More Luxury Buyers Would Rather Have A Buick

More Luxury Buyers Would Rather Have A Buick

By Dale Buss July 20, 2011

How to wring the most out of the Buick division has been a challenge for General Motors Co. off and on for most of the brand's 108-year history. But with only four brands to spread over the U.S. market now instead of the eight GM marques of just a few years ago, the company needed to broaden the appeal of Buick after the 2009 bailout -- and to get it right. And over the last three years, with a completely new product line and confidently enhanced positioning, GM’s overhaul has paid off: A re-energized Buick has become the company's workhorse, the fastest-growing U.S.-based brand of any automaker, with an unmatched 21 consecutive quarters of year-over-year sales growth. First-half 2011 sales of 94,000 units were 34 percent higher than a year ago and placed Buick solidly in third place in its new "luxury" segment behind BMW and Mercedes-Benz.

One after another, Buick’s new-age models – Enclave, a hip revision for the LaCrosse and a similar revival for the mothballed Regal nameplate – have been hits with American consumers and rising quality rankings have helped as well. To a more limited extent so far, GM also finally has managed to upgrade Buick perceptually, into the ranks of entry-luxury brands competing in the U.S. market, despite a history of hovering just below near-luxury positioning. “We decided to start the Buick renaissance from the product standpoint, from inside-out, and it has captivated a lot of new consumer interest in the Buick brand,” said Tony DiSalle, Buick’s U.S. vice president of marketing.

At this point, Buick still has a way to go in persuading typical consumers that it has reached the Lexus level. “It will take lots of time,” said Doug Scott, senior vice president of GfK Automotive, which researches auto brands. “Buick isn’t in the same ‘perceptual space’ as Lexus,” though Americans’ cross-shopping of the two brands recently has increased significantly.

One reliable indicator of the fact that Buick’s overhaul remains a work in progress: Buicks are selling at the lowest average prices in the luxury segment while requiring among the highest levels of incentives to move them off the showroom floor. The True Market Value of Buick in June was $35,630, the lowest of the nine major luxury brands in the U.S. (except for Lexus, whose first half was anomalous), using Edmunds.com’s proprietary formula that reflects the average selling price of Buick models. And the True Cost of Incentives for Buick, using another Edmunds.com formula, was $3,686, higher than for any luxury make except for Lincoln – and Cadillac."

Shedding Tradition
“The combination of those two rankings shows succinctly what GM is up against as it continues to try to reposition Buick and describes a brand that is still striving for credibility in the luxury space,” said Jeremy Acevedo, a U.S. industry analyst for Edmunds.com. But some observers credit what GM has accomplished so far. “I think they’re getting there,” said George Cook, executive professor of business at the University of Rochester and a former Ford marketing executive. “Everyone I’ve talked to says they love the Regal and the LaCrosse. They’ve lifted the brand’s image and created – through styling and performance and everything else – a place in luxury. In that sense, Buick is in much better position than ever before.”

Buick’s conquest rate now is 41 percent, DiSalle said, “much higher” than historically, and about half of those buyers coming to Buick from non-GM brands are switching from imports. Also much higher, he said, is the percentage of new Buick customers who are migrating to the brand from luxury makes. Such results have been a long time coming. In the legendary last-century strategy of GM Chairman Alfred Sloan, Buick was slotted above Pontiac and just below Oldsmobile on the ladder of GM brand prestige that presented Chevrolet at the lowest rung and perched Cadillac at the top. Buick became the “doctor’s car,” a staid indicator of the owner’s age and traditionalism as well as accomplishments.

But locked down by the rigidity of that scheme, Buick sales volumes actually have been dropping since 1984. Every once in a while over the last quarter-century, GM would try without much success to elevate Buick’s positioning and lower the age of its average buyers, such as with the Reatta sports coupe in the late Eighties and a couple of turbocharged Regals. Over the last decade, Buick survived its first SUV, the middling Rendezvous, as well as a close marketing relationship with Tiger Woods that ended just before the golfing icon self-destructed.

Buick vs. Pontiac
Along the way, most things have conspired to keep the Buick brand in a sort of box that bespoke a buyer’s aspiration to luxury, but didn’t provide true luxury, and maintained a continuing primary appeal to sixty-somethings even as aging boomers moved into that demographic slot. “Buick was what Mercury was to Ford – it primarily appealed to older drivers,” explained David Cole, chairman emeritus of the Center for Automotive Research, in Ann Arbor., Mich., a veteran analyst of the industry who also is the son of Ed Cole, a former GM president. Even some relatively recent efforts by Buick reinforced this stodgy positioning: despite being represented by Woods, the icon of professional golf’s younger generation, for instance, golf’s biggest appeal remained to Generation Y members and boomers.

Meanwhile, Oldsmobile historically had been considered “the poor man’s Cadillac,” which also meant that the lower-prestige Buick “certainly wasn’t a luxury car by any stretch,” as Cook put it. As GM’s aggregate market share shrank over the last few decades, there were fewer sales from near-luxury buyers for Oldsmobile and Buick to parse – and a bigger penalty for the fact that they remained adjacent brands. Marketing executives had an increasingly difficult job differentiating the two and imparting each with a strong raison d’etre. Rather suddenly, GM deep-sixed Oldsmobile in 2004. In 2009, when the company faced pressure from the Obama administration and the bailout process to eliminate yet more brands, many presumed Buick would disappear because it remained uncool and nondescript, while Pontiac still stood for driving excitement and performance and snared a more youthful demographic.

