At the brand level, the structures of the U.S. marketing and sales operations of all the major automakers are similar with the exception of one. The OEMs operating in the U.S. have one dominant make accounting for at least 60% (and much higher in most cases) of all its U.S. registrations while Chrysler's registrations are spread more evenly across five makes (see chart below).
Chrysler's U.S. structure is the result of both acquisitions and a different marketing strategy. Chrysler purchased Jeep in the 80s primarily for Jeep's strong brand image, so obviously Chrysler would retain the Jeep brand in its portfolio. Chrysler then expanded Jeep's product lineup to include crossovers and a four-door Wrangler, both of which have boosted the share of overall Chrysler registrations. However, Dodge has declined as a percent of the automaker's portfolio in large part because Chrysler made the deliberate decision to move Dodge pickups to the new Ram brand. While this decision allows for a more efficient marketing focus on pickups, it decreases Dodge's clout in the marketplace. The Dodge share of Chrysler registrations may continue to decline in the near term given recent information suggesting that the Avenger will not be replaced (at least immediately) when it is discontinued next year. Chrysler's brand structure will evolve even further in the direction of one umbrella organization with several moderately-sized makes when Alfa Romeo launches later this year and Fiat and SRT grow. With Alfa, Chrysler's brand count will rise to nine (including Ferrari and Maserati).
The current U.S. brand structure used by all OEMs except Chrysler has been around for so long that it seems to be taken for granted. Is this the most efficient structure? Does it accurately reflect the actual real-world dynamics of the U.S. new vehicle marketplace? I don't know that these questions have been asked recently. The existing structure is based on price, but there may be other metrics on which a brand structure should be established. Chrysler uses functionality (Ram, Jeep and SRT) in addition to price.
One reason to question the existing structure is that there are data suggesting significant cross-shopping between the top several dominant makes and the lower end of their corresponding premium marques. For instance, there is interaction between the Maxima and the G, the Camry and the ES350, and the Accord and the TL/TSX/ISX.
While the existing brand structure may have limitations, it has some major advantages. One clear advantage is that as the number of models marketed under one brand name increases, the brand's awareness and clout from the consumer's perspective also increases. Another, more quantitative advantage is that marketing expenditures become more efficient as dollars spent per registration declines.
Still another advantage of the structure used by most OEMs is that, as the number of models marketed under one brand name increases, the distribution channel becomes more profitable. As volumes per store increase, dealership profits rise. As dealership profits rise, the likelihood that the retailer will build a standalone facility for a particular brand will increase as well.
Going forward, it is hard to envision any radical change from the existing brand strategy utilized by all the OEMs and Chrysler will be challenged to create the efficiencies that other manufacturers enjoy with their mainstream makes. Chrysler has recently shown that it not only can survive but can prosper following its own path.
Posted by Tom Libby, Senior Forecasting Analyst, Polk (07.12.2013)