The Importance of Brand

Brands–all brands, in all industries–have taken a beating of late. In automotive terms, you need look no further than Toyota to see what can happen to a brand image, and how quickly it can happen.

On the flipside, looking at General Motors can give you an inkling of just how steep and long the climb back to a previously unassailable position can be. Which is only to say that brands, or at least the way most people think about them, can be fickle things.

And yet there are some very tangible benefits that brands can bring, benefits that can not be explained by simply looking at the glass and steel, or bricks and mortar, that make them up.

Canadian Tire, for example, has an enduring brand image in Canada, even if a great many people have a denigrating nickname for the company; they still know “The Tire” and they still shop there.

For the aftermarket, the recent experience for what we have normally referred to as “national brands” can be described as difficult, to say the least. Many distribution groups have also sought to differentiate themselves from the competition by creating their own so-called “private label” brands (in some cases stripping away much of the value-added that went with them), and have gone even further to create private-label price fighters, and no-label price fighters too, all in the name of lowering costs.

Now, with the aftermarket– which is, in a sense, a brand of its own–on the threshold of some of the biggest opportunities for growth in some time, owing to the crisis at the car dealer level and the general price consciousness of the consumer in a tough economic environment, the issue of brands and what they bring to the party is getting a second look.

The premium-brand promise is simple to state, according to Charles Pariano, manager–North American Aftermarket Sales for brake supplier Aisin World Corp. of America. “Today the installer and the consumer both want value and quality.

“The OE premium part in the aftermarket offers this combination to both parties. The OE part as an aftermarket offering provides the form, fit, and function that originally came on the vehicle, therefore giving the installer and the consumer the best of both worlds for quality and the latest in technology, versus what some entry-level products may offer.”

“Premium parts play the same role in a price-conscious market or not,” offers Brian Fleming, director of marketing, Affinia Canada Corp. “They represent the best value and quality available, and in the long term represent value for the money, more than compensating for the difference spent on their initial purchase price.

“More to the point, they tend to set the price point that all other quality levels benchmark themselves against, and in a price-sensitive climate set the stage for the price points that entry-level products can be set below them.”

And that speaks to the brand promise of the aftermarket.

“Speaking for the industry as whole, and Bosch in particular,” says Pam Krebs, director of advertising and sales promotion, Robert Bosch, “premium products and their highly recognizable brands provide ultimate value in today’s value-conscious marketplace. Motorists or installers rely on premium products to perform better and last longer, right off the shelf. Today, when motorists want to be sure they get the maximum bang for their buck, they rely on and select premium products first, with confidence.”

The confidence that Krebs refers to is also referred to as brand equity: a brand promise to the customer.

From the overall aftermarket’s perspective, the influx of products that are focused on making market inroads based on price has many concerned that the aftermarket’s brand could be eroded–at precisely the time when it needs to build confidence in a consumer already shaken by changes at the original-equipment service level.

“Premium products are really more important in times like today, when consumers are looking to extend vehicle life,” says Michael Proud, director of marketing, North America, Federal-Mogul Corporation.

“It’s true that customers are price-sensitive–as they always are–but they’re also increasingly cognizant of the fact that there are real differences in the parts and services available for their vehicles. In fact, recent consumer studies have shown that vehicle owners prefer four key characteristics when choosing parts for their vehicles: engineered specifically for their make and model by an OE supplier; designed to help improve vehicle performance; engineered to help extend the vehicle’s service life; and proven to provide a safer, more reliable driving experience. By these measures, the smart choice for the consumer is a better-performing, longer-lasting product that might cost just a little more.

“We learned an interesting fact through our own research,” says Proud. “Consumers participating in our focus groups told us they strongly prefer premium brands and products that are offered in conjunction with special offers. Our ‘Smart Choice’ campaign answers this demand, and in doing so helps reinforce this brand loyalty.”

Evidence of how premium brand suppliers have responded to the new realities of the marketplace can be found in the launch of the ACDelco Advantage line.

Recognizing the need to offer a line that meets economic imperatives, but without devaluing the premium ACDelco brand–one of the most recognizable in the world–is no mean feat.

