Archive for the ‘Strategy’ Category

Buick behaves unexpectedly.

Monday, December 13th, 2010

When General Motors was going through bankruptcy many industry observers were surprised that Buick would be one of the four brands that would be part of the new company (along with Chevrolet, Cadillac and GMC). The explanation was that the Buick brand was very successful and respected in China. What was left in the “un-said” was that Buick was a basket case in the United States.

Since coming out of bankruptcy there has been lots of discussion and coverage regarding Chevrolet and Cadillac but relatively little about Buick.  Chevy represents 70% of the company’s business and certainly warrants attention.  No one was really surprised that shortly after arriving, Joel Ewanick hired Goodby, Silverstein & Partners to help re-build the Chevy brand.  Cadillac, the company’s luxury brand also seems to garner a lot of attention.  With bold designs, terrific new products, another new agency (Fallon), the folks at Cadillac believe that they are in a position to finally break into the Tier 1 portion of the luxury segment.  Marketing for Chevy and Cadillac has been stepped up and through November sales are up 18% for Chevrolet and 38% for Cadillac.  All good.  There’s also quite a bit of anticipation for the Superbowl as one or both of these brands will launch new campaigns in the big game.

While Chevrolet and Cadillac seem to grab the headlines, Buick has been quietly going about its business and making unexpected progress in the US market.  In fact, Buick is the fastest growing GM brand; it is also the fastest growing automotive brand in the United States with sales +54% year to date.

It would be easy to attribute Buick’s success entirely to product, after all the new Lacrosse and Regal are pretty darned impressive (see my earlier blog post) but that would be unfair to the marketers.  The folks responsible for marketing at Buick continue to find interesting ways to let us know our expectations of Buick are misplaced and that we should think of the brand differently.

This starts with the television advertising that clearly establishes an unexpected competitive set for Buick:

(more…)

17 Million in sales predicted for 2015, here we go…

Friday, December 10th, 2010

Things have been looking up in the US market for the automotive industry lately.

Sales have been improving.  November was strong with most companies showing significant gains and one, Hyundai, blowing past everyone else with a +46% increase over same period year ago.  Some marques like Audi are predicting that they will achieve new sales records in 2010 and break the 100,000 unit mark for the first time.  It looks like we’ll finish the year at about 11.5MM units, up about a million over 2009.  Next year sales are expected to improve to 12.8MM.

The LA Auto Show was up beat; there were a number of new and exciting products shown (my personal favorite was the Audi quattro concept).  The sense of the industry moving forward was palpable; it was good to be there.  Then of course there’s GM’s successful IPO, where investor interest was so strong that the share price exceeded everyone’s expectations.

Even more important, the industry has made important progress during the worst recession within memory.  Given the widely held view in 2008 that we were entering a “new normal” with significantly lower industry sales, manufacturers took steps (some with taxpayer help) to reduce production capacity, which has led to dramatically lower inventories at the dealer level.  In turn, lower inventories combined with better product quality have led to lower incentives and higher margins.  Some manufacturers (BMW, Fiat) are even attempting to encourage consumers to order cars and wait for delivery as Americans become accustom to lower inventory levels and the idea that the car they want won’t be on the lot.

Sales on the rise, higher margins, lower inventories, Americans ordering cars, what’s not to like?  Nothing, all good news, until… (more…)

Is Fiat taking VW’s US positioning?

Monday, November 29th, 2010

The week before last, I was in Los Angeles for the auto show.  There were a number things that were interesting, but for me, the most interesting was the introduction of the Fiat 500 to the US market. The Fiat 500 represents the re-introduction of the Fiat marque to the US and thus garnered quite a crowd at the press conference:

As we watched Laura Soave, Fiat’s head of marketing, introduce the Fiat 500, I couldn’t help but lean over to a colleague and say “Fiat is taking Volkswagen’s US positioning.”  The presentation was full of “Italian passion” which might have been code for a youthful, fun, engaged approach to driving.  Here’s a video/ad:

(more…)

Why buy a Volkswagen?

Friday, November 12th, 2010

VW is intent on becoming the world’s largest auto manufacturer.  To achieve this lofty goal, the company needs to sell a whole lot more in the United States.

“The company plans to triple annual U.S. sales of VW, Audi and Bentley models to 1 million units annually by 2018 as part CEO Martin Winterkorn’s drive to overtake Toyota Motor Corp. and General Motors Co. and become the world’s largest automaker.”  Automotive News 9/18/09

Based on the VW brand’s 2009 sales (213,454), volume in the US will almost quadruple: “By 2018, VW wants to sell 800,000.”  Automotive News 1/19/09

800, 000 is a heck of a lot of cars for VW.  Especially considering that VW’s biggest volume year in recent memory was 2001, when it sold 355,648 units (in the 1970′s VW did sell roughly 500,000 units).  Many industry experts have questioned the wisdom and even the possibility that VW might sell 800,000 units in the US.

