Automakers gamble on marketing, image makeovers that break with their past

2012-03-17 01:55:27

Share with others:

By Don Hammonds / Pittsburgh Post-Gazette

As General Motors works to build on momentum that yesterday saw it post a better-than-expected profit on operations, part of its strategy rests on a fairly big gamble. It's banking on a marketing and image makeover that it hopes will inject some pop into its sagging Saturn brand, known for its folksy image and modest sedans that lack sex appeal.

In the coming year, GM hopes to move Saturn "uptown," with a new, more upscale image bolstered by the Sky, a popular new sports car, and Aura, a suave, Euro-flavored sedan.

Other makes have entered new corners of the automotive market and succeeded handsomely in the last year or two, such as Pontiac with its Solstice and Audi with its A3 compact.

But there have been flops as well by automakers seeking to move established brands out of their "comfort zones." These include Volkswagen with its ultra luxurious Phaeton, whose sales were off nearly 60 percent for the first six months of the year, and Suzuki with its intermediate Verona, whose sales were off nearly 70 percent in the same period. Both models have since been dropped from the respective automakers' lineups.

In the old days, car companies wouldn't dare invade parts of the market that consumers did not associate with their brand. For instance, luxury carmakers Packard, with its One Twenty, and Cadillac, with its LaSalle and Cimarron, experienced strong sales with the more modest models at first but eventually pull them from their lineups. The issue, auto historians say, was that consumers felt the new models didn't "fit" the brand, harming the parent company's prestige image -- fatally in the case of Packard.

But today, invading unfamiliar and new market territory is a growing trend in the auto industry as car brands fight tooth and nail for sales in a demanding, competitive market dominated by ever pickier consumers.

The trend is being abetted by technology that allows car companies to build several varieties of cars on the same platform at lower costs and less risk to the bottom line.

"The major market force driving all this is the fact that there's so much capacity now and [automakers] are looking for volume in any way they can get it," said Jack Nerad, of industry researcher Kelley Blue Book. "The Jeep Compass is an example of this. DaimlerChrysler was looking for additional volume out of a platform that they had."

But the company also stayed consistent with its brand images in designing the Compass, which is Jeep's first crossover as well as the first Jeep not to have all-wheel drive as standard equipment. Its grille and parts of its interior say "Jeep" loud and clear, even though it's a new product for a new niche.

Thus, the Compass represents what auto experts say appears to be a successful effort to crack two new markets at once. "A person buying the Jeep Compass is unlikely to buy Dodge Caliber, which is built on the same platform, and vice versa," Mr. Nerad said. "There's not much danger of these two cannibalizing from each other's sales turfs."

That's the first rule for car companies that want to tackle new markets: Stay true to your brand. "You have to go with products that are consistent with your brand's image, or else it will be a real struggle," said Tom Libby, an analyst with auto researcher J.D. Powers and Associates. "The customer has one perception of the brand [and if] the company offers products that don't fit with that perception, it can cause conflicts" and undermine sales.

Another potential problem is that old customers who "bought into" the brand before it decided to invade new market territory will feel snubbed and confused about the brand's new direction. Meanwhile, the target customers in the new market, faced with the old image in their minds, will look askance at the new model.

A good example of this rule was the Volkswagen Phaeton, experts say.

Volkswagen simply was not known as a luxury brand, and consumers couldn't get past that. The brand's image became muddled with some old customers wondering what was up with VW's forays into the luxury market -- and even wondering if the company was leaving them behind, experts say.

"I think they simply tried to stretch the brand too far, although I really liked that car," said Mr. Nerad. "The VW brand just would not stretch that far in terms of price. If you buy a premium luxury car, you don't necessarily want it to say 'VW' on it."

Suzuki did much the same thing with its Verona, experts said. Suzuki had a well-established reputation for quality small cars, but erred by trying to be something that most consumers didn't think it was -- a maker of intermediate sedans.

Audi, on the other hand, didn't try to kid itself into thinking it suddenly was a maker of lower-priced sedans when it went down market with its A3, experts say.

It knew that in most people's minds, Audi was all about high performance and sporting luxury, and thus introduced the A3 as a fast, well-equipped premium model with a price that, when loaded with options, was only slightly less than its other models.

It also helps if brands "understand the market niche and the customer in that niche," Mr. Libby said.

Pontiac did a particularly good job in doing its homework with the Solstice, taking the time to understand the ins and outs of the two-seat sports car market -- a notoriously fickle one that changes rapidly -- before rolling out the Solstice. The reward? Sellouts, waiting lists and lots of "buzz."

Another way to draw consumers is to provide the same equipment offered by the brand's competitors -- then undercut them with a lower price. Pontiac did that with the Solstice, and it's also a trick used by Hyundai, whose sales were up 15.4 percent for the first six months of this year. This year it moved into the entry-level luxury market with the Azera.

"Moving to a new niche is working well for Hyundai because they way underprice other models in each segment that they are in," Mr. Libby said. "I know that with the Azera, they are marketing it as a luxury product, but they're successful with it because they are offering value to the consumer and a certain amount of content."