When it was launched in the U.S. last August–it was actually test-marketed in Canada nearly a year earlier –a positioning statement from Timothy Murray, director, maintenance nd repair business for ACDelco, explained the thinking.

“We’ve seen that the aftermarket brake landscape is continuing to shift to the growing ‘Good’ and ‘Unbranded’ segments. The ACDelco Advantage line of rotors and drums is designed to meet this market shift with an enhanced brake offering and will capitalize on this growth opportunity while complementing our GM OE and DuraStop product lines to ensure we have the right products for the right customers.”

Since then, the Advantage line has been expanded to include brake friction, suspension parts, and wheel earings, in addition to brake rotors.

Outside of the understandably partisan need to turn brand equity into sales and profits, the overarching need to protect the integrity of the industry is also at issue.

“Our industry’s reputation is only as good as the parts we provide to consumers,” says Steve Handschuh, president and COO of the Automotive Aftermarket Suppliers Association (AASA), which recently launched its “Know Your Parts” campaign. That is true whether in the primary market of “do-it-for-me” or the “do-it-yourself” market. While the industry campaign may sound like a motherhood issue, there is research to back up the claims.

In August 2009, the AASA released a landmark report, Independent Repair Industry–Focus Group Findings on Buying Influences of Repair Professionals. More than 60 shop owners, technicians, and service writers participated in focus groups commissioned by the AASA Marketing Executives Council in three geographic regions. The results clearly show that repair professionals prefer premium, branded products over low-cost generic brands.

“Although representing a smaller share of the aftermarket, DIYers learn the value of premium brands, at their own expense. For example, a family member of an AASA staffer recently had to replace the front wheel hub bearing ssembly in the family car for the third time in a one-year period. The first two repairs used value lines made in China; on the third repair, a premium brand-name part was used. The expense associated with a three-time eplacement far exceeded the initial cost savings of the value-line part.

“That is why it is so important for both repair professionals and DIYers to ‘Know Your Parts.’ AASA launched this industry awareness and education campaign at AAPEX 2009 to address the proliferation of low-cost, low-quality parts throughout
the aftermarket supply chain. These low-quality parts pose a serious potential danger. A failure by one of these parts could threaten the safety of drivers operating the vehicles on which they are installed, as well as the repair professional who installed it. And these failures also threaten the reputation of the entire aftermarket.”

At the root of much of the question about the impact of brand on the aftermarket also is the question of what the national brand, and premium-brand suppliers, bring to the party beyond what is in the box.

“AASA and its Marketing Executives Council launched the ‘Know Your Parts’ campaign at the 2009 AAPEX show to answer that very question,” says Jack Cameron, vice-president, member services and programs, AASA, and group executive of the AASA Marketing Executives Council.

“At the heart of the campaign is the definition of a full-service supplier, to differentiate them from short-line, generic part suppliers that generally sell on low price alone. In addition to high-quality products and brand recognition, full-service suppliers provide essential services not offered, at least in total, by value-line suppliers.”

Among the services Cameron includes are:

• Sales representation and manpower

• Industry standard cataloguing

• Regional service centres / inventory availability

• Marketing support and programs

• Product specifications and quality control

• Product liability and IP protection

• Technical support and training

• Product research and development

“Services that are supplied today at no additional cost may come at a price or be eliminated altogether as low-cost, low-quality products garner market share and create commodities out of all product categories. If left unchecked there is the risk that essential services such as technical support, training, industry-standard cataloguing, and others may no longer be available.”

“The price line or price pressure in the market affects everyone who is in contact with the automotive part,” says Ian Braunstein, Satisfied Brake Products. “From the standpoint of the installer who is struggling for profit dollars, he has a dilemma: does he put a price product on, or go more premium to service the economy segment?” Braunstein says that the phrase, “cheap is expensive,” has some real validity if the part being installed costs the garage in terms of reputation or comeback if it fails. In this respect, premium brands are really money-savers.

“Maybe he shortens the margin on the branded option slightly, to be competitive, but at the same time he avoids the comeback, delivers a good experience to customers, and ensures their return business.”

