Back in the day, a discerning motorist rocking-up in a Mercedes Benz 300 SEL 6.3 was in no danger of encountering an equally-horsed "baby Benz." These days, the power-crazed pistonhead can purchase a 6.3-liter engine in any one of seven Mercedes body types. And while I'm sure an S-Class sedan has some fancy gizmos you can't buy in a C-Class, I'm not sure they're worth mentioning. But Mercedes' and its luxury competitors' slink downmarket IS worth examination. Are volume sales a form of luxury brand suicide?
I reckon the whole thing started with "feature creep." And why not? Why shouldn't a reasonably-priced car offer dual-zone climate control, satellite navigation, leather seating and a fine engine? If customers are willing to pay extra for their pleasure, why not sell it to them? And it was only natural for luxury brands to see the trend as a golden opportunity to reach down, add a little "prestige" to the mid-market mix and bank some big bucks. And so they did.
While Mercedes and Lexus had the longest journey down from their mechanical Mount Olympus, Audi and BMW quickly joined the corporate colossi's mass market migration. All four brands found riches refashioning their upmarket cachet into more affordable packages. Today, Americans can buy a Mercedes-Benz for $31,975 (C300), an Audi for $25,340 (A3 2.0T), a BMW for $33,175 (328i, soon less for a 1-Series) and a Lexus for $30,790 (IS250).
There is, of course, a flipside to this "downward line extension." Call it the Groucho Marx effect. Just as the legendary comedian "wouldn't want to join any club that would have me as a member," consumers in search of brand cachet tend to shun products that are widely available. Examples of companies producing upmarket and/or trendy goods that bet their life on the mass market and lost, abound– especially in the automotive arena.
Today, you can buy a Cadillac for $32,500 (CTS), a Jaguar for $34,995 (X-Type 3.0), a Lincoln for $29,305 (MKZ) and a Saab for $26,995 (9-3). That's before discounts. Discounts that reflect the fact that these formerly upmarket brands have squandered their allure to the point where their dealers wish their inventory had ten foot pole marks on it. For these former luxury car playas, moving into the mass market signaled the beginning of the end.
So how have the luxury Gang of Four avoided the same fate? You could argue they haven't. Their current success may be sewing the seeds of their eventual destruction. Perhaps Audi, BMW, Mercedes and Lexus' sales embody former NBC Prez Bandon Tartikoff's "Least Objectionable Theory of Programming." In other words, their products are popular simply because they're less bad than the other guys'.
Alternatively, you could say these companies make damn fine automobiles. Suggesting that the average car buyer is savvy enough to recognize and appreciate a given model's adherence to its maker's brand values may be something of an intellectual leap, but there's no doubt that the lowest priced U.S. Mercedes still has a certain "Mercedes-ness" to it. The other marques are equally unmistakable.
That said, these luxury brands' bean counters have severely stretched their products' DNA. Merc's bank vault gestalt took an enormous hit over the last twenty years. Bimmer's SMG gearbox, iDrive multi-media controller, run-flat tires, SUV and dumbed down steering are a worrying divergence from their Ultimate Driving machine ethos. The aforementioned Lexus IS' harsh driving dynamics bear scant resemblance to their magic carpet LS flagship. Only Audi creates a range of automobiles with brand-faithful consistency.
George Petersen of Autopacific consultants provides the bottom line: "Entry-level luxury cars need to demonstrate the capability of their brand–just as the more premium entries do." As the unforgivable Cadillac Cimarron and execrable Jaguar X-Type proved, a fancy badge can't compensate for product malfeasance. In fact, a lousy mass market line extension is the worst of all possible vehicles. It kills a brand's value for both financially-challenged aspirants and the well-heeled brand faithful.
All of which bring us to a piercing glimpse into the obvious. No matter where they're offered in the price spectrum, "luxury" automobiles that rigidly adhere to their manufacturer's core values bestow honor and longevity to their brand. Crap upmarket luxury cars are bad for business; but lousy mass market versions are lethal.
By this logic, an affordable Cadillac is not a bad thing per se. But you know what? I still can't get my head around it. As GM Marketing Guru Mark LeNeve said, "A Cadillac is something a kid should aspire to. Not something he should be able to own." Call me a snob, but my gut says he's right.
I agree the cars should be priced up there with the status they infer. There are always used cars available for the masses
I think they’ll be fine as long as they don’t put out any junk. Everybody’s real psyched for the bmw 1-series, myself included. It just fills a good empty spot. I don’t think anybody will think less of the 6-series just because there’s a great 1-series. However, hypothetically, if the 1-series was garbage, then yes, it would tarnish the brand.
Years ago, Cadillac had an “entry luxury” marque-mate called the LaSalle. It was supposed to serve as another step up on the GM “status ladder” just below the top rung Cadillac. It never sold in big numbers, and a case could be made that LaSalle just pilfered sales from Buick and Olds. When the LaSalle was replaced in 1941 by a new entry Cadillac, the Series 61, 61 sales were higher than anything LaSalle achieved.
A good gauge of “luxury-ness” I’ve developed is to drive a car in traffic in San Francisco. For some reason, that city has a high number of “car haters” and you can get a sense of this when you are the first car waiting for a crosswalk, by the dirty looks a given car gets from pedestrians. Far and away the worst glares are reserved for BMWs (or is it BMW drivers?) with a close second to Mercedes-Benzes (even a 190 or C Class). For some reason, Audis and Lexuses (Lexi?) get a pass.
I may seem like I’m arguing with myself, but I did learn a great lesson from my first job, a rug import company. The owner showed me this amazing rug that he just brought back from the middle east. He said he bought it for next to nothing, although it was one of the finest rugs he had, he priced it accordingly. It didn’t sell for about a month. He then told me that, sadly, as he was an honest man, if he wanted to sell the rug, he would have to raise its price. I couldn’t understand it, but he raised the price from $600 to $1400, and it sold that week. That’s how I learned how people (especially rich people) have no understanding of value, they only wish to buy what others cannot afford. Pretty disgusting if you ask me.
Great editorial. I think MB is a very typical example. Not sure how many customers they lost but I am definitely one of them because of what they did to the “entry-level luxury” C-class, at least the mid-90s version of the C-class was absolutely a mockery to the MB brand, in every respect. When the time came to replace my S-Class two year ago, I simply did not even consider the new MB.
I think what is an Oxymoron is a “mass marketed Luxury brand”. Lexus in the UK, for me, partially damaged their brand. When they first entered the UK, there were VERY few on the road. Entry prices started at around £50,000 (remember, this was in 1989. So allowing for inflation, the current day price would be £65000). But then, they introduced the IS range. This range allowed people to get a Lexus at around £20000. Surely, the whole point of a luxury brand is the knowledge that you’re buying a cut above the rest? No-one looks at a VW the same way as an Audi. But if you allow a brand to be accessible to the mass market, then expect your brand image to go with it.
BMW is considered to be a luxury car maker, yet according to recent sales figures, in the UK the BMW 3 series outsold the Ford Mondeo! How can you take a manufacturer like that seriously as a luxury brand?
That’s why luxury makers have to go down one of 2 routes:
1: Expect to be a small player, but try to retain as many shares as possible within the company to avoid takeover.
2: Affiliate or join a mass market maker to have the clout on prices and size. Just like Porshce did with VW.
