German vs Japanese. Luxury Goods – Why do consumers pay more?

Alok Sane 216177624

It’s no secret that German cars such as Mercedes – Benz, BMW and Audi are without doubt more expensive to purchase and have a higher total cost of ownership when compared against an equivalent Japanese car such as a Honda or Toyota. Yet so many consumers still pay the extra dollar to own a European made car, why?

Brand Perception

In 2014, Consumer Reports National Research Center conducted a comprehensive Car-Brand Perception Survey, which looked at 7 different categories including quality, safety, performance, value, fuel economy, design/style, and technology/innovation (Consumerreports.org, 2016)

The results found that Toyota topped the list in terms of brand perception, followed by Ford and Honda. Mercedes -Benz came seventh.

Brand Perception

(Consumerreports.org, 2016)

If we look at the highlights from the Consumer Reports 2015 Annual Reliability survey, it shows Japanese cars to be more reliable than European cars overall.

Brand Reliability

(Consumer Reports, 2015)

From a market share perspective, in 2014 Toyota retained the number one position as the world’s largest car manufacturer. This could have been due to its brand and reliability perception along with many other factors.

So why do people still buy German cars? Well – we have to look at it from a sociological and cultural perspective. The brand perception survey surveyed a general sample and did not limit the sample to specific socio economic groups.

According to researchers, esteem (4th in the Maslow’s Hierarchy of Needs) is a significant factor in whether a person will purchase luxury goods. For example, in China men tend to use luxury goods to show off their success (Page, 2015). A sense of accomplishment is also a reason why people purchase luxury goods.

If we look at Mercedes-Benz, it is its marketing emphasis from sportiness to affluence as it tries to attract more well-off, older buyers according to an article at autonews.com (Automotive News, 2016).

“When you look at the demographics in Europe, there are more and more older buyers. Our customers are wealthy but older, said Klaus Maier, Mercedes Car Group executive vice president of sales and marketing. (Automotive News, 2016)

Perception amongst affluent consumers

A study by YouGov BrandIndex found that between August 1 and Sept 7 2012, Mercedes Benz was well ahead of its competitors when it came to brand perception, based on affluent car buyers in the US with an annual salary of more than $120,000 who were looking to make a purchase within the next 12 months. Mercedes Ben topped the list, followed by BMW, Infiniti, Lexus and Audi (Lamb, 2016).

This could be attributed to Mercedes – Benz’s long history of positive brand perception, however starting Aug 1 in 2012, Audi and Mercedes were leading in terms of impression/perception score. It is believed Mercedes pulled ahead of its competitors as it premiered a television, digital and social campaign during the US Open; and due to its huge Fashion Week sponsorship which drew in many different types of consumers (Lamb, 2016).

The Mercedes Benz ‘All or nothing commercial’ shows a man explaining the benefits of the mbrace2 system, and each time he mentions a benefit the commercial flashes to a real life matching scenario. According to Mercedes, “it is meant to illustrate how one can shift and toggle through life’s events through the system…” (Carr, 2016). Mercedes also aligns itself to the US open which would in turn attract more affluent consumers.

Brand Equity

We will examine several aspects of brand equity, including brand loyalty, awareness and association to understand why consumers tend to purchase more expensive luxury goods.

Brand Loyalty

Brand loyalty is the pattern of consumer behaviour where consumers become committed to brands and make repeat purchases from the same brands over time. Loyal customers will consistently purchase products from their preferred brands, regardless of convenience or price (Investopedia, 2010).

A study conducted by (Jung and Sung, 2008) revealed that there is a positive correlation between brand loyalty and purchase intention.

Brand Awareness and Association

Car Logos

Brand awareness is the consumers’ ability to recall or recognise a brand by identifying a link to a brand name, logo, symbol or associations from memory.

Instantly when a consumer sees the following 3 logos they think of prestigious, quality German engineering. These are premium brands with logo’s recognisable anywhere, they are part of ‘German Big 3”

Brand awareness is an essential part of marketing and brand development as it helps a brand stand out from competitors and plays a significant role in the decision making process.

Brand association however refers to all the things that involve a consumers’ imagination like product features and all the associations related to the brand like personality and symbols. (Jung and Sung, 2008).

According to a study by (Keller, 2009), that is to maintain a premium image for luxury brands the messaging needs to be strong, consistent and cohesive over time.

The Mercedes Benz slogan – ‘The best or nothing’ is one that is strong and one that will aid consumers in associating ‘best’ with Mercedes Benz.

Mercedes Slogan

References

Automotive News. (2016). Mercedes chases older buyers. [online] Available at: http://www.autonews.com/article/20061106/SUB/61101016/mercedes-chases-older-buyers [Accessed 31 Jul. 2016].

Carr, T. (2016). Mercedes flaunts in-car technology platform via multichannel campaign – Luxury Daily – Multichannel. [online] Luxurydaily.com. Available at: https://www.luxurydaily.com/mercedes-flaunts-in-car-technology-platform-via-multichannel-campaign/ [Accessed 31 Jul. 2016].

Consumerreports.org. (2016). 2014 Car Brand Perception Survey | Best Car Brands – Consumer Reports. [online] Available at: http://www.consumerreports.org/cro/2014/02/2014-car-brand-perception-survey/index.htm [Accessed 31 Jul. 2016].

Consumer Reports. (2015). Highlights From Consumer Reports’ 2015 Annual Auto Reliability Survey. [online] Available at: http://www.consumerreports.org/cars/highlights-consumer-reports-2015-annual-auto-reliability-survey/ [Accessed 31 Jul. 2016].

Investopedia. (2010). Brand Loyalty Definition | Investopedia. [online] Available at: http://www.investopedia.com/terms/b/brand-loyalty.asp [Accessed 31 Jul. 2016].

Jung, J. and Sung, E. Y. (2008). Consumer-Based Brand Equity: Comparisons among Americans and South Koreans in the USA and South Korea in Korea, Journal of Fashion Marketing and Management, 12(1):24-35.

Keller, K. L. (2009). Managing the growth tradeoff: Challenges and opportunities in luxury branding. Journal of Brand Management 16:290–301.

Lamb, R. (2016). Mercedes marketing pushes it to top of customer perception: study – Luxury Daily – Research. [online] Luxurydaily.com. Available at: https://www.luxurydaily.com/mercedes-marketing-pushes-it-to-top-of-customer-perception-study/ [Accessed 31 Jul. 2016].

Page, V. (2015). The Psychology Behind Why People Buy Luxury Goods | Investopedia. [online] Investopedia. Available at: http://www.investopedia.com/articles/personal-finance/091115/psychology-behind-why-people-buy-luxury-goods.asp [Accessed 31 Jul. 2016].

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s