Is Our Customer the Same in Every Market?

Felix Kilbertus: The new quarter numbers just came in. Sales are down. Europe is slowing. North America is under pressure. China is collapsing. The boardroom quickly fills with explanations. Chinese customers are different. American customers want something else. European customers have different priorities. Every market seems to demand its own solution. And before long, the familiar phrase appears on the first slide, „We need a product tailored to local needs.“

But is that really true or are we mistaking symptoms for causes? Which leads us to today’s question, „Is our customer the same in every market?“

Wolfgang, how would you answer this question?

Wolfgang Philipp: Hello Felix, this question has many layers to it, it’s not so easy to answer. My take is, the answer depends if you have a brand-driven perspective or market-driven perspective.

If you have a market-driven perspective, you focus on what’s working right now in a given market, what is selling, and what can we do to take away the market share of other products that are successful right now.

And in a brand-driven perspective, I ask myself, what are we about? What is our reason to exist in the market in the first place? And then we have a very clear picture what we want and we are not targeting any customers, but we are just trying to fulfill a certain vision and the product is just a tool to do this.

Felix Kilbertus: It is a loaded question, of course, because there are so many elements to it. It also depends on what sort of brand, what sort of a company you are. Are you an extremely niche, sharp sort of a brand where your whole raison d’être is really that precise positioning? Therefore, you can use the same product and it’s so desirable that the same thing appeals to different markets, different customers, but it’s really the same thing. As soon as you go into a, let’s say, a mainstream-ish position, even if it’s a premium mainstream position, then you probably need to think about both of these forces, the market forces and the brand forces. In my experience, of course, there’s always a strong correlation between the two.

Wolfgang Philipp: Let’s try to pinpoint this problem a little bit. What is really the question behind „Is our customer the same in every market?“ So let’s say we are a volume manufacturer and our target is this volume market. What are our KPIs? Why are we asking this question in the first place? What’s your perspective on this? How does an OEM start trying to answer this question?

Felix Kilbertus: Let’s say we are in a global mainstream market, some sort of a car that appeals to many people where really big volumes are. What you usually do is you define what are your ideal personas. What are the types of customers that you’re after?

Because it’s quite clear when you reach a certain volume, when we talk about 100,000 units, a million units, that sort of volume, it’s not always the same customer, quite simply because people have different incomes, demographic, geographic situations. So the same product probably doesn’t satisfy identical age groups or identical mindsets, for example. So very often it’s defined by simplifying the complexity of the situation, by trying to define key personas and then trying to identify, „Okay, what if we did it for these three personas without compromising too much, without making the car too bland, without personality?“ We can look into successful cases for very successful, even global products, even though they’re getting rarer and try to understand a little bit what they’re about.

Wolfgang Philipp: Do you have an example? Do you want to go?

Felix Kilbertus: The examples that come to mind are the cars that are kind of secret champions. They’re not necessarily number one in many markets. They might be number one in two or three markets, but they’re successful in every market worldwide. Therefore, you get a surprising amount of customers for that product.

And these products at the moment very often are Japanese products. So think of the Honda CR-V, for example, or the Toyota Camry, or the Toyota RAV4 is probably one of the most interesting examples for that. And why are they successful? Because they offer a very competent car. They are then regionalized, so there are specific powertrains. Certain markets might need something more hybrid, others more diesel, when you look back at Europe a few years ago. And you address different customer groups, but essentially with the same product. so a mid-sized SUV in the US targets maybe young families while the same car would probably target someone a bit older, a bit wealthier in Europe, quite simply because demographics and income patterns are different.

Wolfgang Philipp: And also because sizes of the cars are different. But I think when we answer this question we have to differentiate first between this regulatory differences, so everything that needs to be accomplished to sell a car in the market, which has nothing to do with the customer in the first place. It’s just „What do I have to do to sell a given model in a given market? And then we can look at the customer and say what really differentiates them in the different markets.

Because my opinion is that the idea that a different market equals a different customer is not true. Just because you cross the border doesn’t mean that it’s a different customer. And the same also applies to the local market. It doesn’t mean that in your home market, the customers are all the same or in a given market, the customers are all the same. There is no one customer in the market.

This is for me the main idea to really rethink this whole approach of the market-driven thinking, to say „We want to sell as many products as possible in a given market, but they are different customers.“ This is what we hear with the in China for China approach, for example. „They are different people. They have different requirements. Our products wouldn’t work there and vice versa. And that’s why we need to localize our products.“ But I think this thinking doesn’t discern regulatory requirements from customer needs.

Felix Kilbertus: That’s a very true statement, of course. So there’s certain cars that are not available in certain markets because the regulatory environment doesn’t allow for it. So think of the kei cars in Japan. Even if you wanted a kei car in Europe or in the United States or in China, problems are that the emissions, the size, the crash norms don’t even allow you to address a potentially interested customer. So there’s that.

There’s also, as you said, crash norms that kind of cluster-markets. As you said, it’s not one country border necessarily that makes the difference, but I think we can talk about major regions. We can start by outlining the regulatory mega-clusters. One, of course, is North America, where the US is, of course, the dominant one. Canada tends to kind of follow America’s lead in this case, because the market is quite smaller and the American oil industry has historically been quite strong in Canada as well. Then you have the European mega-cluster because of the European regulations. And with the exception of the UK that decided to step outside that regulatory framework, it essentially still has to adhere to it because that’s where a large part of the market still is. Then you have one cluster, which are the so-called Japanese domestic market, Korean domestic market, and the Chinese market, which is, yes, of course, a domestic market, but also one of the biggest markets in general, in automotive terms, the biggest market in the world at the moment. China used to follow the European crash and homologation norms quite closely, maybe not identical, but very similar. And they’re increasingly switching to a model that defines certain Chinese specifics, because the market has matured. And it’s of a size where you can request people to adhere to these standards to have access to this market.