Another thing that luxury brands must never do (especially, if they affiliate with a mass car maker) is allow platform sharing and dilute their technology. As much as Mercedes Benz were considered brutal to Chrysler, they were absolutely right to refuse platform sharing. Audi platform share with VW (and their other brands). Which begs the question, what are people buying? A more expensive version of their mass market affiliate?
As much as I hate to say it, Luxury car brands need to retain their snob value and keep themselves exclusive. Otherwise, what are you aspiring to?
Incidentally, this isn’t unique to the car industry. The fashion industry go through this almost cyclically. A new CEO comes into a fashion house, announces their intention to bring their clothes to the mass market and ruins the brand.
So, dalava, what did you buy to replace your S-class?
Is everybody forgetting the 1990 ES250? Lexus hasn’t moved downmarket at all, since their inception they have offered a downmarket model (based on the pedestrian Camry of all vehicles). When Lexus started, even the LS was not as expensive relative to other vehicles as it is now. Neither were the SC or GS when they were first introduced. The amazing thing is how Lexus has managed to build a luxury image while at the same time offering (and even relying on-the ES and Camry-based RX are their best selling cars) relatively cheap cars.
Likewise, Audi and BMW have relied on cheaper priced cars for a long time. Jaguar, Mercedes and Cadillac are really the best examples of the danger of moving downmarket, but Mercedes has somehow managed to (mostly) avoid the fate of the other two. That’s perhaps because Mercedes is an independent company (the average car buyer probably didn’t know that Mercedes and Chrysler were once tied together, and even after the merger Mercedes pretty much did what it wanted). When you buy a C-Class it’s a real Mercedes, not an upgraded version of anything, unlike buying an upgraded Mondeo/Lincoln LS (X-Type/S-Type) or Buick/Cavalier (Deville/Cimmaron). I can’t count how many people (people that have never even heard of a Mondeo mind you) that have told me Jags (not just the X-Type, but the XJ and XK as well) are just upgraded Ford Tauruses.
One last thing, I mentioned this in the Buick article, but a great car is sometimes able to truly transcend a downmarket brand. The best example of this is the Corvette, when I drive my Vette around nobody dares to suggest that its just a Chevy. But the Corvette has been around for over 50 years and it is so far out of touch with the rest of the Chevy lineup that it’s probably the exception to the rule
KatiePuckrik, i thought the chrysler 300 was built upon a Merc chassis? isn’t that platform sharing?
Phil: the 300s suspension (possibly subframes) are shared with an older E-class design. Platform sharing between the current 300 and E-class isn’t really happening.
I’m all for low-end luxury cars.
In my experience from 2003, if you buy a Passat 4Motion, you’ll end up paying something like $32K. You get a V6, AWD, and leather.
Buy a BMW 325XI for $35K and you get an I6, AWD and Leather.
The difference is one is a tarted up passat that uses parts from the $15K golf, and the other, well, doesn’t.
The thing that sold me on the baby Bimmers was the size of the rear brake rotors. In my mind, a 325Xi has no sporting pretensions, and instead delivers what appears to be a GOOD car with minimal embarassing cost-cutting. (please don’t flame me for that one).
I can’t WAIT for the 1 series. too bad it’s fugly.
Phil,
I believe that was on a redundant platform. Mercedes Benz didn’t let Chrysler use their active platforms.
I’m sure an executive was quoted as saying “A Mercedes will stay a Mercedes.” A reference to platform share with Chrysler.
Some do down market pretty well. You can’t spot MB’s badge engineering/homely roots in America, because the C-class isn’t used as a taxicab here. The Infiniti G35 is a Nissan Z, but its really hard to tell. Both are good cars for that price range, and that’s how you do it.
The Americans don’t. Cadillac could move up (sixteen?) and give the CTS to Buick (or Pontiac?) in the time-honored GM tradition of brand aspiration.
Lincoln can get Continental-like again now that Jag is (almost) out of the portfolio. By the same token, the MKZ’s unique interior/powertrain goodies would make a very fine Mercury Milan indeed.
Who knows what will become of Chrysler and Jaguar. Besides the 300C, both have been wrong for this market for years now.
phil:
Platform sharing is not a problem when a platform engineered from the start for a luxury brand is passed onto a ‘lesser’ brand. Especially if that platform is from the last generation and the new car looks nothing like the older one. The Chrysler Crossfire also used the last gen SLK’s chassis but not many outside of enthusiast circles knew that
Platform sharing is a problem when it’s the other way around, when a common platform is used to provide the basis for a ‘luxury’ car, especially when that platform has minimal changes and/or the premium model looks nearly the same as the downmarket model.
I think the real danger for luxury carmakers is not from moving downmarket, but rather from mainstream brands moving up.
These days, M-B, Lexus and BMW do not have a significant lead over mainstream players in terms of reliability, capability, safety and features. The differences between a $25K Honda and a $50K Mercedes are really quite subtle — the feel of the leather, the shininess of the chrome, the prestige of the brand.
I think a lot of luxury car buyers would consider buying 80% of the car for 50% of the money, so long as the dealership experience was respectful.
Are luxury makers going down market or are they just continuing to increase the size and price of their models as time goes on? There was a time that a 3 series was the size of the soon to be 1 series and had an affordable price. As the 3/5/7 have continued to grow in size and price a hole has been created at the bottom of the lineup. The 1 series will prove very lucrative for BMW in NA as long as they do a good job which I think they will do. The 135 specifically is going to be a milestone, a return to “The Ultimate Driving Machine” a return to the core design principles and many enthusiasts are very eager to get their hands on it.
I think Audi will do better with the A3 cabrio and coupe than they did with the hatchback. I do not know if the A1 will be a smart decision as the A3 is easily in VW territory how much more so would be an A1?
I wouldn’t be surprised to see MB come out with a B-Class to fight the 1 series. The C-Class is not a small car by any means.
If done properly, “affordable” or “entry level” luxury cars get you accustomed to the brand and you will want to step up for your next vehicle.
How many people just buy another Toyota because that’s what they had before and it was good to them?
I’m sorry but this argument is lost on me. BMW has a long tradition and has not always produced what is being termed “luxury” here. What they do need to do is produce great driver’s cars that can be taken into the countryside or to a track for some level of exhilaration and driver satisfaction.
IMO – the X5, X3 SAVs are the oddity in the BMW lineup but hey those strange high center of gravity Americans want ’em so why not…
The 1 series will be the great tradition of the 2002 and E21 and E30 3 series and will not damage the brand unless they lose sight of quality.
Please read Roundel or attend a BMW CCA event to find out what BMW drivers want from the brand – not what pundits expect after they’ve pigeonholed the brand.
The last paragraphs of this op-ed are 100% right on the money.
No matter where they’re offered in the price spectrum, “luxury” automobiles that rigidly adhere to their manufacturer’s core values bestow honor and longevity to their brand. Crap luxury cars are bad for business; but lousy mass market versions are lethal.
The problem with a mass market company owning a luxury brand is that they have the crap to “steal” from. Pure-play luxury automakers don’t, which makes it that much harder to screw up. Also, why the fact that Audi hasn’t succumbed to “quick & dirty” up-market rebadgification all the more remarkable. Better management, or just the residual effect of Germany Inc.?
Interesting to see that Porsche seems to survive just fine without a single offering below 40K… An entry level Porsche is a used one ;)
I certainly wouldn’t buy a Mercedes anytime soon. The quality advantage is long gone, and now the snob factor is gone, too. Hopefully the Italians will see the opportunity to take over the high-end market.
