What the auto industry can learn from North Face

Yesterday’s New York Times had an interesting article on North Face, the outdoor clothing company: North Face keeps walking the tightrope between exclusivity and the mass market.

The question was: how is it that a brand like North Face maintains its perception as a premium or exclusive brand when it sells to just about everyone from kids and suburban moms to elite mountaineers, hikers, trekkers, runners, and skiers?

If you read the article you’ll see that the President of the company actually says that they don’t pay much attention to analyzing who buys their products. They don’t know the demographics of their customers and aren’t to worried about it. He acknowledges that they know where their products are sold and that their “core customers” (NYTs 11/17) are centered around four activities: “hiking, trekking and mountaineering, running and training and snow sports.”

It struck me that North Face is a good example of a company that understands that “people don’t buy what you do, they buy why you do it” (see my prior post). North Face is very clear about their brand core values. They make products for serious, elite athletes who participate in the aforementioned activities. Their products are designed to meet the rigorous conditions these core customers routinely find themselves in.

The fact that so many people are willing to pay for North Face products, despite not being elite athletes, has been great for business but hasn’t changed the North Face “why you do it” one bit. Despite being sold in Dick’s Sporting Goods and commanding a 33.5% share of market, North Face has maintained its image as serious gear for people who test the limits because they have never lost sight of their core values and continue to execute against them: “Committed athletes, meanwhile, say North Face has managed to maintain, and even improve, it’s quality control and innovation.” ( NYTs 11/17). They haven’t adjusted their “why you do it” to reflect new opportunities or potential customers, volume has come to them because they are perceived as doing something special.

The automobile industry struggles with this idea of sticking to core values. Brands are stretched to the limit to increase volume and the potential for profit.

Porsche is a great example of a brand that has stuck very close to their core values of engineering and performance. Although known for exceptional sports cars, Porsche has successfully expanded it’s line to include SUV/Crossovers and a four door sedan by making sure that every model delivers on being the “Porsche” of that particular segment (i.e. the best performing and driving vehicle). Porsche has stuck to its knitting and volumes have grown dramatically, just like North Face.

Volkswagen is trying to walk the same “tightrope,” but has chosen to do it differently.

Historically, Volkswagen has been one of the 3 or 4 best understood automotive brands in the US. VW defined itself for an entire generation with their “Drivers Wanted” communications campaign. Drivers Wanted was based on a VW core value of offering German engineering and driving sensibilities for people who were willing to spend a little more for something special. Hundreds of thousands of Gen Xers and Millenials were willing to spend a bit more to get a car that was fun to drive and a bit different than their peers’ Hondas.

A few years ago Volkswagen set the goal of selling 800,000 units in the US and they determined that they couldn’t get there with premium pricing and product designed for the European market. Consequently, they decided to engineer the product to American tastes. The product was de-contented (e.g. Americans don’t care about handling so they don’t need 4-wheel independent suspension) to be more competitively priced with the Japanese and domestic offerings. At first, this approach seemed to be working, the product is still very good, if not quite as special, and sales grew nicely, particularly with Japanese manufacturers crippled in 2011 by an earthquake and tsunami.

Flash forward to 2013. Volkswagen sales are down -4% year-to-date in a market that grew +8%. In October sales are down -18% in a market that grew +10%.  US management is attributing these results to aging product which I’m sure is part of the problem. But I can’t help but wonder if  there’s more to it than just old product. Have they made an error by engineering more to local tastes? Are the designs just a little less interesting? Have some astute customers that are interested in performance noticed a difference? In an effort to appeal more broadly has Volkswagen become too mainstream and lost that edge that made them special?

Only time will tell if Volkswagen can manage “the tightrope between exclusivity and the mass market” as deftly as North Face and Porsche but it’s hard to ignore the President of North Face’s assessment of why his company has succeeded where others have failed:

“I think the big mistake other brands make when they find a wide variety of different consumers like their product is that they try to change the way they position their brand. We have never done that.” Todd Spaletto, President, North Face

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