Friday, January 24, 2014

if “luxury kia” seems weird to you, read on

In teasers for what is sure to be a big Super Bowl ad push for Seoul-based auto manufacturer Kia (client of agency David&Goliath), the company is announcing the launch of a new model, hinted to be the brand's first true "luxury" vehicle. The jump into the luxury division is hardly surprising, as the brand has shifted towards more expensive models and trims over the last few years. While the decision is certainly bold, throwing a gauntlet at the feat of established luxury brands such as Audi and Lexus, it only formalizes what we already knew about Kia's future aspirations: To shirk its perception as an "economy" car.

Three years ago I wrote about the high cost of the redesigned Optima, which totaled around $26,000 at the time, and how it was an indication that Kia wanted to move up in the market. However, feedback on the article (available in the comment section) took issue with using the $26,000 price-point as a bellwether for the brand. The commenters all had fair points, but I believe were missing the forest for the trees, as the K900 clearly shows.

The point was not that Kia couldn't effectively reach various market-strata through trim options, but that Kia shouldn't try to do that.

Conventional wisdom suggests the greater variety of your offerings, the more customers you will reach (and the more money you will make). However, that's not the case when it comes to branding. Bygone are the days when companies made money producing average products for the average person. To paraphrase Darwin: The market today favors the extremes; not the averages. Brands who try to expand their territory -- either trying to move up in the market, or down -- often find themselves in a dangerous place branding pioneer Al Ries calls the "mushy middle" of the market. And, this is a place even the strongest brands go to die.

"When management sees the great success of its brand, the next thing they usually say is, ‘What else can we get into with our hot brand?'" writes Ries' daughter and fellow branding maven, Laura, in a 2010 article about this concept. "The answer is usually trouble." Laura uses Gap as an example; a brand once known as a "the" place fashionable, basics in apparel. Then, Gap success caused it to expand, adding GapBody, GapKids, and GapBaby. However, as Laura writes, Gap discovered that its core customers -- teenagers and 20-somethings -- didn't want to wear the same clothes as baby's and kids.

"All the expansion diluted the power of the Gap brand," Laura writes. Gap's hot brand turned into a hot mess. It lost its identity, and competitors had a foothold to overtake this once powerhouse name in fashion. It is no coincidence the company's strongest sister brands today are those occupying the low end of the market (Old Navy) and the high end (Banana Republic).

Taking this same principle and applying it to the auto industry, it's obvious why brands caught in the mushy middle, in particular American automakers, are struggling to carve-out an identity in a market that has evolved away from the everyday car for the everyday driver. The growing number of import options since the 1970s gave car consumers greater variety. As a result, the old model of a "one-size-fits-all" car gave way to a niche market where consumers could now be choosy about what they were looking for in a vehicle.

Today, there are domestic cars, "Japanese" cars (yes, people by cars simply by the fact that it is engineered by Japanese company -- the country itself has become a "reliability" brand), economy cars, luxury cars, hybrid cars, electric cars, etc. The strongest auto brands are those that clearly occupy a single space in the market.

There is little question that Kia is one of the strongest automotive brands right now. However, its success is largely because Kia is a brand born in the bottom of the market, which it then grew to dominate by producing a quality product for a budget price. In 2005, Al Ries even uses Kia as an example of a low-priced brand "doing great," while lamenting the "mushy middle" troubles of automakers like GM and Ford. Unfortunately for Kia, they must have overlooked his article.

Nobody can fault Kia with wanting to capitalize on its success. It's a natural thing, especially for an auto manufacturer; the existence of brands such as Acura (owned by Honda), Lexus (owned by Toyota), Infinity (owned by Nissan), and others are a byproduct of this desire for greater market share, especially at the top (Scion is Toyota's recent divergence into the low-end of the market). But, Toyota, Nissan and Honda recognized that it was better to create a new luxury brand than try to introduce a high-end model with mid-market brand ID. Many consumers have no idea those three luxury brands are really spruced-up, rebadged, lower-priced cars.

Even Hyundai, which debuted a luxury-model under its own brand, gave the Genesis its own logo and identity. Sure, it was the Hyundai Genesis, but you wouldn't know it from the badge. Hyundai recognized the need for keeping it at arm's length, even if it didn't want to fully commit to a full line-up of luxury cars.

However, Kia looks like it will release the K900 as a Kia, with a price tag decidedly un-Kia. And, that's the problem. The idea of a "luxury Kia" is an oxymoron in the consumer's mind; Kia stands for quality economy, not quality luxury. While the K900 is an astounding car on paper and will undoubtedly be one of the best "bangs for the buck" as luxury goes, the Kia consumer is not a luxury consumer, and portraying itself as a luxury brand dilutes the Kia name. Just like Gap, the move could have traumatic long-term consequences for the company.

At the moment, Kia enjoys the same sort of niche notoriety as its high-end German colleagues. Consumers know Kia as the premier economy vehicle, just as they think of BMW and Mercedes as the premier high-end vehicles. So, it makes little sense why it would want to leave a position occupied -- largely without rival -- in the economy market. A move to the middle would only cannibalize the success of its parent company, Hyundai -- just as Coke Zero merely cannibalizes the success of Diet Coke.

It's easy to sit back and suggest, "Well, surely if Kia got this far, it knows what it's doing." Yet, the same thing could be said for thousands of once-household names now defunct as a result of bad branding decisions, many of which were the same as Kia is making now. There is a reason why GM and Chrysler were bailed-out, and it wasn't all to do with Union-related overhead or quality issues. It was because everybody knows what an Audi is (German luxury, and thanks to the positioning work done by agency Venables Bell, it is becoming even more specialized as a German luxury auto for the younger generation), or knows what a Toyota is (Japanese reliability). There wasn't one "idea" consumers had about Ford, GM, or Chrysler, except they were "American" -- and the widespread availability of competitor imports (many of which are now more "made in America" than "American" cars) quickly showed how weak of a positioning that was.

In its teasers for the K900, the ad copy says "preconceived notions are the voices that distort reality." It's a great progressive philosophy, but it simply not true when it comes to a brand. A preconceived notion is the very definition of brand. Your brand is not what you say it is, but what a consumer believes it to be in his mind. That is why positioning in the mind of the consumer is one of the hardest, but most important aspects of brand management. It takes years, if not longer, to move the needle on consumers' "preconceived notions" about a brand. Hyundai's fight from the bottom to the middle of the market did not happen overnight.

Kia may very well think it's attempting to change the preconceived notions about the brand, but it's already been doing that over the last few years with industry-leading warranties, on top of industry-leading quality; not to mention stylish designs that challenge what an economy car has to look like. All Kia will accomplish with the K900 and the models that follow is muddying the waters for what the Kia brand "is" in the mind of a consumer.