I have to disagree with Saab’s inclusion as “near luxury” failure – they’ve always been (well, at least since they ditched the 2-cyl engine) slightly past the top of the affordable mid-range (the Saabaru 9-2 excepted).
Saab’s problem today is purely shitty products and lack of dealers. Outdated (9-5), useless (9-7), and unreliable (9-3). For all intents and purposes, they’ve been replaced by Subaru, Prius, and Audi on the college professor list.
Why is it Volvo blossomed under Ford but Saab wilted with GM?
Finally, BMW has always amazed me – questionable reliability (several friends really know what the B, M & W stand for), high-end prices, and plenty of poseurs…but yet sales increase every year. I do know that they are a pleasure to drive as an enthusiast, so maybe it’s because, like Honda, they know their purpose in life. It will be interesting to see how the 1-series affects their chi.
Alex:
Porsche plays in a different segment, but you can argue that it suffers from the same problems. The Boxster and to a lesser extent the Cayman are ‘entry’ level. The same way a potential S Class owner might not want to be associated with Mercedes after seeing a C230 hatcback on the road, does a potential 911 Turbo/GT2 driver really want to spend $150k for a car from the same brand as the lowly Boxster (or spend that much to get a car that looks just like a $75k 911 Carrera2 to everybody buythardcore enthusiasts)? Especially when he can spend a little (OK, only a ‘little’ in relative terms but still) more and get a Ferrari or Lambo that carries much more prestige.
Nobody has yet mentioned the biggest down market car ever, mainly because nobody now thinks of this brand as luxury any more, merely because this car exists.
Have you guessed what it is yet?
It’s the Chrysler PT Cruiser.
It’s current MSRP is $15,530, although you can probably find some for five digit price tags after all discounts and rebates and crap.
People forget that, at one point, Chrysler was at least an equal to Cadillac and Lincoln, if not Mercedes or BMW.
What happened was that the PT Cruiser was supposed to be a Plymouth, but they eliminated that, so they gave it do Chrysler at the last minute.
Entry level luxury is a market segment coveted by all manufacturers. The original idea was to come up with a lesser priced model to get customers into the “family” and hopefully this customer would stay with the brand. Does it sound like Alfred Sloan?
When brand loyalty still had value. Today brand loyalty is highly diluted in the entry level luxury segment. Its a game of stealing business from your competitor, and the product reflects the fact that its destined to steal business, in a price and subsidy sensative market.
The brand loyalty is as long as the lease term, and 3 months before the end of the lease whoever has the next car with “buzz” and “subsidised” lease rate will win over the customer.
Every manufacturer wants to be there to “play the game”, Hyundai is attempting to get in.
BMW is the master in that segment with the 3 Series, the upcoming 1 series will win over some new converts for the duration of a lease. The risk for the established luxury manufacturers being that they lower they go in the market, the more dilution there is in loyalty.
It is all about a company’s center of gravity. For Mercedes, that center of gravity is the S Class and Cadillac is in a similar proposition with whatever their high end luxo-barge is (the De Ville?). In comparison, the center of gravity for BMW has always been the 3 Series. For Lexus, the center of gravity is more amorphous as their brand has been built on selling a high-end, worry free luxury car backed by Toyota resources and build quality.
Mercedes and Caddy have been relatively unsuccessful in their downmarket moves because trying to translate snob appeal to the mass-class is a tactic that is fraught with danger and both of these companies stepped on land mines. Mercedes downmarket move was timed perfectly with the huge hit their bulletproof quality reputation has taken over the last decade (and the rise of Lexus). Caddy got killed because they did things like the Catera and other badge engineering projects. The kind of people who drop $60K to hold their heads above the proles have an innate ability to sniff this sort of inauthenticity out and the sales numbers for both brands prove that those customers have turned to other alternatives.
BMW is in a much different position. They cut their teeth on selling high-performance versions of the appliance vehicles every Tom, Dick and Harry drives daily. BMW’s snob appeal was never something organic to the company- the market projected that image onto the cars based on the kind of people who bought them, not because BMW tried to establish the company that way. This isn’t to say that the 7 and 6 series are not important products, but BMW can play in the Luxury class without the pressure of needing to live up to some snob appeal pretense. The 3 Series is what makes or brakes BMW (for comparison, notice how Mercedes has been working their German asses off to show off the new S Class and how great it is as a way to try to claw back some reputation?).
Lexus is a different animal because they don’t have a legacy built up from a single automobile platform that has 50 years of history behind it (like the BMW 2002/3 Series and the S Class). Lexus has always presented themselves to the market as the bulletproof, value alternative to German/American luxury car buyers. In whatever segment of the market Lexus competes in, they live or die based on the mistakes made by other brands sort of like sharks sniffing out blood in the water. This is why Lexus is so successful in poaching Mercedes business (due to Benz’s quality foibles and perceived lack of value) while they have been unsuccessful in putting a dent in the 3 Series (BMW hasn’t really messed up that car, aside perhaps from the styling).
I don’t know if this model is available elsewhere, but in Canada Jag sells and X-Type Vanden Plas. (cue derisive laughter) If that’s not an oymoron, I don’t know what is.
I remember BMWs last downmarket foray, the two door 318 of about 1990. My boss had one. It sucked!
Well, at first I was kinda put off by this article, but I think I see the point in the last paragraph. I can’t imagine a worse example of this than MB. In Clevo, a MB dealer has been running a “Mercedes for the price of a Camry” commercial. Seems to be working in the amount of new C-Class I have seen cruising the streets. They have also been heavily promoting the R-Class and that too seems to be working I have seen at least three Passports and Siennas replaced with a shiny R-Class. Will these people be moving up after the kids leave? Probably not, but Mercedes seems to like the Mercedes for everyone deal. Okay, the corporate marketing department probably doesn’t like it at all.
K.
omnivore:
I replaced the two MBs I had with a BMW M3 and Subaru Legacy GT Wagon. I might’ve sacrifice a bit in luxury and “status”, but I can’t be happier as a driver and owner, not having to go to the MB dealer once every month.
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^ Are people around here ever gonna read a proper piece of article ?!
Why did the existed ?!
Answer: because there were cars like 170D/170E and MB badged trucks, buses and Co. witch saved MB bacon after WWII.
BTW wasn’t back then and entry level Porsche worth 20 000 USD in today’s money ?!
The Cimaron and X type were a rebadged Chevy’s and Ford Mondeo.
Ive been a reader for some time, but was prompted to register in order to second dolo54’s comment about the rugs. In 1977 approximately, the head of Oldsmobile Quality control confided to me an intersting result of a survey GM had taken of Cadillac Seville owners. The Seville was a new vehicle at the time, based on a heavily modified chevy nova platform. The Number One Complaint the buyers of this vehicle had, was that “It Didnt Cost Enough” !
Like Dolos rug tale, this has stuck with me all these years. Rugs, Cars, diamonds etc – it all connects. Thus down market brand migration seems very dangerous. The 76-77 Seville introduction was handled pretty well -features, engineering, promotion and market niche wise. The Cimarron 5 years later was a complete disaster as has been well documented.
Carmakers need to go downmarket to sell to Americans because we’re such an aspirational country. As a member of the great unwashed, I’m tantalizingly close to being able to afford a CTS or 3-series, and may someday buy one. Money for Cadillac! It’s great to sell a few cars to a few rich-rich people, but it is better to sell the millions of middle and upper-middle class people a vehicle at the top of their price range.
