Branding is Important
Research done by authors at Strategy-Business.com suggests that "the price consumers expect to pay for otherwise identical luxury vehicles can vary as much as $4,000, depending on the car’s brand.
For mass-market cars, brand helps determine which products a consumer considers buying. Furthermore, superior brands extend their halo across every model of vehicle within the brand. It’s no surprise that most auto manufacturers make brand positioning and development a key item on their marketing agenda."
For mass-market cars, brand helps determine which products a consumer considers buying. Furthermore, superior brands extend their halo across every model of vehicle within the brand. It’s no surprise that most auto manufacturers make brand positioning and development a key item on their marketing agenda."
Brand Perception
Source: http://arcasadvertising.com/brand-positioning-ford/
Research shows that notwithstanding automakers’ attempts to distinguish their brands on the basis of lifestyle or emotional imagery, consumers evaluate brands in terms of their earned reputation for product excellence relative to their total ownership cost.
These perceptions are obviously not perfect. Some brands’ reputations exceed or fall short of their demonstrable product attributes. But, as a rule, consumers’ beliefs are accurate, stable, and relatively immune to manipulation. In contrast to the situation with other consumer goods, in which equity is created substantially through advertising, automotive brand perceptions change primarily through consistent and sustained changes in the underlying product portfolio.
Two insights critical to understanding how, and to what extent, manufacturers can enhance and leverage the value of their brands, were found.
1. Almost all of brand perception can be explained by performance against two holistic measures: product excellence and cost.
These two holistic measures, product excellence and cost of ownership, account for 91 percent of the difference in how consumers perceive automotive brands.
Of the remaining variation in consumer perceptions, roughly half (or 5 percent) is due to specific attributes such as “sporty.” These secondary attributes are not highly correlated with other attributes and cannot be included in the holistic measure of product excellence. With the exception of a few outliers (for example, BMW, whose reputation rests in part on its sportiness), most brands tend to be relatively undifferentiated along these secondary attributes.
2. Brand positions tend to change relatively little over time.
The perception-forming process is long and relatively immune to simple manipulation by the manufacturer, in contrast with most consumer goods, whose brand equity is created substantially through advertising. Consumer perceptions are shaped in large part through accumulated product experience, both firsthand and indirect and a large number of objective sources of information like word of mouth, product reviews, and safety ratings.
Although marketing communications certainly play an important role in what consumers think, the only way to sustain meaningful change in automotive brand perceptions is with ongoing, consistent changes in the underlying product experience.
For example. the Hyundai and Kia brands have benefited from a sustained flow of new products that offer significantly improved quality, attractiveness, edgy styling (at times), and extremely low cost of ownership due to low sticker prices and extended warranty coverage. The resulting value proposition has not only increased these brands’ unit volume, but also has radically changed consumers’ perceptions of the brands. What is stunning is how much the Korean brands have improved in such a short time, especially in comparison with how long it took Toyota and Honda to shake their reputation for producing tin cans. If the Korean brands continue to improve their reputation for product excellence while maintaining their cost of ownership, they could leapfrog the Big Three mass-market brands to join the cluster currently defined by VW, Nissan, and Saturn.
Conclusion
Tangible product differentiation is both critical to success and difficult to maintain on a sustained basis.
Minimizing cost of ownership (both up-front acquisition cost and long-term ownership cost) within the segment boundary is critical.
Lifestyle and emotional imagery cannot compensate for weak brands and undifferentiated products. Consumers may acknowledge a brand’s “personality,” but the aspects of the brand that drive consumer shopping behavior are promises that the brand represents for product excellence and cost of ownership. Image advertising and lifestyle and event marketing may help to accelerate consumers’ understanding of the brand, but it cannot fundamentally change the promise.
For mass-market vehicles, incentives are a symptom of a weak brand — not the cause. In the absence of a strong brand, price is the only plausible way to affect near-term demand. Hence, curtailing incentives in an effort to “build brand” is not likely an economically viable option.
-- Shikhar Nigam