Volkswagen believes that it can sell 800,000 cars in the US by specifically developing vehicles to meet Americans’ tastes: “VW has concluded that price-sensitive U.S. consumers simply aren’t willing to pay for the extras found in a mass-market European sedan.” Automotive News 7/5/10

Consequently, the “new mid-sized sedan, which will be built in Chattanooga, Tenn., is supposed to be bigger and cheaper than the Passat that it replaces… VW wants to make its Passat replacement competitive with the mid-sized segment stalwarts — the Toyota Camry, Honda Accord and Ford Fusion — and thereby boost sales sharply.” Automotive News 7/5/10

This strategy is also evident in the new 2011 Jetta, which has been de-contented to make it price competitive with the Japanese.  The 2011 US version of the Jetta will have drum brakes in the rear and a torsion bar rear suspension.  The interior has also been cheapened to enable it to reach a competitive price point.  The European Jetta has been dumbed down to meet the needs of the “price sensitive” US customer: “European buyers will get a more costly and more upscale version of Volkswagen’s new Jetta sedan than North American customers.” Automotive News 11/1/10

This approach is being mirrored in the Company’s US marketing. When recently searching for a new advertising agency, the VW CMO offered the following rationale: “The Volkswagen brand needs to inspire our base of enthusiasts as well as reach out and captivate those in mainstream America.”  Automotive News 8/18/09

So, Volkswagens will be more mainstream in the US, larger, less expensive and less European, more price competitive with the Japanese marques.  While I am tempted to go on a rant about the dilution of the VW brand and the dangers of chasing volume (see my earlier blog post), let’s skip all that, and ask a simple question:

(more…)

Volume is the holy grail of the auto industry…but should it be? The case for stronger brands.

Wednesday, October 27th, 2010

A casual observer could be excused for thinking that volume is the only thing that matters to the auto industry:

“The annual global industry sales leader for 76 years.”

Headline on GM’s website

“Toyota ends GM’s reign as leader in global sales”

New York Times, April 24, 2007

“VW Group has declared its intention to become the global leader, overtaking Toyota by 2018”

Fortune 10/11/10

GM may have been the leader for 76 years, but we all know how that worked out.  The quest to be the global leader in sales drove Toyota to the breaking point where it lost its legendary focus on quality and reliability.  The result?  The biggest series of product recalls in history, allegations of unintended acceleration, thousands of lawsuits, and a decline in brand perception that will take years to recover.  Now Volkswagen has set its sights on the global sales crown and some are questioning the wisdom of the company’s leadership.

You can’t spend much time working in or around the automobile industry without feeling the relentless pressure of needing to sell more.

The problem that auto manufacturers face is that their business has extremely high fixed costs.   Unlike “variable” costs that go up and down based on the amount of vehicles produced, fixed costs remain the same regardless of volume.  Fixed costs include all the developmental investments, labor expenses and the costs of the factories themselves.  With such high fixed costs, the more vehicles the manufacturer can produce, the lower the cost per unit and the better the margin.  In short, higher volumes equal higher profits.

So bigger is better?  Maybe.

The performance of the automotive brands in Interbrand’s “Best Global Brands 2010” study might lead to another conclusion.  Interbrand’s study uses 10 principles to assess “brand strength” and ultimately places a “value” on the brand.  Ten automotive brands made the list of the top 100:

What’s interesting is that the brands that made the list fall into two distinct camps; (more…)

Nissan decides to build a brand.

Thursday, September 9th, 2010

A couple of weeks ago, Nissan launched a new brand campaign. Today Nissan made available a new commercial for the Leaf, their soon to be launched plug-in EV:

This is a wonderful commercial, it’s big, emotional and engaging. Before seeing it, I was certain that I didn’t want an EV, now I’m less certain, and I know for sure that I want to help that polar bear.  I admit that this commercial makes me think about Nissan a little differently; I’m not yet convinced that the company stands for “Innovation for all” but it’s a start.

Nissan has struggled over the years to establish a brand identity for itself. Automotive marketing history buffs can probably trace the issue back to the decision to change Datsun to Nissan in 1981.  In 1986, after a transition period, the brand was officially Nissan.

Since that time Nissan has struggled in the shadow of Toyota.  While Toyota steadily built a reputation for quality and reliability and smashed sales records, Nissan labored as the number two Japanese brand.  Nissan’s brand identity has never been clear and I suspect for many people it’s an simply an alternative to the better established Toyota.

The manufacturers in the vast middle of the market struggle with brand identity partially because (more…)

Cadillac breaks new ground in auto industry marketing with an old idea.

Friday, August 6th, 2010

I was speaking with a colleague the other day and we were trying to think of an instance where an automobile manufacturer (or any brand for that matter) looked back into its own history and re-introduced a brand tagline that had been thrown in the bin.