So those, I think, are the big clusters. Many of the other regions that we can identify as markets, when you think of North Africa or the Middle East, they tend to follow EMEA rules, European rules, same for South Africa. South America has a slightly different logic as well, once again, because it’s a relatively mercantilist market. So there’s certain barriers to trade. There’s also rules and logics, even fuel types. So roughly speaking, you have continental regions that have specific rules.

Wolfgang Philipp: Yes. And then we also have these climate zones. Some markets have several zones and other markets are just in one climate zone. What do we have to consider? I mean, this is like a second layer to the market. So we have the regulatory divisions and then we have the environmental.

Felix Kilbertus: Absolutely. All the factors that define your climate zones. In Europe, it’s easy to explain. It’s very clear that in a city like Naples in the south of Italy, your driving style is vastly different from what you would find in the north of Finland because you have different size streets and parking facilities, driving habits, fuel prices, insurance patterns. Climate, of course, minus 50 degrees, plus 50 degrees. You know, there’s a huge bandwidth. And that’s just Europe. That is the same market, the same regulatory space and so on.

But the same thing is true also for China. So China is also divided in large climate zones where you have a fairly cold and humid north. You have an extremely humid and hot southern area as well. You have very dry inland areas as well. And it’s not by coincidence that you have certain brands dominating certain zones because they would come from, let’s say, the northern regions around Beijing or the southern ones around Guangzhou. Even the U.S. has fairly big differences between sunny California, humid tropical Florida and salty East Coast environments.

Wolfgang Philipp: Yes, and then we also have significant differences in infrastructure. So we have the highly developed countries with a fully available charging infrastructure. And then we have developing countries with no infrastructure at all, where you need an extra large fuel tank to survive when you go through the Sahara.

Felix Kilbertus: There’s all of that. There’s also differences in fuel quality, octane ratings. In the olden days, you had leaded fuel and not leaded fuel. That would be a problem. What I find really interesting are spaces where all of these things meet. Because you could say, well, America is its own thing. Europe is its own thing. China is its own thing. But you have markets where all of these cars meet.

So Mexico for me is a fascinating place because you have big American influence. You have a lot of the big American domestic cars, but you also have the European cars coming in and you also have the South American slash European cars coming in. So you have really interesting mixes where a specific Nissan from Brazil meets a specific North American Nissan and they couldn’t be more different in terms of size. Maybe not so much in expression, but certainly in size and in attitude.

Wolfgang Philipp: But what are the real differences then globally between customers? One that comes to mind is obviously wealth, to have a certain amount of money available for mobility. Another one is infrastructure, what I have at hand. And another one would be the context of the mobility. In North America, you need a certain size of a car to feel like a participant, which would be completely out of size in Europe, for example. I can’t imagine a Tesla truck in Europe in an urban area.

Felix Kilbertus: Of course, there are differences. I find that the differences are getting ironically smaller at the moment between car sizes in various markets. There are outliers, of course, but let’s think back to the 1950s for a moment. Post-war Japan, post-war Germany, post-war France, post-war America, vastly different automotive solutions. You could really viscerally feel that an American car from the 50s was, I’m not exaggerating, twice as big, certainly at least twice as heavy than a Japanese car. So think of a Honda N600, which was a tiny car, a very modern shape, by the way, not dissimilar from the Mini, next to a full-size Chevrolet or something that would cover a similar price bracket in terms of middle-class mobility in these countries.

Nowadays, the sizes tend to be a little bit more similar. So there’s very few cars that are below four meters nowadays. That’s already a very, very small car in most markets. So most of the market ironically now is somewhere in terms of size between 4.50 and 5.20 meters. So interestingly, the size difference in length is probably a bit more than half a meter. But what you can do with that space, especially considering height and wheel sizes, gives you a lot of versatility nonetheless.

Wolfgang Philipp: That’s very interesting, because I think that the customers are not really that different in the market. Half a meter is not that significant. We’ve also discussed this in the previous episodes that the features have reached a certain baseline in the last decade. So there are no weak cars. There are no bad quality cars. There are no uncomfortable cars. So these basic requirements, they are met.

Let’s say you want to build this universal car, this global car. Now, what differentiates the customers? And from your perspective, what are the things to be considered when we would like to build a global car?

Felix Kilbertus: If we rigorously focus on global cars – that is a big if, because this is getting increasingly rare. So the Japanese are still very good at it. The CR-Vs and RAV4s, for example. Tesla is extremely successful at that, interestingly. It’s the one-size-fits-all approach in the shape of the Model Y and the Model 3. Only now, after I don’t know how many years in the market, there’s a slightly bigger Y model coming out for some markets. But think about that. That’s quite a radical situation. A lot of companies are raising not so much in the economies of scale, because that would mean a centralized factory. It’s a Ford Model T logic where you produce – ostensibly at least – in one place, and ship things all over the world.

The only reason why I’m mentioning this is, when you think of a company like Volkswagen. Volkswagen is the opposite of Tesla. Because Volkswagen produces in South America, in North America, in Europe, in China. And those are vastly different cars. In China, they actually have two companies that produce cars under the Volkswagen brand, plus two versions of Audi, plus an Audi without the rings. And these are all different situations. The one-car-for-all model is only one possibility and I think today, this one-size-fits-all exists only in two use cases: One because it is such a compelling product that it is useful to many people, the CR-Vs go in there, the Tesla Model Y goes in there. Or you do it through aspiration: one global aspiration is powerful enough to attract people into the Porsche 911 logic, it’s the same logic that you would have with global luxury brands, the Rolexes and the Patek Philippes. They are essentially the same car, the same watch produced in the same factory in one country and then maybe tailored in terms of taste and additions and so on, but it’s all centralized.

