Middle Market Brands

[Brougham-Holiday]

What happened to America's Middle Market Brands?

With the demise of Mercury Ford Motor Company no longer has a mid-market brand. They are not unique in this marketing strategy nor are they alone in cutting brands over the last few years. Perhaps the most interesting point is all Automakers are moving away from mid-market brands.

We saw this in 2000 when General Motors announced they would phase out the Oldsmobile division. GM cited slow sales and poor returns on investments made into Oldsmobile as the key reasons why the brand went under. Rick Wagoner told Sam Donaldson of ABC in an interview:

"If everyone who is now telling me what a terrible thing I've done had actually bought an Oldsmobile recently, why, it would be our biggest seller and I'd be putting money into the division instead of closing it."

With Oldsmobile gone, GM made an attempt to expand the Pontiac line-up (Bonneville GXP/Grand Prix GXP) and move the failing Saturn brand into Oldsmobile's marketing position. GM soon found that even with the newest product range in the GM line, (not unlike Oldsmobile in 2000) Saturn was unable to gain large volume and continued to bleed red ink. Pontiac also found itself in hot water as its G6 failed to retain the high volumes of the Grand Am and the Grand Prix lost its 40+ year luster in the face of becoming the definition of a rental car.

Saab another middle market/entry level luxury brand that was recently sold by GM is another example of the slow death of mid-market brands. Saab has struggled to exist for twenty years. Some have said the reason was due to poor management and an aging product line. Both points that conspired to lead Saab to the brink of liquidation in January 2010. Spyker, who stepped in to save Saab, recently announced they were losing money as well. This does not wholly explain Saab however. Saab has struggled for the same reason as the other mid-market brands: it lacks prestige yet commands a premium price. It competes in the same price range as "value" brands and luxury brands.

These issues are not unique to General Motors.

Today we found out Mercury is following Oldsmobile and Pontiac down the road to annihilation following decades of slowing sales and a lack of standout product. Mercury not only had its own market niche within the Ford Family, but at one point Ford decided they needed yet another brand to fill in their market coverage, that brand was the Edsel.

At Chrysler, the Chrysler brand is clearly the week link in the Mopar chain. Dodge and Jeep both have loyal followings yet the Chrysler brand seems to stand for nothing (except the 300 which is aging quickly). Again the issue here is a product line of vehicles that carry little prestige yet cost more then their Mopar counterparts.

Even the Europeans are struggling with this issue. Lancia and Alfa-Romeo have both been hurting for sales over the last few years (Sergio hopes putting Chrysler and Lancia together will help, but I doubt it) and Saab as mentioned above also continues to hurt (although it is too early to pass judgment on the new 9-5).

All of these weak brands are middle market brands, most (Mercury, Olds, Pontiac, Lancia, Saab, Alfa, Chrysler) have many decades of automobile building under their belts and all have had great sales years. What happened to them?

More models please - As more and more people grew up with entry level brands (Chevrolet, Ford, VW, Toyota, Honda) the brands lost their image as simply cheap cars. In an effort starting in the late 1950's with the Chevrolet Impala and accelerating in the 1970's and 80's the American value brands started offering models that were priced into the same range as their big brother brands. Impala, Monte Carlo, Galaxy, Thunderbird,etc were all priced into other brands territory. As people began to grow up with these cars they began to attribute these new luxury machines with the value brands. Honda and Toyota did the same in the 1990's and 2000's by growing the accord in size, adding the Toyota Avalon and offering option that are typically found on luxury vehicles (navigation among them).

The SUV craze - Because the entry level brands offered SUV's to a larger extent then their premium brothers, remember Pontiac's 1st was the Aztec, Oldsmobile's was the Bravada (a thinly dressed Blazer) and Mercury's was the Mountaineer (a thinly dressed Explorer). Chrysler only had the crossover Pacifica in 2004 and didn't get an actual SUV until the short lived and forgetable Aspen. In short these brands missed out on the SUV craze (notice how GMC and Jeep took advantage of this as mid-market brands and established themselves as important to the overall business). Considering that the last twenty years have not been kind to American cars, many Americans only found themselves behind the wheel of an American vehicle because they loved those big SUVs. Do an informal survey in your area and notice how many foreign cars are garaged alongside a Grand Cherokee or Tahoe. Don't forget many of these SUVs followed their predecessor (Impala/Thunderbird) in selling in the price range of higher cost brands. Have you seen the price of a Tahoe lately? You can easily option them over the $50k mark.