We couldn’t think of any and we began to talk about what a mistake that was.  We were able to rattle off a number of instances, where great automotive brands walked away from positioning or taglines that perfectly encapsulated their brands.  Mercedes-Benz left behind “Engineered like no other car in the world.”  Volkswagen threw away “Drivers wanted.”  Chevrolet moved away from “Heartbeat of America.”  A few months ago, BMW, one of the most consistent marketers in the industry, looked as if they were moving away from “The Ultimate Driving Machine” in favor of  “Joy.”  In the case of BMW, this has been hotly denied and “TUDM” still appears at the end of the ads but it has certainly been demoted.

Why does this happen?  Why does it seem so difficult for marketers to realize that they have a real asset that needs to be protected and nourished?  A lot has to do with the constant pressure to increase volume and the find something new to “take the brand to the next level.”  The other factor is the constant churn of marketing management and agencies.  New marketing leadership needs to demonstrate that it is moving the business forward and that means doing something new.  Every agency is genetically coded to do something “new and unexpected” to burnish their reputation.  Bringing back an old idea can also be seen as a copout.

So it struck me this morning when I read an article in Advertising Age where Joel Ewanick was interviewed and he said that Fallon (Cadillac’s new agency) had developed the brand’s soon to be introduced tag-line: “The new standard of the world.”

(more…)

Audi makes a rare marketing misstep

Monday, August 2nd, 2010

In recent years, Audi has done a terrific job marketing its brand. Sales are up globally and will probably exceed 1.0MM units this year (WSJ 8/2/10).  In the US, Audi came through the recession on a tear and has never looked back.  Great products, great design, with quality that has improved and is now comparable to the best in the business. The Audi brand is aspirational and prestigious in most global markets. While it has lagged its competitors in the US, it has gained in prestige in recent years and many would say it has achieved the vaunted Tier-1 status in this country.

So why would one of the most well-regarded progressive luxury automotive brands in the world make the silly mistake of blatantly copying their nearest competitor?

A few weeks ago I was in the UK and I happened to walk by Leicester Square in London and was excited to see an Audi display in the park. I went over to have a look and discovered that the display was part of the UK’s introduction of the A1.

The display was called “AreaA1″ and it was getting a lot of attention from Londoners.  It was the first time I had the opportunity to see the A1 in person.  It’s a wonderful car and I hope the folks at Audi of America make the decision to bring it to the US.  It was so crowded, that it was hard to get a picture….at least a good picture: (more…)

www.momentoftruth.com—Buick on the cusp of a marketing breakthrough!

Friday, July 30th, 2010

How many times have I sat in meetings with manufacturers and discussed the need to get consumers engaged with their brand in the digital space? Too many times to count and the concerns are always the same.  What if they say things we don’t like?  What if they say something untrue?  What will they expect of us?  How will we respond? Inevitably the lawyers weigh-in and the reasons “why not” stack up like cordwood.

So I think it noteworthy that Buick has found a way to get beyond the reasons “why not” and to give consumers an uncensored voice regarding the new Buick Regal at www.momentoftruth.com.  This is a terrific website with tons of information from a variety of sources, the company, general media, buff books, blogs and real consumers.  The use of Twitter and Facebook feeds, Youtube videos and Flickr is terrific and makes the site feel very credible.  The net effect is that you feel as if you’re getting a chance to see the entire body of opinion regarding the new Buick Regal in one stop.

GM is using technology that searches the web for mentions of the Buick Regal, aggregates it, edits out the profane and posts the rest. The result is really fun and full of interesting commentary.  It’s not quite a dialogue with consumers but it’s a step in the right direction.

I admit that I had to wade through a lot of positive comments to find the few negative ones, but they’re there.

Good for Buick, maybe the reality is that most of the response to their new vehicle is positive!

How “naughty” do you want your Volvo?

Thursday, July 29th, 2010

Volvo has, since the ’70s  all but owned “safety” in the automotive segment.  Not a bad place to be…do you know anyone who’d prefer an unsafe car?

Brilliant work by Scali, McCabe, Sloves took Volvo from the choice of professors in tweed jackets to the boomer choice for family hauling. The Volvo wagon was a staple in the suburbs on both coasts.  Volvo was even featured in the movie “Crazy People” where Dudley Moore played an ad man who decided that being honest was a good idea and suggested that Volvos were “Boxy but good:

While the brand became part of popular culture and owned safety, it has struggled with that one-dimensional view for years. Volvo has its loyalists who love the brand and it’s products but it also has more than its share of detractors for whom the truth of “boxy but good” was a real barrier to purchase.  The challenge has always been how do you retain and nurture the safety reputation while also convincing a broader swath of the car buying population that the brand is cool and emotionally appealing. (more…)