Another problem: no matter what you price something at, people will stretch to buy it if they want it, no matter how disastrous it’ll prove. Hence the looming real estate fiasco as everybody used ARMs to get into $800,000 houses they didn’t need for the last 5 years. You can’t price poor dopes out of a car, creative financing has leveled the field.
You wanna piece of road candy to flaunt at the poor? Buy an Porsche. Careful, though, people making less than $100,00/year can afford a Cayenne. There’s still room for ultra rich snob-mobiles, but don’t we already cater enough to rich jerks? I think so. Sell ME a car, I’m moderately well-off and willing to buy and appreciate a nice vehicle.
Hurrah for entry-level luxury cars, says I.
SherbornSean has it right. The mainstream cars are becoming far more luxurious with every redesign…At little or no price increase. People are starting to question if a 100% premium is worth it so it is forcing the luxury makers to move down-market to capture the 20-somethings into the brand.
If it were not for wrong-wheel-drive, I would choose an Accord over a C-class. (I prefer $50 scheduled maintenance charges rather than $600).
Ultimately, how far does the “entry-level” deviates from what the brand stands for is the question. If executed properly and the “entry-level” adheres to the brand value, the brand and the car will do well and achieve the intended purposes. Case in point, the Boxster, in my mind, is Porsche’s successful entry into the “entry-level”, while the Jag X-Type is not, for all the reasons we all know.
Thanks Luther. As you point out, RWD is the last unique selling proposition that MB and BMW have. I’m very curious to see what happens when Hyundai starts selling a nice RWD sedan for $25K.
All of this mess is a result of psychologists in the marketing department. They figured out some of what motivates us and the way we perceive ourselves in the world and we haven’t been the same since.
Why it used to be that people with money bought luxury cars and the rest of us bought whatever we could afford. Seems somewhere along the line power windows were no longer exclusive to Cadillacs and Lincolns and now everyone has a luxury car with PW, PS, PB A/C and auto transmission.
Don’t underestimate the influence different cultures have on our perceptions and desires. As more Europeans and Asians made their home in the US they brought to the workplace notions from their cultures that are quite different from our own notions. One example that illustrates this difference is from a German that told me in the 1970’s that depending on your position in the company certain cars were appropiate for purchase. I being an American purchased a Porsche. My German friend who could have bought 10, he was quite wealthy, would not because it would make him appear irresponsible. He bought an Opel instead, because that was consistent with his position. Later when he was promoted he bought a MB, not that he could not have purchased one when he bought the Opel. Some people make choices by what they think others think, rather than rely solely on their own criterion.
Of course we know that image and brand are becoming our reality more each day. Once we succumb entirely to brand we will loose our souls.
The US market is merely a (large) window into the global market. Globally Audi sells/sold the A1 & A2 below the US entry level A3, M-B sells the A-class in Europe, VW still sells the Phaeton everywhere else, the X-type was a success in the UK and the IS is probably the only Lexus most Japanese could ever even dream of owning. “Downmarket” is an arbitrary threshold set by a particular country’s economy that can never map exactly to the product portfolio of a global manufacturer.
“A Cadillac is something a kid should aspire to. Not something he should be able to own.” Call me a snob, but my gut says he’s right.
My gut tells me the same thing.
I am hopeful for a downmarket move from BMW. Get rid of all that excess weight, electronics, sunroof, sound proofing, seat cushioning, etc. and make a pure drivers car with that TT I6 for
BMW will sell all the 1-series it can build for a good while. There are no players in the RWD 4 seater compact car space. Also dont forget that the 3 series pricing can easily hit 50k and close to 60k for a 335i convertible. There is plenty of pricing room under the 3 series to still leave the 1 series upmarket.
This is so true it hurts. Brand extension downward is long-term suicide. I thought Toyota and Nissan had figured this out by establishing Lexus and Infinity as separate brands, but the low end of their lines is pretty low. Mercedes and BMW have really messed up; it is no longer prestigious when someone says “I have a beemer” and you have to ask “which one” to be impressed… On the other hand Jaguar has messed up at both ends, because their high end isn’t high end anymore, even though their low end is too low. Brand suicide.
This happens sideways, too; I mean, a Cadillac SUV? A Volvo SUV? A Porsche SUV? (911 owners, I feel your pain)
Of course, what you’re writing about is nothing new.
Can you say Packard 120? 110?
“Carmakers need to go downmarket to sell to Americans because we’re such an aspirational country. As a member of the great unwashed, I’m tantalizingly close to being able to afford a CTS or 3-series, and may someday buy one. Money for Cadillac! It’s great to sell a few cars to a few rich-rich people, but it is better to sell the millions of middle and upper-middle class people a vehicle at the top of their price range.”
But that is the purpose of brands, isn’t it? You sell Caddys to the rich, in relatively small numbers. You sell a downmarket luxury car as a Buick (to use the old GM ladder systerm). You get the sales w/o destroying the image of the high end brand.
Another way of looking at it: Social mobility in America is way down from what it used to be, so instead of selling aspirational products for people on the way ‘up’, the makers are positioning themselves to track a member of a social class from youth to grave.
Hence, it is OK for BMW and Audi to sell less than camry priced cars as long as they are small and targeted at upperclassmen in their youth. By the time they need a camry sized car, these peoples budgets have room for a 5/A6. And when they retire, they’ll do so in a 6/7/A8.
Hence, the 1-3-5-7 / A3-A4-A6-A8 buyer generally belongs to a different social class than his scion-corolla-camry-avalon / fit-civic-accord-? counterpart, despite the facts that there is some price overlap.
An M-B 300SEL 6.3 was a serious hot rod for the rich at the time, followed by the 450SEL 6.9 another serious performance car. Today a bi Turbo S600 is the equivalent serious performance car.
Who remembers the M-B CL230 Coupe/Hatchback which did reasonably well in the market until sales started inexorably declining.
In Canada M-B is selling the B Class, on a Powerpoint it looks good, in practice if they “juice up the B with incentives” it takes sales away from the C, the following month they “juice up the C” and so it goes.
BMW might experience the same, where the 1 Series cannibalises 3 Series sales.
Years ago, my uncle bought a 3 series BMW while he was starting up his businesses. That was all he could afford at the time. Now, 20 years later, he’s loaded. The entire time he was growing his business, he owned a BMW that was nicer (and more expensive) than the last.
His first 3 series treated him right, so he rewarded BMW with much repeat business.
While in college, I thought I might move from owning a couple of VWs to owning an A4 or an A6. After a bum VW Jetta and Golf, I’m not going to dump $40,000 on an Audi….not out of spite….I love the new Audis….I’m afraid of them now.
My next car will either be a G35 or IS250. You can be sure, if I like those cars, I’ll be back in the showroom for an upgrade later on.
Do smaller, lighter cars from luxury makers have to be perceived as “downmarket”? I’ve always thought that one of the most glaring examples of Detroit’s disfunctional thinking is the notion that small = cheap. The new 1 series is more intriguing to me than, say, the 6 or 7 series, not due to price but rather the potential for fun in a small(er), light(er) BMW. Likewise, the Cayman is in many ways at least as enjoyable to drive as the (justifiably) pricier 911 due to its extra helpings of smallness and lightness.
As Americans we tend to think in terms of more-better, but Goldilocks was on to something with her notion of “just right.” Just as a smaller better designed house can be far more enjoyable than a McMansion and a Nano can be better to live with than an 80g Ipod, so can a 3 series or C class be more appropriate choices than their larger brethren, regardless of ability to pay.
