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Marginal: Burst Bubble

One of the problems-as if there aren't a sufficient number as it is, without bringing up still another-that vehicle manufacturers and, yes, their suppliers, particularly those with "brand names" that are sometimes being put to good use (Ford is doing a notable job with Sony audio) is the overall fickleness of consumers.

One of the problems-as if there aren't a sufficient number as it is, without bringing up still another-that vehicle manufacturers and, yes, their suppliers, particularly those with "brand names" that are sometimes being put to good use (Ford is doing a notable job with Sony audio) is the overall fickleness of consumers. No, this is not simply the issue of whether it is going to be all small cars all the time, or whether there is going to be a resurgence (hard to imagine, but stranger things have happened) in the light truck segment. No, the problem is simply stated: "Consumers are simply falling out of love with a majority of the brands they buy." That's from The Brand Bubble: The Looming Crisis in Brand Value and How to Avoid It by John Gerzema and Ed Lebar, both of whom work for Young & Rubicam Group.

Perhaps in a way that is analogous to what has happened in the housing market, Gerzema and Lebar posit that Wall Street has driven up the valuation of brands far in excess of how they are valued by consumers. And this is no idle speculation, as Young & Rubicam has a "BrandAsset Valuator," which studies consumer attitudes and perceptions regarding brands. What's more, they reference other research, such as this: "In successive studies between 2000 and 2007, the Carlson Marketing Group found a decline in consumer loyalty to brands. In 2000, four in ten consumers showed a genuine preference for or commitment to only one brand, but that dropped to one in three consumers in 2001, and crashed further in 2007 to less than one in ten consumers feeling committed to a single brand."

One issue, the bubble aspect, is that of "brand value," which has an effect on the stock market enterprise value. Presumably with the decline of the Dow, much of that is a moot point. But what isn't a moot point for vehicle manufacturers is this observation from the authors: "Consumers are reserving their devotion and dollars for a basket of truly 'irresistible' brands, leaving the rest to fight for existence on a hostile terrain of promotion and discounting." And if that's not enough, consider this: "Now even the lowest-priced goods exceed the average acceptable quality levels for most people. With high quality meeting surplus demand, consumers become more demanding while less willing to pay more . . ."

Arguably, the strongest zealots for many of the Detroit Three products are those who buy pickups (as in the cartoon Calvin on the backlight relieving himself on the logo of another brand). With that segment of the market cratering, the number of zealots is likely declining. So what then? How many other cars have such fans? And this is not just something that is a problem for the Detroit Three. Hyundai has long focused its attention on besting Toyota wherever it can. Toyota certainly has an advantage when it comes to brand versus Hyundai. But Hyundai is designing, engineering and manufacturing cars that have features that are first-rate and are priced at a comparatively low level. If that company's "low-priced good exceed the average acceptable quality levels for most people" and if many people are "reserving their devotion and dollars for a basket of truly 'irresistible' brands" and if Toyota isn't simply irresistible, it may find itself having to do things that it has never had to do before vis-à-vis moving its sheet metal.

The authors don't just diagnose the problem. They do provide a prescription for companies that either need help now-or will need it soon-with their brands. They essentially argue that energy is needed, with energy representing consumers' perception of the brand (i.e., what its purpose is, what it's delivered on, and whether it is dynamic compared to other brands). And, of course, there is the all-important differentiation. As the environment changes, so too must brands. But the brands ought to help lead the change, not simply react to it ("A brand is not a place, it's a direction.").

And the benefits aren't just external, which is what people tend to think about when it comes to marketing (as in marketing is something you do to people Out There). Two of the companies-neither of which are surprising-that Gerzema and Lebar identify as energy-driven brands are Nike and Apple. They write, "a big brand idea can do more for a culture than almost any other type of management activity. Just ask Nike or Apple. Big ideas are simply irresistible. They grab hold of people and make them proud. People then work harder at keeping them alive and making them better. They start to believe. Consumers begin to believe that people at Nike or Apple must be cooler, more creative, and more in love with their work." Imagine how powerful it is to be working for a cool brand rather than one that is generally undifferentiated in the market. And arguably, people commit their "devotion and dollars" to Nike and Apple products. Can car companies do this? 

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