Porsche Cayenne Case Study

During the more then 60 years that Porsche has been producing automobiles they have implemented a variety of design changes and launched many new models -- some drastic, others small. These changes have all been based on the brand’s firm ideals of high performance, fine craftsmanship and a high level of engineering, With the launch of the Cayenne SUV, Porsche experienced an immense challenge in connecting its brand image and identity with the new offering, while maintaining brand legacy.

As with any well-established brand there was an entrenched community of customers who participated in ongoing conversations about Porsche and the brand’s meaning. These online communities of loyal customers, such as www.Rennlist.com offered valuable insights into brand change reactions, particularly related to the new Cayenne.

Porsche began as a design firm in the mid-1930’s in Germany, and were responsible for designing the first Volkswagen. The company designed some military vehicles during WWII, but by 1948 had launched their first Porsche branded automobile, the 356. In the early 1950’s the company introduced its first racecar and in 1964 unveiled the iconic and brand defining 911, which soon became a “design landmark.”

Through the next few decades Porsche successfully built its brand image and garnered an extremely loyal customer base. The company introduced various new models, based on the popular 911, but in 1987 was in dire economic straights due to the U.S. stock market crash – sales volume drastically decreased through the early 1990’s.

Under the direction of Porsche’s new CEO Wendelin Wiedeking, the company drastically changed directions. In response to rapidly declining sales volume, Porsche launched an array of new cars at lower price points, than what was typically associated with the brand. This brand diversification meant Porsche was able to compete in new market segments. As design and production changes continued the company was able to avoid bankruptcy through cost cutting, product line simplifications, implementing Japanese

Beginning in 1996 Porsche launched its second model series the Boxster, a two-seater entry-level sports car line. Following in the steps of the Boxster and 911, the company announced that it was planning to develop a third model series, an SUV – the Cayenne.

The Cayenne was envisioned as a combination of traditional Porsche styling and performance with 4-wheel drive capability and plenty of storage space – but emphasizing “sport” over “utility.” While the SUV was new territory for Porsche the core strengths of performance, design and the chassis that defined the brand were retained. Above all else the Cayenne had to be a Porsche, but be able to “accommodate family, outdoor and transport activities.” Based on the research they conducted the company saw that a typical Porsche driver owned a sedan, an SUV and Porsche sports car. As well, the surveys they conducted told them that a significant proportion of their customers were interested in a Porsche SUV.

The genesis of the Cayenne was routed in the burgeoning SUV market of the 1990’s and early 2000’s, in the United States. Beginning in the late 1980’s with the Ford Explorer, SUV’s offered an alternative to minivans and station wagons, with sporty and aggressive designs that appealed to a wide range of drivers including young professionals, working women and stay-at-home mothers. As the demand for SUV’s grew, a variety of manufacturers entered the marketplace and soon began offering premium models. These luxury models were headlined by successful selling vehicles such as the Mercedes M-Class and Lexus LX 450.

As the sales in the luxury SUV market continued to expand Porsche understood that the introduction of the Cayenne would give them the ability to leverage their premium brand identity and capture incremental growth as they entered a growing market. The underlying goal of the Cayenne was to help diversify Porsche’s model offerings and hedge against possible downturns in the market for sports cars because of unpredictable economic fluctuations. Observing the market showed that competitors such as BMW and Mercedes-Benz were

already leveraging their luxury brand identities across a broad variety of categories and Porsche wanted to do this as well. Porsche estimated that they would only need to sell 10,000 units priced at between $100,000 -$120,000 each and by building 20,000 SUV’s each year they could increase their overall profits by as much as 50%.

Porsche was willing to make the large financial commitment necessary to develop the Cayenne because they were confident in their strategy that an SUV which corresponded with the brand’s high technical and visual standards would allow for large potential growth in sales, turnover and earnings areas. Research and development for the Cayenne would cost over $400 million, and a partnership with Volkswagen who would be responsible for the plant and majority of production, helped to weight the inherent financial risk involved.