So, do smaller, lighter cars from luxury makers have to be perceived as “downmarket”?
To be honest, yes. Luxury isn’t just about the driving experience, but about the comfort you get from just sitting in that car. It doesn’t matter if they made a Smart car with Alacantra leather, burled wood, and brushed aluminum on every surface of the interior, it won’t create an atmosphere of luxury because it feels so claustrophobic inside.
I’ll put it to you this way: if First-Class seating on an airplane was as cramped as it is in Coach-class, would it still feel like it was first-class, even with the luxury appointments that a first-class passenger pays for?
“Of course we know that image and brand are becoming our reality more each day.”
I think the opposite is true that most Americans care about value and not brand/image now. I live in an upper-class area and most vehicles are Tahoe/Suburban and Explorer/Expedition and secondarily Odysseys and Siennas…There are very few MB, BMW, Lexus or even cars (My neighbor has a Rolls). Nobody really cares what others drive and they drive what they want. Of course the 2.801 vehicles are short-term leased :)
Leasing has made luxury cars easier to obtain. Go to a BMW dealer and all they talk about is lease and monthly payments. (Even if you say you’re interested in a cash price.) For $700/mo you can get a fully loaded $50K 3-series. For $900 a Boxster S. Other makes are similar. If you have a reasonable job, you can get into one of these for 3 years. Even though you’ll never own it, you’ll drive (flaunt) the luxury for less than a grand a month.
On the other hand, your run-of-the mill cars have moved uptown once options are added. Take the inexpensive $18K MINI, add a few option packages, and all of a sudden you’re over $25K. For a bit more you can get a year or two old Audi or BMW.
Basically you can take and make any car luxury-esque.
I’ll just restate and reorganize my thoughts as posted in the previous Buick Ain’t No Lexus (No Matter What Bob Lutz Says) discussion:
-I think that there is some confusion here between “luxury” and “exotic”. The nomenclature used in the world of consumer products is somewhat different from cars, in that the top of the heap in typical consumer goods (think Gucci, Rolex, etc.) is often termed “luxury”, whereas in cars, “luxury” typically covers just the upper-middle portion of the spectrum, and does not include the top.
In the car world, the top of the pile is termed “exotic”, and BMW, Mercedes, Lexus, etc. don’t belong in that category. That space is occupied by Aston Martin, Ferrari, Rolls, Bugatti and all the other stratospherically priced chariots that almost no one can afford. The semantics are different.
-In many cases, the lower end products of the “luxury” brands are not just gateway products, but are where most of the money gets made. Most BMW sales are 3-series; most Audis sold are A4’s, etc. The upper end provides the halo, image, and higher margins, but the “near luxury” cars are what brings most of the actual cash in through the door. The upper and lower ends are both vital to the luxury brand — SAAB, Acura, Lincoln and Cadillac illustrate what goes wrong when you dwell at the bottom without anything better above it.
To add a new point, I think that GM’s branding history is a unique case that does not parallel that of most other automakers. With the exception of VW in Europe since its acquisition of SEAT, Skoda, etc., only GM has gone down this road of progressive marketing via numerous different marques, at least to this extreme extent.
Most of the other major automakers have never followed GM’s path in this respect, limiting the progressive marques to a chain of two or three badges, i.e. Ford, Mercury and Lincoln; Toyota, Scion and Lexus, etc. What most other automakers have done with nameplates to build progressivity, GM is fairly unique in having done it largely with badges.
In the old days, this GM strategy was quite successful when the large number of badges was offset by limiting the number of nameplates. (It was possible to carry just a few models with a variety of body styles under each brand.) But it then evolved into a huge mistake, bloating the number of nameplates without offsetting that increase with a decrease in the number of badges.
Aside from the Big 2.5, the big losers in this sweepstakes have been SAAB and, to a lesser extent, Acura. SAAB has made the mistake of trying to play “luxury”, even though all of its offerings barely enter the threshold of “near luxury” — without a halo, the brand creates confusion, as there is no aura emanating from a higher-end offering.
Acura’s mistake was to play it too safe by starting with the Integra, which was too low on the pricing totem pole and had too much appeal to boy racers (the wrong demographic for a luxury brand), which ultimately tainted the whole brand by moving it downmarket, and taking cars such as the RL out of serious contention. (And to be fair, the upper end products also aren’t good enough to do the “luxury” message justice.)
To do luxury right, the last thing you should try to do is to appeal to kids who are trading in their skateboards for their down payments. It has proven to be a marque with one or two well-branded nameplates (TL comes to mind), but not much more to it than that. Once you go TL, there’s no where else worth climbing to, so it’s a dead end marque.
Let’s not confuse “high-end” with “luxury”. This is a nice article, but it conflates a number of different issues. Whoever said that BMW is not a luxury brand is right – they are a high-end brand, and there is a difference. I think they can absolutely succeed with the 1 series in a way that Mercedes (or, say, Bentley) never could with a line of compacts. Don’t think for a second that the 1 series will be cheap compared to vehicles of similar size.
Some auto brands have succeeded in promoting a sporting image, and some have not, but not all need to. Those that have can successfully sell smaller vehicles on performance (I think). Of course, if BMW pushes 1 series models out of the factories like they’re making Corollas, then yes, they will irreparably damage their brand.
When RL sales tanked Acura introduced a stripper model at a lower price point. Widely reported quality issues pounded an additional nail into the unfortunate RL’s coffin. The predictable result has been accelerated depreciation and alienated customers.
Acura overpriced the RL and got bit in the ass. This stellar automotive marketing lunacy is right up there with abandoning the famous Legend name and squandering a nearly insurmountable lead in the premium Japanese car segment.
Acura must determine the RL’s market segment. If it wishes to compete with the Lexus LS it will produce a first class, large, V8 RWD or AWD car and price it significantly lower than the LS until cachet is attained. If it thinks it’s a BMW 5-Series, Audi A6 or a Mercedes E-Class challenger it will design and produce a better car than those and price it accordingly. And it has to equal or surpass the superb Lexus owner experience, a tall order with much of the current dealer body.
Acura will not succeed by building an AWD Honda Accord with a fancy interior for twice the money without pampering customers. There are insufficient numbers of rich stupid people who will pay serious money for a smallish car with a high-winding, low torque six-cylinder engine and put up with Ford-style owner care.
Nice editorial, RF. :-)
Back in my day, I purchased a used BMW 320i. That was in the ’80s. It was a nice looking, good performing car that met my expectations as an auto enthusiast. (It sure sucked in the snows of New England, though.;-)
Not that Bimmers are perfect–-the 320i was far from it. Yet, take (nearly) any vintage of 3-Series out on the open road and tell me it’s “just another car.”
So, there I was, a young guy living in a blue-collar town, daring to own a “drivers car.”
That the BMW was seen as a Yuppie-mobile simply drove me insane. I could have cared less about all that “image” crap. But there ya go, a classic case of how perception can become reality.
I’m a little surprised to read comments claiming BMWs are, some 30 years later, “everyman’s” cars. I’d submit that’s only the case due to dual-household incomes, and the incerdible personal debt levels in the “gotta have it now” that is the America of today.
Anyway, in tangent with BMW image thing: My neighbor, who sells BMWs for a living, tells me that his customers will look at transmission choices in two distinct ways:
Buyers looking for an automatic will say: “BMW is a luxury car,” and therefore certainly should have an automatic transmission.
Buyers seeking manual transmissions say: “BMW is a performance car,” so of course it should have a manual transmission.
