Asymcar 19: About that Ferrari SUV…

What motivates a company to destroy its brand?

We start with Mini’s plans to sell 100,000 cars in the States by 2020, nearly double today’s pace and remember how Cadillac destroyed their brand and how Mercedes, Porsche, Ferrari et. al. can’t wait to do the same.

Also, might retail power in the form of strong dealer regulation limit brand’s ability to improve or address customer experiences? What motivated Warren Buffet to enter the American car dealer business? (With a long aside on what Buffett investment logic is all about and why it’s not contradictory to a growth investor).


via Asymcar 19: About that Ferrari SUV… | Asymcar.

  • I agree that American brands do some amazingly stupid things under the label of “brand extension.” Remember Coca-Cola clothing back in the 80s?

    Though it’s interesting to note that what American brands can or can’t do without looking silly is different from what Japanese companies get away with. In addition to building cars, Toyota has a line of factory-built pre fabbed homes sold under the Toyota Home brand. Panasonic builds homes…and makes high end bicycles. Sony has booming life and car insurance businesses, and also sells makeup, all under the Sony name. The Tokyo Broadcasting System (TBS) also has a line of home builders named TBS Home. It’s quite bizarre…

    • madmaxmedia

      I think those those examples are more driven by business environment in Japan (and Korea) which favors large conglomerates, rather than branding exercises. But you’re right- customers also have to accept these products or services as well, otherwise Toyota for example could have used a different brand for their prefab houses if they really wanted to get into that market.

  • RAZ

    Remember the horror felt by Porsche and BMW owners when the Cayenne and X5 were announced. All those vehicles have done is help Porsche and BMW make money hand over fist and further expand their lines with BMW X3, X1 and now the Porsche Macan. So while some may have preferred them to stay as smaller speciality manufacturers it’s hard to find fault with their success.

    • madmaxmedia

      You’re right to note that brand ‘extension’ is not automatically a bad thing, if those extensions are keeping in line with what customers associate with your brand (otherwise it is generally better to launch a new brand for a new product.) But I think it’s one of those things that is easier to screw up than get right.

    • Success is precisely what is so tragic about this. The company trades its brand for sales growth. Sounds like a bargain but it isn’t. The brand is the meaning of the company. It is why it exists.

      • Taiwanosaurus

        Surely not. A brand is amongst other things the result of a sustained period of effective product delivery that coalesces market perception of certain characteristics and allows pricing power. The brand exists because the products delivered. Otherwise there is no brand, just a name without pricing power.

      • art hackett

        Again, Apple seems to be the company that is able to protect and grow its brand. Most of the rest seem to be juicing up on steroids for the temporary hit, with the inevitable decline to follow. The quick fix never is.

  • Taiwanosaurus

    Regarding Porsche, here in China no self respecting millionaire would drive one of their fiddly little coupes around on these crazy roads. On the other hand a Cayenne or Panamerica makes perfect sense and the place is littered with them. For the average Chinese millionaire, the ‘brand’ that Porsche represents is different (to that you mourn the passing of), less minutely articulated, and more about general quality and sense of European prestige and performance. In short, the brand is renewing or even rebooting. A key perspective here is that the world is big, and brands can mean different things in different places. China is a truly enormous car market and we will see more and more prestige brands doing things that seem sacrilegious in order to win position. Good for them.

    • But the meaning of “European Prestige” will fade as Chinese brands develop. Once being European ceases to be meaningful, what are these brands left with? Again, I cite the histories of Cadillac and Lincoln (American Luxury—don’t laugh), Jaguar (British luxury and performance, now owned by Tata) and Rolls Royce.
      Selling the secondary meanings (a heritage or history) is a sign of decline not of value creation.

      • Taiwanosaurus

        The European Prestige tag surely is allowed to continue so long as “prestige” is delivered (surely connoted by the end user rather than inherent in the product by some magical way). Cadillac failed because it didn’t deliver quality. Having recently sat in a Cayenne, Porsche still very much does. The owner, a Chinese, was very impressed with the way it was put together. This guy is not a fool – he knows a good bit of engineering when he sees it. Jaguar seems to have its strongest line up in years (although to reference my local market of China, the Land Rover brand is going to drive its future growth in this most urban of markets. Go figure..) and Rolls Royce is not declining in the pure engineering quality that it can offer. Arguably both Jag and RR are more secure in their value delivery now that they have deeper pockets to draw from. Jaguar in particular was unable to do quality in any way at all (I am british and saw their products while growing up) until Tata came in and properly managed the business.

