LexFather

by Peter M. DeLorenzo



Brand Erosion Hell: How To Tell If Your Favorite Car Company Has Started To Lose Its Way.

Birmingham, MI - Following-up last week's col about the importance of brand image in today's cutthroat automobile market, I thought it would be a good idea to provide a handy guide for automakers and auto enthusiasts alike - so that they can tell when their favorite brand has started to lose its way.

Last week, we sent several Honda and BMW zealots into apoplectic fits because we had the temerity to criticize their favorite car companies in our "On the Table" col. We stand by our criticisms of those two "sacred cow" brands, however, because this business of protecting brands is such a fragile endeavor that even the smallest of missteps can end up derailing a so-called "bullet-proof" brand down the road - even if their current lineup of cars seems to be stellar. I will say that I lumped the BMW 1 Series in with other recent BMW atrocities, and that wasn't accurate or fair. If anything, the 1 Series is shaping up to be the first authentic BMW in years - that is if Helmut Panke and Chris Bangle and Co. can restrain themselves from screwing it up.

So, how can you tell if your favorite automaker has started to lose its way? Well, sometimes it's obvious - whether it's major product gaffes or playing in segments that the automaker doesn't really belong in or fire-sale prices, the big things are easy to see. But other times it's the "little things" that are harder to see and that pile up over time until, all of a sudden, the attitude of "good enough" has replaced the old way of going the extra mile to make things right - and then slowly but surely, little bits and pieces of brand character end up falling by the wayside.

Here are a few examples...

1. If car company executives seem to be spending and inordinate amount of time justifying their actions, that's your first clue that something's wrong. We've seen it countless times since we started this publication (and long before that in the ad biz - ed.), but usually, the more car companies blather to the media and to everyone else about "getting their story out" and the more defensive they get about certain aspects of their new products - it's because there has been an inexorable shift in the wrong direction. For instance, the moment Chris Bangle unleashed his "vision" for BMW's future design direction, BMW executives were put on the defensive at every auto show and at every media event they attended. All of a sudden, the traditional traits that made BMWs so attractive - the inherent goodness of the handling, the sweet motors, etc., became an afterthought. All because BMW had departed from a logical, evolutionary design sequence - in favor of a jarring exercise in visual excess and unabashed self-indulgence. That combined with the fact that BMW engineers became completely lost in their quixotic quest to have electronic technology "add" to the BMW driving experience - when all it did was add another layer between the driver and the road - to create a classic recipe for a brand that has begun to lose its way. There are plenty of other car companies who fit into this category, but BMW certainly is the most visible example - and the company with the most to lose if they can't manage to extract themselves from the brand erosion that has already begun as the result of too many fundamentally bad product decisions.

2. If an established luxury brand all of a sudden feels compelled to become more "approachable" - watch out. At certain times during a luxury automaker's life, there always seems to be a point where a really bad combination of doubt and greed sets in - and heretofore well-meaning executives get it in their heads that if they extend their brand downmarket just a little bit, huge profits await. The problems begin when they actually start talking themselves into believing that these forays into new, lower price point segments can't possibly have an adverse effect on their brand images. And they would be dead wrong for believing that, too. You only have to look at two brands that have embarked into territories where they don't belong - Jaguar and Mercedes-Benz - to see what I'm talking about.

The X-Type has been a disaster from the get-go for Jaguar - no matter what they say to the contrary. The official Ford/Jaguar company line is that the X-Type has accomplished what they set out to do - which was to bring younger buyers into Jaguar brand consideration. The reality is that since the X-Type's very survival in the U.S. market is solely dependent on heavily-supported factory leases, the car has taken the Jaguar brand off of its pedestal and plunged it into payment hell - cheapening the brand in the U.S. market immeasurably. And it's really too bad, because the new XJ8, on the other hand, is a superb car. But when Jaguar is having to shove X-Types out the door with tainted, distress-sale lease prices, while at the same time telling customers that the new XJ8 is worth every penny - a giant disconnect occurs. And what message does that send to the customer, exactly? That some Jaguars are better than others? Probably. Or worse - that some Jaguars aren't "real" Jaguars at all - and those are the ones to be avoided.

