Rinascimento?

Fiat plans to jack up its struggling marque by moving into the more up-market C-segment, but to do so it must put a dent in the market shares of the likes of VW, Ford and Peugeot. And if it does, can Fiat leave behind its Panda past and take o

Fiat, known for its cheap, small cars, is going in for a $12.7bn (£8.9bn) service aimed at rebuilding its market share and reversing the decline in profit. The Italian car company, which has the more up-market and sophisticated Lancia and Alfa Romeo marques – not to mention Ferrari – in its stable, describes the move as a “brand renaissance” primarily for Fiat.

Part of the strategy is to move Fiat into the middle-range category market – the so-called C-segment vehicles – to compete against Volkswagen’s Golf, and Ford’s Focus.

Ford, (which is finding the European market a little rocky, having recently announced plant closures and job cuts), has an American, good-value-for-money image. Volkswagen, on the other hand, has a reputation for high safety specifications and reliable engineering.

The Fiat marque, in contrast, tends to suffer from being associated with its cheaper, smaller cars, such as the Panda – though this is no longer in production – which are considered not to be as robust as some other brands in that sector.

Now Fiat wants to be known for style, design, innovation and safety with its new mid-size hatchback, the Stilo.

Already the company is heavily promoting the C-segment car in Frankfurt, where this week the cream of the car manufacturers will be pushing their wares at the Frankfurt Motorshow.

Fiat is banking on the Stilo to help turn around the group’s declining profits. Fiat is still 30 per cent owned by the founding Agnelli family, and in a bid to expand its auto business outside Europe, Fiat last year traded a 20 per cent stake to General Motors for a 5.1 per cent stake in the US car giant. Under the same agreement Fiat Auto has the option to sell 80 per cent of its shares to GM.

The term “brand renaissance” is not new to the car sector. Ford embarked on a similar move when it launched the Focus in 1998, marking a turing point for the Ford brand. Imagination was given the task of re-engineering Ford’s image.

Imagination client services director David Girling believes that companies undertake such major changes when the competition is managing to steal a march on them and they need to get back in touch with their consumers.

He says: “Mass-market car companies are having to evaluate themselves and look particularly at where they can forge key relationships with consumers.

“Marketing dynamics change, companies face increased competition – even beverage companies are doing it.”

It is not unusual for large companies, particularly those that were founded decades ago, to freshen their brand. Girling claims that companies often choose to reassess their brands when there is a product launch.

In the case of Fiat, it is the Stilo that is to be the catalyst. The parallel between Ford and Fiat does not stop there. Both Ford’s Focus and the new Stilo look remarkably similar and they are both aimed at the same market – the lucrative mid-size range driven by families and bought for company fleets.

New face, new strategy

“New management can also be a stimulus for change,” says Girling. “A new personality will come in and want to recreate the brand.”

True to form, Fiat’s brand assessment coincides not only with a launch but a new personality at the company. Last year the Italian company lured Toyota’s European marketing director, Juan Jose Diaz Ruiz, to be its executive vice-president of sales and marketing (MW August 3, 2000).

Fiat claims Diaz Ruiz has been instrumental in assessing Fiat’s marketing and new positioning.

Fiat public relations director Peter Newton says: “Diaz Ruiz has worked at Seat and Audi and is perhaps best known for the way in which he put Toyota on the European map.”

How long Fiat has been working on its new image is unclear, but Diaz Ruiz took up the role at the end of August last year, so it has been at least 12 months since the planning for the revamp began.

According to Girling the planning behind “brand renaissance” need not take a long time. The implementation of the repositioning, on the other hand, demands about two years.

“You have to be consistent with the brand message, and it is also very important to have all [the company’s] staff involved,” he says. “Anyone who interacts with the public should understand exactly what the brand is.”

When Imagination had created the definition of Ford’s updated brand, it took over a disused factory in East Berlin and flew out 650 Ford dealers and their sales staff from all over Europe to feed them the new brand message so they could act as ambassadors for new Ford.

