The impact of branding: Mercedes-Benz (top), Honda (middle) and Kia (bottom)are taking a cue from other industries and aim to put more polish on branding. BRAND MANAGEMENT BUILDS ON IMAGE MAKING: EVERY CARMAKER HAS HEIGHTENED NEED TO CRAFT A CHAMPION; EXECUTION VARIES

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Brand management is changing the car industry.

Positioning strategies and advertising are more focused. Ad budgets continue to climb every year.

At the same time, however, there's corporate pressure to cut costs.

Auto marketers are facing stiffer competition with a plethora of new products and product parity. Some are starting to study other businesses, including the trend-setting fashion industry, hoping to get ahead of the pack.


The auto industry is one of the last categories to initiate brand management systems. General Motors Corp. got the ball rolling when it formally reorganized three years ago based on Procter & Gamble Co.'s package-goods brand management system.

GM's three-tier interpretation of brand management is the industry's most unusual. Every model made by the giant carmaker is a brand, as well as the individual automobile marketing divisions, such as Chevrolet, and the corporate GM name.

Ford Motor Co. revised its two-year-old branding system last summer, adding individual model brand managers like GM.

Experts say branding may be easier for Ford because it only has two car divisions and one of its divisions bears the Ford name. GM, on the other hand, has six divisions.


Although the industry has different definitions for brands (see list on Page S-22) and executes brand management in different ways, the concept is here to stay, car executives and auto consultants agree.

No matter how an auto marketer approaches branding, it should live by this rule: Be consistent in product names, advertising themes and brand images, says James Mateyka, VP-automotive practice for A. T. Kearney Inc.

"If you're going to build a brand, you don't change themes every three weeks," he says. "You've got to stand for something."

BMW of North America has a sort of mission statement it calls the "champion strategy," explains Jim McDowell, VP-marketing.

"We really believe we have the best product, the best ownership value and the best ownership experience. We focus on that in everything we do," he says.

For a brand to stand out in the marketplace, "you have to stand for something," Mr. McDowell continues. "A lot of our brethren attempt to be the best of everything and if you attempt to do that it probably means you don't stand for anything."


Creating brand identities is easier for niche marketers such as BMW than mass marketers such as GM or Ford, he concedes.

Kia Motors America, the Korean importer who entered the U.S. in 1994, bases all its communications and advertising on two core concepts -- down-to-earth and affordable quality, says Dick Macedo, VP-marketing.

The car brands performing best in unit sales and profitability tend to understand the simple image and identity of a brand, says auto expert Chris Cedergren, managing director of Nextrend, an auto consultancy.


"The best and most important brands haven't deviated from that," says Mr. Cedergren. Building a brand can take years and "everything goes into it -- even the way you run your company behind the scenes," he says. "It's the way you design it, the way you sell it, the way you advertise it and the way you retail it."

Turning around an ailing brand is tricky, but doable, says Bob Lutz, Chrysler Corp. vice-chairman.

"You can really radically change the image of a brand like [Chrysler's] Dodge in five years," he says. "You've got to have all guns blazing. The advertising has to be right. The product has to be right. The dealerships have to be right and the press has to be favorable."


Mr. Lutz says "design has to be consistent with the image you're trying to convey for the brand."

Other car executives agree.

Mike Jackson, president of Mercedes-Benz of North America, says, "Product is an absolute essential. Without it, you can forget about it."

Mercedes set out earlier this decade to alter its brand image from "admirable ... up on a pedestal ... an icon," to an aspirational brand that appealed to a wider variety of buyers, says Mr. Jackson.

It succeeded with new products that were positioned as more youthful, fun to drive, with strong safety features and a "very compelling value story," he adds.

New products, he stresses, must reinforce and deliver the expectations promised by the brand.

Eric Conn, senior manager of national advertising at American Honda Motor Co. -- overseeing both Honda and Acura brands -- also believes product is key.

"If you have bad product, you're in trouble."

That's because, Mr. Cedergren maintains, the auto industry is an image business.

"If the image business starts with product and you don't have product, you don't have image," he says. "You have to develop products that are emotional."

Brand management's effect on the industry will be even stronger in the future, says Jay Houghton, marketing manager of Kearney.

One reason: New vehicles designed under new branding systems at GM and Ford won't be out for another two to three years.


Several Asian transplants and importers are now fine-tuning or tinkering with their brand efforts.

Much of the industry's branding work won't be done at the dealer level for perhaps another five to seven years, and changing customers' brand conceptions can take as long as a decade.

Mitsubishi Motor Sales of America, for example, "still hasn't done true brand advertising," says Pierre Gagnon, who became Mitsubishi's top U.S. executive as exec VP-chief operating officer in December.

Under his direction, Mitsubishi developed the new brand statement of "spirited products for spirited people." Mr. Gagnon, formerly consumer marketing director at GM's Saturn Corp., says the new brand positioning will show up in the 1999 Galant sedan's summer launch.

Even Honda, which experts cite as a strong auto brand, is fine-tuning its brand strategy. Honda plans to strengthen its corporate brand in the next few years as it attempts to take some of the spotlight off its popular Accord car, Mr. Conn says.

"Honda is known for the Accord and not much else. It's a great car, but it's not the whole corporation," he notes.

Chrysler, by using similar grilles for its Chrysler brand cars, is "doing a pretty decent job" of creating a family resemblance and thus, an identity, says Mr. Cedergren. GM was the industry's styling leader until it lost its way in the '70s during the oil crisis and import invasion, he says.