As for Mercedes-Benz, some M-B purists will argue that the last great Mercedes was the previous S-Class, that everything since has been cheapened or corrupted by technical and electronic overkill, reduced build quality and poor reliability. And I'd be hard-pressed to argue that point (except for the AMG cars, which are still worth owning). But for me, the moment M-B really lost its bearings was the decision to introduce the now infamous C-Class Coupe - a car that featured a retail price of around $26,000. Overnight, M-B dealers found themselves having to sell these cars against loaded VWs - and any shred of "specialness" attached to the Mercedes-Benz brand literally went right out the showroom window.

Seasoned German auto executives will tell you that Mercedes has always played in a wide range of segments back home and that it shouldn't be such a big deal for M-B to play in a wide range of segments in the U.S. But that logic falls apart when you take into account the image that had been pounded into the American car buyer about Mercedes up until about ten years ago - and that was that Mercedes-Benz cars were "engineered like no other car in the world." Not only did people really believe that about Mercedes - the cars seemed to live up to that reputation, even if they were a bit stodgy.

But when Mercedes-Benz shifted their brand image strategy from one of "technical superiority" to one that revolved around the concept of being "more approachable" in the marketplace, they began a downward spiral that they've yet to pull out of. It didn't help, of course, that the cars seemed less solid, featuring cheaper-looking interior materials for the first time, while suffering from the same German predilection for electronic overkill that plagues BMW.

Despite the current sales numbers and an attitude emanating from their U.S. and German executives that everything is just peachy with Mercedes-Benz, this brand remains as the most classic example of brand erosion in the market today. And I've yet to see any evidence that they a.) get it, or b.) are taking steps to do something about it.

3. Yes, as a matter of fact, in the car business, it is about the "little things." Several years ago, Honda redesigned the front suspension of the Civic, replacing a classically elegant "wishbone" design derived from traditional racing car practice with a cheaper, lowest common denominator McPherson strut design - typically used in more mundane econo-cars. Honda executives breathlessly described (see point #1 above) how these struts wouldn't compromise the Civic's sporty character and said that basically people would not only get used to it, they wouldn't give it another thought after they drove it. But Honda purists went ballistic - and justifiably so. Here was Honda, which built its reputation on building brilliantly innovative racing motorcycles and eventually with creating equally brilliant championship-winning Formula 1 engines - not to mention an impressive array of creative street machines - "copping out" by opting for a cheaper, less creative suspension design to save money. It was a totally baffling move for a company that prided itself on its technical innovations and its "march to a different drummer" attitude - characteristics that separated it from virtually every other mass-market car manufacturer and aligned it more with the boutique high-performance icons of the automotive world. Honda executives bristled at the criticism, of course, insisting that enthusiasts were reading too much into the change and that Honda had not changed its innovative philosophy in the least.

But it remains a significant development, because it seemed to be the "tipping point" from which the Honda brand began a gradual walk away from its previous reputation. No, it did not mean that Honda started churning out inferior products overnight (the S2000, and Acura TL and RSX remain some of our favorites), but it did alarm the Honda purists for all of the right reasons. Where else was Honda cutting corners? What other pieces would Honda determine to be "good enough" - when its previous stance would have never allowed such calculated mediocrity? In short, what else was Honda not doing that they used to do on a regular basis - the things that made Honda, well, Honda.

The Honda Motor Company that was on display at the media conference at the Detroit Auto Show earlier this month was simply not the same car company that once was. Instead, we saw a car company wallowing in "me-too" SUTs, while using a gimmicky robot to represent Honda's creative research into mobility. The previous Honda - that innovative car company that once wowed the rest of the industry on a regular basis, was nowhere to be found.

Now, Honda finds itself being attacked on all fronts by innovative car companies that haven't yet yielded to "good enough" thinking - ones who still believe that the "little things" are absolutely crucial when it comes to brand integrity. Something Honda has either forgotten or at least misplaced, apparently.