Although the SUV market was highly saturated, Porsche was not worried about the Cayenne being redundant as it would be obviously distinguished from its competitors – while other manufacturer’s were producing vehicles focused on practicality that could go off road but also carry groceries, the Cayenne would be a fun car, going faster, handling better and being more comfortable then its competitors. The company set out to offer an SUV that would be fun to drive, incorporating all classic attributes of the brand and that would ultimately appeal to sports car lovers who wanted both an SUV and a Porsche.

In order to gauge reaction to the Cayenne before and after its launch, the company observed the large online community of Porsche owners and enthusiasts, who regularly discussed the brand and its many attributes. The largest of these communities was Rennlist, www.Rennlist.com. This community boasted nearly 36,000 active posters and a silent population of almost 200,000. Based on the posts in Rennlist and similar online forums, the Porsche brand was seen as an expression of ego associated with a masculine identity. The posts focused on areas such as performance, engineering, manufacturing adoration and racing prowess.

Initial response to the Cayenne among Porsche drivers on these online forums

was particularly harsh. As the launch approached online activity reached a crescendo – enthusiasts criticized everything from design and engineering attributes such as the front mounted engine, to the development and manufacturing processes, which were in conjunction with VW. The nature of these visceral responses suggested that Porsche’s brand credibility would be severely tested. The Cayenne went on sale in Europe in December 2002 and in the United States in March of 2003.

Postings on Rennlist began to take on a hostile tone toward Cayenne owners with an attitude of exclusion or ostracism perpetrated by the purist Porsche enthusiasts who were part of the online community. This negativity prompted Cayenne owners to respond in an attempt to include themselves as positively contributing members of the online forums and broaden the perception of the Porsche community in general.

As the debates about the Cayenne and whether it was a “real Porsche” raged in the online community the criticisms spilled into the offline world. Influential or compelling posts were copied to other online communities, blogs or personal sites, quoted in news stories and even influenced the circulation of bumper stickers, license plate frames and t-shirts.

As the number of Cayenne owners quickly grew, they began to assert their support for the SUV, deflecting stereotypes heaped on them by disgruntled Porsche enthusiasts who were part of the online community. Cayenne owners were proud of their Porsches and shared anecdotes about off-roading and going skiing, fishing and hiking.

They boasted about the performance of their Cayenne and how they were faster then sports cars, including Porsche’s own boxster – the prediction that the Cayenne would be the SUV for sports car lovers had indeed come to fruition. The next evolution was that those Porsche owners who now owned another model as well as a Cayenne began to extol the SUVs virtues in comparison to other luxury SUVs, taking pride in the Cayenne’s heritage and performance, further validating the building of the Cayenne.

Between 2002-2003 the Porsche Cayenne sold slightly upwards of the predicted 20,000 units and was a bona fide hit in the luxury SUV market. The company’s goal of positioning the Cayenne with in the market as a sports car lover’s

SUV and marrying it to the prestigious legacy and performance associate with the Porsche brand was highly successful. It expanded the brand’s identity and visibility by helping the company broaden its model offering beyond the sports car realm to attract a significantly larger and more profitable customer base. The Porsche image of producing high performance and well engineered vehicles was maintained, but the Cayenne allowed the identity and Porsche to become more accessible, increasing its appeal and in turn the company’s profits.

While the online Porsche brand communities and their continued conversations were a source of consumer research, they were not overly representative of the target market as is evidently clear by the incredibly successful launch of the Cayenne. Those consumers who were significant contributors to online communities such as Rennlist held views that shouldn’t be discounted, but were certainly more extreme then the average consumer.

As brand enthusiasts these people found it difficult to understand the business sense behind the Cayenne –“for them to keep having their beloved 911s, we have to find a niche elsewhere,” that niche is the Cayenne.

As Porsche moves forward and the brand continues to evolve, the company would be wise to apply the lessons it learned from the Cayenne to future model offerings. With the launch of the Panamera, Porsche’s first four-door sedan they will again be entering new market territory. The goal should be to position the Panarema strategically in the overly saturated luxury sedan market as a sports car lover’s sedan that maintains the unique performance and engineering standards which define the Porsche brand.