Confused Marketing - As the middle market brands started to fade, their marketing began to become confused. Ex: The 2001 Aurora's advertisement reads "Its starts at $30,800, it never ends, start obsessing." What the hell does that mean? Look at Mercury and their ad 'You gotta put Mercury on your list." Or Chrysler's complete lack of a coherent marketing campaign over the last few years. It seems as though all of the good advertising was saved for the profit making value and luxury brands leaving the mid-market brands looking for loose change in the couch cushions.

The glass ceiling - Mercury, Pontiac, and Oldsmobile (not so much Chrysler although they do seem lost without an Imperial brand now, and this did effect them while they were owned by Daimler) have to be careful not to price the products out of their market range. Lincoln and Cadillac in the US are the crown jewels of their corporations. The other brands have to be careful not to tread on their territory as it could diminish the value of these prestige brands. The same cannot be said for value brands who often price products into higher price brackets (Taurus SHO, Corvette, Camaro SS, the large SUV's) are all priced into higher price ranges. We live in an age of $30,000 Malibu LTZ's and $21,000 Chrysler's. You can option a Malibu to a higher price then the you can the flagship of the Mercury line (Grand Marquis).

Who are you again? - Oh right.... The mid-market brands have been getting second fiddle for decades. They are often forgotten in the face of higher volume or higher profit divisions. Because they lack a clear marketing strategy they also lack a clear product strategy and because they lack a clear product strategy they lack a clear marketing strategy and because they lack a clear marketing.....you get the point. What the hell was a Mercury anyway? How can Pontiac sell performance and MPG and price and being the all American muscle car but having imported models and compete with BMW but also with Kia and Honda....it just made no sense. People were confused as to what the brands stood for anymore. Why buy a Chrysler over a Dodge? Why buy an Oldsmobile over a Chevrolet?, Why buy a Mercury over a Ford? This has been accelerated in the age of the internet because people can easily cross shop and because reviews often quickly point out that a Grand Prix is an Impala, a Grand Marquis a Crown Vic, etc, etc.

So do people just not like middle market cars anymore? NO! They love them, but the luxury and value brands do a better job selling then the middle market dedicated brands could/can. Middle market brands lack the large dealership network (compared to the value brands) yet cannot convince people they are worth the extra money/hassle like the luxury brands can.

Thats my rant on the mid-market brand mess. Its too early to tell how Chrysler and Buick will hold up but for the track record for these brands isn't all that great.

Whats your take on this?

[Camino LS6]

Excellent, well-thought-out post!

I'm way too tired to dive into this one tonight, but it deserves a considered response.

or 20

[bobo]

Entry-level value brands aren't very entry-level anymore. In many cases they are better equipped than luxury vehicles of a few years ago. I think the middle brands just got squeezed out. The luxury makes have also become more accessible with cheap leases, and Lexus and Infiniti expanded that segment, and BMW and Mercedes had to go downmarket to compete. Also, most vehicles these days are pretty generic, with unremarkable styling. Take away the badge, and most family sedans are seemingly interchangeable. Is there a need for 15 different family sedans when they're all similar? Certainly the mainstreaming of Honda and Toyota and now Hyundai have attracted many of those buyers as well.

[ZL-1]

Entry-level value brands aren't very entry-level anymore. In many cases they are better equipped than luxury vehicles of a few years ago. I think the middle brands just got squeezed out.

[Lamar]

Entry-level value brands aren't very entry-level anymore. In many cases they are better equipped than luxury vehicles of a few years ago. I think the middle brands just got squeezed out.

:yes:

Plain and simple.

[NINETY EIGHT REGENCY]

Very well written. I can tell you you hit the mark on all points.

Import Brands:

Toyota

Subaru

Lexus

Scion

Hynudai

Kia

Equus

Honda

Acura

Mercedes Benz

Smart

Maybach

BMW

Rolls Royce

Mini

Nissan

Infiniti

Suzuki

Jaguar

Land Rover

Volvo

SAAB

Mitsubishi ( how in the hell they are still here is beyond me and Mercury out sells them)

Volkswagen

Audi

Bentley

Porsche

Maserati ( see them on Entourage all the time in in magazines)

Fiat

Alpha Romeo

Aston Martin

Lotus

Morgan

Lamborghini

Ferarri

Mazda

Domestic Brands:

Chrysler:

Dodge or Chrysler or Jeep or Ram( truck brand)

Ford:

Ford or Lincoln

GM:

Chevrolet or Buick or Cadillac and GMC truck

Then if you just list the car brands and remove the truck and suv brands:

Dodge, Chrysler

Ford, Lincoln

Chevrolet, Buick, Cadillac

If I listed each model for the import companies, they still would have more models. What is wrong with this picture? Where have we lost our way?

