Car brands: Why self-identifying as premium won’t work
In some sectors, products are whatever the marketing people say they are. Madri beer has been hugely successful as the premium lager that is “the soul of Madrid”. Except it has never been brewed in Madrid, and comes from Molson Coors breweries in the UK.
Life in the car world is more difficult. Anyone can claim to be premium, but that is like someone claiming to have a sense of humour: it is a characteristic determined by other people. Some premium brands (e.g. Mercedes) started life as luxury cars and then steadily moved down to lower segments: its smallest model went from being the E Class (then called 200) in the 1970s to the C Class (originally branded 190) in the 1980s and A Class in the 1990s. No-one would ever doubt Mercedes is premium (possibly apart from some buyers of shoddily made early A-Class models).
Creating a new premium car brand is very difficult. It is possible to create a premium small model, which young people (who tend to have fewer ingrained preconceptions) think is cool. The first Citroen DS3 was a smash-hit, winning 20,000 British sales per year. However, DS then thought it was a premium brand and introduced ever-larger, ever less-successful cars. Today, DS has a full range of models – and sold 1152 cars in the UK last year.
Infiniti has been and gone in the UK, despite peerless build quality and dealerships that looked like boutique hotels. Even Lexus, backed by the mighty Toyota, has never really delivered on its early promise – the first LS 400 in the 1990s terrified the European premium brands. The one Lexus designed specifically for Europe – the CT family hatch - was a flop.
The two questions would-be premium brands have to answer are, “What is this brand for?” and “How does it make a customer look to their friends?” In 1990, Lexus stood for the most refined and reliable luxury saloon in the world. At a time when Audi/BMW/Mercedes reliability was being questioned, that was a pretty compelling offer. LS 400 owners could go to the golf club and happily tell their friends that they were driving the future of luxury cars (as Tesla owners did 20 years later).
Today, there is no measurable gap between the perceived quality of Asian and German models, so it is much harder for a new premium brand to break through – they don’t have a credible answer to either of the above questions. The oldest myth in the car industry is that buyers are bored with the traditional German brands. Familiarity does not worry buyers in the slightest. What worries them is being laughed at for their choice of car.
As the old political adage says, “If you have to explain, then you are probably losing the argument.” People want a premium car that either speaks for itself, or has such a compelling story to tell that others will be convinced. Finding that story in the car world is a lot harder than dreaming up a fictional Madrid character in a houndstooth jacket.