The Power of Branding: How Consumer Behavior Shapes The Market – by Rodrigo B. Ferreira

In a recent article on “The Economist” there is an overview of the current car market in Europe. The most interesting marketing insight I got from this article was that brands have a strong effect on what goes on in the market place. Volume (i.e. non-premium) carmakers are struggling as many consumers choose premium brands that have broadened their ranges of cheaper entry-level cars.

There are a number of reasons for some carmakers to have recently lost hundreds of millions of euros, but one of the main challenges they are facing is consumer behavior. It sounds like premium brands understand their consumers better. One possible reason for the difference is that the bosses of German firms tend to be people who have been in the car business for most of their careers and their passion and understanding of the car industry helps their companies and brands perform better among consumers.

Also, the brand equity that some firms have built along decades symbolize status, reliability and quality to consumers, even though Europe’s weaker volume carmakers have been producing high quality cars. The consumers are choosing based on their beliefs, preferences and taste, which in turn have been shaped by the image that the brands represent in their minds. Given the same offer level and equivalent perceived benefits for the price, consumers will decide on the basis of their brand perceptions and some firms have figured out the key drivers of value creation for their core customers.

In conclusion, market positioning is key for carmakers and the interactions of all the different global brands in Europe is a good reflection of the economics of this industry in which the power and the performance of a company are associated with many factors such as technology, key alliances, operations efficiencies, globalization, innovation capacity, overall business strategy, and politics, but especially with how companies can position their brands among customers, who ultimately will shape the demand for certain features like style, comfort, safety and, arguably, the most important: brand status and recognition.