Reality Is Perception: The Truth about Car Brands
A strong car brand can create significant value in the automotive industry. The price consumers expect to pay for otherwise identical luxury vehicles can vary as much as $4,000, depending on the car’s brand. For mass-market cars, brand helps determine which products a consumer considers buying. Furthermore, superior brands extend their halo across every model of vehicle within the brand. It’s no surprise that most auto manufacturers make brand positioning and development a key item on their marketing agenda.
Yet despite intense interest in their power, automotive brands remain relatively poorly understood. Why do car brands have such value in a business that is clearly product driven? How do brands acquire their value? What causes their value to wax or wane over time?
Because of the prominent role that brand positioning and development play in many auto manufacturers’ business strategies, we conducted extensive research and analysis to better understand how consumers think about car brands. Our analysis uses standard statistical techniques to distill multiple brand image attributes (drawn from Allison-Fisher International LLC surveys of car buyers) into a small set of underlying factors, which provide valuable insights into consumer brand perceptions. (See “Research Methodology” at the end of this article)
Our research shows that consumers have a simple yet sophisticated understanding of what differentiates car brands. Notwithstanding automakers’ attempts to distinguish their brands on the basis of lifestyle or emotional imagery, consumers evaluate brands in terms of their earned reputation for product excellence relative to their total ownership cost. Consumers’ perceptions are based on their accumulated direct and indirect experience with the products that constitute those brands.
These perceptions are obviously not perfect. Some brands’ reputations exceed or fall short of their demonstrable product attributes. But, as a rule, consumers’ beliefs are accurate, stable, and relatively immune to manipulation. In contrast to the situation with other consumer goods, in which equity is created substantially through advertising, automotive brand perceptions change primarily through consistent and sustained changes in the underlying product portfolio.
Within this overarching conclusion, we were able to identify five central insights that are critical to understanding how, and to what extent, manufacturers can enhance and leverage the value of their brands.
Virtually all of the difference in how consumers perceive competing brands can be explained by their relative performance against two holistic measures: product excellence and cost.
Traditionally, car manufacturers have tried to measure their brands across a large number of image attributes, hoping to develop additional insights about brand differentiation. However, consumer perceptions of a brand’s reputation are generally consistent across different measures of value. For example, consumers believe that manufacturers whose car lines have a reputation for luxury and prestige tend to produce cars that excel in many other areas, such as ride, handling, safety, and reliability. In fact, a brand’s score on any one attribute tends to be so highly correlated with its score on another attribute that these scores can be integrated into one measure that represents a car line’s propensity to create excellent products.
Consumers also have a sophisticated understanding of product cost. They recognize that vehicles differ not only in their initial purchase price, but also in their expected maintenance and operating costs, as well as their ultimate resale value. Together, these different types of expenditures determine the total cost to the consumer over the ownership cycle. As with the product excellence dimension, the various attributes that determine a brand’s expected ownership costs can be integrated into a single measure of product cost.
These two holistic measures, product excellence and cost of ownership, account for 91 percent of the difference in how consumers perceive automotive brands. (See Exhibit 1.) In fact, these two holistic measures are comprehensive enough to predict the consumers’ overall opinion of the brand with an extremely high degree of accuracy.
Of the remaining variation in consumer perceptions, roughly half (or 5 percent) is due to specific attributes such as “sporty.” These secondary attributes are not highly correlated with other attributes and cannot be included in the holistic measure of product excellence. With the exception of a few outliers (for example, BMW, whose reputation rests in part on its sportiness), most brands tend to be relatively undifferentiated along these secondary attributes.
Consumers are not only elegantly simple in their view of automotive brands, they are acutely rational as well.
For the average consumer, a new car is second only to a new home in the size of the transaction, the length of the ownership cycle, and the potential to reaffirm and communicate an individual’s sense of self-worth. Consequently, consumers spend a substantial amount of time evaluating their alternatives. In addition to their own firsthand experience, they consult a number of sources, from the anecdotal evidence of friends and family, to independent reviews by magazines, industry groups, and government agencies, to the manufacturers’ marketing communications, including brochures, measured media, and owner events.
It’s true that some brand reputations, particularly in the mass-market segment, don’t keep lockstep pace with actual changes in the products. But in general, consumers are well informed, and their opinions accurately reflect the accumulated performance of the products that are the physical embodiment of those brands. For example, the cost-of-ownership brand measure is highly correlated with actual cost of ownership. Similarly, consumers’ perceptions of a brand’s reputation for durability, reliability, and workmanship (which are key constituents of the holistic product excellence measure) are highly correlated with the actual dependability of that brand’s vehicles.
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