Creating a brand image in the car business is an exceedingly difficult endeavor - even when a car company has all of the ingredients in place. It can take literally years to get it right. And yet, maintaining the right brand image "formula" is like juggling a volatile and unstable mixture - and it becomes an endless, day-in, day-out struggle to protect the integrity of the brand, especially with the kind of sheer inertia that these car companies operate under.

That's why when BMW got off track with its Bangle-ized design language and its obsession with electronics - to the detriment of the brand - it's folly to suggest that these missteps won't matter. Yet, when you listen to BMW executives like CEO Helmut Panke, you can tell that they're scoffing at any suggestion that they have somehow lost their mojo and insisting that absolutely nothing can derail them from keeping their title as one of the most sought-after brands. But I argue that it has already begun for BMW, that the slow but sure erosion of BMW's brand image is well under way. BMW will have to stop being obsessed with sales numbers and start worrying about the authenticity of their cars before I believe that they understand what's happening - and what needs to be done to stop it.

BMW's big problem is that they've forgotten who they are. They've gone from being the thinking-person's sport sedan to becoming almost a caricature of themselves in the marketplace. Bloated, terminally electronically-assisted "luxury" cars have nothing to do with BMW's brand image. We'll have to wait for the 1 Series to see if they can get back on the right track.

Half the battle for a car company in creating a brand image is knowing who they are and what their brand stands for - or at least what they'd like it to stand for.

Honda's problem is that they've forgotten who they are. Or maybe it's that they don't want to be who they once were anymore - they're more comfortable with aiming a little lower. After all, mediocrity is bliss for a lot of car companies. It's a lot easier to be a "me-too" car company than to live up to a past reputation.

In Jaguar's case, it seems to be intent on trying to be something it's not - which is a manufacturer of "near-luxury" automobiles. That's not brand erosion - that's brand delusion. People want beautiful, elegant and even fast Jaguars. They don't want Jaguar poseurs running around, "faux" Jaguars with similar design cues but with none of the substance of a proper Jaguar. Why is that so obvious to everyone but the Jaguar brain trust?

And Mercedes-Benz actually believes they can do whatever they want in the market and it will work out. They remind me of the "old" GM - a company that acted like the world still revolved around them a good 15 years after that ceased being the case. There's a whiff of arrogance hanging from every communication and statement emanating from Mercedes-Benz, and it's still obvious they believe that they can enter any segment without impunity - and with no brand erosion to speak of.

But they're flat-out kidding themselves.

There's a time lag at work here - in that a car company's bone-headed moves have a cumulative, negative effect. Mercedes-Benz has now been mired in poor quality ratings for three years running. They have unleashed a series of very "un-Mercedes-like" cars that have neither the presence nor the street "cred" of their previous cars. In the midst of straining for more sales volume, Mercedes has eroded its brand equity by building more vehicles that seem to play to the lowest common denominator. And now, the biggest sign of real brand erosion for Mercedes? Their resale numbers are spiraling downward.

In other words, Mercedes-Benz has forgotten who they are and what got them to this point to begin with. It's not brand erosion in their case - it's more like brand implosion.

This industry is littered with car companies that have been doomed to Brand Erosion Hell - to the names mentioned above you can add names like Buick, Chevrolet, Ford, Pontiac, Saab, Saturn, Porsche and a few more. At one time or another, they either lost it, found it or couldn't find it if you laid out a trail of bread crumbs to help them find it again.

And all of these auto manufacturers that have found themselves in Brand Erosion Hell share the same basic things:

Either they forgot who they are, don't remember who they are, or can't, for the life of them, figure out who they want to be.

mooretorque

Well thought out piece. Cautionary, indeed.


Who's next?

SC400-V8

iTrader: (1)

This is indeed a very good arguement. Especially the mercedes part. The four cylinder mercedes hatchback, whatever its called, sucks.

