The honeymoon is over for the auto companies who have been neglecting brand-building.
The impressive numbers describing the incredible size and scale of the Chinese automotive market are familiar. According to the China Association of Automobile Manufacturers, nearly 7 million new vehicles were sold in 2006; of this, 2.8 million were sold to private citizens. Nonetheless, only 0.3% of Chinese citizens own a car, suggesting huge potential growth in the years to come.
The one thing more impressive than the staggering scale of the market is the pace at which it is changing. It took the rest of the world nearly a century to arrive at its current level of brand-savvy and marketing sophistication; it has taken China less than a decade to do the same.
In the beginning, there were just local, state-owned enterprises assembling the most basic of vehicles for the few who could afford a car. For these manufacturers, the brand was – and for many, still is -- nothing more than a mark of ownership, representing no distinguishing values, beliefs or promise. It’s there, stamped onto the back of the car, simply as a way of answering the question ‘who made that car?’ Then came Volkswagen (VW), the first international car manufacturer to establish operations in China. Car buyers were attracted to the Volkswagen brand because it symbolized a higher level of quality than every other (local) brand in the market at the time. It was not just a mark of ownership, but more importantly, a mark of quality.
Following quickly on Volkswagen’s heels, came other international brands, each seeking a piece of the Chinese miracle. Critically, none of them invested significantly in creating a distinct identity for their brand; all focussed on promoting individual models to try to capture market share as fast as possible.
This lack of branding early on in the development of the Chinese car market was unfortunate. Consumers needed to have some knowledge of the brands they were considering, to offset their complete lack of knowledge about cars in general. At the time, the average Chinese car buyer knew almost nothing about cars and what made good cars different from bad cars. Brands were to be their proxies, a way of making this important decision without knowing all the facts. But because car manufacturers did not go to the trouble of establishing and communicating unique positioning for their brands, consumers did it for them, using the little information they could discover for themselves.
Most people outside China know that Henry Ford is the father of modern automobile; in China, we were surprised to discover in focus groups and in-depth interviews with prospective car buyers that very few consumers know this, and that some even doubt that it’s true! In the West and in most of the rest of the world, car brands rely heavily on their history, and the mythology that may have developed over decades around them, to establish a point of differentiation vs. other brands. In China, this history and mythology do not exist – whatever may have existed before was wiped away during the country’s decades of isolation. For information-hungry new car buyers, the only easily discoverable information about car brands were their price level and their country of origin. Until very recently, these two pieces of information dominated in shaping consumers’ perceptions of what they could expect from each car brand.
Because of the lack of proactive brand building in China, consumer expectations from manufacturer brands tend to be one-dimensional. Because brands have remained silent, consumers here haven’t learned that they can expect more from a brand than just product quality. When they consider the origin and price level of a brand, it’s really only to help them determine the level of overall quality that they can expect from that brand’s products.
One brand has benefited greatly from this unusual – and temporary – state of affairs. Hyundai, which had began producing cars in China in 2002, started to make its presence in the domestic market felt in 2005. One large factor behind Hyundai’s phenomenal success is the superior quality- for-price ratio it offered to its customers. Unlike other foreign brands, whose models in China were priced almost 20% above equivalent models in other markets, Hyundai launched models at less than a 5% premium over its equivalent cars in other countries. The result: significantly cheaper vehicles that proved irresistible to less wealthy prospective car buyers who still aspired to a car from a foreign maker. Because of the low prices of the cars, many of Hyundai’s first wave of buyers expected a level of quality less than that of more expensive than Western brands. However, the cars performed surprisingly adequately– if not well – and got delighted owners talking to their friends positively about the brand. The result: Today, two years after its opening salvo in China, Hyundai is one of the fastest growing brands in the market, and is rapidly catching up to market leaders Volkswagen, General Motors and Honda.
In the last couple of years, two interrelated changes have gradually taken place that threaten to further reduce the attention that is paid to manufacturer brands. The first is car-buyers’ increasing reliance on the Internet, and particularly on online bulletin boards and blogs, for information on the car models they’re considering buying. The second, which is partly a consequence of this first trend, is the rapidly increasing levels of consumer knowledge and sophistication, in all matters related to cars. In this new environment, many have argued that investing in the brand is even less necessary than it was before.
Today in China, there are over 120 models for new-car-buyers to choose from. While it’s true that consumers no longer need to rely on manufacturer brands to guarantee quality, the question remains: How does one even begin to narrow down the range of choices to a more manageable number?
The process of choosing a car brand has begun moving from the rational mind to the heart and the imagination. In the past, it was critical that rationality prevail completely in the buying process, as there was a large risk of blindly buying a poor quality car. Now this risk is much smaller, and consumers can afford to look at the bigger picture when choosing a car.
