Are Downmarket Luxury Carmakers Oxymorons?
Back in the day, a discerning motorist rocking-up in a Mercedes Benz 300 SEL 6.3 was in no danger of encountering an equally-horsed "baby Benz." These days, the power-crazed pistonhead can purchase a 6.3-liter engine in any one of seven Mercedes body types. And while I'm sure an S-Class sedan has some fancy gizmos you can't buy in a C-Class, I'm not sure they're worth mentioning. But Mercedes' and its luxury competitors' slink downmarket IS worth examination. Are volume sales a form of luxury brand suicide?
I reckon the whole thing started with "feature creep." And why not? Why shouldn't a reasonably-priced car offer dual-zone climate control, satellite navigation, leather seating and a fine engine? If customers are willing to pay extra for their pleasure, why not sell it to them? And it was only natural for luxury brands to see the trend as a golden opportunity to reach down, add a little "prestige" to the mid-market mix and bank some big bucks. And so they did.
While Mercedes and Lexus had the longest journey down from their mechanical Mount Olympus, Audi and BMW quickly joined the corporate colossi's mass market migration. All four brands found riches refashioning their upmarket cachet into more affordable packages. Today, Americans can buy a Mercedes-Benz for $31,975 (C300), an Audi for $25,340 (A3 2.0T), a BMW for $33,175 (328i, soon less for a 1-Series) and a Lexus for $30,790 (IS250).
There is, of course, a flipside to this "downward line extension." Call it the Groucho Marx effect. Just as the legendary comedian "wouldn't want to join any club that would have me as a member," consumers in search of brand cachet tend to shun products that are widely available. Examples of companies producing upmarket and/or trendy goods that bet their life on the mass market and lost, abound– especially in the automotive arena.
Today, you can buy a Cadillac for $32,500 (CTS), a Jaguar for $34,995 (X-Type 3.0), a Lincoln for $29,305 (MKZ) and a Saab for $26,995 (9-3). That's before discounts. Discounts that reflect the fact that these formerly upmarket brands have squandered their allure to the point where their dealers wish their inventory had ten foot pole marks on it. For these former luxury car playas, moving into the mass market signaled the beginning of the end.
So how have the luxury Gang of Four avoided the same fate? You could argue they haven't. Their current success may be sewing the seeds of their eventual destruction. Perhaps Audi, BMW, Mercedes and Lexus' sales embody former NBC Prez Bandon Tartikoff's "Least Objectionable Theory of Programming." In other words, their products are popular simply because they're less bad than the other guys'.
Alternatively, you could say these companies make damn fine automobiles. Suggesting that the average car buyer is savvy enough to recognize and appreciate a given model's adherence to its maker's brand values may be something of an intellectual leap, but there's no doubt that the lowest priced U.S. Mercedes still has a certain "Mercedes-ness" to it. The other marques are equally unmistakable.
That said, these luxury brands' bean counters have severely stretched their products' DNA. Merc's bank vault gestalt took an enormous hit over the last twenty years. Bimmer's SMG gearbox, iDrive multi-media controller, run-flat tires, SUV and dumbed down steering are a worrying divergence from their Ultimate Driving machine ethos. The aforementioned Lexus IS' harsh driving dynamics bear scant resemblance to their magic carpet LS flagship. Only Audi creates a range of automobiles with brand-faithful consistency.
George Petersen of Autopacific consultants provides the bottom line: "Entry-level luxury cars need to demonstrate the capability of their brand–just as the more premium entries do." As the unforgivable Cadillac Cimarron and execrable Jaguar X-Type proved, a fancy badge can't compensate for product malfeasance. In fact, a lousy mass market line extension is the worst of all possible vehicles. It kills a brand's value for both financially-challenged aspirants and the well-heeled brand faithful.
All of which bring us to a piercing glimpse into the obvious. No matter where they're offered in the price spectrum, "luxury" automobiles that rigidly adhere to their manufacturer's core values bestow honor and longevity to their brand. Crap upmarket luxury cars are bad for business; but lousy mass market versions are lethal.
By this logic, an affordable Cadillac is not a bad thing per se. But you know what? I still can't get my head around it. As GM Marketing Guru Mark LeNeve said, "A Cadillac is something a kid should aspire to. Not something he should be able to own." Call me a snob, but my gut says he's right.
More by Robert Farago
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"Their current success may be sewing the seeds of their eventual destruction." Sowing. Their current success may be sowing the seeds of their eventual destruction.
Brand dilution through offering cheaper models is part of what killed Packard back in the 50s. In the 30s they had started a cheaper Packard 120, which saved the company during the Depression, and in the 40s they started offering the Clipper, which was aimed more at Buick than Cadillac. If they had made Clipper a separate marque (which they considering doing towards the end, although by then it was too late) it might've been okay, but it had a disastrous effect on Packard's patrician image. Cadillac managed to avoid that when they introduced the first Seville by not making it an entry-level car -- they targeted it at people who wanted a smaller Cadillac, but not the stigma of a cheaper Cad. Of course, they couldn't leave well enough alone, resulting in the disastrous Cimarron and Catera. Brand dilution of the luxury marques here is not nearly as severe as it is in Europe, particularly in the UK. Sales of D-segment cars like the Mondeo and Accord plummeted a few years ago because people started figuring out they could get a lightly equipped 3-series or C-class -- usually with a four-cylinder engine -- for the same money. Seeing a profit opportunity, the companies responded with the 1-series, A-class, A3, etc. Now, becoming a 'full-service' carmaker rather than a niche luxury player isn't necessarily disastrous if they continue to offer desirable product, but their ability to leverage the snob appeal of their brands will be diminished, and history suggests they won't be able to get it back with their existing brands. This bedeviled Chrysler's Imperial through most of its existence; it had begun as a Chrysler Imperial, and the effort in 1955 to make it a separate, luxury marque convinced no one because they were fighting three decades of their own marketing that said the Imperial was the top-of-the-line Chrysler, not a tony luxury marque. This is why Toyota was smart to create the Lexus brand -- if the LS400 had been sold as a Toyota (as it was in the home market), it wouldn't have been nearly as successful as it was. By that standard, the Mini was a smarter move for BMW than the 1-series.