Exploring the Art & Science of Marketing
The problem with Audi
Audi has a problem on its hands, and it may stem from its parent company Volkswagen Group.
There’s a new model of car called the Audi S8, which is making the rounds at auto shows, and the S8 is going to be a problem for Audi. (read more after the photo).
The Audi S8 is a great looking car (priced at $120K), but it’s an Audi. Volkswagen made the same blunder when it introduced the Volkswagen Phaeton. People didn’t pay a Mercedes price for a Volkswagen and they won’t pay a Maserati price for an Audi either. Despite the fact that the car has a Lamborghini V10 under the hood, people aren’t going to buy it (not very many), and the car will be gone in a few years.
What probably happened is some well-meaning consulting firm told Audi that their multi-million dollar research says that people would buy a high-end Audi for 120k. Maybe they came to this conclusion themselves. Here’s some free advice for Audi that I gave to Volkswagen about the Phaeton (only I wasn’t there to tell them). “People don’t pay big bucks for pseudo-exotic cars.” People don’t pay 120K for an Audi.
| Print article | This entry was posted by Russ on January 13, 2007 at 4:04 pm, and is filed under Branding, Business, Citizen Marketing, Marketing, PR, Public Relations, Strategic Marketing. Follow any responses to this post through RSS 2.0. You can leave a response or trackback from your own site. |
about 5 years ago
I totally agree with your statement. Audi makes a great car, but it should stop at the $60-70K A6, but adding a new “high-end” product when they have a secure customer base doesn’t make sense. If they want to make the outrageous car, show their capabilities at the car show, but leave it on the showroom floor.
about 5 years ago
“What probably happened is some well-meaning consulting firm told Audi that their multi-million dollar research says that people would buy a high-end Audi for 120k.”
Do you think Audi could be trying to increase the luxury or high-end identity of their brand with such a car?
If people know that Audi makes a 120k car, perhaps that will translate into a higher preception of the luxury brand for their other lower cost cars.
Great blog.
about 5 years ago
Absolutely. It wouldn\’t suprise me at all if that\’s what they were trying to accomlish, but people don\’t see Audi that way, and it\’s Audi that has created that perception. If te car can survive, props to Audi, but Audi has put itself in the low-end luxury range.
Plus, you can get a Mercedes E63 for less than the Audis S8, and the E63 is quicker than some Ferraris.
about 5 years ago
Russel, do you think that the term ‘public relations’ could be a misnomer?
I mean, a relation usually implies that there’s a two-way dynamic, but really, the point of the pr firm is to convince or persuade the public of a certain idea or value.
Wouldn’t it make more sense, then, if the ‘public relations firm’ was called a ‘public strategy firm’ where the firm uses public perception strategically for the company it works for?
I think that would be a fun title, too. I’m a public strategist.
I know it’s off the topic of your post, but seeing as how you’re the pro, I’d like to see what you think.
about 5 years ago
That\’s where most people have a misunderstanding of public relations. Public doesn\’t refer to \”general public.\” Public is another way of saying stakeholders or audience.
What are the \”publics\” that your organization addresses? Customers? Shareholders? Etc… Even the media is a public. But, the media one often gets the most attention because it\’s in the spotlight the most. But even the media is just a tool for reaching your target public (or market), which could be people interested in golf or food.
So when you say the point of a PR firm is to persuade the public, I say . . . which public? I think I am going to write a post now about public relations because I think there\’s a real gap between how PR people see it and how business owners see it.
But again, when you say \”public strategy,\” I think of strategy toward markets or stakeholders. And when you say \”publc perception\” I think of targeted groups who hold the same views.
