Every Tier 2 brand aspires to be in Tier 1.  Audi set the target years ago to become a Tier 1 brand and some would say that it has achieved that goal.  More recently Cadillac has made no bones about the fact that it wants to be a Tier 1 brand and has set it sights on BMW.  Infiniti is striving to make it into Tier 1 and Jaguar would like to return.  The fact remains that only Mercedes-Benz, BMW and Lexus have achieved the volume, credibility and prestige to be true Tier 1, everyone else is Tier 2:

That said, I think the goal of becoming a Tier 1 brand may be a fool’s errand in today’s luxury segment.  It made sense almost 20 years ago when Audi set that as the target but does it really make sense today?

Tier 1 is full of accepted conventions that must be present in order for the brand to be truly Tier 1.  For example, in the Tier 1 world, all dealerships must be exclusive and should be Taj Mahals built to reflect the prestige and loftiness of the brand they represent.  In these Taj Mahal dealerships, customers must be served lattes, have a customer experience befitting their level of success and certainly not have that experience sullied by the presence of mass market product or customers.  In Tier 1, as defined today, manufacturers must offer three sizes of sedans, at least two cross-overs, a sports car as well as a tuner division that churns out high performance model variants.  In traditional Tier 1, it is essential to have a D-segment (think MB S-Class, BMW 7-Series, Audi A8) sedan that represents the brand’s ultimate execution of a luxury vehicle.  It’s pretty rarified air up in Tier 1, but if you can get there, profits and volumes are huge.

Here’s the rub, the whole Tier 1 paradigm has been built around the baby boomer generation and I can’t help but wonder if the conventional thinking about Tier 1 runs the risk of taking a manufacturer down a path that will be less relevant in the future.  There’s a new generation of luxury car buyers coming into the market that are forming their own opinions about what “luxury” means, what connotes prestige and what brands they will value.

What’s interesting about the new generation (call them Millennials if you like, they’re the children of the boomers) is that their view of luxury is being shaped by experience that has included the Great Recession and its re-jiggering of peoples’ sensibilities, high unemployment particularly for their age group, the broken promise that they will do at least as well as their parents not to mention technologies that are changing the way they communicate, collaborate, research and ultimately act as consumers.

All luxury brands recognize that their future depends on younger upcoming luxury car buyers, but the goal of Tier 1 and its conventions risk throwing them off track.  This new generation of luxury car buyers may not need a Taj Mahal dealership or even a latte. They’ll need a product and experience that fits their sensibilities, not their parents’.

I think the future of luxury rests with the next generation and if I were introducing a new luxury entrant or re-building a luxury brand I would focus all of my energy on understanding how Millenials will define luxury and what I need to do to satisfy their requirements.

The luxury segment is going to go through a transformation and becoming a “Tier 1” brand with all its trappings represents “old luxury.”  The long-term winners will figure out how to become the new generation’s luxury brand without losing their existing customer base.  Fortunately, boomers are consumed with the need to be perceived as youthful and forward looking, so chances are if their kids think something is cool, they will too.

I immediately thought to myself “Good for them.”

Infiniti from the very beginning has had a difficult time establishing a brand identity and finding a way to execute it in communications. Introduced in 1989, Infiniti was Nissan’s response to the introductions of the other Japanese luxury marques, Acura and Lexus.  The original Q45 was a sporty performance alternative to the Lexus. Unfortunately, Infiniti got off to a rough start when it introduced the car and brand with the infamous “rocks and trees” campaign created by its agency Hill, Holliday, Connors, Cosmopulos.

The “rocks and trees” campaign sought to present Infiniti as the result of the unique Japanese culture and sensibility.  The campaign attempted to make its Japanese origin an asset, similar to the way that the German brands have used their ‘German-ness.’  The Infiniti ads were very different than any automotive company had ever done (they didn’t even show the car initially).  I still think the campaign deserved high marks for breaking new ground and attempting to make the fact that it was a brand from Japan important. Unfortunately, the campaign was panned by the automotive marketing community, blamed for anemic sales, resulted in the agency getting fired and ultimately resulted in a much more traditional approach to communications.

In the years that followed, Infiniti communications bounced from expected campaign to expected campaign without ever establishing a clear identity for the brand.  Infiniti was relegated to Tier II status in the US luxury market.  Tier I luxury brands like Mercedes-Benz, BMW and Lexus are considered more prestigious, have higher levels of customer loyalty, higher resale/residual values and not surprisingly have better established brand identities.

It’s been unfortunate for Infiniti because they have consistently offered well-engineered products with some very distinct designs. The product has delivered on Tier I expectations but the brand’s reputation or image did not.