It would seem that BMW has done a respectable job of meeting the expectations, needs and desires of both types of buyers. Their solid sales/corporate earnings would support that proposition.
Whatever the label used to define the target-market for potential BMW buyers may be, they’re doing something right. And have for a long time.
“I’m very curious to see what happens when Hyundai starts selling a nice RWD sedan for $25K.”
Thanks to rapid advancements in Material Science, Metalurgy, and CAD/CAM systems, all cars from Yaris to S-class will become equally “luxurious” with handling of a BMW 3er and ride of a Lexus LS…How will cars/brands differ then? Size and Style…And maybe engine performance.
How will MB get a 3X price premium for S-class over a Hyundai Genesis? Or a Chery S-class-clone? I think it was Jim Press that stated that the new Lexus ES is better in every way than the original LS. Aside from WrongWD, he is right.
I Love Capitalism!!!
Maybe I missed it, but has anybody identified the fact that a major reason people buy Toyotas and Nissans rebadged as Lexuses and Infinitis is the dealer experience? They don’t want to line up at the Toiletta service desk behind the schoolteacher whining about her Corolla and the butt-crack landscaper with a Tundra problem, then go sit in the dirty waiting room amid screaming kids and greasy issues of Motor Trend, they want to go to the place that has stainless-steel furniture and fishtanks and a cappucino machine. That’s a large part of what they’re buying, and if you told them they could get exactly the same car by buying a Camry or a Passat, they would quite rightly tell you that you were wrong.
Downmarket rocks. I’ve got a VW with a power to weight ratio that would shame just about any luxury car from 20 years ago (and many today), satellite navigation, every song on every cd i’ve ever owned, an air conditioner *in my car* (take that 1950s!), gets a billion miles to the gallon, can go to the moon without a tune-up, has star-trek motors for the windows…what more could you ask for?
Give me rear wheel drive and it’s all over…call it downmarket, but I don’t need prestige to make me feel like a man, so I call a 3 series my next stop (and I’m not the only one). I aspire to awesome machinery, not label cachet.
How exactly does Near-Lux play into this? I used to consider Near-Lux to be Volvo, Saab, Acura, and Audi. However Audi seems to have graduated to the Luxo status (sans A3 and TT) and Saab has just fallen to pieces.
I’m just wonder what folks opinions are on Volvo right now especially with the new c30 hitting our shores just around the corner. I mean, a Mazda3 platformed stylish hatch with a turbo 5-cylinder starting at $22.5? Not to mention the Volvo interior is going to be much nicer than my wife’s Mazda3. Is there such a thing as near-lux value? Is a volvo this cheap going to hurt volvo or help them?
I personally think it will help them as volvo is more of a scandinavian style / safety niche player, but who knows. As the new v70 is based on the s80/xc90 platform and there has been no word of a new s60 (methinks it’s gettin the axe) volvo may be accomplishing what everyone here seems to think car companies should aspire to. Product focus. What other full fledged brand (not smart or mini) has only two base platforms?
Sorry, maybe a TTACer should just qwrite an editorial on that.
Well, I have two takes on this situation. The first take is that this is a brilliant decision in the short term. I’m in my early twenties and many of the people that I know driving the acura tsx,lexus is250, audi a3, etc are my age. There is a segment of the rich suburban 20 somethings that grew up in lux cars and would never consider “working up” to them. They want it now and that is what those nameplates are giving them, so they can graduate into the bigger models later. This is especially important given the fact that many of these kids were in highschool with new civics, so they need somewhere to move up to with a first job and they don’t need or want an Accord.
The other part of this is that I truly believe that lux cars partially doomed themselves years ago. Now that Toyotas and Hondas are bulletproof and the quick pace of tech means you get all the same goodies, what is the s-class offering? 27,000 way adjustable seats that massage you (and remove the need for a $20 hooker) are not enough to make me spend 100k and becomes increasingly irrelevant as tech grows. In fact, the gadgets are getting so complex people don’t even want them (see I-drive). In an era where a camry gets to sixty in under 7 secs, adding more power is pointless. Who cares is the merc cruises smooth and 180 mph, you’ll never see it. The truth is that honda, toyota, subaru, etc are killing the lux brands by leaving ever so little room for imporvement. Sure BMW will survive with enthusiasts who want rwd, but merc is simply unneccesary. In my opinion, they should have led the way in hybrid tech, it would have given the lux badges the perfect snoot factor. However toyota beat them all to it with the prius. One wonders have would have happened if the pruis had been badged a lexus and been the defining diff between lexus lux and pedestrian toyota.
Well, it’s all right to be a snob, most especially an intellectual snob, but Mr. LeNeve is off-base. Some of it depends on how you define “a kid.”
If you think “a kid” is someone who is 25, then maybe Mr. LeNeve’s logic works. Of course, then the challenge is to get that 25 year old into a Chevrolet Cobalt SS – another topic, another time.
If you think “a kid” is someone who is 35 or 45 years of age, then the logic is off. I think the same people who are buying BMWs, even 3-series, are people that Cadillac should want as “conquest sales.”
I know a computer repair technician who is a BMW buff – had one until an accident left him with just a Chevrolet Cavalier – who covets the Cadillac CTS. He is somewhere in his thirties and is just the kind of person Cadillac should want in their showrooms.
That kind of person is likely not going to be too interested in the Cadillac Sixteen concept car. But a Cadillac CTS tricked out by some clever aftermarket firm would likely get his attention, maybe even his money. And isn’t that what GM needs right now?
Re Glenn Swanson’s
Buyers looking for an automatic will say: “BMW is a luxury car,” and therefore certainly should have an automatic transmission.
Buyers seeking manual transmissions say: “BMW is a performance car,” so of course it should have a manual transmission.
Yeah, I think BMW has things figured out. They should make the 1 series work.
Tho I’d like to see 328S/335S series. S for sport. Firmer suspension, performance tires, manual tranny only. Dump power locks, windows, I-drive, nav-system to scare away posers…
Can such a car be ordered???
You are forgetting Europe. Audi produced the A2 – engines ranging from 61hp 1.2L 3cyl diesel to range topping 110hp 1.6 4cyl petrol engine – basically direct Yaris/Fitz competitor only with nicer plastics inside. Basic equipment levels didn’t even include AC or rear electric windows. Then there is the A3, engines starting from 1.6L 102hp. In basic trim they are horrible, everything comes extra. In Europe Audi A4 starts with 1.6 102hp engine, manual everything, no luxury-level equipment. Audi A3 and A4 share whole platforms or suspension components, engines, gearboxes with cheaper VAG cars – VW, Seat, Skoda.
The ulimate driving machine BMW E46 was sold in Europe with petrol 4cyl 1.6L 105hp engine (316i), they also offered 318td diesel 115hp. E90 starts with petrol 4cyl 318i 2.0L – 129hp. Those cars are lightyears from the company slogan. Also you should look into statistics – 3-series is a cash cow for BMW, the main source for profits. They sell it in vast numbers in Europe, and what a surprise, from all the 3-series sales the poorly equipped 318i and 318d and former 316i are making up by far the largest percentage. Same applies for Audi A2,A3,A4 and Mercedes (A,B and C-class with miniature engines). Those poorly equipped underpowered “luxury” cars are really the bread and butter (the main most important source for volume and profit) for the 3 European luxury car manufacturers in Europe.
ihatetrees:”Tho I’d like to see 328S/335S series. S for sport. Firmer suspension, performance tires, manual tranny only. Dump power locks, windows, I-drive, nav-system to scare away posers…
Can such a car be ordered???”