I think that’s what makes a big difference – I’m still with the manufacturing logic not yet and the customer logic – but these are the two things that you can do. One-aspiration-fits-all or one-size-fits-all.

Wolfgang Philipp: I think the manufacturing logic is one of the reasons why we have this market thinking. There are different markets and Volkswagen has these two factories in China for regulatory reasons. They didn’t say „We need two factories to meet the demand in the Chinese market.“

You also mentioned Tesla. Tesla is to me the other approach. This is the brand driven approach. So we have one idea of the brand and the model is the tool. And then it’s working for every market, no matter what.

Like the iPhone, for example, it’s also not locally adapted to the Chinese market, the American market. You have a different charger, but that’s it.

Felix Kilbertus: It’s the same form factor. It’s the same brand aesthetic. There might be a slightly different chip. There might be a slightly different charger, as you say, but ostensibly it’s the same thing. You’re right.

Wolfgang Philipp: That’s the difference between these approaches and the examples with the Honda CR-V – to me, it’s a high quality product that works for many people, and that’s why it works in many markets – but this approach comes to an end, because now every manufacturer has high quality products. And there are so many SUVs in every size and every price class.

Felix Kilbertus: The interesting thing about these two products is that they made their reputation because they were pioneers. The RAV4 was one of the first ones. The CR-V was one of the first ones. We’re talking 35, 40 years ago. They’re really extraordinary products. Certain Chinese companies are younger than this product. So it is quite a heritage position and they need to defend it. You’re right. There’s more competition going into this.

Wolfgang Philipp: What are the consequences of this problem when we say „Are our customers the same in every market?“ – so are they or aren’t they?

Felix Kilbertus: I think the larger your market share, the larger your volume, the more the customers are different. They have to be different. My favorite example is when you look at Korea. Korea is dominated by Hyundai-Kia Group and Hyundai is the leading brand, so when you walk the streets of Seoul – I don’t know what the market share exactly is but I assume it’s 60 something percent. So this brand is so dominant that actually makes sense for them to be very diverse in their offering, because they’re basically taking the role of three or four different brands in other markets. So it helps you to be aware of where you are and what market share you have. That’s one extreme example.

The other thing is that in the future, do we have open markets or not? That is the other question because the Japanese really worked well in a moment where they had fairly stable trade agreements so that they could export a lot of things into lots of markets and they would only invest in local production when it started making sense and there was a stability.

North America is an example, just like the Germans. But nowadays we see a world where there’s a lot more instability, so it’s tricky to do that and this sort of like central hub model is under a lot of challenge, because even when you think of the watch industry – if you followed the news over the last two years – even the Swiss watch industry is under a lot of pressure, because tariffs go up, tariffs go down, your business cases collapse or not and you can’t quickly switch your manufacturing into different markets.

Wolfgang Philipp: Yeah the car industry has always been system-relevant if this is the right term. What you’ve mentioned with Korea also applies to France with the significant market share of French brands you wouldn’t see in any other countries – and also to Germany because the Volkswagen-density is very high.

Felix Kilbertus: It is it has gone down in Europe, let’s say 50 years ago you used to have Fiat dominating Italy, Volkswagen dominating Germany. That has changed a little bit, so you have successful brands coming into these markets. Think of Hyundai, think of Toyota, but also the Germans in Italy are surprisingly successful.

So Italy is maybe an interesting country where Fiat had roughly 80% market share and now they’re roughly at 20% market share. So they really switched in a relatively few years. But it brings me to this question, like how do you structure this? I think once again, the Japanese have done it remarkably well because they’ve realized very early on that they were export focused.

So they knew that they had to think for other people’s needs – and have the domestic needs as, yes, an important customer group: you need to have your Toyotas in Japan, you need to have your Hondas in Japan – but when 80% of your production is outside of your home country, you start to listen better.

And that’s the difference with the Europeans. The French exported the idea of the French car: bad roads, soft suspensions after the war, really adapting to the local needs. Same thing in Germany. Germany sells German cars built on the myth of the Autobahn because of the infrastructure and the speed regulation. But they don’t necessarily listen to actual customer needs. They say like, „Oh, this is a better car because we drive it on the Autobahn in Germany. So you better buy this thing.“ It’s not because you need an Audi, because you need a BMW. It’s kind of indirect thinking. And there’s a lot of truth in the quality of something that is engineered to a higher spec. But it’s a different type of quality and customer logic than, let’s say, the Japanese had traditionally.

Wolfgang Philipp: That’s true because the Japanese were not the leading car manufacturers. And it absolutely made sense to focus on export markets with higher standards or baselines to even be relevant in these markets.

And the French and the German automakers, they could keep focusing on what they were doing because they were the top brands, shaping the quality of the car with Mercedes-Benz, shaping safety, shaping innovations like the ABS, ESP – those were leading milestones in car history. And as long as you could deliver these milestones, there was no reason to listen to anyone, because you were basically directing where the industry was headed.

Felix Kilbertus: Yes and no. I probably need to disagree on a couple of points there because when you think in terms of the car history, you could say that, yes, the car was invented in Germany. And there’s a lot of reasons why Europe, France in the early days, later Britain and Germany developed the first industries. Very quickly, the Americans became leaders in mass motorization and leaders quite simply in car technologies.

The Japanese were maybe not the inventors of cars, but they had a huge culture of mechanics assembly even before the Meiji era opening of the industry. So they were capable of catching up extremely quickly. And I think there was a tipping point somewhere in the late 70s or in the early 80s where the Japanese became as good, if not better in many ways, with respect to the established Western companies.

But it’s always been a different logic. Maybe it’s also a Japanese cultural element in there, because the way you listen to things, the way you try to solve problems in a different way, plays into that. I don’t think that it’s as simple as that. Say they had to listen, because they were catching up. That is partially true. But they’ve become, especially in the 80s and 90s, they’ve become incredibly strong at identifying new trends. So there’s no coincidence, once again, that the SUV trend, a lot of the hybrids and crossovers, a lot of the sports cars and affordable, joyful motoring, a lot of this was done in Japan, because of identifying unexpected custom needs.

