Brand expansion or dilution? What say you?

[hoffmeister_fan]

So inadvertently, there was some debate regarding the merits and ramifications to expanding from a brand's core products by adding more niche-based products, many of which are based on other products within the brand's portofolio. This was brought about in the BMW 6er GC thread around the time it was debuted.

So I ask what's your opinion. Do more product availability that appeal to wide swath of a population benefit the company in its survival? Or does overexposure and possible dilution potentially damage the brand's equity in the long run? What is more detrimental?

 

[Wunderkind]

It depends on the strategy being pursued by the brand in question. Is the carmaker blindly chasing higher volumes or is the carmaker looking at niche segments and the ever-changing needs and tastes of their customer. The execution is equally important.

 

[K-A]

DILUTION! Speaking for myself, every year more models get released, these "Premium" brands lose more magic and "Premium" value to me.

 

[hoffmeister_fan]

DILUTION! Speaking for myself, every year more models get released, these "Premium" brands lose more magic and "Premium" value to me.

K-A, since you own an E-class, how likely are you to get another E-class? An S-class? Next-gen CLS-class?

 

[K-A]

K-A, since you own an E-class, how likely are you to get another E-class? An S-class? Next-gen CLS-class?

I just read your reply on the 6er GC Thread, and you have some very valid points, however, looking at it from an enthusiasts perspective, I just can't find anything about such heavy dilution/saturation that would maintain a Premium-aura of these cars, to me. I'll admit, I don't buy an M-B ONLY for the quality, and M-B doesn't charge me so much for a 268HP, 25 MPG (Highway) car (i.e lower statistics than a $30K loaded Kia Optima I'd assume) 4-Door Sedan only because of it's superior quality.... They charge me that because I'm buying into a Luxury Brand, a brand that I drooled over and said "One day I will afford this" as a little kid. THAT'S the magic of M-B to me, and that's what got them to where they're at.... PLUS the quality/design/safety. If M-B had A/B/C/D/E/F/G/XYZ brands and a partnership with Chrysler or Nissan when I was a kid, I probably wouldn't aspire to own one so much one day.

It was the focus, the exclusivity, yet still design and price tag with the quality and longevity and substance of a mass manufactured car in mind that drew me to M-B.

These niche models might not hurt their "Premium Values" now, but in the long run, BMW and Mercedes can easily be a higher quality Toyota or Ford, which means that along the way, they lost the plot.

IMO, a core group of *focused* cars is what M-B and BMW should have continued.

Imagine if BMW didn't make a 6GC, or a 5 GT, or a X6, or a 3 GT, or 4GC, etc. etc. Imagine if they had, instead, a more "limited" selection, BUT put alllll the R&D money they (IMO wasted) into these rebadged and re-skinned versions of those very core cars, into only those core cars? I'm sure they could have made the 5 Series SO dynamic and ahead of anything out there, that it would fulfill the role of a 5 Sedan, a 6 GC, etc. all in one, and would be an absolute benchmark without question. Same goes for M-B....

.... Instead of putting so much money in Marketing (i.e, niche models, as many of them are purely Marketing created/related), but into engineering the E-Class to be so above and beyond anything out there, with an attainable price tag, IMO that would have continued M-B on the very path that got them to the epic level of cache they are at today. However, I'm not in the business, and I'm speaking purely from an enthusiasts perspective. Cars are my escape, and I deal with enough business in the real world, so when it comes to cars, I will always push my enthusiast agenda and take less consideration of what business moves are necessary behind the boardroom doors. I want my cake and I want to eat it too.

About your question: I was actually washing my gleaming E, looking at it, and thinking that unless I want a car that I even like as much as, nevertheless more than it, I'd have to spend a lot, lot more money, and even then, nothing out there for even $100K gets my juices going more than a nicely equipped E-Class.

A CLS I have to rule out, because of the idiotically function-less design rendering it without enough headroom to accommodate my tall a$$. I was trying to push myself into liking it, as it would be the most rational next-choice for me in relation to what I drive and pay right now, but I don't love the design fully, and it's a deal breaker with its terrible interior headroom space.

