Being BMW: The Paradox of Prestige

One of the golden rules of branding for any marketing company is that a premium brand can produce a standard variation of their product, but that a standard brand can’t produce a premium version. So for example, if you made expensive watches, you could viably create a cheaper version and take it to the market successfully. Those buying the cheaper watch might feel they’re getting an element of the quality of the parent brand, but at a better price. On the flip side, if you already made $ 100 watches, and all of a sudden wanted to start branching out making timepieces for $ 1000 or more, you’d have some explaining to do: how is the expensive version any better than the $ 100 one?

Another good example is the pizza market, where many high street pizza chains have been caught in a cycle of discounting and now struggle to charge a premium price for their products. Alternatively

Nowhere is this more evident than in the luxury car market. We all know Toyota and we all know the quality of the car they produce. But we also all know the price point for the average Toyota, which is why when it comes to buying a Lexus, we’re suspicious. “It’s just a Toyota with a different badge on it,” is the accusation we often here.

On the other hand, both BMW and Mercedes have had great fortune when it comes to diversifying into more standard models – the One Series and the A-Class respectively. This has given the ‘average’ car owner the opportunity to drive a ‘luxury’ car without the luxury tag, and enjoy some of the engineering and class that made both cars into the brands they are today.

This is where the theory breaks down.

Let’s assume you own a luxury watch, chances are you purchased it as some sort of status symbol. The point of having this status symbol is to define yourself against ‘ordinary’ people, or present yourself in a certain light. If you’re out and about at a party, and every other person at that party also has the same brand luxury watch, all of sudden your status symbol is much less, well, status.

And this is a trap that BMW and Mercedes have fallen into. A prestige reputation allows you to deliver a reputation for quality and allows you to market downwards. But as more cheap cars are sold, the less prestige the brand becomes. The brand sits in a vicious circle compounded by desperate acts of financing and the desire to keep beating previous year’s sales figures and deliver return for the company’s investment.

Who wants to drive a BMW M3 if all the cars stopping next to them at the traffic lights are also BMWs? Once again, that status symbol has been diminished. There might be several hundred thousand dollars between the two models, but the reason someone spent $ 200,000+ on their car was so no-one else would have the same badge on the front of their car.

So how do you solve this conundrum?

You could restrict the number of the lower value cars sold. ‘Limited edition’ are two words that work for many brands. Maximize profit by reducing internal costs, manufacturing and shipping and grow in value if not in sales.

One of the better alternatives is to create a different brand. Something not burdened with the parent brand name. Clearly this is going to diminish the initial opportunities to sell to a market that won’t recognize the name initially, but if you loosely establish a link between the two, this avenue may take a little longer, but may provide a lot more fruitful.

The core lesson is to control every level of the brand – premium and standard – and the number saturating the market place. Especially if you’re a vehicle brand, then the number of second hand cars on the road spiral dramatically and the resale price plummets, again adding to negativity in the brand.

If you’re lucky enough to own a prestige brand, think long and hard before you expand downwards. There’s an intrinsic danger in being too encompassing to your market place. Remember what made you special is that not everyone could access you. Don’t lose that.

 

Simon’s a marketing expert based in Brisbane. His core business is running TwoCents, a boutique agency based in Brisbane’s Fortitude Valley that helps small to medium-sized businesses around Australia with their advertising, marketing, branding and social media needs. For more information about the services offered, Please click these links marketing companies, marketing consultants & marketing consultants Brisbane.

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Being BMW: The Paradox of Prestige