And the other thing that they’ve done, was to be quite brave and to fail fast as well. They had a booming local market. They could test things and then build on local successes quite quickly as well. And that leads us once again to what’s happening today. We’ve seen a similar growth and success story in Korea, a similar creativity, also a safe home market that helps you to use your local market as a jumping point into other markets.

China is interesting because China has the characteristics of becoming an export market. But it’s so vast, it’s kind of like combining the innovation speed of the Japanese market in the 90s or in the 80s with the size and sheer mass of what America had as a domestic market. So it’s kind of its own thing. And that’s why you mentioned „In China for China“, which is a fairly popular mantra these days. There is some truth to it, quite simply.

Wolfgang Philipp: I just try to go back to our question „Is the customer the same in every market?“ And I would say that the customers are more similar than we assume with our thinking „In China, for China“ or whatever it is „In America, for America“, „In Europe, for Europe“.

This is not helping the brands in hyper-saturated markets because the moment you start with this market-driven approach and listen to the market, what is working – I mean, listening is the same as watching basically what’s working, what is selling – you put the brand in the passenger seat and you start imitating what’s working for others. And you stop prioritizing what your brand was about in the first place.

And I’d argue that many brands don’t know really what they are about today. They have this manufacturing approach, this manufacturing thinking. We have these factories. This is what we manufacture. These are the main markets. How can we sell as many cars as profitable as possible? This is the thinking. And it worked for decades because there were mobility needs. There was this growing demand. The market share could stay the same because the market itself was growing. But it’s over now because we live in an era with hyper-saturated markets. And there are new manufacturers coming in every year with top quality. They don’t need decades like the Japanese in the 50s, 60s, 70s to catch up or the Koreans in the 80s and 90s to catch up and then get this momentum to start in the market. And then the customers realize, „Wow, this quality is actually superior or the same at a significantly lower price. So why not take a Kia or why not take a Toyota?“ or whatever it was in the days.

Today you have a newcomer brand. It’s manufactured from a third party supplier and the product is there. It’s just working.

Felix Kilbertus: There’s a couple of things to say about this. So first of all, no brand is eternal. You know, like brands are like species. They are born and they evolve and sometimes they die out because they’re not relevant. You know, the dinosaurs to a large degree got extinct because of a change in global climate and a certain size and That typology didn’t make sense anymore. So it’s a dynamic thing.

Think of Porsche. You know, Porsche became a brand from nothing, 1945, 1946. Porsche was not a brand. It was a man who used his knowledge to start his own brand. But 1955, it was a world-famous brand. There was China speed, we would call that today. Equally, Porsche has gone from a golden success to dire straits, sales volume-wise. in China because they did stay true completely to their ethos, completely to their shape, completely to their language. And they were not listening to the market or compromising on the market. They were selling something that was all of a sudden no longer the leading thing because other brands used the same recipes, made them cheaper, maybe sometimes better in terms of feature diversity.

It’s a dynamic situation. You can’t keep doing just one thing to remain successful. you need to constantly change to remain successful. I think that’s one of my conclusions looking at this versatile landscape. As in soccer, you know, there’s always a new game after you just finished the last one.

Wolfgang Philipp: Porsche is a very interesting example because Ferry Porsche didn’t start his brand by looking at the market or listening to the market. He basically listened to himself and said – what was his famous quote? – „I couldn’t find the sports car I liked, so I had to build it myself.“ So at the beginning, it was just his vision that he had. And he sticked with it and he became very successful with it. And over the years, there were ups and downs. But I would argue that the decline now of the market shares in China, it’s not because the brand didn’t listen.

From my perspective, it’s because the brand has to readjust what it really is about. It’s no longer enough to just have a great product that has a superior performance to the competition – and the moment the competition catches up and has the same specs, your brand becomes irrelevant – then the brand lacks power.

Then the brand has to really think about what is its meaning and why should anyone buy a Porsche rather than any other car with 700 plus horsepower. This leads back to the argument I said before. In this era with the saturated markets, you really have to go back to the roots like Ferry Porsche.

He didn’t start by listening to anyone. He started with a strong idea and the same with Tesla. There was this strong idea. And then you had a certain product. Elon Musk didn’t take a market research and say, „Okay, someday we will have an electric future, but now it’s the diesel SUVs. Let’s build a diesel SUV. That’s what people like. They want to have 500 plus kilometers range, at a maximum price point of 50,000 euros. We can’t achieve this with electric, no way. So that’s the obvious solution. Let’s do it.“

Felix Kilbertus: There’s a strong case for what you’re saying. You know, like there’s the uniqueness, the stubbornness of someone saying like, I don’t see the product I want. I’m convinced I can do it better. And that’s what I do.

In the auto industry, you have lots of examples for that. Even Lamborghini is a good example for that. Porsche, of course. But there are others as well. But I think we can bring it to two driving forces. You know, you have the economies of scale, which simply speaking, bigger volumes help you spread the investment costs over a larger number of models. Therefore, the opportunity to be profit positive, to create significant margins goes up. But there’s always probably a sweet spot because you then become so heavy and have so much upfront investment and your logistics and your factories can also dominate your thinking.

And then you have the very human quality of someone saying, like, „Listen, I don’t see that this sort of problem is well solved at the moment“, whether it’s a sports car or an SUV in the 80s. There was always room for people inventing something new. Sometimes this mix of needing the volume and having great technology produces interesting things.

I don’t know if you’re familiar with a gentleman called Hoffman. He was an importer of cars into the US.

Wolfgang Philipp: Speedster.