Public to me isn\’t a mass group of faceless people.
about 5 years ago
The author makes it sound like owning an Audi is a bad thing…
If people do not pay $120K for an Audi, then you might want to be aware that there are now three Audis over the $100K mark. The $100K S8, $130K Audi A8 W12, and newly introduced $130K Audi R8 are all in the market as we speak. They even have two cars that exceed 70k and 80k, the RS4 and S6 respectively. Furthermore, and RS6 is about to be introduced that will also exceed $100K. Audi builds some incredible cars that no Lexus/Acura/Infiniti can compete with. With their ownership of Lamborghini and the placements of their engines in cars from Bugatti to Spyker, they are widely respected vehicles for those that can actually afford them. To compare their pricing structure with that of the VW Phaeton that failed miserably is hugely inaccurate. VW never made luxury cars and then made a single attempt to go ultra-luxury. Audi has been making luxury cars for a very long time and has had a 70-80k A8 model selling in the U.S. for a decade. Audi is numero uno in China (above Mercedes and BMW) and tops in its home country. The rest of the world knows this. Audi has increased its sales over the past 14 years in the United States. Its brand presence and awareness has skyrocketed. Each time a media comparison is made between the top German three (Mercedes, Audi, and BMW), it has the Audi placing 1st or 2nd because of their attention to detail, quality, and design of their cars. It is widely known that Audi interiors lead in the automotive industry and that their performance/technology is highly respected. Audi has taken many customers from its rivals here in the US (I being one of them) and in places like Orange County, CA – A6s and A8s abound aplenty. The R8 has already sold out before it has even hit our shores. Many people will buy this car over the Porsche 911 because it represents a higher degree of technology and style over its Stuttgart, Germany counterpart. The area that Audi has failed in within the U.S. is in marketing their products. They have been inconsistent and have used an advertising budget that is 1/4 of its competitors. This means the company has to continue to excel in tangible areas like safety, design, and technology and let perception catch up (as it has been doing). This is a slow and gradual process that to Audi’s credit, is finally being addressed. Their cars are being placed in highly visible areas like Motion pictures (I-Robot, Transporter II) ,areas such as Hollywood Premiers, and fund raisers. They are not trying to get the ‘average joe’ to purchase their $130k A8, but those that are in the ‘know’. People that appreciate a high quality car first and aren’t so influenced to buy a car for their friends or people that they don’t even know.
about 5 years ago
This is the most idiotic thing I have read in a long time…
It seems to me that you have not looked at an Audi in a very long time.
The S8 is worth every penny and you won’t find any other car in its class as well built as this one. The S8 will be built in small numbers every year and less than 1,000 will come to the U.S do to the fact that the car is sold out in Europe for the new 2 years.
I can tell you that my local dealer has all of its S8 sold (all 10 of them). Production will be limited and it will stay that way.
The E63 may be fast, incredibly fast but it does not handle well. Case in point the less powerful S6 with 435 hp that was 3 seconds faster than the E63 at the track.
The E63 cannot use all its power because it is RWD.
I don’t know if you know this but on average, Audi clients make more money than any other buyers.
You need to stop looking at Audi like it was 10 years ago.
Look at the Audi R8; it will be over $100k and it is sold out in the States for the next 2 years.
If Audi wants to be consider seriously it HAS to offer $100k car plus. The best part, you still get more bang for the buck with a $100k Audi than you do with a $100k MB or BMW.
People WILL pay $120k for an Audi.
With what Audi has coming out the next 2 years you are about to see a whole lot more of them on the road….get ready.
It was said that Audi was the best kept secret in Luxury Automobile….this is about to end. Audis are now more reliable than BMW or MB (Consumer Report 2004) and they are breaking sales records every year…
Give it time…you’ll change your mind on Audi.
Go check out a S8 (if you can find one)
about 5 years ago
this is about the stupidest most biased most ridiculous article I have ever read about Audi. Unjustified, bullshit galore, I wish to meet the editor and smack his face.
If he has the balls to do so.
bashing such a reputable car company soley because it is owned by volkswagen???!!! thats like saying BMW is owned by a uber wealthy family, which is true, and thrashing their cars beacause of it. STUPID STUPID STUPID
about 5 years ago
Obviously, the author of this article knows very little about automotive marketing. Just plain stupidity, nothing more can be said…a real moron. Why don’t you go look at Lexus trying to sell a $115,000 LS when the 600h comes out…but I am sure in the authors puerile mind, that will be ok, as it is a Lexus.
about 5 years ago
You might try examining the car and the company not on how you might individually percieve it but instead on the actual products themselves (fine, underrated automobilies in my opinion) as well as where the company wishes to be in a decade…
I’m sure that if you were asked in 1990 about Toyota’s ability to build a car that challenges the best of the Germans you would have given them little or no chance – yet that is the reality of Lexus today.
