Marque madness

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The frenzy of carmaker acquisitions in the years just before and after the millennium has sparked more new models, made largely possible by sharing major auto component systems among the new sibling brands. The opportunity to dip into another brand's parts bin has allowed automakers to churn out more new models faster and cheaper, resulting in an explosion of marques the likes of which the industry has never seen.

More are on the way, which means more advertising dollars, but it's not going to be easy for those who frame the marketing or media strategies. Carmakers will have more shared-equity models than ever before and face tougher competition in a fragmented, consumer-controlled marketplace.

Consider this: The 241 nameplates sold in the U.S. last year will increase to 307 by 2010, according to AutoPacific. The best-selling 10 badges in 2004 captured 26% of the U.S. market, says George Peterson, president of the consultancy. If one assumes there will still be 10 models in 2010 accounting for 26% of the industry's annual sales, that means 297 nameplates will be fighting for 74% of the market, he says.

As Mr. Peterson asserts: "If that isn't a marketing war, I don't know what is."

Marketing becomes more critical in today's overcrowded auto market, says Jim Sanfilippo, exec VP of Omnicon Group's auto consultant AMCI. But he says advertising that tries to prove differentiation that really hasn't been built into the vehicle won't work.

Today's consumers are too sophisticated and have easier access to more information than in the past via the Internet, so "no amount of creative advertising will be convincing," says John Casesa, auto analyst at Merrill Lynch & Co. "Badge engineering provided illusionary economics for carmakers," he contends. "If the vehicles aren't differentiated, you lose on the revenue side."

So, in today's gridlocked auto industry, it's more about the product than ever-differentiated vehicles, that is, true to a brand's core positioning. Seems pretty simple, right?

Well, it's not. Mr. Peterson says it takes discipline among the sharing brands.

"You can't reinvent the wheel every time," Ford Motor Co.'s Earl Hesterberg, group VP-marketing, sales and service in North America, says about producing new cars. "Everybody is trying to be more cost effective."

The experts caution car companies must consider the sharing more of an art form than a cost-cutting exercise. To be clear, the industry has used the platform-sharing process for decades, but industry consolidation has accelerated it. Teams from different parts of the world increasingly work together to develop sibling vehicles.

Sometimes the results are a burden. General Motors Corp. flubbed the last generation of its minivans, partly because its European Opel arm insisted it needed to be narrower for Europe, says Mr. Peterson. GM's U.S. team acquiesced and Opel canceled its minivan six months after it came out, leaving Pontiac's Montana and Chevrolet's Venture less spacious than leading competitors.

Daimler-Benz started a virtual feeding frenzy with its 1998 acquisition of Chrysler Corp.

A RASH OF MERGERS

Other carmakers scurried to the mating dance. Also in 1998, Germany's Volkswagen and BMW fought over Rolls-Royce and sibling Bentley. VW bought the company and U.K. factory that year, but BMW separately acquired the rights to the Rolls name. In 1999, Ford acquired Sweden's Volvo Car Corp., and Land Rover the next year. GM bought the North American marketing and product development rights for Hummer from AM General Corp. in 1999, and the next year acquired the remaining half of Sweden's Saab AB. BMW acquired the Mini brand in 1995 when it bought the Rover Group, but didn't start selling a modern, redesigned version of the small car until 2001.

The automakers spent $10 billion advertising in U.S. measured media last year, according to TNS Media Intelligence. Carmakers are increasingly turning to nontraditional marketing to better reach consumers. They're shifting ad dollars from conventional mass media into events, branded entertainment, videogames and ride-and-drive programs.

AutoPacific asked 32,000 new car and truck buyers where they got information about the vehicles they bought. Test drives ranked first, Mr. Peterson says. The research didn't ask where they first learned about the models.

Mark LaNeve, who on March 1 became VP-sales, service and marketing for General Motors Corp. in North America, says one of his region's missions is to tighten the focus of the automaker's eight vehicle brands.

"Platform sharing is commonplace in our industry," he says. "If you can't deliver the brand proposition, don't do the product. How well you can differentiate an attribute is going to separate the winners from the losers."

He cites GMC for its strong all-truck lineup and Cadillac, which has its own premium platform that won't be shared with any siblings, as among the strongest in GM's stable. "We need that same kind of crystal-clear focus for every brand."

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