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BrandEquity in Autos - (134-143)Q1'02_AutoBrand_v8 10:55 AM...

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Revving up auto branding S car companies spent more than $50 billion on marketing in 2000—more than any other US industry and upward of 200 percent of the total global net income of the top five automakers. Yet from 1996 to 2000, while the marketing costs per vehicle of the Big Three auto companies increased by 87 percent (to an average of $2,900 per car sold), their com- bined market share dropped by more than four percentage points, represent- ing $15 billion in lost revenue for 2000 alone. More spending is not the 134 Anjan Chatterjee, Matthew E. Jauchius, Hans-Werner Kaas, and Aurobind Satpathy Why do two almost identical cars experience radically different fates in the marketplace? Think brand equity. U
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135 SCOTT MENCHIN answer. The industry cannot turn the tide until it addresses a deeper prob- lem: the loss of brand identity. In recent years, the number of car makes and models has grown in every product segment. At the same time, the once vast gaps in quality, perfor- mance, safety, fuel efficiency, and amenities have all closed significantly. Although variations in quality and performance persist, the remaining possi- bilities for differentiating products, and thus achieving competitive advan- tage, revolve around styling and other intangibles and the emotional benefits they confer on the customer. But instead of attempting to convey these bene- fits, carmakers spend 55 percent of their marketing budgets—$24 billion a year—on rebates and incentives. Price has become, in many cases, the main reason for choosing one brand over another—the classic trap of a commodi- tizing industry and the destroyer of healthy profit margins. What sets brands apart? The industry itself has proved the dollar value of a great brand. Consider the fate of “badge-engineered” vehicles—cars and light trucks sold into the
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same market by two different car companies, often with little but a name- plate to differentiate the products. Such vehicles can meet dramatically different fortunes. Workers at the General Motors and Toyota joint venture NUMMI (New United Motor Manufacturing Incorporated) plant in California build the Toyota Corolla and the Chevrolet Prizm side by side, for example. Toyota designed both models, and the differences in their components and trim are minor. Both vehicles receive high marks from Consumer Reports , and comparably equipped midrange models have similar price tags. Yet the Prizm requires up to $750 more in buyer incentives to support its sales. Even so, only one- quarter as many Prizms are sold, and their trade-in value depreciates much more quickly (Exhibit 1). Toyota’s name on the Corolla attracts customers, while the Prizm is lost among the offerings on a Chevy dealer’s lot. What accounts for such preferences? Marketers have long understood that consumers are influenced by the emotional connections they form with products—and with manufacturers, dealers, and other owners. Our study 1 confirms the idea that consumers attach significantly greater importance to
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