Felix Kilbertus: Max Hoffman, exactly. And he would say, „Listen, I know that I can sell 300 Mercedes SL roadsters. Build them. I take them off you.“ He was influential also, of course, with the BMWs and the Alfa Romeos and many other cars. And in this case, it was really an individual knowing a market, identified an opportunity and allowing the volume to make these cars. Europe at that time in the mid 50s wasn’t a big enough market to produce these things. But here the volumes helped create something unique.

Wolfgang Philipp: But when we are honest, you never know the demand for sure. So even Max Hoffman, he was an entrepreneur. He was taking a significant risk and he was successful, and he got the payoff taking this risk. But he didn’t have 100 signed contracts that said, „I’m buying it, take my money.“

Why do we ask this question from an OEM perspective? We have to ask it because we need better margins. That’s why we need to make sure customers are willing to pay a premium price. And the point I’m trying to make is that this market-driven thinking leads to lower margins. It leads to the race to the bottom because you ultimately end with a product that is very similar to many other products. Low risk in the beginning and low margin at the end.

The other approach is that you have a brand that you have a really strong idea what you are about. And you don’t target customers, because you have a clear vision that you target. You have an aim and this is what drives you. And this is so attractive to the customers that they buy your product and they come to you and not the other way around. And then you have this higher margin. And you have people pre-ordering Tesla Roadsters that probably will never make it to production. But it’s there. The excitement is there. The idea is there that I want to have this, the desire. You don’t see the Tesla Roadster for minus 30% in online portals or car dealerships.

Felix Kilbertus: I think you see the minus 30% or more for the Cybertruck at the moment. But hey, I get your point.

Tesla is a paradoxical thing because it does things so differently from other brands that they challenge so many notions. That’s one of them, being essentially a two-model car brand that somehow creates premium prices and fans to buy an unknown model. It’s quite astonishing.

But I think the larger picture is, there’s a bit of a polarization happening because you see the drive for commoditization that pushes into low margin, high volume sort of things. It’s kind of like the Procter & Gamble approach in many ways. You know, it’s like mass markets. It’s solid business, but no one expects a revolutionary toothpaste, really. Like every once in a while, there’s a new product.

On the other hand, you then have niche brands, more niche brands that then do something more specific. But then you need to tell a better story. Then you need to have a clearer product. Then you need to have maybe higher quality or at least clearer archetypes.

So it’s basically the more inclusive you are, everybody’s transportation needs, the lower your margins, but the higher your volume. I think it’s the opposite of a bell curve in a sense. It’s like an empty center and two ends that make a lot of sense. But that classic middle, I think is really dying out because the middle has been forced to either go up or down.

Wolfgang Philipp: To me, it’s not about niche or volume manufacturers. Tesla is a mass market brand. They have this global car. They are the living proof that it works. And to me, this is because of the brand. And I’m very pessimistic for all the brands who hunt customers or who target customers, which are very similar in the end.

So everyone is targeting the same customer and then you end up with this huge discount. But there is no real meaning to the brand. You have no reason for the brand to exist in the first place or why it is building this car at all. Your only reason to exist is to make money with the car as fast as possible. And this is what people see and what they feel. This is not attractive.

So unless I really need a car to fulfill a specific use case – okay, I buy something. But the only factor I decide on is price when there is no real meaning. To me, as an average customer, I see every car has fine quality. Every car has decent looks. Okay, the aesthetics are something I can judge whether I like it or not, but this comes down to taste. But other than that, there’s just price. And the point I’m trying to make is that the brand itself is now the differentiator and that you need to have a clearer picture.

Felix Kilbertus: To dig a little bit deeper into the Tesla case, I think as customers, they did target fairly similar customers worldwide because they essentially created a new customer that wasn’t identified by anyone else, because otherwise other companies would have gone into the electric market earlier.

They targeted people of a certain wealth and socioeconomic class with certain similar attitudes. They were pro-technology, maybe early adapters, partially in the beginning. They had the stability of their own home, most likely, or they were entrepreneurs where they could organize charging quite early. And they had one deep insight, which was infrastructure is as important as the hardware.

And that is, I think, what links it very directly to the iPhone or to consumer electronics at the moment, because your iPhone is completely useless unless you have your apps, your digital payment systems, the 5G networks, your Apple Pays and whatnot. So it’s not the hardware. Imagine a vintage iPhone in 20 years will be the most useless object in the world because none of the infrastructure is compatible with it anymore. And Tesla made a point of developing cars in a similar fashion, targeting something that is essentially the same for a certain type of customer.

Wolfgang Philipp: I would say that Tesla did not target anyone specifically. I mean, if you would have been in their shoes back then, it would have been like a crazy bet. Who do you target? Those people don’t even know that you exist or that this solution exists.

So you have to come up with something that you can show first. There is no target customer in the sense that „This guy is in the market for this car because of that“. The people who bought their first Tesla S, what cars did they drive before the Tesla? I would argue this was a very diverse target group. They were not coming from a Porsche Panamera or from one specific model only. And now they had the better version and Tesla successfully targeted this group.

No, Tesla was driven by a strong idea and they tried everything to make it happen. And the charger, the super grid, it was just one problem solved on the very long way of challenges. And they saw it’s useless, the car, or it’s only attractive to a tiny population – if we cannot guarantee a certain range or certain usability. So we have to build it ourselves. We have to come up with this grid. In 2010, I saw the first Tesla and it was charging in the supermarket because the first supermarkets allowed electric charging. And this was the first charger I saw.

Felix Kilbertus: It’s the old saying, make it and they will come. It’s very clear that they had to demonstrate that it is possible and therefore people came to them. But I think what I mean is by similar customers, they might have driven different cars. Some of them might have driven something sporty, some of them something more luxurious. But think about it. They didn’t make money on these cars. They were sold nonetheless at $120,000, something like that. They were expensive cars and they targeted people with an open-minded, tech-forward, early adopter sort of a mindset. And I think 15 years ago, that was a consistent cluster with generally liberal values as well.