Here is the thing.. GM and Ford are trying to convince people they can cover more market with fewer brands. Those brands themselves do not have many models for the most part. I mean really..

1. Not everyone wants a Chevrolet or a Ford

2. Not everyone can afford Cadillac or Lincoln

3. Some do not like to display their wealth.

4. The Chevrolet and Ford showrooms are packed. How many more models are you going to put in these brands?

5. Lincoln and Cadillac do not yet have that luxury status they once had or even the right models yet.

6. Buick lives because of China.

7. Chrysler is not even a luxury brand. Where is Imperial when you need it?

8. Lincoln has more cars than it once had and sells fewer cars. Lincoln stores will struggle because they need volume.

They see the short term fix and not the long term strategy. I will speak only for my self when I say this. When I was younger, I wanted a Chevrolet Caprice Classic. That was 1974-1976. I then grew into my Pontiac and Oldsmobile period. That segment offered me what I wanted and I needed: comfort, room, space, style, and luxury and a price that was right. A full loaded Chevrolet Impala LT still does not have half of the features I have on my Ninety Eight or Toronado. Why on earth would I want to go down market and look at Chevrolet again? I could buy Cadillac, but I do not because it is too flashy, and I do not want to draw attention to my income. Buick is now the near luxury import intender car. The biggest thing they have is La Crosse. Nothing offers a bench seat anymore.

They are thinking about the bottom line. It is almost like they have conceded the market to the import companies. They created this problem because of marketing. Ford and Chevrolet and the high end luxury brands are creating the problem. The squeeze was put on the middle. It is reflection of the times we live in. We have become a nation of the working poor and the rich.

They could easily put the mid market brands in a niche brands to reflect the current times. Oldsmobile would be at the Chevrolet dealerships selling luxury and Pontiac would be the performance brand at Buick GMC. Both would be all American brands without the import twist. Cadillac would be top of the line. They do not have to be in stand alone dealers.

Ford could have done the same thing with Mercury They could have had Grand Marquis, Cougar, and Sable and a smaller car and called it a day.

Imperial would be revived at Chrysler and then you would have 300 at Chrysler.

Just my thoughts...

[balthazar]

>>"In an effort starting in the late 1950's with the Chevrolet Impala and accelerating in the 1970's and 80's the American value brands started offering models that were priced into the same range as their big brother brands."<<

Who wrote this piece, because this is the first time I've seen what I always believed to be true: that the '58 Impala was the first tangible sign the Sloan Ladder was no longer used.

bobo ~ >>"Entry-level value brands aren't very entry-level anymore. In many cases they are better equipped than luxury vehicles of a few years ago. I think the middle brands just got squeezed out. The luxury makes have also become more accessible with cheap leases, and Lexus and Infiniti expanded that segment, and BMW and Mercedes had to go downmarket to compete. Also, most vehicles these days are pretty generic, with unremarkable styling. Take away the badge, and most family sedans are seemingly interchangeable. Is there a need for 15 different family sedans when they're all similar? Certainly the mainstreaming of Honda and Toyota and now Hyundai have attracted many of those buyers as well."<<

Excellent points, all.

Often I've mused that having NAAAAVVVVV, moonroofs, 18" alloys, hard drives, etc etc in the cheapest cars completely dilutes the price tier and has been instrumental in killing off the mid-priced segment. What's left; slightly different sized versions of the same car. That, and the downmarket/ full-line expansion of nearly all the foreign brands have flooded the market with generic homogenization. Left jab, right cross, TKO.

And I believe it's irreversible, so more death is to come.

[FUTURE_OF_GM]

What happened to America's Middle Market Brands?

With the demise of Mercury Ford Motor Company no longer has a mid-market brand. They are not unique in this marketing strategy nor are they alone in cutting brands over the last few years. Perhaps the most interesting point is all Automakers are moving away from mid-market brands.

We saw this in 2000 when General Motors announced they would phase out the Oldsmobile division. GM cited slow sales and poor returns on investments made into Oldsmobile as the key reasons why the brand went under. Rick Wagoner told Sam Donaldson of ABC in an interview:

"If everyone who is now telling me what a terrible thing I've done had actually bought an Oldsmobile recently, why, it would be our biggest seller and I'd be putting money into the division instead of closing it."

