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.

the power of perception

The mind is powerful. So powerful, in fact, that people see what they want to see regardless of the reality that surrounds them. Hypochondriacs, even those that are self aware, suffer from the persistent delusion that they are plagued by a never-ending series of illnesses. In their minds, they are gravely ill, and no doctor can tell them otherwise.

Consumers can suffer from the same delusions. “There is no objective reality,” write marketing mavens Al Ries and Jack Trout in their book The 22 Immutable Laws of Marketing. “There are no facts. There are not best products. All that exists in the world of marketing are perceptions in the minds of the customer or prospect.”

“The perception is the reality,” they continue. “Everything else is an illusion.”

If facts ruled the day in marketing, many of the top consumer brands would be bottom-shelf items. However, because those brands have established a perception of strength, quality, or leadership in the minds of consumers, facts are irrelevant. Consumers believe that leading brands are “better” than their competitors, and that’s all that matters.

Roger Dooley, a marketing consultant specializing in neuromarketing, recently wrote at his site about a new study that will be published in an upcoming edition of the Journal of Consumer Research. The study illustrates the power of perception in consumer behavior. “Individuals who are dieting or trying to eat healthy foods have learned to avoid some foods by name,” writes Dooley. “The researchers found that the same dish containing vegetables, pasta, meat, and cheese was rated as healthier when it was called a salad instead of ‘pasta.’ Another test showed that subjects ate more ‘fruit chews’ than ‘candy chews,’ even though the product was the same.”

What is the lesson for brands? Consumer perception — positive or negative — is a good place to start when developing any marketing campaign. It’s far easier to start with how consumers perceive your brand rather than developing an entirely new branding strategy or creating a new product. Doing so would require building a new idea in the mind of the consumer, which is much more difficult that altering a misperception.

For example, Porsche discovered through consumer research that its models were perceived as impractical as a daily driver. This perception was hurting sales, especially in a down economy. Porsche wanted to change the perception and began a multi-channel marketing campaign highlighting the value of Porsche as an everyday car, without actually changing the car. “We're not going away from the core brand values of performance, engineering and state of the art technology,” Porsche’s Vice President of Marketing David Pryor told DMNews, adding they simply wanted to focus on some of the more “every day” aspects of it.

For brands hurting in sales, the problem may not be with the product, but rather the perception of the product. The first step to turning around sales should be discovering how consumers perceive the brand, then building a campaign around that perception. The research can discover a weakness (or, even a strength), which can serve as a solid launching for rebuilding the brand. As the research shows, even changing the name of a product can result in an increase in sales.

the $26,000 kia

In case you haven't heard, Kia has a car they want to show you. You may have seen NBA All-Star Blake Griffin jump over it in the 2011 Slam Dunk contest, or in a plethora of other places, as Kia seeks to shove its new Optima into every conceivable placement spot. For a company with a reputation for, well, uninspired styling, the redesigned Optima is a welcomed change. If you want to snag the premium edition of the car, you'll need to be prepared to fork over more than $26,000.

At the top of the market are makes like Audi, BMW, and Lexus. Kia plays a respectable role at the low end, and they do a good job of it. Budget-conscious consumers gladly sacrifice the styling of more expensive vehicles for the affordability and dependability of a Kia. For what many used cars cost, consumers could get a brand-new Kia, warranty and all.

However, it seems that Kia is no longer satisfied with the low-end of the automotive market any longer, and its rising price tag is slowly moving them into what branding guru Al Ries calls the "mushy middle" of the market.

Ries warns brands to stay away from the mushy middle, and for good reason. "As a market matures, it tends to fragment into two different markets, usually at opposite ends of the scale," says Reis. "There just isn't much action in the middle of the market." Simply put, the middle of the market is where brands go to die.

The high and low ends of a market are like black and white. Companies can easily define themselves as a luxury or discount brand. However, the middle is an amorphous gray. Defining a middle-of-the-road brand is much more difficult. For example, Walmart's brand is based built on cheap products. Target's brand is built on more expensive, higher-quality goods. Then you have Kmart, which was never able to establish a strong foothold for its brand in the middle of the market and filed for bankruptcy in 2002.