The dealers were told that while the blue Ford logo, familiar to customers, remained the same, perceptions of the brand had to change. Ford was to be seen as a consumer-focused organisation.

Fiat claims to have done something similar and two months ago flew all its dealers to Milan to coach them on the new brand positioning. Fiat’s new brand message is about “life in primary colours”. It claims its cars and brand messages should convey “energy and appeal” to consumers. The company’s new positioning also aims to “exploit the strength of the brand that offers cutting-edge technology at balanced prices.”

One senior car executive says: “I wish Fiat luck. It has a schizophrenic brand. It runs stylish advertising on TV for the Punto, and then destroys everything by running lots of ‘pile ’em high and sell ’em cheap’ ads.”

But Newton plays down Fiat’s renaissance. He says: “I wouldn’t call it a major shake-up of our brand. It’s a matter of redefining what we have.”

However cautious the company may be about discussing brand strategy, the launch of the Stilo is expected to be backed by a fanfare of advertising and marketing, outweighing anything that Fiat has done in the past.

According to Newton, Stilo, which is being brought in to replace the Bravo and Brava, will be supported in the UK by the company’s largest advertising launch spend to date.

D’Arcy, Fiat’s advertising agency, has been briefed to produce an advertising campaign which will break first in Italy when the car goes on sale there in October. The same campaign will run in the UK when the car goes on sale from February 1 next year.

Over-ambitious?

Fiat has ambitious sales plans for the Stilo. By 2003 it expects to sell 400,000 in Europe. Newton says sales expectations for the UK for the same year “will comfortably exceed 22,000, and be closer to 30,000”.

The campaign, which is being kept under wraps, is unlikely to take the Italian-style, sassy theme that D’Arcy came up with for Fiat’s super-mini, the Punto. However, D’Arcy’s board account director on the business, Kate Hopkins, says: “Spirito di Punto is very close to the hearts of British consumers. The advertising [for Stilo] will also have a sense of identity and show the car as being inventive and creative. It also has to present the Stilo as the practical C-segment car that it is. It will be a balance.”

The campaign for Stilo marks an end to Fiat’s focus on its smaller cars where, particularly in the UK, most of the advertising spend has been concentrated.

The C-segment market is Europe’s most competitive car sector, and Fiat faces a tough task attempting to break into it. The European market is dominated by VW’s Golf, Europe’s best-selling car; Ford’s Focus commands the number two spot. Last year the C-segment accounted for about 5 million car sales – one-third of the total European passenger car market.

Fiat, in trying to meet its full-year volume forecast of 400,000, will come up against additional competition from French-owned Peugeot, which plans to sell 550,000 of its new 307 C-segment car. Combining these two targets means Fiat and Peugeot together hope to snare ten per cent of the market in 2003.

Rough going

Not only will the C-segment market prove tough going for Fiat, the car marque is entering new territory at a time when the European car market is static, which could mean a price war. Aware of this possibility, Fiat says the entry price of its Stilo will be about ten per cent less than rival C-segment vehicles. However, Fiat UK will not be drawn on specific pricing, saying only that it will be priced “competitively”.

Fiat’s competitors question the logic of introducing huge customer offers for the car. One says: “It would create a false economy, which will greatly deflate the car’s resale value. It will make consumers fume and damage its brand.”

Volkswagen, too, is unlikely to take any threat to its market domination lightly, and is already planning ahead. Last week it confirmed that Bernd Pischetsrieder, former BMW chairman, will succeed Ferdinand Piech as chairman of the management board. Since joining VW last year, Pischetsrieder has been managing the group’s Seat brand and overseeing quality.

Insiders say VW will be very different under Pischetsrieder, and claim he already has plans to reinvigorate the company with the aim of keeping the VW Golf as the top-selling car in Europe.

Over the past year a number of European car marques, including Peugeot, Citroën, Skoda and Renault, have said they plan to stake a claim to the C-segment market. As each car company concentrates much of its resources on the one sector, they must secretly wonder if their targets can be met.

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