With this in mind, Braunstein believes that price pressures are mostly coming from the distribution segment, and are not a direct reflection of pressure from the service garages and technicians.

“In the matter of where the real business is taking place, I don’t think the price products are as much in demand as the distributor thinks. I don’t believe distributors are always giving the customer what he wants.”

“The distributor has been obsessed with commodity approaches, as sometimes differentiation from the manufacturer is solely based on price,” he adds. “The manufacturer is actually responding to that by competing against others. That being said, even the manufacturer is responsible for the commodity drive in order to gain more market share.”

And, as seems to be supported by recent research, he believes this puts them out of step with decision-making at the garage/service level, where what part is actually installed is not driven by price, but by quality.

Even beyond the hard parts realm, this value proposition is recognized. “Premium products provide additional value and benefit to consumers beyond basic protection to help the consumer to meet today’s and tomorrow’s engine/equipment needs, gain technical edge, and be good for environment and fuel efficiency,” says Amana Li, Pennzoil-Quaker State Canada. “Furthermore, premium products not only contain the company’s technical and product edge, but also are the result of dedicated, heavy R&D investment and consistent cooperation/partnership with major OEMs and racing teams.

“Premium products closely link with brand positioning, new industrial standards, new OEM engine requirements, etc. Other than premium products and technology, we provide various [forms of] marketing support with target customers for added value, e.g., promotions, training, merchandising, and various programs, etc.”

“I think the biggest thing at the customer level, the jobber level, is that we deliver profit to their business,” says David McDuffe, product and pricing manager, Wakefield Canada, Castrol’s Canadian distributor. “We spend a lot of time and effort really helping them retain customers. A lot of our marketing programs are focused on loyalty and retention for their customers.”

McDuffe says that the resources available from a premium brand supplier–quality products, expert representation, technical resources, marketing programs and tools–increase the profit opportunities for everyone in the supply chain.

“If you talk to our customers today, they see the value and they definitely value what they bring to them beyond the oil in the bottle. The oil change is the most frequent service. Shops get to interact with their customers and it is usually a fairly positive experience.”

He says that every business needs to have a balanced portfolio of product offerings, but that premium, branded product tends to be the focus of marketing and other resources, which builds customer awareness, and that builds the profit proposition.

“I think the shoppers understand the value of brand,” says McDuffe. “They want to have the option. Our brand is really a promise to consumers. They expect high-quality product in the bottle.

“And it is a promise to the customer. They expect quality, service, training, programs, etc. It is all one big package.”

“Premium products are manufactured under higher quality standards than entry-level product; most premium product manufacturers follow original-equipment quality and performance standards and set their level of quality based on OE product,” says Ramzi Yako of brake parts supplier ProMax Auto Parts Depot Ltd.

“However entry-level products are produced under lower quality standards to meet the marketplace price demand; consumers expect very low and competitive prices from entry-level product. Even with current slow economic situations, demand for premium product has not decreased at all, but is steadily increasing; I have seen an increase in demand in our premium parts especially in the past 12 months.”

Malcolm Sissmore, vice-president, IAM North America, Delphi Product & Service Solutions, says that the very concept of premium has shifted in important ways.

“Today’s economic climate has everyone making adjustments, from groceries to aftermarket products, as a business and as a consumer. We’re all looking for a fair price, but we still demand a high-quality product. That’s where OE suppliers have the ability to maximize their assets while containing pass-through costs. During product development, OE manufacturing, engineering expertise, the latest technology developments, as well as a global footprint, all contribute to the bottom line. These assets provide the opportunity to be cost-competitive with our customers and their customers.”

And, as a market force, he says, such suppliers have established a standard for parts development and manufacturing, in the process reinforcing aftermarket regulations. OE suppliers have helped establish a benchmark of sorts for other aftermarket manufacturers to follow, driving them to maintain a level of quality for customers. In turn, they’ve become a sort of “honourary watchdog” for quality parts entering the aftermarket.