J. Mays is leading the way at Ford Motor Co. Mr. Mays, who became Ford's design chief last year, says the carmaker's new vehicles will mark an expressive era, communicating a range of emotions and values, from safety to honesty.

The carmaker has mapped out brand missions and niches for Ford, Lincoln and Mercury, so they don't chase the same customers.

BMW has always tried to keep certain design elements common in its lineup, Mr. McDowell says.

"You should be able to look at a BMW in your rearview mirror and be able to tell a BMW is coming up behind you," he says.


The auto industry is looking for ways to evolve its brand management approaches. Mr. Mateyka says the fashion industry is being looked at because it successfully gauges changing consumer tastes.

Martin Levine, general manager of Chrysler Corp.'s Chrysler/Plymouth/Jeep Division, says the automaker recently completed a study of retailers and marketers that included Tiffany, Ralph Lauren Polo, Sony Corp. and Johnston & Murphy. He declined to offer details, but indicated the focus was retailing methods.

"We're a manufacturer and we're a marketer. To think we're not a retailer is a mistake," he says. "It's very healthy to look at other companies."

Toyota Motor Sales USA's Toyota Division looked at brand-building by many companies, including Calvin Klein and Coca-Cola Co., says Dave Illingworth, senior VP-planning and development.

Honda isn't studying any other industries, says Mr. Conn.

"We don't worry how Nordstrom's draws people in," he says. "We're either not that sophisticated or not that desperate."

Mr. Jackson says Mercedes "looks at everybody in every industry and tries to learn every day."

He adds the fashion industry's successful labels consistently develop products to meet and exceed customers' expectations.


The fashion side of the car business is especially critical in upscale vehicles, says Mr. Cedergren. The bulk of automakers' profits come from consumers who buy vehicles because of their upscale images.

"You wear your car," he says. "Your car is an extension of yourself, based in image."

Self-image is extremely important to baby boomers and Generation Xers, Mr. Cedergren says. "The auto industry is the only smokestack industry that's fashion."

Cultural and societal changes affect car-buying habits, Mr. Cedergren maintains. To study the current sport-utility boom, he went back to the mid-'80s. He noticed a trend to more casual clothes, the rising popularity of hiking boots and stores like Nature Co. "SUVs are an extension of that" move to the outdoors, he says. "It's the look."

In terms of auto styling, the carmakers need to know what drove their past successes, he says.

Automakers who rely heavily on consumer research won't learn this fashion-image lesson, he says. That's because consumers are reluctant to admit they are buying certain vehicles for image or emotional, intangible reasons.

Mr. Mateyka agrees, saying Americans don't like to admit they're buying vehicles for their image because "it's classist."

Brand management is affecting research at the carmakers' advertising agencies.

Kearney conducted a survey of 100 branding executives at carmakers and their ad agencies for Advertising Age and Automotive News (see story on Page S-4). Kearney reported 42% of respondents say brand management has considerably affected research at the agencies.

But carmakers shouldn't rely too heavily on research.

Mercedes does all its research, then relies on its own judgment when deciding on a course of action, Mr. Jackson says.

"The real challenge is how to make that leap on all you know to where you want to go," Mr. Jackson says. "That's the art, the fun of it."

Mr. Cedergren says asking consumers what kind of vehicles they want in the future would be like asking him to design a man's suit that would be popular five years from now.

Designing suits, or future vehicles, he adds, should be left in the hands of the experts. "Consumer input is critically important, but it isn't everything."


In the current competitive climate, carmakers have been increasing ad spending.

Mr. Mateyka points to GM's brand czar Ron Zarrella's public announcement three years ago that GM planned to spend $30 million annually on advertising to sustain each of its key 30 brands.

BMW's advertising budgets continue to rise every year, says Mr. McDowell. "Everyone understands the need to differentiate themselves from the sea of mediocrity," he adds, but the entire industry is "looking for ways to deploy ad budget costs in the future."

Toyota, to help stem rising ad expenditures, is now combining its "Toyota. Everyday" brand ads with its product ads, says Mr. Illingworth. "We thought we were losing some ground because we were spending so much on our models."

Mercedes is spending more now than a few years ago. Mr. Jackson says "in total [ad] spending we're much higher, but we are spending less per unit" because Mercedes is selling more vehicles today.

BMW's loyalty rates means it doesn't have to spend as much to bring in new buyers as carmakers with lower loyalty rates, Mr. McDowell says. It costs an average of about $200 per vehicle to retain an existing owner, he says.

It could cost $800 per vehicle to attract a new buyer to a brand, and that's without cash rebates or other incentives, says Mr. Macedo.

Honda plans to strengthen its corporate brand in the next few years as it attempts to take some focus off its popular Accord and Civic, Mr. Conn says.

"We're trying to move a little away from our individual models," he says.

The dealer side of the branding story has yet to unfold in terms of the consistent dealership look and sales' experience, says Mr. Mateyka. "Most people [surveyed] aren't expecting that to change very much."

Kia looks at branding as "any consumer contact and we need to represent the brand at that contact," says Mr. Macedo. Those contacts include showrooms, auto shows or calls to Kia's toll-free number.

Mr. Macedo doesn't think branding has changed the industry much because he doesn't think the industry uses Kia's philosophy.

Mercedes believes, Mr. Jackson says, "We're basically in the relationship business."

He describes brand as "that emotional link of your brand, your product and the customer. The need in the future is to focus your efforts more intensely on that bond. That's where the industry is heading."

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