Segmentation: The Age of Premium and Economy Brands

It used to be that the bulk of European market sales were of the core product in the middle of the company’s range. Today, that business model is faltering as more people either buy frugal basic transportation or high-end luxury products. The diagram that could be seen as a circle in the past has morphed to become a peanut, with the middle offerings in the line-up getting the squeeze.

To cater to these market changes, an increasing number of car companies are beginning to diversify their offerings and evolve their current strategy to include a premium and economy sub-brand pairing. While each company is taking a different approach, it seems evident that this has been spurred by the success of Renault’s low-cost Dacia brand and Citroen’s premium DS offering.

Car brands are to some extent behaving like fashion brands, which have long diversified under a house ‘umbrella’. Giorgio Armani’s brand ranges from the entry-level Armani Exchange label to the couture Armani Privé collection, while Prada separates Miu Miu completely, with many consumers not realizing the two are related.

As more car brands join the premium/economy race, it will be interesting to see which strategies are the most successful. Regardless, we expect the examples below to be just the beginning.

Nissan: Infiniti / Datsun
Infiniti Q30 concept Datsun Go (2013)
Personnel appointments, the decision to separate the Nissan and Infiniti design teams, and the brand’s recent concept cars show Nissan’s intent to make Infiniti a household premium brand name in all markets. The company is making a big push in Europe and China as well as in the US market, where the brand has consistently struggled against Lexus and German premium segment models. On the other end of the scale, Nissan has revived the Datsun nameplate to compete in new markets such as India, where the first models are being launched. The decision to resurrect the Datsun as company’s economy brand comes off the back of the success experienced with the low-cost Dacia brand, run by Nissan’s alliance partner Renault.

Renault: Initiale / Dacia
Renault Initiale Paris concept (2013) Dacia Sandero (2012)
The launch of Initiale in Frankfurt shows Renault’s desire to have a premium sub-brand — a foil to the success of economy brand Dacia. In many regards it’s a clear reaction to the DS brand, which PSA is separating from Citroen and building up as a standalone product in burgeoning economies – specifically China. French products are held in high regard in the People’s Republic and customers are more willing to spend on a premium product that encompasses the qualities encapsulated in high-end luxury goods like Chanel and Louis Vuitton.

Citroen: DS / C-Line
Citroen DS Wild Rubis concept Citroen Cactus concept (2013)
The DS brand might be the one many are reacting to in the premium space, but Citroen is rethinking its core C-Line as a more ‘economy’ offering — harking back to the simple yet innovative approach of its past cars. The Cactus concept is the latest model to preview a production C4 derivative, and in many ways it is akin to the carmaker’s iconic Mehari – a simple back-to-basics vehicle that is fun to own and drive.

Ford: Vignale
Ford Mondeo Vignale concept (2013) Ford Mondeo Vignale concept (2013)
The Vignale show stand at the Frankfurt motor show made Ford’s intentions for the nameplate clear: with the brand showing a DS-style design and experience approach with Vignale furniture and on-stand masseurs, it’s intended to be more than just a trim level. Though Ford hasn’t done much with Vignale since indirectly purchasing the Italian coachbuilder in 1969, the company’s ownership of the nameplate will allow it to be affixed to vehicles that would sit above the Titanium trim level. Ford’s European arm sells more than 50 percent of all vehicles in its range in Titanium trim.

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