Brand reinvention through pioneering innovation: Case of Mercedes
One of the fundamental tenets of building global iconic brands is to pursue consistency in strategy, identity, communications and positioning. Toyota, Google, the New York Times, Singapore Airlines, Apple, and IKEA are just some examples of global iconic brands that have followed this fundamental branding tenet. Given such religious following of this tenet, it is no wonder that when companies experiment with any aspect of their brand, it manages to catch everyone's attention. More importantly, such moves challenge this fundamental tenet of consistency.
Changes in the global brandscape have brought about rethinking among the global brands. No longer are brands confined to any one particular market. Different markets pose different challenges in terms of customer preferences, local practices, resident competitors and together a challenge to the global brand identity. As such, brands have continually adapted to different demands. However, changing the fundamental identity and positioning of the brand is completely different.
Consider the case one of the most well known brands, Mercedes. The Mercedes brand has consistently been known for luxury, premium pricing, cutting edge technology and superior quality. However, in distinguishing itself from another well known brand, the BMW, Mercedes has focused more on its quality and premium--evel than mere technological superiority.
Given such strong notions of premium, the primary target of Mercedes has long been the high flying executive or mid-career professionals who have a sense of professional achievement and personal status image. Despite the recent sporty models, Mercedes has consistently been touted as the luxury car of the grown-ups. Such a singular positioning although ideal in normal circumstances is proving to be tough for Mercedes in the face global recession, falling demand, tighter environmental regulations across Europe and increasingly in the US and the closing of the gap by competitors like BMW and Audi.
Should Mercedes change its positioning? Or should be it true to the fundamental branding tenet of consistency? And if Mercedes decides to change, how can it do so without negatively impacting the brand image and equity?
Brand consistency is important. But equally important is for the brand to be responsive to the changing conditions. Mercedes has chosen the route of both incremental and substantial innovation to make the brand ever more relevant. Mercedes' (part of Daimler) CEO Dieter Zetsche has instituted a number of companywide initiatives to move Mercedes in the right direction.
For starters, despite cutting budgets in every possible area, Zetsche has kept the R&D budget intact. Innovation in enhancing fuel efficiency, better platforms and better designs have formed the pillars of the basic strategy. On technological innovation, Zetsche has bet hugely on the yet to be proven lithium ion battery technology to kick start the hybrid range of cars.
The company has enlisted many partners including Tesla Motors in the US to build an electric-roadster in the near future. The market has reacted very favorably with Daimler stock rising 50% to US$34 from a low of US$22.
Another tactical innovation has been to break down every Mercedes car into different modules to make sure similar parts can be used across the different models, thereby enhancing efficiency and achieving scale. It is forecasted that the soon to be launched next generation C-Class will use this sharing strategy completely.
In addition to these tactical and incremental innovations, Mercedes is also involved in innovation is two other fronts - dealing with competitiors and responding to customer needs. In a rare turn occurrence, Mercedes and BMW are collaborating in procuring parts and leveraging commonalities. Such collaboration has not only garnered positive reaction from the market, but also is expected to help both brands minimize costs.
Additionally, Mercedes has finally decided to expand its portfolio to target young but affluent customers, who traditionally have preferred the much sportier BMW or Audi, by launching A and B-class models. Although such a strategy is never easier to pull off given the traditional associations with a brand such as Mercedes, the new push by CEO Zetsche is seen as a move to stop the declining trends of Mercedes. From earning of around US$8 billion in 2000 to a loss of US$4.8 billion in the first quarter of 2009, from a market share of 24% among luxury car brands in 2003 to losing the market leader position to BMW in 2008, Mercedes is under immense pressure to show a turnaround.
In such circumstances, iconic brands do not just change their entire strategies, betray their brand identity and start afresh. Rather, they adapt a clever strategy of pursuing simultaneously incremental innovation that would streamline their process and cost structure while also pursuing strategic innovation that positions them well. As such, although consistency is a fundamental brand tenet, it can only be effective when practiced along with strategic adaptive capabilities.
Changes in the global brandscape have brought about rethinking among the global brands. No longer are brands confined to any one particular market. Different markets pose different challenges in terms of customer preferences, local practices, resident competitors and together a challenge to the global brand identity. As such, brands have continually adapted to different demands. However, changing the fundamental identity and positioning of the brand is completely different.
Consider the case one of the most well known brands, Mercedes. The Mercedes brand has consistently been known for luxury, premium pricing, cutting edge technology and superior quality. However, in distinguishing itself from another well known brand, the BMW, Mercedes has focused more on its quality and premium--evel than mere technological superiority.
Given such strong notions of premium, the primary target of Mercedes has long been the high flying executive or mid-career professionals who have a sense of professional achievement and personal status image. Despite the recent sporty models, Mercedes has consistently been touted as the luxury car of the grown-ups. Such a singular positioning although ideal in normal circumstances is proving to be tough for Mercedes in the face global recession, falling demand, tighter environmental regulations across Europe and increasingly in the US and the closing of the gap by competitors like BMW and Audi.
Should Mercedes change its positioning? Or should be it true to the fundamental branding tenet of consistency? And if Mercedes decides to change, how can it do so without negatively impacting the brand image and equity?
Brand consistency is important. But equally important is for the brand to be responsive to the changing conditions. Mercedes has chosen the route of both incremental and substantial innovation to make the brand ever more relevant. Mercedes' (part of Daimler) CEO Dieter Zetsche has instituted a number of companywide initiatives to move Mercedes in the right direction.
For starters, despite cutting budgets in every possible area, Zetsche has kept the R&D budget intact. Innovation in enhancing fuel efficiency, better platforms and better designs have formed the pillars of the basic strategy. On technological innovation, Zetsche has bet hugely on the yet to be proven lithium ion battery technology to kick start the hybrid range of cars.
The company has enlisted many partners including Tesla Motors in the US to build an electric-roadster in the near future. The market has reacted very favorably with Daimler stock rising 50% to US$34 from a low of US$22.
Another tactical innovation has been to break down every Mercedes car into different modules to make sure similar parts can be used across the different models, thereby enhancing efficiency and achieving scale. It is forecasted that the soon to be launched next generation C-Class will use this sharing strategy completely.
In addition to these tactical and incremental innovations, Mercedes is also involved in innovation is two other fronts - dealing with competitiors and responding to customer needs. In a rare turn occurrence, Mercedes and BMW are collaborating in procuring parts and leveraging commonalities. Such collaboration has not only garnered positive reaction from the market, but also is expected to help both brands minimize costs.
Additionally, Mercedes has finally decided to expand its portfolio to target young but affluent customers, who traditionally have preferred the much sportier BMW or Audi, by launching A and B-class models. Although such a strategy is never easier to pull off given the traditional associations with a brand such as Mercedes, the new push by CEO Zetsche is seen as a move to stop the declining trends of Mercedes. From earning of around US$8 billion in 2000 to a loss of US$4.8 billion in the first quarter of 2009, from a market share of 24% among luxury car brands in 2003 to losing the market leader position to BMW in 2008, Mercedes is under immense pressure to show a turnaround.
In such circumstances, iconic brands do not just change their entire strategies, betray their brand identity and start afresh. Rather, they adapt a clever strategy of pursuing simultaneously incremental innovation that would streamline their process and cost structure while also pursuing strategic innovation that positions them well. As such, although consistency is a fundamental brand tenet, it can only be effective when practiced along with strategic adaptive capabilities.
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