I suggest you stop looking at the badge on the trunk for your opinion and start getting to know your vehicle with your hands, feet and the seat of your pants… you might be surprised at what you find.
about 5 years ago
Try driving one. Many in the automotive press never even drive the cars that they “review”. They have no concept about the entire car as a package.
Sure the E63; S63; M5 maybe faster and if that is what you want great. But if you want a car that will move you in all types of weather and is not seen at every stop light, then you hae=ve missed the boat. Mr Page and some other “journalists” have missed the boat…err car.
Study and drive a product before you trash it. You might actually learn something…nah never happen. You have zero respect from me.
about 5 years ago
Russell –
If your article was intended to invoke a response, bravo, you have done a handsome job.
If, however, you were intending to make a thoughtful critique, you have failed miserably. I would recommend that you re-focus your comments to make it clear that you are referring to Audi’s *previous* reputation in North America alone, not in the rest of the world.
Audi’s standing and perception worldwide is very different from what it has been in North America. And outside of the automotive wonks, few people recognize the fact that Audi’s parent is Volkswagen.
Having said that, the S8, like the RS4, has been exceptionally well received in North America and the rest of the world. If memory serves me correctly, Audi NA sold out its allocation for 2007 several months ago, so I don’t think there is much concern on the vehicle not selling here.
The failure of the Phaeton in North America was quite distinct from Audi’s (success) with the A8 platform here. Audi has and continues to improve its standing in North America and has been able to sell the A8 and new S8 with little trouble. Volkswagen was attempting to launch itself into a product range approximately $30,000 and a whole caliber of client higher than they had ever done before. They lacked the advertising, the dealership support and service and the brand cachet to succeed in this. It was not the fault of the product, but the brand itself that failed to live up to the product, which in essence is a Bentley Continental for about $75,000 less.
Audi, on the other hand, has a premium moniker and reputation that continues to improve year upon year. They already have the service and support structure in place to cater to that clientele. This is one reason why the A8 has succeeded where the Phaeton failed. Audi’s premium reputation is far greater in the rest of the world than it is in North America, this is true. However, hop into the way back machine with me about 30 years and you’d find BMW in a similar position. As you should well know, building a brand takes a long time and Audi is doing that very well at the moment.
Back to the S8 specifically: I would suggest you try driving one before taking a shot from the peanut gallery. If you need more proof, please check the March 2007 issue of Automobile Magazine, which ranked the S8 well above the comprable Mercedes AMG and Masarati.
The S8 is not designed as a volume product, it is a specialty model for the elite – for those drivers who know about and respect the engineering and development work of the product. For those drivers who recognize a great product when it is crafted. And it will sell, in limited numbers as it was planned, to those people, just as the RS4, S6 and R8.
Were the S8 to be a volume product I would agree with you on your critique that it would not succeed, but it is a niche product. Having said that, your criticism of the brand is a hackneyed response based upon old perceptions of Audi. Ten years ago I would have agreed wholeheartedly, but I would recommend taking a look around today. You’ll find the landscape significantly changed.
about 4 years ago
It is a niche product. This class and price of car is more or less comparable to an Alpina b7 in price and class more or less.
about 3 years ago
Well russel, I ended up buying an S8, after having had to wait for 12 weeks. I could buy an MB6.3 as well but fortunately do not believe in the old adage that Merc is the best car around. Obviously you grew up when the only competition the Benz had were Chryslers, Fords and Chevs. In comparison with those old rattle boxes it did appear to be good but, then anything looks good when compared to Yank tanks or Jap scrap.
Unlike the rest of the world, Europe, the Uk and the rest where we tend to be awake during the day and thereby dont buy what daddy did but are able to make our own decisions Americans have never really been known for their knowledge about anything. Where else would someone ask you “Is it very hot in England?” or ” My frien was in South Africa, he went to Lagos” Lagos is not even a close guess and you should first check out the world and then pretend to know anything about cars.
about 3 years ago
Enjoy the car.