And I can still remember when I saw a grey mid-90s C class in the parking lot of an outback steakhouse and thinking to myself: "What the HELL is so special about this thing?"

Iceman

I will refer you to two other recent threads, one about how Toyota executives in the U.S. have gotten braggingly condescending and another on how Lexus plans to both go downmarket to increase sales and upmarket by adding "features" and "more luxury" to their top-end products.

Uh-oh...

SecPole14

I don't know what you're talking about. Lexus has stated that they will not release any cars below the IS. And the next IS will be a legit 3-Series competitor. How is that moving downmarket?

Also, Toyota has the right to brag. Until they start changing their strategy (which is why the other companies were criticised) I see no reason for concern.

SCHEME

Exactly, Uh-oh is right. Think how much closer Infiniti would be to Lexus in image if they would have never released the G20. Brand image must work very differently in America because in the rest of the world, not only is there a C-class coupe, the is an A-class that looks like a straight up golf cart with windows.

edit sp

SecPole14

Don't get it twisted. Infiniti was never close to Lexus. I don't know why people praise the original Q so much. It was an ugly car. And Infiniti really messed up their flagship over the years. You just can't do that. Infiniti isn't going anywhere. They have some interesting products, but it's still a half-witted attempt to blend Lexus luxury and BMW's performance. Until they at least equal both in my book, they'll never be in the Big Leagues:

Lexus
BMW
Mercedes
Jaguar (mostly the XJ8)

That's where it's at.

BigVIPness

I wonder what car that guy drives.

Iceman

Whoa, WantaNewLex, take off your Lexus blinders there for a sec. I see from your profile that you drive a 1990 ES250. Do you really think that the ES250 and initial offering of the LS400 were substantially better than the first Acura and Infiniti products? You're entitled to your opinion on the "ranking" of carmakers, but just realize the whole world doesn't line up with your point of view.

As for embracing the lower end of the market with the new IS, here is a quote from that other thread I referenced: "The key to volume growth is the IS 300," Press said at the Detroit show. "It's in a price category where having volume is OK. It's feeder stock for future Lexus purchases."

So now Lexus is going to bring in tens of thousands of new buyers at the cheapest end of the product line as "feeder stock", and you're not the least bit concerned it could water down the prestige of the Lexus name? Let me ask you this: how much respect do you have for someone who brags up and down about their "Bimmer", and then you find out it's a stripped-down base-model 323i (or worse, a 318ti)? I'm not saying Lexus can't do a better job, but they do have to be careful.

That attitude is the first step on the path of arrogance preceding a fall. Needless to say, they ARE changing their strategy, drastically! The addition of all these new models, a performance segment, AWD... And it's almost added as an afterthought, "Oh, yeah. Um, we're going to keep up the Lexus quality and customer service and stuff, too." I'm just saying that, as a Lexus fan, it is cause for concern when I see them REACTING to other products on the market rather than LEADING the market and DILUTING their core focus and spreading themselves thinner over more areas.

mmarshall

Your long piece on the downfall and arrogance of several auto manufacturers was well done. I agree with most of it.
However, most of it can also be wrapped up in one long sentence......A number of manufacturers are simply ignoring their niche and tradition in order to try and market to the huge numbers of "mainstream" buyers, where most of the money and profits are.

SecPole14

Not a chance, baby.

Who said I expected the world to align itself with my view(s)? However, I expect more than a few people would agree with me.

Well, that's true, but I really wouldn't go out of my way to brag about any car I would have. However, I would certainly drive a new 325...It's RWD. The fact that so many people have a lower-end 3-Series takes nothing away from the 5-Series or their ///M models, etcs.

I'm well aware of your views about arrogance leading to downfall (I think you mentioned it in another thread) but I have to disagree. What may seen like an afterthought to you was probably in the planning at Lexus for a loooooooong time. Lexus knows the pillars that support them are made of quality and customer service.