        So, I take your point that selling secondary meanings is not value creation but I am not attempting to go that far. I want to argue that brands like Porsche can extend into new categories by continuing to do their job: offering top engineering and sports performance with a flavour and thus meet the evolving needs of the market. Surely they don’t have to double down to suit the purists and end up like Kodak?

      • My complaint is about a brand being stretched across areas over which it becomes meaningless. This is common and the practice has its own name (badge engineering), but I contend that it has significant costs for companies which depend on their brands.
        Luxury automakers seem to have thrown caution to the wind in the pursuit of expanding markets (China and Middle East, surely). I am not arguing a purist point of view. I am arguing the point of view that brands need to be protected.

      • Taiwanosaurus

        I am not quite sure that I follow the logic completely though, seeing this and also your comment below on the ‘tragedy’ of sales growth via new categories/form factors as something that means the end of a brand.

        To mention Jaguar, Bristol, Lotus etc., as a few examples from my own British heritage, we have a mixture of brands who in some cases have withered or become niche to the point of irrelevance (outside the House of Lords in the case of Bristol) through a blinkered attempt not to move with the times or with market growth.

        At some point one needs to address the major product or geographic drivers of overall market growth in one’s segment, surely? Can we not also assess the opportunity cost of not trying to succeed in China (for example) with a line up of coupes perhaps only suited to a junior wife when one could do things so much more successfully and still (with the Panamerica rather than the Cayenne) something measurably Porsche?

        The local market cares little for legacy brand heritage details if it is even aware of such. A Panamerica or Cayenne would still do well at a fair price point in China (a very new market for cars and one where brands both hit and miss – ask Aston Martin) due to the quality of product execution. These products meet local market expectations and thus provide the necessary if not sufficient conditions for continued brand relevance. Given that the world’s largest automobile market is China’s and that India’s is the world’s 4th largest, we do not boggle that an SUV might be a logical extension of the existing line up. If Porsche can withstand the credibility damage around being a product-extension play of something as 2009 as Blackberry, then I must insist that a Porsche SUV, for example is both non life-threatening and perhaps even warranted for purpose of longevity. Can we not celebrate this move as a daring execution of brand values in a new framework? Who is judge and jury in this kind of assessment in any case?

      • Taiwanosaurus

        Just had a look at Bristol Cars in Wikipedia:

        “Bristol Cars Limited is a manufacturer of hand-built luxury cars[1] headquartered in Kensington, London, United Kingdom.

        Bristol Cars is the last remaining descendant of the Bristol Aeroplane Company, a major aircraft manufacturer that at one point employed well over 50,000 people. After the Second World War the Car Division of the Bristol Aeroplane Company was formed, later becoming Bristol Cars Limited.

        Unlike most speciality automakers, Bristol does not court publicity and has only one showroom, on Kensington High Street in London.[1]Nevertheless the company maintains an enthusiastic and loyal clientele.[2]

        Bristol has always been a low-volume manufacturer; the most recent published official production figures were for 1982, which stated that 104 cars were produced in that year.[3]

        The company suspended manufacturing in March 2011, when administrators were appointed and 22 staff were made redundant.[4] In April 2011, the company was purchased by Kamkorp.[5] Since 2011, the company has restored and sold all models of the marque, whilst a new model is being developed.[6]”

        Purists do need to take care not to end up implying that in effect the best protection for the pure brand could be found in Chapter 11! In Bristol’s case neither what was a successful aircraft company or a less successful car company – despite all those loyal clients – managed much by insistence on or leverage of brand characteristics as the market moved on.

      • Nicholas

        Buick is actually a well respected brand in China. Why? Because the officials drove Buicks in the past. You may note that some of the current models are designed there. Four doors too… Two door cars are not popular in China. Global does not equal local. A local focus is what drives growth in markets with different needs.