Brand management in the auto industry isn't fulfilling its promise.
General Motors and Ford Motor Co. revamped their organizations in 1995, embracing brand management. The theory was car buyers would pay more for a strong, well-defined brand.
Other car companies, including Honda, Toyota, Nissan and Mitsubishi, also jumped on the bandwagon by starting either corporate or brand advertising. Ad budgets have risen dramatically.
But consumers generally are more confused about the differences among brands, said Debra Pruent, CEO of Allison-Fisher Inc., an auto marketing research company in Southfield, Mich.
From June 1996 to June 1999, consumers' opinion of all vehicle makes declined slightly. Allison-Fisher also found that consumers disagreed more on what brands stood for at the end of the period.
Consumer confusion is more pronounced in the luxury category. Consumers who plan to buy luxury vehicles disagreed more on luxury brand attributes than they did three years ago.
'It's a disturbing trend that despite brand-building emphasis, there's confusion in the marketplace,' Pruent said. 'We seem to be going backward.'
Pruent said there are more vehicle choices than ever. Manufacturers are trying to spread marketing resources to support all the brands. An exception to that rule is DaimlerChrysler, which is dumping Plymouth after the 2001 model year.
Despite heavy ad spending on vehicle-brand advertising in the past four years, incentives are still relatively high, and vehicle prices haven't increased dramatically, said Jeremy Anywl, president of Marketec Systems Inc., a Santa Ana., Calif., automotive research and consulting firm. Brand loyalty has stayed relatively flat since late 1994, Marketec research shows.
Anywl and Pruent spoke at a recent conference on automotive branding in Dearborn, Mich.
Anywl predicted the Internet soon will exert more pressure on vehicle prices. The rising use of online car shopping threatens to 'commoditize' the industry, he said. A commoditized brand has a reduced or no price premium. With pricing data freely available, a low price could become the deciding factor for many shoppers.
'If the new (Internet) economy hits the car business, you're going to see price pressure like you've never seen before,' he predicted.
Overall profits have risen in the auto industry, but they are tied more to cost-cutting gains, Anywl said. The record pace of vehicle sales this year is due more to the strong economy than brand building.
Allison-Fisher's Pruent recommended car companies should understand consumer expectations.
'The danger in doing that is you can overpromise' because buyers may have higher expectations than a brand can deliver. 'That sets up a suicidal death spiral as consumers spread their disappointments by word of mouth and loyalty goes down.'