In fact, let's take this from another perspective...Just because Lexus is wanting to go into higher-volume and "feeder" cars doesn't mean they'll be cheap and totally accessable to anyone who wants one. In fact, I see the next IS moving up in price quite a bit. Not to mention there are some real halo cars on the horizon, if the rumors of the ultra-lux cars are true.

And again, I will have to disagree with you. REACTION is what it takes to be successful. They can't keep pumping out boring sedans. Even some hardcore Lexus fans were alienated by the recently-revealed GS. Honestly, Lexus couldn't possibly have a more diluted brand. The associations between Lexus and Toyota are more than enough to make the case for many people who wish to criticize. And if blending in-house, German super-tuner-like performance with ledgendary Lexus Japanese-made quality and luxury isn't called LEADING, I don't know what is.

By the way, since this plan worries and bothers you so much, what would you do if you were in charge of Lexus? Which direction would you like to see the brand go?

kylesc400

while i never paid much attention to the early acura products, there is no comparison between lexus's us launch and infiniti's. the difference is not so much in the quality of the products, as few were truely exceptional right off the bat, but in how long these first products hung around. the es250, admittedly inferior to the 92+ es300, didnt hang around nearly as long as the g20 did. lexus replaced the es250 with the es300 barely 2 years after their initial launch, almost immediately improving its entry level vehicle. infiniti, on the other hand, decided they needed to keep a dolled up 4 cylinder eco-car for 11 years, from 1991-2002!

this alone isn't really enough to keep infiniti from truely competing with lexus's brand image. on the other end of the spectrum, the reason that the original q45 was praised so much is that it handled and behaved very much like a bmw, with quality and luxury near (at the time) lexus/mercedes levels. it was a big touring 4 door that was pretty successful. here's where infiniti's brand takes a dive as compared to lexus: in order to attract more customers, infiniti decided to make their flagship car more mainstream; when they redesigned it for 1997, they actually downgraded their 4.5L v8 to a 4.1L v8 with 20 fewer horses. they tamed it, and it fell into the background with no compelling reason to consider it against a bmw 740, lexus ls400, or mercedes s320/420.

on the other hand, i think infiniti is on the right path with the g35. this is the first truely exciting car theyve produced in years. while they still have quite a ways to go (especially when it comes to the quality of the interior), and the m45 doesnt seem to be an especially inspired car in the same sense as the g35, their recent full-range overhaul has them headed in the right direction. ill be very interested in seeing what pops up in infiniti showrooms in another 3 years or so.

Iceman

Those are all good points in your last post. And here you have asked an excellent question: what WOULD I do? Honestly, I'm not exactly sure. The sheer volume of changes they're talking about are what cause me to fear they won't be able to maintain focus on excellence. None of the changes taken alone (making the IS more 3-series-like, adding AWD across the line, producing an exotic sports car and super-luxury sedan, developing an in-house super-tuner) is a bad idea. I guess if they succeed at all of them and keep the things that make Lexus Lexus-like then we'll have a company that has done what no other has ever been able to accomplish.

Will BMW, Mercedes, Acura, Infiniti, Jaguar, and Audi let them do this? Will Lexus' striving for perfection cause them to rededicate their efforts as well? Or will Lexus put them out of business (because let's face it, if Lexus does all the things they're talking about doing and the other guys stand still, there will be no reason in the world to buy from them)? And if they do, and there is no longer competition driving Lexus to strive, will they get lazy or STILL maintain a corporate culture of excellence?

LexFather

My 2 cents is, it seems to be (and it is) a helluva lot more expensive and harder to make quality your #1 priority than adding a turbo this, anti-roll bar that to a car. Since Lexus focused on the FOUNDATION of a great car (Quality and Reliablity), they can always add more. Look at what we do to our cars. It does not make them any less reliable.

Gekko

Great article. I think Lexus/Toyota is vigilant in remembering what got them to where they are:

The Toyota Success Formula
By making some of the finest and most reliable cars ever built, Toyota just keeps getting better - and BIGGER
By Malcolm Fleschner

http://www.sellingpower.com/article/...207&pageTitle=