I think the Japanese companies have (sadly) succeeded in homogenizing the automotive business structure into a 2-3 tier competition. They inadvertently introduced the 2 tier set up and when the majority of the market bought into that idea, it began making the domestic middle market brands irrelevant. Add too that the HORRIBLE products that the domestics gave these brands and the complete lack of direction and effective marketing and we begin to see the fall coming a long time ago. Once the middle brands began to "fail" the domestics started pumping money into the brands with the most equity (mass market brands like Chevy, Ford and Cadillac) and that only accelerated the decline. All of the sudden, you could spec out a Chevrolet with essentially the same comfort and technology as an Oldsmobile or Buick and it was easier to find a Chevrolet dealer and a 'safer' buy because it was a bigger brand.

What the domestics FAILED to do IMO is realize the potential that still existed in these brands. Pontiac could've been an excellent performance car division. Mercury would've been a great place to introduce a line of premium small cars that would allow Lincoln to move upmarket. It's sad, really.... All that wasted potential just because Detroit, in their efforts to wring every ounce of profit they could out of every bit of volume they could get, wasn't smart enough to give each brand a unique identity/positioning. Did Ford need Mercury right now? HELL NO... All Mercury is, the Ford brand can cover. However, had Ford grown Mercury into what it said it was going to, they could've made a healthy profit and given the buyer yet another option in the ever splintering automotive market.

With Oldsmobile gone, GM made an attempt to expand the Pontiac line-up (Bonneville GXP/Grand Prix GXP) and move the failing Saturn brand into Oldsmobile's marketing position. GM soon found that even with the newest product range in the GM line, (not unlike Oldsmobile in 2000) Saturn was unable to gain large volume and continued to bleed red ink. Pontiac also found itself in hot water as its G6 failed to retain the high volumes of the Grand Am and the Grand Prix lost its 40+ year luster in the face of becoming the definition of a rental car.

I don't think it's that cut and dry. Pontiac wasn't Olds and it shouldn't have been forced to try to be Olds (especially with no new product and marketing budget) You don't go from teenagers that like red gauges and flaming birds to 40 somethings that want touring cars with tepid styling in one year. It just ain't gonna happen. Saturn suffered the same image crisis that Oldsmobile suffered. GM's treatment of these two divisions is akin to setting up a stage in your closet, hiring a symphony, playing Bach and then looking around and wondering why the hell nobody showed up to watch. You can't just give a division product for 24 months, then not 'inform' the consumer and EXPECT the sales to materialize.

Saab another middle market/entry level luxury brand that was recently sold by GM is another example of the slow death of mid-market brands. Saab has struggled to exist for twenty years. Some have said the reason was due to poor management and an aging product line. Both points that conspired to lead Saab to the brink of liquidation in January 2010. Spyker, who stepped in to save Saab, recently announced they were losing money as well. This does not wholly explain Saab however. Saab has struggled for the same reason as the other mid-market brands: it lacks prestige yet commands a premium price. It competes in the same price range as "value" brands and luxury brands.

A lot of Saab's problem was price... They were selling junk technology (OLD or rebadged) through a brand with little to no prestige for prices that Cadillac and BMW sell for.

At Chrysler, the Chrysler brand is clearly the week link in the Mopar chain. Dodge and Jeep both have loyal followings yet the Chrysler brand seems to stand for nothing (except the 300 which is aging quickly). Again the issue here is a product line of vehicles that carry little prestige yet cost more then their Mopar counterparts.

Remember, originally Chrysler was a mid-lux brand as Imperial was the corporations luxury brand. Chrysler just needs to start over... The Germans wouldn't allow them to develop into a luxury brand because that would be stepping on MB's toes. I really hope Chrysler can get it together.

The SUV craze - Because the entry level brands offered SUV's to a larger extent then their premium brothers, remember Pontiac's 1st was the Aztec, Oldsmobile's was the Bravada (a thinly dressed Blazer) and Mercury's was the Mountaineer (a thinly dressed Explorer). Chrysler only had the crossover Pacifica in 2004 and didn't get an actual SUV until the short lived and forgetable Aspen. In short these brands missed out on the SUV craze (notice how GMC and Jeep took advantage of this as mid-market brands and established themselves as important to the overall business). Considering that the last twenty years have not been kind to American cars, many Americans only found themselves behind the wheel of an American vehicle because they loved those big SUVs. Do an informal survey in your area and notice how many foreign cars are garaged alongside a Grand Cherokee or Tahoe. Don't forget many of these SUVs followed their predecessor (Impala/Thunderbird) in selling in the price range of higher cost brands. Have you seen the price of a Tahoe lately? You can easily option them over the $50k mark.