For the most part, yes. Idrive and satellite nav are not standard on the 335. You can get a manual tranny, and you can order the sport package for your suspension and tire needs. You’ll also end up with some very nice seats. As for power windows and locks–these days there is no new development work being done on manual windows and locks, so you’ll get a better product cheaper (and likely lighter in weight) if you just stick with the standard power windows and locks. Besides, in a 3600lb vehicle, what’s saving 10 pounds anyway? Just skip the donuts on Sunday and visit the loo before you get in the car.
I confess that I haven’t read all the comments yet, so pardon me if this has been mentioned before. One aspect not mentioned by the author which is also contributing this situation is the growth in the size of vehicles. The current 3 Series is almost as big as the 5 Series used to be.
There is also a defacto division emerging in luxury cars with the entry versions offering better performance and the bigger cars being more boulevard cruisers. In fact, you are seeing performance bargains (and I’m using that term loosely). The 335i, IMHO, is the performance bargain in the entire BMW line (at least until the 1 Series hits US shores). In the Audi line, it’s probably the A3 (an argument can also be made for the A4), Inifinity the G35/37, etc. With all of these vehicles, the combination of relatively high horsepower for their weight and overall sophistication means that paying for the bigger cars in their respective car lines just means you are getting a bigger car and of course, a measure of exclusivity.
An earlier post pointed out that a flaw in the thinking in the editorial and subsequent comments was that it conflated “high end” and “luxury”. It does more… it defines a high end car in terms of it’s features, comforts and performance, but leaves out the most fundamental aspect of a luxury vehicle: quality. Quality of materials, quality of engineering, quality of design.
I have a ’95 C-Class that is a quality car… even after 12 years, it still looks good. It still drives good. It still feels like a high end car. Take a Nissan or Toyota or Chevy of the same vintage, even if they’ve been carefully maintained, and they feel like what they are: old, budget cars. A friend has a ’92-ish 525i in brilliant nick… and it still looks and drives great.
You used to buy a quality car because it would give you 10 years plus of faithful service — unfortunately the feature-creep madness of electric gizmos means anyone owning a luxury car of today would be bleeding cash like mad to keep it running once the warranty expired (“I’m sorry sir, you can’t open the windows because of a problem with the computer KAAA CHING!”)
That’s because automakers have lost sight of “quality” in their quest for “luxury”.
An added point. I think a lot of luxury carmakers are trying to strike a balance between volume and exclusivity. BMW is a good example as around 40% of their sales is 3 Series. Other cars in the line probably offer much better profit margins, but also much lower volume. Audi has a similar profile with A4 model having the highest sales numbers followed by the A3. The problem with this kind of balance is that the low end of a luxury model ends up being in a very price competitive market.
Even the 1 Series will face more competition than first appears. By not offering a hatch, BMW is proabably trying to differentiate the car from the hot hatch market. But it will end up competing with the new, much more civilized WRX STI and EVO models which are due to hit the market around the same time. Such brutal competition does not allow any maker to merely stick their name on the car and expect it to sell.
I think a lot of luxury carmakers are trying to strike a balance between volume and exclusivity…The problem with this kind of balance is that the low end of a luxury model ends up being in a very price competitive market.
The primary goal of branding is to get the consumer to buy a given product because they want the product, irrespective of its price. Good branding removes price as a consideration (at least within a given band), and you’ll buy it even if it costs more.
Any good that are sold primarily on the basis of price is a commodity good. If your product is a commodity, then by definition, its brand has no value.
A typical example of a commodity is a bulk agricultural product. It’s tough to distinguish one bushel of wheat from the next, so price remains the priority. Any automaker that allows its brands to fall so far that its cars are assessed in the same way as a bushel of wheat (price as the central consideration) is in serious trouble.
It’s no coincidence that the winning automakers don’t compete on price but on brand virtue. The brand should support higher prices, and therefore, higher margins. Toyota and Honda, two firmly mainstream brands, don’t compete on price, either. They compete on value, which transcends price, and ultimately translates into higher prices. The domestics clearly have a lot more in common with a silo of grain than their successful rivals.
The “luxury” automakers shouldn’t compete on price, either, but they need to consider what their audience can afford. In that vein, the 3-series, etc. are not brand killers. On the contrary, without them, these companies would have already failed, because their revenues would shrink considerably and their brands would not extend far enough to make a difference.
In other words, there is a symbiotic relationship between the near-luxury and luxury products in the lineup of companies such as BMW. They need both types, not just one of them. Without the higher-end products (think Saab, Lincoln and Acura), the brand sinks under the weight of its lower-end offerings. But without lower-end products of any merit (the closest current example is Maserati before its recent revival), there is no introduction to the brand or revenue to the automaker, and the upper end would languish.
So being “luxury” without “near luxury” in the mix is not enough. An automaker that wants to avoid the near-luxury category needs to take the next step and go exotic, because luxury in a vacuum doesn’t work.
> The current 3 Series is almost as big as the 5 Series used to be.
Just for fun, check out Wiki’s stats on lengths and heights
http://en.wikipedia.org/wiki/BMW_3_Series
http://en.wikipedia.org/wiki/5_series
E34 is only 5 inches longer and an inch narrower than the E90.
There’s plenty of space for the 1 series, “a luxury car of small proportions”.
I don’t know what to think about the euro only Benz A-series.
Pch101,
Love your “bushel of wheat anology”!!
Entry “level luxury” caters to an “opportunistic buyer” the differentiator between one bushel and the next in many instances is not the brand.
The opportunistic buyer / customer has limited brand loyalty, he is “trading up” and whatever bushel conveys the message that he is “trading up” will work.
The bushel that has the best financial package will work even better, BMW for one is well aware of all this, they learned the lesson a few years ago when they lost 3 Series business to G35’s.
Its a crowded market, with the bushels all having the same features, and the majority going out on 36 month leases.
Which model will captivate the imagination of the “opportunistic buyer” that is looking to “trade up”?
on a different note all manufacturers build cars to fit the 95th percentile, and human beings are getting physically larger its the reason wheelbases get stretched, and width gets stretched. In entry level luxury especially the rear seat leg room can easely kill a sale in certain instances.
Entry level luxury was a lucrative market segment when only a few manufacturers were offering product in the segment.
As the offering from new entrant manufacturers started making inroads into the market segment, the rules of the game changed, its not just competitive, its hyper competitive.
BMW is the strongest in the segment and also the most vulnerable with so much of their business coming from 3 Series. They are masters at protecting their turf at all costs. Similar to M-B protecting their S Class turf at all costs.
Its interesting when all these entry level luxury cars return from their 36 month leases, with a brand loyalty factor of 50% at best.
The “opportunistic buyer” drives up to a competing brands showroom “my lease is up in 2 months what can you do for me?”
Pch 101:
Good summary of Marketing 101. I think BMW relies on a wrinkle in your basic marketing analysis. Some people will buy a 3 Series because it a BMW they can afford to purchase; their focus is primarily on the brand. The twist I see BMW laying on this is two fold:
1) they try to position their best 3 Series (335i) as the gold standard for this class of car. The rest of the 3 Series family may not be nearly as good, but they benefit from all the press and hoopla over the 335i
2) Even if the 335i or other models in the 3 Series lineup are arguably better than the competition, they are also substantially more expensive. The BMW brand makes paying that premium far more palatable than it would otherwise be.
