Next let’s travel across Hyde Park to Harrods’ annual Christmas window. There we discover an entirely different example of automotive diversification sitting centre stage: the new Aston Martin Cygnet. It’s been created because Aston Martin is about to fall foul of the EU’s new emissions standards, which come into force in 2012. From then, fines can be levied against producers whose average car emissions exceed 130g of CO2 per km. Unlike its luxury brand competitors such as Ferrari and Lamborghini – which are part of larger automotive groups, Fiat and Audi respectively – Aston Martin is a single branded house. This confers many strategic advantages, but also means that the company cannot possibly satisfy the EU’s new emission standards as long as it just makes super-cars. The Aston Martin Vantage V8 spews out a whopping 328g per km and there are no little Fiats or A3s to balance that out.
Cue the Cygnet which, with its meagre 1.3L engine, produces only 110g of CO2 per km. Manufacture 3,000 Cygnets a year, as Aston plans to do from 2011, and you have a nice way of bringing down Aston’s average emissions per car. But here’s the catch – Aston has neither the time, money, core competence or production capacity to make their own economy car at such short notice, so it has opted to import and modify Toyota’s new mini-car the IQ instead. Add some touches to the bodywork, upgrade the interior and you may be able to sell the Cygnet for £30,000 – about double the price of the IQ.
So now comes my question for you, my educated and experienced Marketing Week reader. Which one of these two companies, Ferrari and Aston Martin, is making a huge branding mistake and which is demonstrating clever brand strategy? Both will make millions from their ventures, but which is branding stupidity, which is brand expertise?
All of Ferrari’s red, prancing horse licensed products have another thing in common – none of them are cars
Let’s start with Ferrari because, despite what you may think, the Italian firm is playing a masterstroke with its licensing and retail strategy. That’s because aside from being red and featuring a prancing horse, all of Ferrari’s licensed products have one other thing in common – none of them are cars. This means Ferrari is selling brand extensions in its stores, because that’s what we call it when you apply your brand to new products outside the category from which the brand originated. We know from a decade of research that when you embark on brand extensions you are unlikely to damage the brand’s perception in its original core category. And while Ferrari’s brand is not being damaged by its licensing strategy, its coffers are certainly being bolstered by it. Last year Ferrari generated £1.5 billion in revenue from its cars and another £1 billion from its retail and licensing operations. In Ferrari’s Modena HQ they call this second revenue stream “solde trovati” – found money.
And what a find it is, because it also liberates Ferrari to focus on what it does best: making superb cars with the kind of luxury elan that reminds us why we love Italy. As Stefano Lai, Ferrari’s director of communications, puts it: “We have a business model that we always sell less than the market demands.” Bravo!
Logical thinkers might assume that if Ferrari is in the clear with its golf towels, then Aston Martin will similarly avoid any brand pain with its new Cygnet. Alas, the Cygnet is not a brand extension because, although it is a new product, it is one being produced within the category in which Aston Martin resides. This means that it is a line extension. And line extensions have very different properties from brand extensions.
The good news for Aston is that line extensions are much more likely to succeed commercially.
The bad news is that if they are inconsistent they can do untold damage to a parent brand. And, my God, if there is a more contradictory product this year than the Aston Martin Cygnet I will buy one and drive it off the white cliffs of Dover. Aston is elite, British, hand-made and performance. The IQ is economic, Japanese, mass produced and, thanks to Toyota’s recent quality problems, being recalled because of serious steering issues.
The Cygnet is going to sell like hot cakes, but that does not mean that it will be a success. Ironically these sales will fuel the damage that this ugly little bird will have on the perception of the rest of the flock.
Ferrari could teach Aston Martin much about branding. Not only because it understands the value of “solde trovati” but also because it avoids the damage that a low priced, economy Ferrari would have on their greatest asset – its brand equity. Or, as the Italians would put it, “non sputare nel piatto dove mangi”.
Don’t spit in the plate that you eat from.
Mark Ritson is an associate professor of marketing, an award winning columnist, and a consultant to some of the world’s biggest brands