The best proof for that is that you have this bumper sticker now on „I bought my Tesla before Elon went cuckoo“, because a lot of these people did have a shared set of values – that was a non automotive set of values very often. But it did unite them by a certain age and tech savviness, a certain income level and a certain idea of liberal middle class values.

And that target group, or that group, it wasn’t necessarily a target, as you rightly say, but that group existed in large enough numbers in the coastal America, in Europe, and ultimately also in China. They found the same customer in enough places, absolutely.

Wolfgang Philipp: I would say the customer found them, and the customer was waiting for this to happen. And these Tesla drivers, they are not one age group. It’s a very diverse age group.

Felix Kilbertus: That’s what I’m saying. It’s attitudes.

Wolfgang Philipp: Yes.

Felix Kilbertus: It’s attitudes and outlook. So it’s tech openness. It tends to be relatively male, I would argue, certainly in the beginning, maybe less so now. But it’s the sort of almost entrepreneurial logic of like, I want to be the first. I want to be in control. I want to have this thing. I want to try it out and I’m willing to invest thinking into it. It’s not for the lazy. It’s not for the conservative. At least it wasn’t. Yeah, customers found it. That’s also true.

Wolfgang Philipp: Yes, and that’s because their brand was so attractive or their idea was so attractive to them that they would trust a complete newcomer brand, which has never built a car before, except for the Roadster – but this was like the complete outlier.

But even the Tesla Roadster started the story. And it was the same with the Model S.

Felix Kilbertus: And don’t forget, it’s like no one thinks of Tesla as an American brand. There’s so much stereotypes about American cars, big and thirsty and slightly lazy suspensions and these things. No, Tesla managed to be as global in their definition as Apple or a lot of the tech companies. Yes, they’re American, but it’s not a stereotypical classic American cliche.

Speaker: Now, looking back over these thoughts, what are the most important insights? What key points can we take away from today’s encounter?

Felix Kilbertus: It’s one of those cases, like if we ask, so is it the same customer? The obvious answer is no. But also, yes, it depends on where you are and who you are as a brand. I think you need to make a choice. Do we go after similar mindsets and similar problems? Or do we really go into the market-driven logic with all its problems where you say like, well, we stand for the highest volume, making most people happy. And then you need to adapt very strongly into different customer mindsets and so on. But you’re driven, you’re not driving. And I think that’s the active-passive paradox.

I think a leading brand probably has a certain pride in leading the markets and certain brands have to work really hard to lead markets. While maybe the slightly more flexible or humbler brands chase the market. Sometimes brands do both at the same time. Everything is contradictory these days. Essentially, you have to make this choice. Do you drive or are you being driven?

Wolfgang Philipp: In this era, the main focus of brands, from my perspective, should be to be in this driver’s seat and really focus on the brand, so that you don’t have to ask this question in the first place „Is our customer the same in every market?“ Because asking this question implies always that you want to target someone who you don’t know. And then you start to comparing what others are doing and you shift the focus from your brand to other brands. And this is always the beginning of a not so good story.

So the challenge in the future is to become so clear in the meaning of a brand that the customers know who you are and that they can find you. And that they don’t search for a car and then look what models are within their price range. And then they have three to four different brands and models. And then they say, „Oh, I like the look of the third one, but the fourth is 500 euros cheaper. That’s why I take the fourth one.“

But they know from the very beginning, „I want to have this brand and then I decide which model is the right one for me.“ But this requires a strong brand, a strong meaning of the brand. You have to know what you are about, what you really want with your brand, what drives you, why you exist and what you want to change.

And if you don’t know this – and I’d argue that a lot of brands, if not most brands, don’t know it or only know it on a very superficial level, it’s more like these statements you see on the website that could be on any website – it’s not really credible. It’s not authentic. And it’s just like another marketing campaign. But there is no skin in the game. There’s no deeper belief behind it. And there’s no culture behind it.

What’s very clear to me is that this is the main differentiator in the future. And this is also where the profits are and the success of the future brands is.

Felix Kilbertus: I can really relate to this, but I might have a slightly paradoxical interpretation of that from a creative point of view. Because when you have an extremely strong brand, there’s a lot there, of course. There’s values, there’s legacy, there’s maybe shapes, there’s identity, you might have fans. So from a creative point of view, you then can still work with it. You can do it in a very revolutionary way like Porsche does. You can do it in a slightly more forward-looking way like Ferrari has traditionally done. You know, cars don’t look the same within the range in the dealership, but they also don’t look the same one decade after another. So Ferrari has always been a revolutionary, while Porsche has been extremely evolutionary. However, you work within a fairly narrow bandwidth. So the challenge is relatively defined.

From a creative point of view, sometimes that sort of product first problem solving approach can be extremely interesting. This sort of like really starting with what do we really want to solve? Like what is the shopping car for a specific target customer? What do they really need this car for? And that somehow from a creative and from a design perspective can be extremely interesting and the outcomes can be super strong because the brand is not necessarily in the way. I think the brand as important as it is, it makes sense for relatively specific needs. But the beauty of the car industry that there’s space also for non-branded things, things that maybe become brands later or products that become almost their own identity.

And as I said, from a creative point of view, I know colleagues who are completely in love with the brand and wouldn’t want to do anything but products for that brand. And I know people who are like, „Yeah, I am bored doing the same sort of thing. I’m bored of doing these sports cars. I want to design a Kei car. I want to design something exciting where I can really do something that has never been done before.“ And that’s the beauty for me of the car industry, of the mobility industry, that there’s so much space to do so many different things and all of them have their own unique challenges.

The one space in between where everything is kind of like boring and defined, where you have the worst of both worlds, when you’re being driven by numbers and segments and hyper-segmentation and all of that, that’s the worst space. That’s where you don’t want to be as a designer, where people tell you what to do and you have no margin to change anything. That is terrible. And I think those products no one gets excited and passionate about.