I was glad to see Infiniti stand behind its current “Brush-Stroke” campaign because for the first time since “rocks and trees” I think they are beginning to make the brand something special.  Here are some recent commercials:

And a couple of print ads:

The use of the Japanese sumi-e painting style is a nice way of connecting the brand to Japanese culture and sensibilities while adding a distinctive executional element.  I don’t find the tag-line “Inspired Performance” particularly, forgive me….inspired.  But it is clear and I get the message.  The brand’s Facebook Fan page and the Twitter posts are also consistent strategically as was their NCAA basketball sponsorship of “Inspired Performances.”   Put it all together and Infiniti is a uniquely Japanese performance luxury car with the full measure of technology and features that you would expect.

With this campaign, Infiniti is re-establishing its roots in Japanese performance.  I don’t think that this campaign is going to win any advertising awards (if that happens to be how you measure success) but I do think it is on strategy for this brand, and is well executed.

More importantly, if the manufacturer and the dealers are serious and really do commit to this campaign for five years I think they have a real chance of establishing a clear Infiniti brand identity and perhaps even making it into Tier I.

The fact is that nothing has happened to Lexus, they design, engineer and build an extraordinary vehicle.  What’s happened is that the other manufacturers have improved to the point where every year it’s a genuine dogfight to get to the top spot.

There were some other surprises that weren’t so good…. Jaguar dropped from the 1st spot in 2009 to 23rd.  Given Jaguar’s long standing reputation for iffy quality, that’s certainly not a good thing from their perspective.  Audi also took a hit dropping from the 12th spot in 2009 to 26th in 2010, but my guess is this year will prove an aberration.

Personally, I think it is exciting to see Buick up near the very top and Cadillac well above average.  These brands have their product act together, now marketing needs to pull its own weight.

This year’s study and the jockeying for position proves something I have been telling people for a number of years:  In today’s market, it’s tough to buy a bad car.

Download the JD Power press release

Lexus is concerned that their customers are too old and they are not appealing to the next generation of luxury car buyers.  A reasonable concern.

Lexus appears to be addressing this concern in the usual way that automobile manufacturers do.

First,  you add product to your line-up that is designed to meet the requirements or interests of the new target group (after all, they’re very different from the current customers),  then you lower the cost of entry into your franchise (they don’t have as much money as the current customers) and finally use marketing to convince the younger target that your brand is cool (at least cooler than they think it is).

Unfortunately, this approach always has the same result, you may succeed in selling a few more cars to the new target group but you leave your current customers confused and your brand weakened.

The Automotive News article even quotes Jessica Caldwell from Edmunds.com who says: “Lexus was really strong, but they have lost their footing….BMW is the ‘Ultimate Driving Machine.’  We’re not really sure what Lexus is.”  I agree with her. The overheated luxury segment experienced so much growth in the ’90s and early ’00s, that many of the luxury marques that were fortunate enough to have clear positionings in the beginning were weaker and less distinct at the end of the run-up.

Lexus now finds itself competing in a segment that has a third less volume than it did a year and a half ago.  Volume growth is going to come from a hard fought battle for share-of-market with the best in the business: Mercedes-Benz, BMW, Audi, Infiniti.  As Lexus moves down market into the “near-luxury” segment, more competitors will enter the fray:  Acura, VW, Volvo.  Every single one of these manufacturers is making well-designed and engineered, high quality vehicles.  More than ever, a manufacturer’s brand reputation is a key differentiator.

Now is the time for Lexus to pause and carefully consider its brand values rather than simply expand its product line to appeal to a new target group’s preferences.  What is at the heart of the Lexus brand? A few things come to mind: unsurpassed quality, comfort, quiet, sophisticated, conservative.  Rather than trying to expand what Lexus stands for, now is the time to re-focus attention on the core values of the brand and make sure that everything they do comes from that core.  Let those values drive product offerings, dealer experience and marketing.  Find a way to make your established core values relevant to a new audience.  That’s how you take an established brand and avoid “tarnishing” it.

The essence of good positioning is knowing what you are….and what you are not. Trying to be all things to all people is the death knell for a brand like Lexus.  It won’t be a question of “tarnishing the image,” Lexus won’t have an image.

If Lexus follows the industry’s well worn path to volume growth, another great automotive brand will be allowed to whither away.  In 1989, Lexus re-invented the luxury car business and established a new brand.  It was an incredibly expensive and difficult thing to do, but they did it and they did it right.  I hope they realize how easily all that good work can be undone.

In the meantime, I’ve got my BOHICA t-shirt on.