Guillaume Saint - Managing Director, Automotive APAC
Luxury auto buying in China has always been more about self-expression than self-indulgence. Now the form of that self-expression is starting to shift, and brands have a choice of strategies when it comes to keeping up.
Not so long ago, owning a car was itself a statement of status, and luxury auto buyers didn’t have to make daring or unexpected choices in order to stand out. As in other sectors, the key to expressing status through your vehicle was to make the same choice as other successful people; the more obvious the choice, the stronger the signal that it sent. The recent history of the luxury auto segment proves that this is changing.
Asserting expertise, not just buying power
The choice available to Chinese luxury auto buyers is exploding – and this broader range of brands and models is supported by a subtle but significant development in how luxury buyers choose to express themselves. Members of a new generation of affluent Chinese are not satisfied with a predictable, uniform display of status. The ability to assert individuality is increasingly important, and refinement and expertise are becoming as significant as sheer ostentation when it comes to showing who you are. The challenge for luxury auto brands is to support individual self-expression whilst still laying down a universally understood marker of status. After all, there is no point expressing your individuality through luxury purchases if the brands you choose lack the broader awareness to impress others.
Differentiation only counts if it’s tangible
Western auto brands have grown accustomed to catering to individuality through subtle, technical changes that treat luxury buyers as engineering connoisseurs. In China though, invisible technical innovation (the generation of more horsepower from smaller engine capacities, for example) is not yet part of the auto buying vocabulary. The cues that brands use must involve tangible elements of the driving experience. They must empower luxury buyers to express their individualism and expertise in a way that is obvious both to themselves and to others. There are two strategic routes available when it comes to doing so.
The Espresso strategy for brand differentiation
The first might be described as the Espresso brand strategy, and it’s one that has been pursued with great discipline and considerable success by Ferrari in China. Carefully guarded distribution, always selling “one car less than the market needs”, combines with precise engineering of the brand experience through locally attuned limited editions. The scarcity value attached to the brand ensures that driving any Ferrari is an expression of individuality, an inherently exclusive driving experience. At the same time, limiting how far the Ferrari brand stretches when it comes to different vehicles and driving experiences ensures that all drivers know what it stands for. A brand managed this precisely enjoys great power in the mind, partly through knowing how to rein in its power in the market.
The Starbucks approach to brand stretch
Sticking within the coffee analogy, we might describe the second route to individuality as the Starbucks approach. Here, a broad range of model variations offer buyers the opportunity to make individual statements through choosing the permutation that best suits their lifestyle. For Lattés, Americanos and Mochachinos, read the Mercedes GLA, CLA and CLS Shooting Brake – or BMW’s sports sedans and SUVs. Yet enabling luxury buyers to choose their own experience of the brand comes with risks as well. Stretching broadly threatens to sacrifice a precisely defined idea of what a brand stands for. Porsche’s Cayenne and Panamera have translated into impressive market share in China, but its on-going management of the brand will necessarily be very different to in Western Europe or the US. The Porsche heritage built around its famous 911 and legendary performances in endurance races, is far less relevant to China (where 2-seater sports cars represent a less obvious need for auto buyers) than in the US or Europe. This requires the brand to be defined and managed in new and slightly different terms. All of these luxury brands have thus far managed their portfolios whilst still retaining their brands’ DNA. They must continue to do so if the Starbucks strategy is to succeed in the long term.
Balancing brand delineation and brand awareness
At the moment, nothing is more important to the Chinese auto luxury market than broad brand awareness. Status absolutely relies on others being aware of just how exclusive a car you drive. However, the strategies underlying that awareness will have an increasing influence over brands’ fortunes as the market evolves. As luxury buyers increasingly look to make individual statements through their choice of vehicles, precise brand management will be ever more crucial to staying on course.