Every strong brand is a niche brand

Think about it: Brand value is all about distinction and scarcity. The brand appeals, in a particular way, to a particular group of people.  And that's why those people will:

1. Pay a premium for it (which results in increased margins);

2. Go out of their way for it (which results in increased margins; and/or

3. Talk about it and show it off to their family and friends (which results in increased margins).

So this struck me as ill-informed (from Adweek, 8/31/2009):

"Explaining that it was embarking on a search for a new advertising agency, VW vp of marketing Tim Ellis said, 'Our goal of rapidly increasing our volume in a mature market requires the Volkswagen brand to evolve into a more relevant mainstream choice.'"

"The Volkswagen brand needs to inspire our base of enthusiasts as well as reach out and captivate those in mainstream America."

Sorry Tim, but that's an oxymoronic statement.  Enthusiasts are not the same as mainstream.  Pursuing that goal is a commodity strategy destined for low margin, GM-like performance.  Instead, inspire your base of brand enthusiasts, and then empower and motivate them to inspire the mainstream.  See the difference?

Posted September 1, 2009
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Comments

Andrew Korf

Does VW really have "Enthusiasts" any more? Certainly they did in the days of the beetle, the microbus and the karmann ghia (I was one of them) - but now their vehicles are pretty non-descript competing more directly with honda and toyota ("mainstream") brands. Certainly for some brands the niche approach works well (http://www.strategy-business.com/article/li00137?gko=d02c9) - seems like it might be a good time for VW to look outside the confines of the their brand loyalists (younger, hipper, whiter more urban) to baby boomers, latino market, small families and thus the change from CPB isn't entirely misguided?

- AK

Posted by: Andrew Korf | September 01, 2009 at 05:41 PM

Mark Gallagher

AK,

There are many VW enthusiasts that you may not be aware of. The Golf has a cult following among performance enthusiasts. The GTI was actually the original tuner econo-box.

VW enthusiasts are buying affordable "German Engineering." Those who see don't see the value in "German Engineering" see VW as expensive vs "more reliable" imports.

Value is in the eye of the beholder. However, it appears the VW management is blind!

Mark Gallagher
Brand Expressionist®
Blackcoffee

Posted by: Mark Gallagher | September 01, 2009 at 06:42 PM

Strategic Growth Advisors

Thanks for the post, Tom.

I do agree that VW made a mistake of using the terms "enthusiast" and "mainstream" closely together.

In my own point of view, enthusiasts are individuals who buy cars because they appreciate how they are made.

The mainstream, on the other hand, is a group of people who buys cars because they are a necessity.

Posted by: Strategic Growth Advisors | September 01, 2009 at 07:59 PM

Denise Lee Yohn

tom -- would you please say more about this: "Brand value is all about distinction and scarcity." -- esp. relative to mass brands like mcdonald's and coke -- i want to understand your pov -- thanks. d

Posted by: Denise Lee Yohn | September 01, 2009 at 09:10 PM

Jon P

Having been a frustrated VW owner for the last 8 years or so, due to a general lack of reliability and large repair bills, I wonder if "mainstream" is code language for more reliable. One wonders, does that come at the expense of driving fun that VW is known for.

BMW has a more innovative approach to the generally less-than-stellar reliability of their fun to drive cars: They pamper the hell out of you with red carpet service, loaner cars, and pre-paid servicing. Therefore the experience is more reliable even if the cars themselves aren't. This is a smart approach to maintaining the mystique of their brand.

Posted by: Jon P | September 02, 2009 at 07:45 AM

Tom Asacker

Thanks for the comments everyone. And for what it's worth, I'm certainly not advising against changing agencies. In fact, I hope they go back to the culturally astute, Arnold-type ads of the 90s.

But advertising won't revitalize the brand in any event. Reliability, styling and attitude will. How 'bout a redesigned microbus? Certainly not mainstream, but if done right a monster hit.

And Denise, regarding high volume, low margin mass market brands like McDonald's and Coke, they do leverage scarcity (location, distribution, shelf space) and distinction (image advertising).

For low-involvement categories, where habit is the primary drive, ease of selection (and forced selection) and brand familiarity are key.

Posted by: Tom Asacker | September 02, 2009 at 08:37 AM

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