I remember reading, circa 2000, that Chevrolet was actually the number one luxury brand in america based on sales because they sold so many $$$-dollar SUVs and trucks.

The glass ceiling - Mercury, Pontiac, and Oldsmobile (not so much Chrysler although they do seem lost without an Imperial brand now, and this did effect them while they were owned by Daimler) have to be careful not to price the products out of their market range. Lincoln and Cadillac in the US are the crown jewels of their corporations. The other brands have to be careful not to tread on their territory as it could diminish the value of these prestige brands. The same cannot be said for value brands who often price products into higher price brackets (Taurus SHO, Corvette, Camaro SS, the large SUV's) are all priced into higher price ranges. We live in an age of $30,000 Malibu LTZ's and $21,000 Chrysler's. You can option a Malibu to a higher price then the you can the flagship of the Mercury line (Grand Marquis).

IMO, Cadillac had the right idea around 03-05. They were planning a massive move upmarket. Middle brands should've been used to alleviate the pressure on luxury brands IMO. For instance, Cadillac should've been moved upmarket at all costs and if it meant that they sell less volume while their image is being rebuilt, then SO BE IT. Buick and Pontiac could've then expanded into old Cadillac territory and provided the corporation with that lost volume. Instead, GM had 5 divisions competing in the same price brackets. We're even seeing it now with "New" GM. Cadillac nd Buick are about to be in a "FIGHT TO THE DEATH" simply because GM won't gets it's sh*t together with Cadillac and take the brand to where it needs to be. Case in point: New SRX actually moved DOWNMARKET into Buick territory... WHY?! I ask... So Cadillac cn hit some sort of volume goal that it shouldn't even have in the first place?

Who are you again? - Oh right.... The mid-market brands have been getting second fiddle for decades. They are often forgotten in the face of higher volume or higher profit divisions. Because they lack a clear marketing strategy they also lack a clear product strategy and because they lack a clear product strategy they lack a clear marketing strategy and because they lack a clear marketing.....you get the point. What the hell was a Mercury anyway? How can Pontiac sell performance and MPG and price and being the all American muscle car but having imported models and compete with BMW but also with Kia and Honda....it just made no sense. People were confused as to what the brands stood for anymore. Why buy a Chrysler over a Dodge? Why buy an Oldsmobile over a Chevrolet?, Why buy a Mercury over a Ford? This has been accelerated in the age of the internet because people can easily cross shop and because reviews often quickly point out that a Grand Prix is an Impala, a Grand Marquis a Crown Vic, etc, etc.

Agreed.

Its too early to tell how Chrysler and Buick will hold up but for the track record for these brands isn't all that great.

Whats your take on this?

I think Buick will be fine, because it's the only division at GM that seems to have any sort of direction right now... In fact, I worry that 10 years down the road GM will be forced to choose between Cadillac and Buick and I'm pretty sure Buick will win the fight. By then, China will be huge and Buick will be a truly global entity through it's ties with Opel (Moreso than Cadillac, even) Cadillac has little direction right now with no dedicated platforms or powertrains and leaching onto corporate programs left and right to the detriment of it's established programs.

Chrysler is up in the air... If it is allowed to actually become a luxury division, it'll be fine. But if it has to compete with Alfa for everything, it's probably toast. Alfa needs to be a niche, high equity brand (that's what it does well now, IMO) where Chrysler needs to be the main outlet for luxury IMO.

I also sincerely hope that Ford has a better plan for Lincoln than competing with Acura... If you're going to sell ALL of your premium brands and then kill a middle brand for the sake of building Lincoln, you better DAMN WELL bring it or your going to lose whatever support you had from the media/market.

[Blake Noble]

It is reflection of the times we live in. We have become a nation of the working poor and the rich.

I couldn't sum it up better myself.

The fortunate will drive Cadillacs and the less fortunate get Chevrolets. Maybe if someone less fortunate gets really, really lucky, they can slip behind the wheel of a Buick.

What a fucking joke.

[FAPTurbo]

Sorry, I'm not buying that 'working poor' thing, at all. The consolidation of brands has nothing to do with class, or income, but instead the awareness of automakers that customers' shopping habits are based on product more than brand. A lot of people are looking beyond the badge, especially with the current economic situation.

And what'd you really get with those mid-market brands? A Buick was pretty much a gussied up Chevrolet anyways, and even the level of 'gussying up' was pretty minute in quite a number of cases.

[Drew Dowdell]

I wish Toyota's middle market brand would disappear.....

[ocnblu]

That would be best-case scenario.