One of the biggest changes that is beginning to take place among Chinese consumers is the ‘settling down’ of the middle class. In the initial years of China’s economic boom, those blessed with the opportunity to ‘get rich first’ literally had more money than they knew what to do with. Uncertain of the Communist Party’s continued endorsement of their right to enjoy wealth, and with no history of consumerism to guide them, this first wave of the modern Chinese middle class spent profligately, especially on items that helped reinforce their status and prestige – and their feeling of being separate from, and better than, the less-wealthy masses. In the world of cars, this meant size, ‘internationalness’, fame and bells-and-whistles commanded price premiums.
Today, the Chinese middle class has reached something of a critical mass: The point of reference has changed from those who are poorer, to those who have the same amount of wealth. It’s no longer enough to feel distinct from those with less money; one has to feel more knowledgeable, and better able to enjoy life, than those who are equally affluent.
This presents an opportunity to the different car brands in the market: Their prospective customers are hungry for guidance in how to live a good life; the successful car brand of the future is one that will have a unique and compelling point-of-view on this, one that it champions consistently at every point of contact with consumers.
In order for this point-of-view to be convincing, it must be consistent with – and maybe even start from – the design language or philosophy of the company. If a company’s cars are designed conservatively, it will never be able to position its brand as one that champions contemporary lifestyle values. Many brands in the market are already beginning to develop points-of-view that are based in their design philosophy, and one in particular has reaped the benefits in recent years.
General Motors established its presence more than a decade ago with its Buick brand. Anchored on the successful Regal, a premium, near-luxury sedan, the GL8, a business- oriented people mover, and later, the more mass-priced sedans Excelle and Sail, the Buick brand perfectly captured the priorities of the period’s car buyer. Conservatively designed and priced just low enough to be perceived as a superior deal, Buick positioned itself as the brand for men on their way up in the corporate world. In a brand ad that ran in 2004/05, one of the first ads for a manufacturer brand in China, Buick made concrete its hold on this positioning by declaring itself the brand for men ‘with the fortitude, vision and will to go the distance.’
By 2005, however, a segment of the market was growing that was decidedly different from Buick’s corporate, conventional, mature target. More and more young men and women, newly out of education and finding their feet in the world, were buying cars. Unlike their predecessors, these young men and women were simultaneously less certain of their path forward in the world, and more excited and energetic in their outlook. Where the Buick target valued conservatism and the ‘face’ value of cars, this new, younger target sought something different: basic reliability coupled with trendier, younger, more energetic design.
General Motors wisely saw the business potential in this segment, and also realised that it couldn’t effectively go after this new breed of car buyer with the Buick brand. So, in 2005, they launched the Chevrolet brand, marketing cheaper, more basic, but also more dynamically designed cars, to younger car buyers. Like Buick, Chevrolet clearly stated its positioning in a brand ad, promising to be at its owner’s side, no matter how long or tough the road ahead. The result: Buick and Chevrolet have both seen healthy growth, and General Motors threatened to overtake Volkswagen as market leader for the first time in 2006.
Once a brand’s point-of-view is clear, the bigger challenge is how to make sure it is communicated well in all possible channels. More than just telling consumers about this point-of-view, it’s critical that the brand create experiences that bring it to life.
At the most basic level, this means ensuring that the process of shopping for, buying, and maintaining the car – both in the real and virtual worlds – are consistent with the type of experience that the brand has chosen to represent. A brand cannot champion ‘modern luxury’, and decorate its dealerships with all the usual trappings of traditional luxury. Color, material, design, finishing – in a world that skews more and more towards the virtual, aspects of real-world experiences are resurging in importance. More importantly, dealership and service center staff must be trained not just to render service, but to deliver an experience.
Beyond this, car brands should also find ways for its owners and prospects to sample the type of life it chooses to champion. This means communicating a consistent message and brand image, and creating a consistent brand experience, in advertising, interactive, CRM, events, and all other channels of communication.
In a short period, China has seen the role of automotive manufacturer brands evolve from mark of ownership, to indicators of quality, and now to promise of experience and a point-of-view on lifestyle. To date, car companies have been able to grow aggressively in China without investing in building their corporate brand. This is about to change. From here on out, in order for its models to even be included in prospective car-buyers’ shopping lists, a manufacturer brand will have to stand out and represent a lifestyle that makes concrete for consumers a unique world of possibility that they can begin to live.
Keywords: Branding in China, Chinese Automotive Market, Chinese Car Market, Chinese Car Buyer, Brand building in China, Hyundai, General Motors (GM), Volkswagen (VW), Buick, Chevrolet