But when GM terminated Pontiac instead of Buick, it was out of the conviction that the company could gain share on the lower end of the luxury market with Buick while Chevrolet took over some of Pontiac’s attributes. Beginning before and strengthening after that decision, everything GM has done with Buick has reflected that conviction; from the day he started as GM’s chief marketing office in 2010, for instance, Joel Ewanick has refused to concede that Buick is anything but a true luxury brand. Yet company executives realized that pulling off Buick’s ascension into the industry’s crowded and competitive luxury ranks would be the most difficult challenge in fortifying any of their remaining four brands.

Driven By Product
Fortuitously, Buick already had embarked on a good start toward more rarefied and upscale positioning with critical and consumer acclaim for Enclave, the well-timed large crossover vehicle that debuted in 2007 (along with and before other versions developed off the so-called Lambda mechanical platform: GMC Acadia, Saturn Outlook and Chevrolet Traverse). A new LaCrosse bowed in 2010 as the brand’s flagship and “Lexus fighter,” with Buick making direct comparisons to Lexus in ads. “Pitting it against an established, formidable competitor was absolutely the right thing to do,” DiSalle said, “and it was able to put LaCrosse into consideration sets of people who otherwise might not have considered it.”

The all-new 2011 Regal, launched last year, has provided most of the recent sales momentum, with its sporty styling and Europe-oriented suspension tuning. By the end of this year, GM expects to begin producing the new Buick Verano, a compact sport sedan that will expand the brand’s lineup at just the right time. In the way it is refashioning Buick, GM has been trying to accomplish a two-fold purpose: giving the company a credible presence in the entry luxury market to face off against the Japanese and lower-priced European entries, and providing a boost for Cadillac as it squares off against the entrenched mainstays of Mercedes-Benz, BMW and Audi. “As part of that, their intent is to make both Buick and Cadillac more premium-priced to bring higher profitability,” Cole said. “They want to make Buick aspirational to Chevy buyers and Cadillac aspirational for Buick buyers. And it’s simpler for them to do that now, with just three car brands.”

Earned Luxury
That’s why, while entering luxury territory, Buick pricing stops well short of Cadillac’s main ground, ranging from stickers that start at $26,360 for Regal to $36,600 for Enclave, while Cadillac’s starting prices range from $34,615 for SRX to $74,135 for the Escalade Hybrid SUV, according to Edmunds.com. DiSalle said that GM now has “a really good grasp on the right consumer insights here,” that have allowed it to shift and lately refine the positioning of Buick, vis-a-vis Cadillac -- as well as externally. “We can see two very distinct customers in this luxury space that are paying off for us,” he said. “We [at Buick] talk about the most beautiful and quiet and comfortable vehicles on the planet. Cadillac is more provocative, comfortable, powerful, performance-oriented, with angular designs – the best of the best from a product perspective.”

Competitors’ views also illustrate that, while Buick is making a case for GM’s newly elevated view of the brand, it hasn’t got the luxury club made just yet. BMW’s vice president of U.S. marketing, Dan Creed, said that his colleagues “will be able to sleep at night” knowing that Buick is on the prowl in the segment. “But with that said, I think Buick and Lexus probably have a lot more in common than Buick and BMW or Lexus and BMW have.” But Mark Templin, general manager of Lexus, was having none of that. “I know [Buick is] trying to position itself as against Lexus, and that’s an admirable thing to do,” he said. But Templin noted that 30 percent of Buick’s sales volume is under $30,000, “and we don’t sell anything for under $30,000.” At the same time, Buick “has nothing over $50,000, and 30 percent of our volume sells for over $50,000.”

Marketing has been crucial in spelling out the new Buick. At the same time that DiSalle said Buick is seeing “a lot of Regal buyers in their late 20s and early 30s,” the brand also is trying hard to hang onto its traditional cohort. “Boomers all want to think they’re younger than they are, and they’re a huge segment, so Buick has to be careful not to alienate them,” Cole said. As a result, Buick has turned to message by which it hopes to psychographically encompass both groups. It is designed to persuade the brand’s audiences that they deserve a luxury vehicle as much as it’s meant to position Buick as the brand they should reward with their purchases.

“Grassroots” and “experiential” marketing has become more important to Buick, including auto shows and other events where consumers can see and kick the tires on new Buicks without first having to go into a dealer showroom. And in a key advertisement that Buick launched as part of its sponsorship of men’s college basketball “March Madness” last spring -- and which GM North American chief Mark Reuss posted on his corporate Facebook page recently -- Buick described “vehicles with substance and quality, with a look and feel that says, ‘Come as you are.’” The ad continued: “This isn’t luxury as you’ve always known it. It’s luxury the way it should be.” And generations from Millennials up through Gen Y and baby boomers, of course, and consumers who are relatively upscale, tend to be college-basketball fans.

Not Chrysler
Overall, DiSalle said, Buick’s research revealed that the brand’s target should be consumers who have “a sense of quiet confidence, who are curious and balanced about life. They’re entrepreneurial, ambitious and individualistic in their mindsets. So the tonality of our communications” is different than for Cadillac. One of Buick’s key insights, for example, was that “Buick buyers are community-oriented and are often hosts and want to entertain.” That was one reason, DiSalle said, that Buick has focused on rear-seat roominess and overall comfort.

In appealing to “come as you are” buyers, Buick’s blatant appeal to people who’ve “earned” their wealth applies a gritty patina that resembles how Chrysler brandmeisters are trying to position their own marque as a deserving occupant of a stall in the luxury stable. But DiSalle said that he “personally [doesn’t] get the sense” that Chrysler is trying to occupy the same space as Buick. “We’ve evolved off consumer insights, and Buick has always had the ability to claim this space. This isn’t a repositioning as much as it is a revival.”

Dale Buss:  is a frequent contributor to AutoObserver.com.