The S, I dunno, it depends on how good the W222 is, and how much money I have. I like the 212 more than the 221, and the S-Class in general is too pointlessly large for me, the E size meets the sweet spot.

As for the E, I'm on my second W212 already, and I vowed to force myself to get something else next time, but I just can't find something that speaks my language for the value I'm getting. The 6-Series COUPE is alluring me right now, but I don't know if I like it $40K more than my car, if even more than my car period.

I guess to wrap it up for your question: I don't really know. But I do know that I wouldn't buy into any of the "niche" models out now, as none of them speak to me enough.

 

[MikeJ]

In my view, there are brands that are mainstream, brands that are exclusive and brands that are somewhere in between. Which brands fall in which category varies from country to country. From my perspective, Audi (8th best-selling car brand in Finland during the first 11 months of 2011), Mercedes (10th) and BMW (13th) are definitely mainstream. The likes of Ferrari, Bentley, Rolls-Royce and Aston Martin (with only a handful of sales here, if that, are exclusive). Lexus, Porsche (thanks to the recent model range expansion), Jaguar and perhaps Alfa Romeo are in the middle ground. As I see it, with the possible exception of the R8 and SLS, no matter which model you buy from the mainstream brands, it's still going to be "only" Audi, BMW or Merc in the eyes of quite a few people. If you want something "different", better look at the in-between brands. I don't see a problem with the mainstream brands expanding their model range (even if it means smaller and cheaper models) as long as they are well-executed and representative of the perceived brand values (luxury/sportiness etc.). It's the in-betweeners that have to carefully think about their positioning - an attempt to move towards mainstream could mean losing their existing clientele.

 

[Mr Robert]

Spreading will make things thinner unless substance is added. Simple as that.

 

[martinbo]

^ Oh that's a tremendous way of putting it dr. D. I'm afraid that as it's now in the public domain I may be compelled to use this in a pub-debate.

 

[Levi68]

As all three brands (BMW/Mercedes/Audi) add more and more version/models, I do not think there will be any dilution, in the way it will hurt sails. But for the enthusiast, the brand will lose its emotional value in regard to history. When I think of Mercedes the instant picture I have is S600 Pullman. When I think of Audi the instant picture I have is Quattro. When I think of BMW the instant picture I have is M3 E30. This goes only for me and other enthusiasts, not for the common, that don't understand anything but just follow trend/fashion.

 

[Guibo]

If you had asked me this question 2 years ago and asked me to consider a parts-bin turbocharged "M" then I probably would have said it's dilution, and that something like BMW should be chasing exactly an E30 M3 and nothing less. But the more I read about the change in markets (particularly emerging markets where the value of a sharp-as-hell 5er would go basically unappreciated/unnoticed), the more I'm leaning toward "dilution as a necessity for expansion," and thus a way to remain competitive. The simple fact is, if there weren't the two dozen or whatever 911 variants, and Caymans/Boxsters/Panameras/Cayennes, and ONLY the same "purist" lineup that existed since the 70s, then Porsche would be losing a helluva lot of sales to competitors.
There's another obvious benefit to expansion: You can better amortize costs and maximize profits when you have R&D budgets spread over more models that appeal to a wider audience. Ferrari has done this well with its V8 engine and DCT transmission. BMW/Merc/Audi obviously do this with the same basic engines/transmissions that can be found through much of the lineup. All of this has helped to maintain some very sharp driver's cars within the company portfolio: 458 (and upcoming Scud version), 1M/M3 GTS, Black Series (which never existed in "pre-dilution" days). Ford and GM are now realizing that they can't keep catering to the same core constituency, and have to adapt the line to a wider, global audience; in the Corvette's case, you can see the problem when the average customer is 54 years old!
One company that knows too well the pains of staying too closely centered around singularly focused cars is Lotus. Now they are revamping their line with several brand-new models, and while it can be said some of their cheesy marketing is left wanting, the basic truth remains: You've already lost your independence and if you want to remain relevant as a prestige marque, you'd have to deliver more cars to a wider audience.
Here's Car Magazine, quoting Lotus CEO Danny Bahar:
"20 years ago Aston, Bentley, Ferrari, Lamborghini, Porsche were all mentioned in the same breath as Lotus. We were perceived as a premium maker. Our competitors invested in their equity, which led to greater awareness, customer value and sales. Lotus has been left behind. We have been loss-making for 15 years.
It is sometimes necessary to change the core DNA a little bit.*
We don't want to be niche. We can't survive with only enthusiasts buying our cars, but we will still maintain products that please existing customers."