I’m not really grokking your argument here; it’s rather scattered. First, it’s the move downmarket that’s hurting these automakers, manifest in the discounts they offer (which may be nothing more than offsetting short-run fluctuations in demand in order to maintain inventory targets).
Then, it’s diminishing quality, and a lack of an explicit brand ethos, except with Audi who you earlier gave as the example of having moved the furthest down market with the cheapest of the “luxury” cars, the A3.
Third, it’s the combination of a downmarket move with low quality that kills the brand; how is this different from low quality period? Any new model that sucks is going to hurt the company, regardless of who it’s being marketed towards.
While I respect and generally agree with your idea of a brand ethos as a significant asset of any manufacturer, I feel that the idea of a “luxury” carmaker, in the context of those discussed here, is essentially meaningless. To impose your idea of what a Cadillac or a BMW should be (unless that idea is merely “good”) is not necessarily an optimal choice for these manufacturers. The fact of the matter is that a Cadillac hasn’t been an object to aspire but never attain for decades; the only reason the average buyer today would have any conception of that feeling is through Mafia movies and their grandparents.
It is the nature of competition that markets for new goods will be explored in an attempt to yield above-average rates of return. If it is profitable for Mercedes to produce a car below some arbitrary threshold “luxury” price, then who are we to argue.
I couldn’t agree more.
There is one very good reason why Acura is not not considered in the same league – the Integra.
A good car no doubt but it hopelessly affected the image of the RL which, while hardly a masterpiece, should have done better.
First off, this is a great site with great discussions. I’m not a real knowledgeable car guy, but following TTAC for the last year has increased my interest greatly.
I think NoneMoreBlack (what’s wrong with being sexy?) has nailed it – it’s all about the car maker making money and brand purity/exclusivity be damned. Entry-level luxury cars (and Porsche SUVs, the Lincoln pick-up truck) are merely a way to tap into a greater portion of the market.
I really think that we’re seeing the future here – the commoditization of the automobile and the gradual erosion of the importance of brand. Here in Canada, Hyundai is running ads comparing its Sante Fe with a Land Rover, saying it’s just as good or better, but for $20,000 less. From my own experience, when I was looking for a used car, I got into an Infiniti SUV and immediately asked why I’d bother paying more for this when I could just get a similarly-equipped Pathfinder?
I suppose the autosnobs would view me as a drone who merely wants a “driving appliance” but I think the distinctiveness of car brands is becoming less and less relevant and I’m not really sure that’s a bad thing if I get a better product at a better price out of it.
I happen to think that branding is actually gaining in importance over time. As the market becomes more competitive and crowded, branding makes it easier to separate the proverbial wheat from the chaff. The fact that some car companies do very well while others teeter at the edge is a measure of the value of branding.
I really think that we’re seeing the future here – the commoditization of the automobile and the gradual erosion of the importance of brand. Here in Canada, Hyundai is running ads comparing its Sante Fe with a Land Rover, saying it’s just as good or better, but for $20,000 less.
If anything, I believe that this is an example that shows how important branding is. It’s really a tongue-and-cheek attempt to make the low-end consumer feel better about his purchase. It’s selling the value message of the brand — Hyundai is effectively telling the customer that he is getting his money’s worth from this purchase.
And the implicit message goes beyond that. Hyundai has long been viewed as a poor man’s compromise brand; the recent quality initiative has elevated Hyundai to be perceived as a reasonable but still inferior alternative to Toyota, etc.
This ad attempts to move things up a notch. It tells the consumer by implication that a Hyundai is now so good that its equality to Toyota and Honda is already understood, so there’s no need to reference them in a side-by-side comparison. At the end of the day, the message is still going back to brand and the importance of building that brand in the minds of the consumer.
GE Morris:
As the proud owner of a Volvo S40, I feel that Volvo is the hidden gem of brand marketing and staying true to it’s identity. They’ve managed to lose the brick styling, up the interior lux amenities, and maintain their image of safe and practical.
From a driving standpoint, my T5 Turbo is no BMW in the dynamics dept (what do you expect, it’s a Euro-Focus platform), but it still makes me smile to take a tight corner or accelerate down the expressway on-ramp.
Volvo owners also seem to avoid the glares of other drivers that BMW/MB owners attract.
Unfortunately for Volvo, people who are looking for safety and a near-lux cabin, without the snob-appeal seem to be a small niche minority of the market.
Is it just me, or does the one series coupe look as much like something from Pontiac as from BMW ?
I don’t know that I care for the glam-look front end. I’ve always been a sucker for almond shaped eyes, but that heavy eye-liner looks a bit trampy.
The BMW 1 Series looks like they took one of their bigger cars and just chopped it in half. I wish I could say the hatch, which makes FAR more sense in a car this size, looked better. But I have seen the hatch and it doesn’t fare any better style-wize. Appears BMW learned that Americans don’t like hatches much, because they are only importing the coupe. However, they may learn the hard way the Americans don’t much like ugly cars either. This car isn’t ugly cute, just butt ugly, and $30-40K for a butt ugly car is a bit much, even if it does sport the BMW moniker.
1p. companies are owned by shareholders, who always want more, and are in the game because they want their investment to grow. So in turn the companies show growth prospects. Ergo the niche market company looks at their market and says, hey we have a powerful brand with plenty of people out there aching to get our product but can’t since they can’t afford it. =Ripe market.
2p. While advocating that companies must maintain brand identity, they must also be flexible to the demands and needs of the customer. If merc only made the 500SEL, would they have the purchasing power to remain in business? it’s a careful balance. My 2p.
“Their current success may be sewing the seeds of their eventual destruction.”
Sowing. Their current success may be sowing the seeds of their eventual destruction.
Brand dilution through offering cheaper models is part of what killed Packard back in the 50s. In the 30s they had started a cheaper Packard 120, which saved the company during the Depression, and in the 40s they started offering the Clipper, which was aimed more at Buick than Cadillac. If they had made Clipper a separate marque (which they considering doing towards the end, although by then it was too late) it might’ve been okay, but it had a disastrous effect on Packard’s patrician image.
Cadillac managed to avoid that when they introduced the first Seville by not making it an entry-level car — they targeted it at people who wanted a smaller Cadillac, but not the stigma of a cheaper Cad. Of course, they couldn’t leave well enough alone, resulting in the disastrous Cimarron and Catera.
Brand dilution of the luxury marques here is not nearly as severe as it is in Europe, particularly in the UK. Sales of D-segment cars like the Mondeo and Accord plummeted a few years ago because people started figuring out they could get a lightly equipped 3-series or C-class — usually with a four-cylinder engine — for the same money. Seeing a profit opportunity, the companies responded with the 1-series, A-class, A3, etc.
Now, becoming a ‘full-service’ carmaker rather than a niche luxury player isn’t necessarily disastrous if they continue to offer desirable product, but their ability to leverage the snob appeal of their brands will be diminished, and history suggests they won’t be able to get it back with their existing brands. This bedeviled Chrysler’s Imperial through most of its existence; it had begun as a Chrysler Imperial, and the effort in 1955 to make it a separate, luxury marque convinced no one because they were fighting three decades of their own marketing that said the Imperial was the top-of-the-line Chrysler, not a tony luxury marque. This is why Toyota was smart to create the Lexus brand — if the LS400 had been sold as a Toyota (as it was in the home market), it wouldn’t have been nearly as successful as it was. By that standard, the Mini was a smarter move for BMW than the 1-series.