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 / Fall 2003 / Issue 32(originally published by Booz & Company)


Reality Is Perception: The Truth about Car Brands

In contrast, the value of Saturn’s brand has been deteriorating. Saturn was initially able to transfer consumers’ satisfaction with the dealer experience to the product. Although Saturn still remains differentiated on the basis of its channel performance, the product has failed to satisfy consumers’ expectations for quality, and the brand as a whole has experienced significant erosion.

Like Saturn, the Buick, Oldsmobile, and Mercury brands demonstrate the impact that a consistently weak product line has on brand value. In their heyday, Buick and Oldsmobile represented the quintessential premium brands — steps above Chevrolet and only a notch or two below Cadillac. Several generations of product that were rebadged versions of mass-market vehicles, and the growth in market penetration of alternatives such as Volvo and, more recently, Audi, undermined the value position of the Buick, Oldsmobile, and Mercury brands.

Mercedes-Benz and BMW have both delivered significant improvements in cost of ownership over the past decade. In part, this was caused by direct pricing pressure from Japanese luxury brands (most notably Lexus). However, we believe a large portion of the difference is due to a change in product mix to include more entry-level luxury vehicles (e.g., BMW’s 3 series and Mercedes’s C-class). As these brands have shifted their center of mass toward “entry luxury,” so has consumer opinion shifted.

Marketer’s Checklist
Few manufacturers have the resources required to implement such a sweeping overhaul of their product portfolio. Consequently, brand positions tend to change relatively little over time. Furthermore, it is far easier to erode brand equity than it is to build brand equity. Product missteps, gaps in the product pipeline, and intentional efforts to shift a brand’s customer base can lead to significant deterioration in brand value.

The five findings detailed above have profound implications for most manufacturers.

  • Tangible product differentiation is both critical to success and difficult to maintain on a sustained basis. A key focus of the marketing function should be to rigorously understand consumers’ preferences, unmet needs, and willingness to pay, in order to maximize the “hit rate” on innovative products.
  • Minimizing cost of ownership (both up-front acquisition cost and long-term ownership cost) within the segment boundary is critical. The marketing function must take an active role in balancing the drive toward lower cost of ownership with the consumer value created through innovative features and options.
  • 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. Consequently, the number of resources applied toward lifestyle and image advertising should be scrutinized for appropriateness and effectiveness.
  • 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.

Many manufacturers have made brand positioning and development a key item on their marketing agenda. Yet brands are not the product of manufacturers’ marketing efforts. Instead, consumers base their understanding of an automotive brand’s value on their accumulated experience with that brand’s products. If you want to change the brand, change the products — for the better.

Reprint No. 03302

Research Methodology

Our research is based on data from the Allison-Fisher Barometer of Automotive Awareness and Imagery Study (the primary source is the “Car Makes” study, which is supplemented with the “Light Vehicle” study to include Saab and Infiniti). The research and conclusions are specifically for cars. Allison-Fisher surveys car buyers on their attitudes, focusing on 24 specific attributes: excellent handling, excellent ride, excellent workmanship, good looking, good warranty program, good customer service, good safety for occupants, high trade-in value, prestigious, luxurious, really dependable, sporty, technically advanced, fun to drive, excellent acceleration, lasts a long time, name you can trust, viewed as a leader, satisfying sales experience, trend-setting vehicles, economical to operate, excellent gas mileage, good value for the money, reasonably priced.

We employed standard statistical analysis (factor analysis) to identify which of these image attributes correlate with each other and to distill the 24 attributes down to a small set of underlying, uncorrelated factors, or “meta-attributes.” Attributes with a 60 percent correlation were considered part of the same factor. Two underlying meta-attributes emerged from this distillation: product excellence and cost of ownership.

In order to further validate the dual meta-attribute model, we employed standard regression analysis techniques to demonstrate the meta-attributes’ ability to predict brand opinion. The results confirmed the model and demonstrate very strong predictive power (R2=96%) for the model.

After identifying the two factors and determining each brand’s scores on the two meta-attributes, we detected clusters of brands. These clusters not only match our intuition of how the automotive market is segmented, but are statistically valid (based on cluster analysis, another standard statistical technique).

To study how brands have changed over time, we looked at historical image attribute data, limiting ourselves to the subset of image attributes that were consistently available across the entire past decade. The original analyses (factor analysis and clustering) were repeated on this subset of image attributes and conducted on the full decade-long set of data. Brand position evolution was then studied to see which brands showed both significant (i.e., large magnitude relative to others) and consistent (i.e., same year-to-year trend) movement.

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