Why Audi’s fall to 3rd place premium brand is a good thing – it’s simple

audi-logoAudi, the recent king of volume growth among premium brands, is about to be overtaken by Mercedes and slip to third in global premium-car sales.

It will be a big change from just a few years back. Mercedes was overtaken as number one by BMW in 2005, and was replaced as number two by Audi in 2011.

And last year, in Europe, ended with Audi as Europe’s number one premium brand. But Mercedes, with a dramatic product offensive, industry-leading quality, a turnaround in China, punchy marketing, domination of Formula 1, steadily growing profits and record sales, is on its way back to number one here too, quite possibly by the end of the year.

So this is a significant moment.

Paradoxically, it may be Audi’s very drive for volumes that’s seeing it slip behind Mercedes and BMW. Last year it was the 6th-highest selling brand in Europe overall, and fifth in the UK, where its volumes approach twice that of Toyota. It’s done this by storming into new segments, fuelling new niches, and aggressively invading mainstream territory.

It has trumpeted the number of models and derivatives it offers, talking of an extraordinary 60-plus model lines. So there’ something for absolutely everyone, and ultra-low interest rates have meant that anyone can get into an Audi, including people who may have only ever had cars from mainstream brands. If you can lease one for the same as a Nissan, Toyota, Renault or Ford, why wouldn’t you?

So how can all this lead to a slowing of sales growth? It has unavoidably become commoditised, but more importantly it has become complicated.

With such a vast product range, what’s needed is simplicity. Audi has a wonderfully simple and recognisable graphic identity, and product design which shows a confident simplicity. Design and engineering teams across all car manufacturers are engaged in delivering a sea change in how we interact with our cars, through the integration of connectivity and the emergence of autonomous driving systems. The human-machine interface is having to be transformed in order to deliver such complex technology seamlessly and intuitively.

But the same drive towards a necessary simplification of these for the user has not been applied to distribution and retail operations, and how the car manufacturers present their products.

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SUV? Low-riding SUV? Crossover? Coupe? Sportback?

Is there anything less intuitive than navigating vast product ranges of SUVs, crossovers, off-roaders, soft roaders, sportbacks, liftbacks, hatchbacks, high-riding hatchbacks, low-riding SUVs, SUV coupes, people carriers, sports tourers, sportswagons and estates? This doesn’t help the consumer. And in this respect the premium brands are failing delivering an appropriate brand experience at a critical point in the customer journey.

In brand consultancy Siegel+Gale’s last Global Brand Simplicity Index, Audi, Mercedes and BMW were all categorised as ‘low score/high premium’, meaning that “They need to simplify their brand experiences, and they’ll be able to reap significant rewards if they do”, according to the report. Tellingly, only Ford – a mainstream brand which has simplified its product portfolio – was in the ‘high score/low premium’ category, for brands already seen as simple and needing instead to focus more on showing the value of the simplicity they offer. Ford was also the only car brand to make it into the world’s top 40 brands across all sectors, in an impressive 17th place.

It’s clear: by expanding their product ranges so fast and so far, the German premium brands have made a rod for their own backs. Mercedes, in 44th spot, is doing better than BMW and Audi, in 65th and 66th places. But it’s humble Ford which leads the way, and ironic that Audi’s mainstream VW parent brand beats it in all the key markets.

It’s a picture reflected in how these brands fare in the UK. Ford is streets ahead at number 19 in the list, with Mercedes at 59, BMW at 81 and Audi at 89. And in the USA, not one of the German brands makes it into the listing of 125 brands, while Ford is at 24.

Look more closely and you see that, in the UK, Audi is the only car brand classified as ‘low score/high premium’, emphasising the gap between where it is an where it could be. But you’ll also see that BMW dropped 15 places in the latest GBSI. That followed another nosedive of 23 places the previous year in the global rankings, and a remarkable fall of 35 places in the listings for Germany, where the native car brands normally perform far better than they do elsewhere.

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Two different models from two completely separate model lines – apparently

So BMW, right now still the highest-selling premium car brand around the world, tumbling down the order. An anomaly, surely? I don’t think so. Audi has been the most aggressive of the three German premium car brands, but BMW was first to attack the mainstream when it pushed the 3-Series hard into fleets in the last decade, effectively making it an upmarket Ford Mondeo. Mercedes followed, with extremely aggressive lease pricing, and paid for it; Audi has merely taken it to the next level with its model proliferation, while BMW has tried to do the same, but has introduced a number of unloved, neither-fish-nor-foul models for tenuous niches. It has lost brand focus and the GBSI reflects that.

And this is the real significance of the current shift among the German premium brands: Audi and BMW may come to be glad of their soon-to-be status as numbers two and three in the premium sales charts. They could focus more on other ways of achieving success, like customer retention, car-sharing and on-demand mobility, to better fit consumer needs in a world where Apple, Netflix and Uber have set new paradigms for consumption.

Volume for volume’s sake is the enemy of the premium brand. Simplicity, clarity, vision and a better brand experience are its friend. Achieve that and the volumes will follow.

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