“For the end user, premium parts offer confidence that the original equipment which rolled off the
line with the vehicle will be replaced with the same parts,” says Keith Gordon, managing director, Canadian aftermarket, Delphi Product & Service Solutions. “Premium OE parts perform as the original equipment intended. Bottom line: we’re all customers. We want a quick repair, and we do not want to go back to the shop if that same repair fails. With OE-quality parts, customers receive the same fit and function as the original, the same level of performance and durability to help get them back on the road.

“For the shop owner, premium parts can help decrease comebacks and increase customer satisfaction, which leads to greater profitability. You don’t want customers returning to a shop frustrated. You want them to return based on a positive repair experience.”

“Strictly from a business perspective, they are selling parts with an advantage over white-box parts, and they can make more profit at the end of the day,” says Dean Weber, national sales and marketing manager, NGK Spark Plugs of Canada Limited.

“The best example I can give is with regards to oxygen sensors, and the absolute necessity of the aftermarket unit to be completely compatible with the OE unit, matching everything about the sensor element and heater characteristics (including many other checks and balances from the PCM); otherwise, the CEL light will invariably come on.

“It is essential that premium brands not only offer complete OEM fit, form, and function, but they must also have a value proposition that gives the aftermarket an advantage over the dealer. This advantage can manifest as solutions to problems with the OEM part(s), as well as increased coverage with fewer SKUs (intelligent SKU consolidation).

“They are absolutely critical to the health of the automotive aftermarket. If we do not provide our valued customers with the right part for their customer’s vehicles, we will lose them to the dealer. I believe we have momentum now, with closure at so many OE dealers and the downward trending of white-box products, that we can service the customer with high-quality replacement parts and ensure they have the confidence to keep coming back to the aftermarket. This is a win-win for everyone: selling more parts with increased profit, while keeping our industry healthy for many years to come.”

“Let’s face it, customer experience is tremendously important in an age when thousands of consumers are turning to the aftermarket for the first time after having traditionally relied on the OE service channel,” says Federal-Mogul’s Mike Proud. “How are we going to solidify these new customer relationships–by offering a bargain-basement price and reduced product quality, or by demonstrating that we can deliver innovative products and services that address the unique needs of the customer’s vehicle?”

“The dealer is a reliable source for quality products and service, as is the independent aftermarket,” says Handshuh. “Surveys show independent service providers are consumers’ preferred alternative once a vehicle is no longer under warranty.

“However, it only takes one bad experience with a substandard aftermarket part to drive a vehicle owner back to the OE dealer. Without premium quality parts, the consumer may come to view dealers as the only reliable source for automotive service–which affects everyone in the independent aftermarket.”

———

Branding Caveats

In the early 2000s in North America, the Ford Motor Company made a strategic decision to brand all new or redesigned cars with names starting with “F.” This aligned with the previous tradition of naming all sport utility vehicles introduced since the Ford Explorer with the letter “E.” The Toronto Star quoted an analyst who warned that changing the name of the well-known Windstar to the Freestar would cause confusion and eliminate built-up brand equity, while a marketing manager believed that a name change would highlight the new redesign. The aging Taurus, which had become one of the most significant cars in American auto history, would be abandoned in favour of three entirely new names, all starting with “F”: the Five Hundred, Freestar, and Fusion. By 2007, the Freestar was discontinued without a replacement. The Five Hundred name was thrown out and Taurus was brought back for the next generation of that car, in a surprise move by Alan Mulally. “Five Hundred” was recognized by less than half of people surveyed, but an overwhelming majority were familiar with the “Ford Taurus.” From Wikipedia

———

“Our industry’s reputation is only as good as the parts we provide to consumers.”

–Steve Handschuh, president and COO of the Automotive Aftermarket Suppliers Association (AASA)

———

“Services that are supplied today at no additional cost may come at a price or be eliminated altogether as low-cost, low-quality products garner market share and create commodities out of all product categories. If left unchecked there is the risk that essential services such as technical support, training, industry-standard cataloguing, and others may no longer be available.”

–Jack Cameron, vice-president, member services and programs, AASA

———

“It only takes one bad experience with a substandard aftermarket part to drive a vehicle owner back to the OE dealer.”

–Steve Handschuh, AASA