Hate the Porsche Cayenne? You’ll feel sick when you hear about the Lamborghini SUV.

Should Moet start selling lemon squash?

It seems like the answer may be yes. Brands that once zealously guarded their integrity are now stretching for brand extensions every which way.

Porsche – which some grey-beards in the audience may know as a sports car company – now sells more big four-wheel drives than speedy two-seaters. The Cayenne SUV shifted 42,000 units last year, compared to 13,000 of the “cheap” Boxster sportscar and 16,000 of the “classic” 911 range.

But how long until the excitement of driving a Porsche wears off? At $220,000, the Porsche Cayenne does not top any category. You can get a real Porsche for less, and you can pay a lot less for a perfectly good Range Rover that has real four-wheel-drive capability.

Porsche can obviously tell it is in a goldmine, and they have a plan. A new obnoxious Porsche SUV, the Macan, will be released in 2014.

Porsche Macan
If you’re thinking: “Wow! what a radical redesign!” You probably have never seen a Porsche Cayenne.

It is smaller and even less expensive than the Cayenne, with a base model coming in at $87,000. The motoring press is pretty enthused about it, but when Porsche is competing with the Nissan patrol ($82,000) that sends a message about Porsche to the market.

When you make a brand extension like this, you sacrifice some buyers for others. The hardcore sports car enthusiast views your product more dimly. The middle-of-the-road consumer’s eyes light up. Whether that is a good idea in the short run is a matter of simple mathematics. Do you lose more customers than you gain?

But long-term, there’s a bigger risk. Pierre Cardin was once a luxury clothing brand in the vein of Hermes. Then it went wild.

From the Harvard Business Review.

“Initially, the brand extensions into the perfumes and cosmetics categories were successful because the premium degree of the Pierre Cardin brand transferred undiminished into the new, adjacent categories. The owners of Pierre Cardin, unfortunately, attributed this to the strength of the brand rather than to the brand’s fit with the new product categories.”

I have a Pierre Cardin dressing gown that I believe came from Target. While it is terrific in its way, the brand impression I now have means I would not buy a Pierre Cardin suit.

Image

iSnack2.0 was an example of a bad brand extension. Not because Vegemite is too fancy to go into other products but because iSnack2.0 filled a niche that no customers lived in.

Jack Daniels and cola in a can is a good example of a brand extension. Laphroaig whisky and cola in a can would be a bad brand extension. What matters is not just the quality of the ensuing product, but how important exclusivity and purity was to the brand in the first place.

That’s why the fact that Lamborghini is preparing an SUV for launch is such a shock. Lamborghini is the quintessence of hand-made cars that cost an absolute fortune. Existing Lambo owners who paid around $600,000 to get their hands on the badge may not be too happy about the emergence of a Lamborghini lump costing “just” $200,000.

(In fact, this is not their first brand extension in the field. They made and sold 320 “Rambo-Lambos” between 1986 and 1993, after attempting to build a military vehicle but not finding any buyers. The market for SUVs is admittedly now much much larger.)

But will Kanye want to name-check the Urus like he did with “mercy me, that Murcielago?”

Lamborghini Urus

Not unless he is making a kiddies album.

The chief of Lamborghini has hinted the new SUV might not even be the end of the brand extensions. And the people most excited about  that can probably be found working at Ferrari. It means one less competitor for the position of top pure sports car maker.

“We will never build an SUV”, said Ferrari in 2013, before going on to claim that “an SUV cannot deliver genuine driving emotion”.

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thomasthethinkengine

Thomas the Think Engine is the blog of a trained economist. It comes to you from Melbourne Australia.

5 thoughts on “Hate the Porsche Cayenne? You’ll feel sick when you hear about the Lamborghini SUV.”

  1. Ahhhhh SUV’s, only the most visible problem with cars today. It’s doubtful any significant technology has been developed since the 1960’s to improve the utility of the car. Since then only incremental and mostly unnecessary improvements have been made in an attempt to sell more expensive cars to people. Even useful improvements in efficiency have been voided by an increase in car size and performance. Perhaps driver assist technology might end up breaking the stagnation.

    Luxury SUV’s have become normalised and are now what many people regard as a regular car rather than a special category of a “Sports utility vehicle” – an oxymoron really. We are living in an era where most people in developed countries have had their basic needs met long ago – any remaining useful things they need are beyond our current technology. The market system dictates the money has to go somewhere and the result is that abominations like the Porsche Cayenne are marketed to people desperate to spend their money on bling to show the world how truly disconnected and meaningless their lives have become.

    If only bad brand management was all there was to worry about. This kind of moronic utility defying consumption is actually destroying the conditions that have allowed humans to thrive and all within one generation? Still if a few Porsche fanatics have their cultural cache destroyed I won’t shed any tears.

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    1. I totally agree with most of your point. But not about cars being terrible. The list of serious, sensible and amazing technology improvements in cars since the 1960s goes like this.
      ABS
      airbags
      catalytic converters
      cruise control
      electronic stability control
      air conditioning
      reversing cameras
      hybrid engines.
      auto tightening seatbelts.

      Cars are so much safer, more comfortable and fuel efficient now.

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      1. Well, I’m not a car historian or mechanical engineer so I rely on quick web searches which may not be gospel, but some of the things on your list were invented before the 60’s – so although they weren’t necessarily widespread they were thought of and proven.

        – ABS was first developed for aircraft use in 1929 by the French automobile and aircraft pioneer Gabriel Voisin, as threshold braking on airplanes is nearly impossible.

        – cruise control – Speed control with a centrifugal governor was used in automobiles as early as the 1910s, notably by Peerless

        – The catalytic converter was invented by Eugene Houdry, a French mechanical engineer and expert in catalytic oil refining[6] who lived in the U.S. around 1950.

        – The first commercial electronic fuel injection (EFI) system was Electrojector, developed by the Bendix Corporation and was offered by American Motors Corporation (AMC) in 1957

        – The first precursor to the modern seat belt was invented in the late 1800s. Saab introduced the practice of including them as standard equipment in 1958.

        – A company in New York City in the United States, first offered installation of air conditioning for cars in 1933

        – The first back up camera was used in the 1956 Buick Centurion concept car. The vehicle had a rear mounted television camera that sent images to a TV screen in the dashboard in place of the rear-view mirror.

        I guess my point was aimed more at significant developments such as the self-starter or automatic transmission that opened the car up to significant new markets.

        The only one that I would regard as providing substantial new utility would the catalytic converter. The rest are nice to have but are incremental improvements – like auto tightening seatbelts or the airbag which is a marginal improvement on seatbelts and originally developed because the US didn’t mandate seatbelts. All things considered it’s better to have them but they aren’t on the level of the invention of the seatbelt or the self-starter.

        Electronic stability control is also something many people still survive without. A hybrid engine is not really new technology either, and I’m not sure the overall impact is significant yet – OTOH The SUV is a genuine innovation of marketing – although a diabolically stupid one whose impacts vastly overshadows anything hybrid engines have achieved.

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      2. Well I have learned something! I must admit I thought all those were much newer. Still, some have only become popular recently.

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