The problem with a big price tag for Kia vehicles is that it's pushing them into the danger zone. Kia has a brand — and a strong one at that — built on producing affordable, reliable vehicles. A $26,000 car does not fit into that brand image.

It's mystifying as to why Kia would want to leave its position at the low end of the market. Low-end brands can still be winners. Nobody tells Bic razors that its brand of cheap, disposable razors is a joke. They're king of the low-end market for razor blades. Kia can be the same for economical vehicles.

Sales for Kia continue to grow, and more power to them for that. They've done a lot in recent years to really improve the look and quality of their cars. Nevertheless, short-term growth is not indicative of long-term sustainability, especially when the growth comes at the expense of brand integrity. If Kia wants to remain a strong force in the automotive market, they will need to focus on dominating with economical, reliable cars and leave the high-end cars to the luxury brands.

is groupon a “road-to-ruin” for local retailers?

In a February editorial published at AdAge.com, marketing guru Al Ries called Groupon – and the whoring of coupons – a “road-to-ruin deal for local retailers.”

“Presumably, all those consumers who bought products and services for 50% off are going to be happy to return to their local retailers and return to buy those same products and services at full prices,” Ries asserts. "That's not going to happen."

Speaking about the "coupon culture" as a whole, Ries has a point.

Coupons are like crack to companies looking for a quick fix in sales numbers. As such, it’s easy for companies to get addicted. And, unfortunately, it can come with some harsh realities after the rush wears off.

Companies that routinely use coupons lock themselves into a dangerous pattern where consumers shop only when product is on sale, or discounted by coupons.

It’s hard to lay off that sweet, sweet discount, man.

Ries points to department store retailers like Macy’s and Kohl’s who have begun to rely on steep discounts to move product rather than the strength of their brand. It’s basically a discount war.

Personally, I find this to be true. I love Macy’s because, from time-to-time, they have a huge discount on dress shirts and ties. Sure, the quality of the store will push me to Macy’s above JC Penny, Belk, or Sears, but I don’t find myself frequently shopping at Macy’s unless I run across a sale.

As a cost-conscience consumer, I know that all I have to do is delay my purchase by a little bit of time, and that the same shirt that costs $39.99 will be $15.99 two or three weeks later.

The distorting effects of coupons also fueled skepticism of the potency of Proctor & Gamble’s Old Spice commercial featuring “The Man Your Man Could Smell Like.” During the explosion of publicity and social media conversation regarding this pop-sensation of a commercial, a simultaneous marketing campaign using coupons was launched.

“It's hard to determine how much of (the sales increase) was due to an aggressive couponing campaign which was in market simultaneously,” says Adweek’s Joseph Jaffe, though he did admit that there was some impact that could be attributed to the viral success of the commercial.

But, is Groupon the same as a packaged good, or department store?

I have to disagree with Ries on this one. While discounts and coupons can ultimately undermine the strength of a brand when they become assimilated into the shopping behavior of a consumer, the platform of Groupon is much different.

The variety of Groupon’s clients makes discounts unpredictable. There is no reason to expect that a discount for an eatery will appear at a specific time in the future – or ever again. Consumers can’t anticipate the appearance of an additional discount in a way that will cause a delayed sale.

If Groupon’s discounts from clients rotated on a predictable schedule – say, a discount to a local retailer that appeared every two weeks – then Ries’ comments would hold some water.

But, it doesn’t; at least, not yet.

Retailers advertising on Groupon have a chance to offer a discount to their products much in the same way a loss leader is used to entice future sales. It’s more of a premium than a discount.

Retailers with relatively small advertising budgets can get a high profile spotlight in the community through the use of Groupon, which is the appeal that has sent Groupon’s value through the roof. As more retailers partner with Groupon, the more varied the discounts will be, and the less likely company’s are to fall into the “coupon trap” Ries fears.