When Steve Odell, vice president of marketing and sales for Jaguar Cars North America, was asked to fill in for boss Mike Dale at a luxury conference in Phoenix this fall, he said he went 'with some trepidation.' After all, conferences are a dime a dozen, and this one would be attended by marketers promoting items ranging from cars to jewelry to cruises.
But Odell learned something. 'We basically have the same set of problems,' he discovered. 'Brand products at the luxury end are growing. We have a problem expanding without diluting the brand.'
There have never been so many rich people in this country. According to Standard & Poor's DRI, millionaires make up about 5.5 percent of the total households in this country, compared with 1.5 percent in 1962. David Wyss, chief economist at Standard & Poor's in Lexington, Mass., says the new numbers are in absolute dollars and take inflation into account.
'Baby boomers are hitting their 50s, so I don't expect the trend to go downward,' he says. 'Wealth is going up.'
That has put ritzy automakers such as Jaguar, Porsche and even Bentley between a rock and a hard place. Do they continue to play in an upper-end market segment with a finite group of people or expand their product lines to include less expensive models that could tarnish the brand name?
Marketing to the rich no longer means just marketing to the small club of the filthy rich at the moment; it also means getting to those affluent consumers who are knocking on the millionaire door.
'There's so much money out there, but we can't just concentrate on wealthy people,' says Richard Ford, executive vice president of Porsche Cars North America 'We need to get that excitement to young people, too - those in law school, etc. We need to reach a broader market.'
Porsche, Jaguar and Mercedes have come out with broader product lines that include less expensive models and have seen sales surge. Lotus and Bentley want to do the same.
Jaguar North America President Dale says his company almost went out of business because it was too exclusive, with a stable of cars costing more than $50,000 each.
'So the average person did not have contact with people who owned Jaguars,' he explains. In other words, Jaguar was not on enough shopping lists.
But with the introduction of the S-Type in the $40,000 range and the upcoming X-400 at an even more affordable price, Jaguar plans to sell 80,000 cars in this country by 2003, up from 8,681 in 1992.
'We never did want to be perceived as a rich person's car,' Dale insists. 'We're in the business of making people feel elegant, not the car business. That's Jaguar's niche. Going to the X-400 won't hurt us.'
Bentley is listening
The net assets of the average Bentley customer range from $10 million to $20 million, which - thank you very much - was just dandy for the snobby British company. But Bentley is being forced to reach out to a broader audience:
1. Volkswagen owns both Roll-Royce and Bentley, but Bentley will split from its sister brand in 2002 when BMW takes control of Rolls.
2. VW is investing $850 million in Bentley over the next five years, which will include an all-new model in the $100,000 range. The cheapest Bentley now retails at $203,080.
3. VW wants to sell 4,000 Bentleys in the United States by 2004, vs. the estimated 750 it will sell this year.
The uppity carmaker got a wake-up call during a direct mailing earlier this year that was virtually ignored.
Tom Smith, the new 35-year old national marketing director for Rolls-Royce in Auburn Hills, Mich., decided to contact 30,000 of the nouveau riche - those with an average income of $380,000; assets of more than $1 million and at least one vehicle in the garage valued at more than $100,000. The response rate was only 1 percent, quite a ways down from the 4 percent to 5 percent rate that marketers hope for from a mailing campaign.
'At first, we were disappointed by the response, but it goes to the lack of familiarity with the brand,' Smith admits. 'We need to slowly warm people to our brand; we have to become better at targeting people.'
Smith says he was wooed to Rolls-Royce from Toyota and Lexus primarily 'to bring Bentley to life.' And the young man has a plan:
1. With an ad budget of less than $10 million, Smith hired DDB Worldwide, the first ad agency for Bentley in many, many years. The first ads were placed in newspapers and upscale magazines during the summer and fall.
2. Bentley paired with Cigar Aficiona-do magazine last month in Las Vegas at 'The Big Smoke,' an event that featured cigars, fine whiskeys and ports. Bentleys also were displayed.
3. The brand supported seven charitable events this fall throughout the country, with cash and in-kind donations averaging about $35,000 at each event.
4. The brand will provide co-op money to its dealers next year for event marketing.
'Unless you're advertising, you're not seen as a credible brand,' Smith believes.
Bucking the trend
Ferrari isn't following the trend and doesn't plan to. 'The purpose behind Ferrari is not commercial,' proclaims Gian Luigi Longinotti Buitoni, president of Ferrari North America. Buitoni acknowledges that wealth and discretionary income are going up. But Ferrari, he suavely says, will not react.
'What we can do is make sure production is lower than demand; we are not selling a product but an experience.'
Ferrari has very few marketing tools: Formula One racing, a magazine that it sends to about 30,000 customers and prospects, and a series of annual racing events and rallies its holds for Ferrari owners. The Ferrari Web site gets about two million hits daily.
Buitoni also brags that Ferrari, whose models sell from about $128,000 to $230,000, enjoys privileges that most other automakers pay for.
'When we go to auto shows, we generally are not asked to pay for the space because we add to the excitement,' he says, adding that stars such as Nicholas Cage and Bill Cosby have asked for the use of Ferraris to appear in movies and TV shows. 'We let them do it,' he says. 'Other companies pay for that; we don't.'
Buitoni says Ferrari customers, on average, are entrepreneurs, own six vehicles and have an income in excess of $500,000 a year.
'We do not see ourself as a luxury company but (a company) for people who have a passion for autos,' he says. 'We have to focus on the dream of speed; the fastest car around, not how many cars we can sell.'
Will Smith, the marketing honcho at Bentley, make Buitoni eat those words?
'Bentley is a great alternative to a Ferrari,' he sniffs. 'We're going to make a statement when our marketing campaign kicks in seriously next year.
'Bentley's got a lot of power, lots of energy behind it.'