Friday, March 12, 2010

Mini’s Small Victory

This article was originally written by the Wall Street Journal.  This is such a great article that I wanted to share with the masses.

Sir Alec Issigonis’s original 1959 mini design was defined by its dimensions—10 feet for length, 4 for width and 4 for height. By rights, the relaunched Mini—a tiny European box on wheels, redolent with memories of the Beatles and swinging London—had no place in the millennial American car market, notorious for its morbidly obese SUVs. But when it debuted in the U.S. in 2002, the vehicle was a surprise hit. Sales and reputation continued to grow, and according to BMW, Mini’s parent company, the U.S. has become Mini’s top market, with sales surpassing those in its native U.K. and 99,300 vehicles sold between 2008 and 2009. If more proof was needed that Americans have embraced this small car as their own, BMW recently unveiled the Countryman at the International Motor Show in Geneva, a Mini designed specifically for the American market that adds 4 x 4 handling and swollen measurements to the brand’s 50-year-old roots.

“The car has had a tremendous impact on the culture,” says John Wolkonowicz, senior analyst at forecasting firm IHS Global Insight, “even if the sales numbers aren’t great in the grand scheme. For Mini, that’s a success.” Indeed, the brand has played a large part in changing the way Americans think about tiny cars and, in doing so, has helped create a new niche market that reconciles downsized consumption with high-performance luxury. Wolfgang Armbrecht, Mini’s senior vice president of brand management in Munich, says, “We are consciously designing for the American market now.”

The Countryman, Mini's new SUV aimed at American families, will debut at the Geneva Auto Show. WSJ. Magazine got an exclusive look at the compact car, which will be featured in the upcoming issue of the magazine, out March 13.

And though it has dispatched the threat of the Daimler-owned twoseater Smart car (sales have dropped off by more than 40 percent since its U.S. debut in 2008) and is clearly in a different league from India’s no-frills Tata Nano (at $2,500), its growth spurt comes at a time of heightened awareness of the benefits of small. “The U.S. has been out of step with the rest of the world regarding car size,” says Michelle Krebs, a senior analyst with auto research site “And Mini was at the forefront of changing those views.” The Big Three are still playing catch-up. “Small used to be a counter culture view in Detroit. Now our business plan involves moving to compact and subcompact cars,” says George Pipas, Ford Motor Company’s senior sales analyst, who says he told executives in 2004 that data showed the best days of the SUV were behind them. (“It was heresy.”) For its part, Mini has been going against conventional wisdom ever since its risky introduction to the U.S.

“It was like a mission for me,” says Jack Pitney, who was BMW’s North American corporate communications chief at the time. “Here was the most successful car in U.K. history, with an uninterrupted production run of 40 years. It needed to be on our roads.” The numbers were against him. “All the classical research said there was no market,” Pitney says. “The Mini brand had less than 1 percent recognition in the U.S.”

His pitch to BMW was that the Mini shouldn’t be marketed as a tiny British hatchback, but instead as a small European sports car with retro flair. Finally, the company gave the North American office a pittance to launch with: around 1/20th of BMW’s North American marketing budget. Still, Pitney promised big, telling his superiors he could move 20,000 cars easily. (BMW’s Z3 roadster—its most successful sports car ever—sold 19,600 the year it hit the market.) “We thought we were hanging it way out there. American cars were getting bigger—the Hummer H2 was just coming out—and here we were bringing the smallest car to the market and charging a premium for it,” Pitney says. Without the budget for TV spots or glossy magazine ads, Pitney put everything into emphasizing the car’s human scale. “We bought two Ford Excursions, mounted Minis on top of them, and drove them around New York City.” Then they put a Mini in the stands at baseball stadiums to create the impression that the car was watching the game with fans. (Their people sometimes take this anthropomorphism to a nauseating extreme—as when they refer to buying a car as an adoption.)

Cute marketing can only sell so many products, though, and BMW was surprised when Mini blew through the initial 20,000-car inventory in less than 18 months. Mini had the advantage of being launched under the BMW umbrella (with its network of hundreds of dealers who already attracted a higher-end buyer), but the debut was also at the forefront of a shifting American zeitgeist. The obvious assumption is that the fluctuation in oil costs dictated the change—the original Mini was born amid spiking oil prices following the 1956 Suez Canal crisis and the current car averages 35 miles per gallon. “We always associate small cars with high gas prices,” Pipas says. “But the trend to small cars started before the $4-a-gallon spike.” Social pressure to downsize was a big contributor, he says.

A 1970 Austin model; George Best in 1969; a scene from 2003’s “The Italian Job”; a Union Jack customized Mini; a marketing scheme involved Minis atop Ford Excursions

Meanwhile, the Mini could also do all the tricks an enthusiast driver would want—hug turns, accelerate on the stretch, brake in an instant. The Mini’s on-road performance created believers, and they became the best recruits a marketing team could want. Take Hrach Chekijian, president of the New England Mini Owners club. He was so smitten by the cars that he sold his jewelry business to become a dealer in Peabody, Mass. (He even sleeps in a bed made from a Mini body.) Chekijian picked up 16 speeding tickets in his first year of driving one.