Talking with ex-Ferrari designer Donato Coco, now at Lotus:
"'What next, a crossover?' I joke.
'Crossover?' considers Coco. 'No, not yet, but why not?'"

*The change in core DNA makes sense, since the "typical buyer" changes as time changes. It's only natural.
This is not to say that it's all roses. A company can suffer a PR black eye if they overstate the case for a car (ie, the market they thought existed didn't). Whether that has any real, long-term negative effects on the company remains to be seen, however. And without resorting to company financials, we can never be quite sure what people in emerging Asian markets are actually buying. There, something like a 5er GT or R-Class could very well sell strongly where it is seen as a failure in, say, North America. We chuckle a bit on the forums at their misfortune, but does the typical prestige marque buyer really care or even know? My guess is they don't.

 

[Kowalski]

Take a good look at Saab and you'll see what brand dilution is all about.

 

[Cashmere]

As much as we may call it brand dilution, fact is that most of these so called niche models are selling. I hated BMW's decision to produce the X1 / X6 / 5GT but aside from the 5GT it seems the others are all selling well. So if it makes BMW money then it does not matter what I think as they company is a business after all. Im also unhappy about the dilution of the mini brand, as some of the newer models are detaching away from the 'mini' form factor but once again, they are selling so who am I to say. I wont be surprised if we eventually see a RR SUV.

The world is evolving and so is the car industry.

 

[Guibo]

FYI
Cayenne vs 911 sales, FY2009-2010
Middle East & Africa: 3,008 vs 959
China: 10,007 vs 674
Australia & New Zealand: 493 vs 293

BMW Group Annual Report, 2010
Volume (Country: net increase over prior year; % of BMW total)
China: 183,328; +83.5%; 12.5%
USA: 266,580; +10%; 18.2%

BMW Group % change in revenue
Africa, Asia, and Oceania: +68.2% (China alone: 109.1%)
Europe: +9.4% (Germany: -2.0%)
Americas: +14.%

Printed in their annual report:
"What does a businessman want from a premium vehicle? Besides exclusivity, comfort and exceptional performance, the main thing is the space inside: the kind of space that makes the BMW 5 Series Long Wheelbase version [developed especially for the Chinese market and produced at the Shenyang plant] so very comfortable. And that is something not only I truly appreciate, but also my business friends."
--He Xialong, Beijing, China

One thing to keep in mind is that "premium" can take on a different connotation depending on where you go. In some markets, brands that don't have great prestige or pedigree can do well. Buick, for example, does very well in China even though sales have remained low for a long time in its home country. In China, it doesn't have the same kind of baggage it carries at home. In the rich districts of Asia, people are aware of the quality reputation of premium brands, but they aren't so driven by things like pedigree, race history, etc. Once the Chinese start building cars with quality surpassing Buicks, this may change. And so might the meaning of premium when they look for increasingly differentiated products; pedigree might be a part of that differentiator.

 

[Gianclaudio]

Dilution, IMHO.

It may be great for Audi, who has no real heritage and needs to sell lots of cars to gain image, but for BMW and specially Mercedes, is terrible. I wish BMW and Merc's SUVs never existed, so the cheapo A/B class, hideous R class/X1 or blunt driving Bimmers.

Sadly, this is the way the world is going: Bentley, Maserati, Alfa Romeo are going to male SUVs, Lancias are rebadged Fiats and Alfa Romeo are miles away from once they were.

 

[Wolfgang]

Cheerio. Here the brand's still undiluted?



http://www.mercedesbenzinnovation.com