But the two extremes, a blank sheet of paper, a brand that is not in a way, a product that can shine, super interesting, and the opposite as well. Strong brand, strong heritage, strong culture, strong fan base. That’s also super exciting.

Wolfgang Philipp: A brand should never be in the way. When I hear this, I shudder because then the brand has some serious problems. Because the moment the brand is in the way and it’s just an obstacle to pass, then it’s not a strong brand.

The brand should be like a culture, a mindset that people unite and they are aligned and they say, yeah, we want to do this. And then they also have this blank sheet of paper with a strong brand. And nobody will take a designer’s pen and guide it and say you have to sketch it this way. But if you are in this brand environment of a strong brand, you know what it is about and you know what you want to convey. And this helps you. This accelerates your working and it’s not getting in your way.

The other approach you described with the product first approach, this was the approach for decades. What is the car that is fuel efficient? What is a car that is safe? But this approach is more and more limited because there are so many products already and it’s a harder route nowadays. You still can go it, but then the moment you have a successful product, others can imitate it. And then it’s really hard to shape a brand out of this.

And this is also what we see with Tesla. Tesla doesn’t have the patent on the electric car. So every OEM has now electric cars, but Tesla is about more than being electric. This is where the brand comes in and this is what gives Tesla a stronger place in the market than just its products that has to cater to as many customers as possible.

Felix Kilbertus: I think Tesla is in a tricky situation because they’re becoming that brand where they are becoming so big and they’re getting into this trap of being essentially also a legacy brand. Now they’re not the same company anymore they used to be 10 years ago, for sure. So I’m not necessarily just optimistic about Tesla.

But what I mean by the brand stands in the way, it’s not so much the brand as such, but the decision makers that shape the brand. And what that means sometimes is that your company might be capable of doing something really exciting, something that is niche, something that is performing, but the overall brand perception maybe doesn’t warrant, let’s say, the price position that would be necessary for that.

So classic example, a mainstream brand wants to do something a bit sporty: sorry, that brand is not sporty enough. You can’t do it. Sometimes you need to do it anyway, and then customers will come, and it elevates your brand, and you might even be profitable. Think of the Ford Mustang. Think of many of the sporty cars in the early 2000s. Not that there’s that many left from mainstream brands. But sometimes the brand simply stands in the way. There are certain brilliant products that are not perceived well because it’s the wrong brand.

Same thing is also true when the brand isn’t powerful enough. Think of the Volkswagen Phaeton, fairly interesting car, but the brand just wasn’t strong enough. Sometimes you have the opposite problem that you bring a brand too far down. And that also becomes contradictory where people don’t take it seriously anymore. Think of the Aston Martin Cygnet.

So sometimes the brand does stand in a way in that sense, not in a strategic point of view. I agree with you there. The brand should help you. But concretely speaking, in the ins and outs, and in the power plays between departments and markets, and risk takers and non-risk takers, sometimes the brand does stand in your way.

Wolfgang Philipp: Also for the Ferrari Luce.

Felix Kilbertus: I did not think of that car at all. Why do you mention this one?

Wolfgang Philipp: Because you said the Phaeton – the brand was not weak or Volkswagen is not a weak brand, but it had a different meaning. And then the Phaeton was not really credible or authentic – or people who would be in the market for such a car wouldn’t associate with a Volkswagen.

But it’s a good example for the brand that it has some meaning that not every product works. And sometimes, what we are experiencing in the last years, that the brands are becoming more mainstream in the sense that they stop manufacturing convertibles and coupes – what you said with more niche, I want to ask you, what do you mean by niche? Because you cannot really guarantee a demand for a specific model at the very beginning of a project. It depends on so many things. Sometimes it’s so promising and then on the last meters of the project, you have these savings and it ruins the design or it spoils something at the very last meters. And you really cannot point it down to one specific problem.

But this doesn’t mean that you should always go with the safe bet or the presumably safe bet and see, okay, this is a model where we can sell at least ten thousands of units, that’s why it’s good. It always shapes the brand, because when we have no brand shaper products anymore that really can elevate the perception of our brand, then we also harm it long-term, even if we sell many products right now.

Felix Kilbertus: It is interesting that these brand and halo products have made a bit of a splash in the last few weeks in the shape of the Audis. You know, Audi was a brand that was really recognizable in terms of its expression. There was this whole Vorsprung durch Technik logic and a certain design language that came with it.

And the first manifestos are cars that try to pick that thing up. We talked about it previously, I remember. But they go now with a halo car first strategy. And we shall see whether that attracts enough people back into thinking of Audi as a relevant, futuristic, specific brand rather than the cars that we see on the road right now, which are unfortunately extremely generic in design expression.

What I meant by niche is that there is such a thing as a global niche, where you find enough people globally that go into something very specific that you can use meaningful economies of scale. So the best example is probably watches or certain fashion brands or maybe many motorcycle brands are global niches where you have enough people in Japan, in England, in Florida to go after one thing. And that still gets you a few thousand units to make it worth. So the global niche is, of course, most of the luxury brands nowadays, the McLarens and Ferraris and the Rolls-Royces and so on.

So what I mean by this sort of global niche is the maximum volume that you can obtain globally at a certain price point. That is a global niche approach for me.

Wolfgang Philipp: We have now all these platforms and synergies in the production. Why do we still think in these scales? Why isn’t it possible to lower this minimum unit number to say, okay, „We don’t need 100,000 units of this model to be successful.“ We have all these synergies – and Audi is now doing the same with less than 500 units. So somehow it is possible.