But can Mini compete with America’s love of the SUV? At Mini’s high-security studios in a bleak industrial sector of Munich, where motion cameras monitor every inch of the exterior and only one person can pass through a capsule-like door at a time before having his cell phone confiscated, Gert Hildebrand, head of Mini design, trots through each department like a Teutonic Willy Wonka. Much of the work—sketches, renderings and life-size clay models—is shrouded behind white bedsheets to prevent industrial espionage. Hildebrand gave me a first look at the Countryman, which is set to debut in Europe by the end of 2010 and in America in 2011.

Standing alone, the Countryman’s silhouette comes across as typically Mini—it’s got the same proportions, sitting squat on the chassis and tapering toward the roof. But next to the Cooper, the Countryman is big and broad. It’s a full 3 feet longer than the original and it rides higher, with 6 inches of clearance, sitting atop MacPherson spring struts on the front axle and a multi-arm rear axle for handling stickier driving scenarios. What baffles visitors to Hildebrand’s studio most is the sight of rear passenger doors. Mundane, perhaps, but given the Mini’s ratios, they’re a design feat. (It’s not an illusion either. There’s space in the backseat. For people.)

Under the hood, the Countryman will keep its standard 1.6-liter with optional sport packages that can boast 0 to 60 in 7.6 seconds. Other options will stretch beyond racing stripes to family-oriented details, like a bench seat for the back. “We are still about having fun,” Armbrecht says. “But now those owners who first came to us in their late 20s have children.” (Mini claims the cargo area can fit a large dog, but a large lapdog would be more comfortable.) Mini also expects the Countryman to extend its geographic reach into parts of the U.S. that get snowfall. Thus far, it has been a car for cities on the coasts—they account for 75 percent of sales—especially ones with moderate climates like San Francisco.

Even though sales hover around a half a percent of total U.S. car sales, “expanding the product line makes sense,” Wolkonowicz says. “Minis are very small, very premium and very profitable—few cars have the profitability margins of the Mini.” (In addition to sharing the BMW distribution network, many of its parts come from the larger automaker’s inventory.) Developing fresh interpretations of what Mini means should also keep people talking about the brand and attract more customers.

If part of Issigonis’s mission was to create a utopian set of wheels—a highly efficient and fairly priced ride for the masses—today’s Mini is playing a different game. While the baseline prices for the Hardtop, Convertible and Clubman are less than $25,000 (and the price of the Countryman has not been set), cars are built to order and Mini encourages personalization with hundreds of add-ons and paint schemes. They even keep design consultants on staff to advise customers, for instance, whether a sunroof or convertible would be a better match. The customization can more than double the final price, upgrading the “people’s car” to a more exclusive group.

The danger for Mini is that chasing the buck and expanding the size could cost them their core supporters. We’ve seen this happen with auto brands in the past. Saab used to have some cachet back when a Saab meant a swift hatchback. Then GM made the 9-3 into just one of many sporty, front-wheel-drive sedans and squandered some of the brand’s unique identity. Mini could also be risking its record of brand allegiance: It won the Polk Automotive Loyalty Award in 2009 for highest loyalty in the compact-car segment. What delivers repeat customers to a niche brand—like the almost cartoonish center-of-dash speedometer—can turn off the mainstream buyer.

Mini’s expansion into the SUV market is also in reaction to the new competition in its field. According to IHS Global Insight research, the subcompact sector more than doubled as a percentage of total sales between 2000 and 2008. “No one can build a small car for the masses anymore, like the old Volkswagen Beetle,” says Michael Robinet, vice president of global vehicle forecasts at CSM Worldwide. “Every manufacturer has a bet on where they think small cars will go and that’s fragmented the market.” Today there are hot hatches, urban hatchbacks, enviro-cars and econo-boxes. The premium subcompact market that Mini created has fresh threats, too, with Volvo’s c30, which came out last year, and the new Audi A1 concept.

The biggest threat comes with Fiat’s takeover of Chrysler, and its plans to bring the Fiat Cinquecento to the U.S. late this year. “It has more history than the Mini. It feels good to drive. And it has similar retro stylings,” Ray Wert, editor-in-chief of trade Web site, says of the 53-year-old car whose popularity forced Fiat to increase production from 57,000 at its European relaunch in 2007 to 190,000 in 2009.

Mini won’t release a specific consumer profile, preferring instead to characterize buyers with pretentious phrases like “post-materialist auto enthusiast.” But Pipas’s research with Ford confirms that within the small-car segment, attitude says more about who will buy than demographics. “From the start of the 21st century, the small-car buyer is someone who has had their assumptions about the world challenged,” he says. “Whether environmental, political or economical, they’re reacting to a broader change.”

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