One key strategy frequently used in the auto industry has been dubbed badge engineering. This refers to the strategy of manipulating the branding of a vehicle as opposed to the actual vehicle itself. The most common form of badge engineering occurs when a single manufacturer has multiple brands and plans to market different brands to different buyers.
Badge engineering is executed for several reasons and can be utilized in several different ways. The following is a list of the badge engineering methods and their benefit:
What: Large auto makers have been known to market the same car under a different brand or model name.
Reason: This can expand the range of brands in a single market without the costs of developing an entirely new car. It can also help market the vehicle to different areas without having to physically change the vehicle.
What: Independent companies have been known to ‘share’ a revised version of their products to compensate for anything missing in the company’s lineup.
Reason: This aids by filling a void in the company’s physical lineup while saving on the cost and time of developing a new vehicle. Also this can help in the overall sales of a lineup and to strengthen company relations.
What: Various collaborations have formed when auto makers combine their resources to develop an entirely new product to sell separately.
Reason: It costs less and is much easier than independently developing other models. Each company can benefit from the others strengths.
What: Companies have designed badges apart from their other brands for the branding of a single model.
Reason: This strategy can be done to separate a vehicle from its manufacturing brand for different marketing campaigns or other image related reasons.
What: Some automakers have been known to market two unrelated vehicle models using the exact same marquee and model name.
Reason: This can drastically boost brand recognition and a trusted marquee can influence buyers even if the model is completely different.
What: Some makers have intermittently manufactured limited versions of certain models.
Reason: The main reason for this is to obtain a minimum production requirement for motor racing. This can also be done to preserve the value and prestige of certain vehicle (i.e. Ferrari)
What: Many auto makers have specifically branded models for the non-retail sale.
Reason: This can build a reputation or create value to a consumer who is receiving a custom made line of vehicles. It is mainly done for rental fleets, etc.
What: A company with a luxury brand and a mainstream brand may upgrade a vehicle from the mainstream brand and sell it as a luxury vehicle.
Reason: This provides a new class of vehicle without the costs of major time and development. The company is able to generate a large Return on Investment selling the new vehicle as a more expensive model under a premium luxury marquee.
Opposed to the beneficial outcomes that can be generated by badge engineering, it can also have adverse affects that lead to a negative impact on a company.
One major difficulty with badge engineering is that when a single company has many brands, they are commonly forced to market each brand separately. This in-turn raises the vehicles total cost and the cost to the customer.
Another possible negative impact is that badge engineering can produce too much competition within its own company. This can occur if appropriate marketing and brand distinction is not utilized.
While badge engineering is utilized to save on R&D costs, inconsistent or under-planned badge engineering may inevitably lead to a loss of revenue for the company. Companies must regularly and strategically plan and execute these types of strategies to stay at the top of the industry.