ASPIRING PREMIUM car-makers must understand that the ownership experience is as important as the quality of the cars they launch, according to independent automotive experts CAP Consulting.
As more manufacturers than ever before plan to establish ‘premium’ offerings in the UK market, CAP warns that fast and efficient problem-solving for customers far outweighs luxurious dealerships and award-winning commercials in building success.
Rapid global advances in engineering, materials and design technology have opened the door to potential luxury positioning for most manufacturers, many of whom now aspire to launching ‘premium’ cars in the near future.
But CAP argues that the customer experience of owning the car when inevitable problems arise is what sets genuine premium brands apart from those which merely launch higher quality, more expensive products.
Matthew Freeman, of CAP Consulting – which provides strategic product development and ‘go to market’ advice to car manufacturers – points to the success of Lexus in the United States as an example of achieving premium status from a standing start.
Writing on the CAP Automotive blog at www.cap.co.uk he singles out the approach taken by Lexus shortly after launching the brand in the US market.
He said: “Lexus became the leading premium brand in the US by making customer satisfaction the central focus of the brand. When it decided to recall the LS only months after launch, all recalled vehicles were dealt with in a mere three weeks and returned to their owners washed, vacuumed and with a full tank of fuel. In doing so, Lexus transformed a technical issue into an example of the brand delivering on the key promise: ‘we will not let you down.’
“Customers for emerging brands are always taking a risk and in this example Lexus understood back in 1989 that winning trust was the first priority and that dominating the customer satisfaction charts was key to achieving authentically premium status.”
Freeman also argues that simply emulating existing premium brands will be insufficient to guarantee success in this sector for new entrants .
“Luxurious dealerships, memorable commercials and clever product placement all have their part to play, but the benefit they can deliver, at best, is only parity with existing brands. And with the premium space getting ever more crowded – thanks to the likes of Volvo, Jaguar, Alfa Romeo, Infiniti and others pitching for prestige status – going ‘above and beyond’ the norm is vital.
“New brands face an even greater challenge. The historic experience of Japanese and Korean brands entering the European market shows that customer scepticism can be a challenge to overcome for any car type. But by those manufacturers managed this by reassuring their customers that the risk of buying into a hitherto unknown quantity was safe to take.
“By offering long-term warranties and gaining a reputation for fast, efficient problem solving they didn’t just acquire new customers, they kept them.
“Hard data supports the strength of this approach. According to a recent Bain & Company study, a customer is 4 times more likely to defect to a competitor if the problem is service-related than price or product-related. And a World Economic Forum survey conducted in the mid-2000’s which surveyed around 800 people in 10 countries including the United States, China, Germany and the UK showed how little fundamental trust is typically held in product manufacturers. People believed manufacturers routinely hold back new technologies from the market, to make money from spare parts, and overcharge for servicing and services.
“For those manufacturers who believe it is enough to engineer and build a superb product they need to understand the ramifications for their target customers. If you want to tempt people out of £50,000, £75,000 or £110,000 BMWs and Audis, the customers have to be confident that this is a decision which won’t come back to bite them financially or in terms of the overall experience of ownership.
“Ultimately, the existing premium brands have set the bar high so that new entrants will have to jump even higher. They must convince buyers that they are not taking any chances by switching loyalty. It is not enough to be ‘different’ or ‘idiosyncratic’, as the marketeers will claim. Nor can they hide behind the familiar claim that they are exclusive merely because they will not chase high volume sales.
“Essential to success in the premium space is managing the customer journey through the lifecycle of ownership, both for new and used cars. Buy an Audi or BMW and you become part of a culture, regardless of whether it’s a £14,000 A1 or a £100,000 7 Series.
“Is no longer enough to offer large, expensive limousines, it is also essential to understand that premium means best in class and offering a place as part of a community. The car market is no different from any other market in this respect. Buy a £40 iPod shuffle or a £300 Louis Vuitton wallet and you become part of the club. New entrants into the premium car sector must understand how to achieve the same sense of ‘belonging’ for their customers.”