Marketing Reminder for CEOs

Brands only get one opportunity to own a position

September 2 2010 by Bob Donnelly


Brands exist in the mind.

Once a brand becomes tarnished, attempts at polishing and repositioning it rarely work.

We have watched this scenario time and time again, but this lesson has proven to be an expensive one for many CEOs. Brands need to be nurtured and refreshed when they begin to age or else customers will move on to other brands that satisfy their changing requirements.

This marketing maxim continues to be played out over and over again in the automobile market. We watched the rise and fall of Saturn due to neglect, and now we see it again with the PT Cruiser and Saab.

Under General Motors’ control for 20 years, Saab, first introduced in 1949, went from a quirky niche brand with a loyal following of customers who loved the Nordic origin and unique technology to an almost nondescript hodge-podge of shared parts like happened with Saturn.

Customers loved the odd ignition switch between the front seats and the “night panel” toggle that shut down the dashboard lighting except for the speedometer. Other idiosyncracies, like having one of the first turbochargers, identified the “Saabishness” that owners loved about the brand.

Chrysler did the exact same thing to the PT Cruiser, which once was their best selling brand. The PT Cruiser won the North American Car of the Year award at the Detroit auto show in 2001. Sales actually topped 1.5 million in its 10 years on the market.

Over the years, Chrysler followed GM’s pattern of cost cutting, like installing cheap seats and radios that eventually cheapened the brand to its death. What started out as a brand designed for Personal Transportation (PT) was eventually relegated to the fleet market.

The lesson here is that you cannot adopt a pattern of behavior of introducing brands (cars in this case) that resonate with customers, and then do almost nothing to maintain the brand. In these car examples, the brands were actually cannibalized rather than embellished. How much sense does that make?

Saabs, like Saturns and PT Cruisers, were practical, safe and offbeat, but under the guidance of GM and Chrysler, the brands became classic cases of brand dilutions.

Only 40,000 Saabs were sold last year globally, and GM finally found a buyer after threatening to shut the Saab brand forever. Saab lost $570 million in 2009.

Saab was sold to Spyker Cars, an almost unknown Dutch maker of boutique sports cars selling in small quantities (about 40 per year) for $200,000+. The CEO, Victor Muller, is about to learn how expensive it is to try to resurrect a battered brand, in his case as an almost miniscule entity in a market dominated by giants.

Industry experts have already attested to the impossibility of the task.

If you look at the pure economics of the challenge, it makes you wonder what’s going through Victor Muller’s mind? His plans call for spending $180 million on marketing to reposition the brand.

If you compare the redesigned Saab 9.5 at $50,000 to the kinds of competitive brands customers can buy for the same amount of money, like a BMW 535i or an Audi A6, who is going to buy a Saab? Isn’t it obvious that former customers have already deserted the brand?

In addition, the new SAAB 9.5 from Spyker Cars has been described as “odd-looking” by CNET in a recent road test preview.

Many of the old Saab, Saturn and PT Cruiser customers are now driving a Subaru, the brand that has taken over the “quirky,” practical, all-wheel-drive position in car customers’ minds.

Last year, as the automobile market was tumbling due to the economic downturn, Subaru had record sales and a growing market share. At the end of 2009 Subaru was the 11th most popular auto brand in the U.S., up from 19th in 2008.

In 2010 so far, Subaru has been the growth leader, outselling VW, Mazda, Lexus, and even BMW! Obviously, many of the frugal, practical and cost conscious customers that used to drive Saturns, Saabs and PT Cruisers, and even those who loved these brands are now proud owners of a Subaru.

The question is – who is going to buy a Saab now being made by an unknown small luxury sports car manufacturer in Holland for $50,000, when you can buy a slick Audi or BMW, or for that matter a Subaru for almost half that price? The average price of a Subaru is now $25,142.00.

Looks like another painfully sad lesson is going to be learned by Victor Muller, the CEO of Spyker Cars, who claims that with the 9.5, a 9-4 crossover and a new 9.3 the following year, they will ramp up production to 125,000 cars a year. He also expects to be profitable by 2012?

What have you done recently to freshen up your brand to insure that it doesn’t lose it’s position in your market? Who is going to steal your customers with a faster, better or cheaper offering?

Let’s start a dialogue to make sure your brand doesn’t become tarnished. E me:

Email: rmdonnelly@chiefexecutive.net

 

  Bob Donnelly, is CEO of VAAS Americas, the U.S. unit of the Chennai, India based maker and distributor of industrial valves. A coach, educator, and advisor to founders/CEOs of growing firms, he is a serial entrepreneur, having started, grown and sold several technology based businesses. Earlier in his career he held senior management positions with IBM, Pfizer, and Exxon. 

He has developed an online MBA program in Entrepreneurship for Rushmore University with managers from global firms enrolled in the program. Since 1998 he has served as a venture mentor at New York University’s Stern School of Business Berkeley Center for Entrepreneurial Studies, where he advises start-ups on business plan development, marketing strategy, and presentation skills.

He writes the online Entrepreneurial CEO column for Chief Executive.