Thursday, May 13, 2010

Audi & Segmentation

Audi recently announced that its 2011 A8 would be 130mm longer than it already is, ensuring that its flagship remains the quintessential expression of Audi luxury. It reminded me of an article I drafted some time ago but never got around to sharing, and prompted me to finally share it, so here it is.

Audi had been a premium brand with its popular 4000 and 5000 series sedans in the 80s, but went through some tough times in the late 80s/early 90s. Down for the count, the turnaround is a nearly peerless business success story. Audi's revitalization can't be simplified as though it happened overnight, and I certainly had no seat on their board by which I can reveal any secrets, but one prong of their attack can be readily identified - a clearly defined segmentation strategy.


German auto engineering and performance are legendary. Volkswagen, Porsche, Mercedes-Benz, BMW and Audi all have a stake in not only maintaining but advancing the standards. The new Audi offerings are marvels of innovation, starting with their 200 kg aluminum chassis. From design to manufacture, Audi dares to innovate its own interpretations for how things should be done, and stands shoulder to shoulder at the vanguard amongst its heady national siblings.

But buying a car is not just about function, else society would all have just one model and the Model T might still be in production. Owning a car is also about identifying with a feeling, an image, and Audi adopted the most tried and true method for establishing a platform by which consumers can more easily make an emotional connection - small, medium, large.

After years of confusing, inconsistent, disposable monikers, Audi has stabilized its offerings around the A4, A6 & A8. Clean, simple, elegant, beautiful.

BMW has championed this foundation for what amounts to "forever," with its eternal 3-, 5- and 7-Series. Sure, there's a roadster tossed in here, an executive coupe there, etc, but they are merely icing on an established cake that has a sense of history, nay heritage, behind it.

It's not a coincidence that Audi's stablemate VW has also used this approach in its redefining, with the large Passat augmenting its small Golf and medium Jetta. It works, and I'm amazed so few tap into it. Honda made a grave misstep in the early 90s by actually making its Accord smaller! (today's Civics are essentially bigger than those Accords were). Accord lost its top-selling sedan status to Camry back then and it took almost 15 years - and a massive recall from Toyoya - to put Accord back ahead of Camry (that this is the biggest Accord ever doesn't hurt either). Meanwhile, Toyota introduced the Avalon over top of its Camry and Nissan moved its Altima up from its Sentra to a mid-size beneath its Maxima, and have both enjoyed success with this model mix.

Segmentation is useful for helping identify customer types. Done right, there should be almost no overlap between models. So, for example, someone looking at a C-Class for their recently graduated daughter is not going to look at the E-Class sedan; similarly, someone considering an E-Class wagon is not going to peak over at the S-Class.

Why is a clearly identified customer type useful? If the customer is understood, then design of teh vehicle and marketing the message that they will hear is easier. They'll hear the message, come see your offerings, and discover your model speaks to their needs and wants.

Conversely, if the customer identity is not properly identified, the design and marketing messages will be unclear, the target customer won't get the message and the emotional connection between the model and the customer won't be made. A lack of communication, or no "conversation" between a manufacturer and a customer is a recipe for brand disaster - how much could the 80s public take of Cadillac Cimarron and and Pontiac Aztec before they just should their collective heads in incredulity and befuddled bemusement before just throwing up their hands and saying "I don't get it"?

Small, medium, large. Keep it simple

The Flagship

Audi's flagship - the A8 - is a big, expensive car: a 12-cylinder 6.3 litre engine, 500 HP, all-wheel is positioned to speak very clearly to people who would buy a Mercedes-Benz S-Class or BMW 7-Series. Its appointments and accoutrements are the language spoken by those who want such things. 

One of the features this buyer wants is size. This segment is about big - a roomy spacious cabin (the 2011 A8 gets a refrigerator in the back seat!) and a large powerful engine are key components of what a luxury flagship is. 

And, it can't come cheap, for a few reasons, not the least of which is that it speaks to a stereotypical profile - people who drive such cars are not motivated to hide their success, but rather want it to be known that they are successful. Whether this is noble or shallow, upright or vain, good or bad is irrelevant - it is what it is.

So, this announcement of a longer A8 is not a surprise at all. Throughout its organization, Audi is committed to being a player in the luxury marketplace. A bigger A8 is a natural extension (pun intended) of Audi's clarity - its flagship must continue to radiate Audi's luxury standard and resonate with the luxury buyer.

While these are among the identity objectives of a flagship, unit sales is not. A flagship showcases the highest standards of a luxury brand. BMW's bread and butter is arguably its 3-Series, but its 7-Series is the flagship.

Audi has clarity on this, which is why the Audi brand is mentioned in conversation when talking luxury. Other brands, who purport to want to be luxury contenders but fail to internalize such clarity, don't get mentioned in those luxury conversations, and it's not a mystery to us here at J&D's Auto Talk.

Kudos, Audi.

The next article in this series, Segmentation 2: Acura needs a true flagship, really breaks down the flagship as a luxury branding tool.

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