or of Volkswagen's original Beetle). Today, companies must position each car within the entire suite of products that bear a given nameplate and understand consumer likes and dislikes so deeply that these tastes shape everything from the car's design to its first appearance in an ad to the service department's after-sales performance. Every consumer touch point represents both an opportunity and a danger. …

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