This is to me another decisive question for the future because this is the thinking of the past. Volkswagen Beetle, okay, they had one model. You need to sell millions. Model T, Tesla Model 3. these decisions are driven to drive the unit costs down. But everyone else, why can’t we make it happen to have more iconic products that don’t necessarily have to achieve these high volumes? We see the ID. Buzz, for example. This is an outstanding car when you see it on the street. You see the difference to other models that are more volume driven. This is more like a question to you, what do you think?

Felix Kilbertus: So this is an interesting question on the one hand I know exactly why and on the other hand you’re hinting at something that is a bit of a mystery to me the part that I know is quite simply the little calculation that you can literally make on a napkin where you say like well Audi sells 500 units they’re sold at half a million a piece so that is an overall business case of 250 million in that sum you need to be able to tool it, produce it, sell it, communicate it.

That’s a business case that you can make. And economies of scale are a magical thing. It’s like compound interest. It is something that mathematically works. And as designers, whether you want it or not, you need to somehow become friends with it.

The reason why you still cannot completely get rid of that is because you have so much cost that goes up front. The tooling, the thinking, the homologation and so on. I would have expected exactly as you said that this threshold goes down and down and down and down and down. Actually, in the 1980s, they were the first people who thought like, well, now that we have global suppliers like Delphi and Valeo and whatever they were called back in the days, they thought a company could be run by a handful of people, doing the decision making, the communication strategy, and everything else is outsourced. But it hasn’t happened.

It’s a bit of a mystery to me why we still are in this. But that said, even the luxury industry is working on this very simple multiplication principle. How many units at what price give me the budget to develop something meaningful? There’s only a number of sweet spots on the curve. If the volume goes up, your exclusivity goes down. Your price has an inverse relationship and there’s not so many spaces you can occupy.

Wolfgang Philipp: Yes, that’s a very good point. But I would also argue that there is another sweet spot on this scale, and Ferrari shows it. I mean, they have 14,000 cars a year and they’re very profitable.

To me, it’s just this short-term thinking, this short-term KPIs. The decision makers, they have no wiggle room. They have to almost guarantee a certain outcome. And it’s not possible to guarantee anything in this era with this environment, with this dynamic changes.

My take is we need more risk-taking in a sense that it’s even possible to take the risk and not stop it from the very beginning and see our brands decline in meaning, because they are basically robbed of their opportunities and the only thing they can manufacture are volume models. But these are not the brand shapers in an era of hyper-individualization and thousands of manufacturers who are doing the same.

You cannot stand out when the technology is facing some parity or it’s no longer possible for customers to find meaningful differences in the technology to find an advantage or whatever is in it for them. Then the brand becomes the driver and then you need to have something that really stands out.

Felix Kilbertus: One main driving force is that our times are characterized by the expectation that you can preview and predict and define everything in advance. You know it as well, like 15 years ago, you could actually travel to a place, find your hotel room somewhere locally. Nowadays, you can’t do it. You need to pre-book everything because everything is built on the idea that you know exactly what you’re going to get. So that sounds amazing in a sense that, yes, I can see in what room, in what bed, with what sort of toothpaste I will wake up. But fundamentally, what is the opposite of that is that people are expecting that the future is essentially predictable.

And that is something that I think we’re missing in our time, that sort of boldness, that spirit that the future can be changed and shaped in different ways, that people are open-minded and are curious and are interested in unexpected things.

And I think we will see a radical change coming up because many brands that we took for granted will not be around for much longer. They might die as quickly as they were born. And some of these brands might be surprisingly big. Who would have ever thought that Pontiac would die? Or there are certain other brands that died regionally, even though they were fairly big brands already.

So in a sense, I’m optimistic that the market will take care of it because if enough people are not satisfied with these products, certain entrepreneurs will come in and propose something different unless you’re locked in. And that is the risk that I see at the moment that because of markets regionalizing again. Think of Iran, one of the biggest markets in the world, single markets, but people don’t have a choice. They’re locked in because of sanctions and so on. So even though people would want something better and they would arguably deserve something better, they have no choice.

And I think in a certain way, you’re also locked into your Chinese market. You’re also locked into your American market. But the optimist in me says there will be enough people having this sort of Porsche moment saying, „I haven’t found the product I would like. I’m convinced that I’m not completely unique at mad. I think that other people will recognize the quality of this product or solution I have in mind.“ We will see more things like this, for sure.

Wolfgang Philipp: We are seeing this right now, with the many newcomer brands coming up and seeing a business case.

But what I also want to add to what you’ve said with brands are dying or they are vanishing from the market: The moment they are just some business asset and there’s nothing more behind it than the logo – and the marketing department who’s working on this brand has three other brands, which it is responsible for. So it’s just a decision, yes or no, is this asset still working for us?

My note as a brand strategist is it’s not like a golden goose that keeps giving you these golden eggs. You have to nourish it. You have to replenish the heritage for tomorrow. You have to create it. And the brands who are disappearing from the market or are becoming so meaningless that you don’t know what they are about anymore. Those are the brands who have been living off the heritage for the last decades. And they’re just this badge on any random car with some black and white story footage. And then you say, „wow, this is the new amazing whatever name.“ I will not say any brand, don’t worry out there – but you see this is not working and you can do this for 10 years, 20 years. And then 30 years later, you ask yourself, what are we really doing here? Why are we building this car in the first place?

This is not working. And then you can just take it off the market because it makes no difference. But the potential would be still there to rejuvenate the power of the brand, but you have to invest in the brand first. Strategies like „We will bring back iconic models for the brands but first we want to sell SUVs branded with this name and see if the brand still works“ – this is the wrong way around.

Felix Kilbertus: There was one brand that really comes to mind when I was listening to you and that brand is Sony. Sony is a brand that is almost irrelevant at the moment it was a deeply meaningful brand for people of our generation or maybe a few years older than ourselves but they’ve basically lost their appeal.

I can’t remember when i was last confronted with something from Sony where I was like „oh I need this, I want this“. So that problem of like becoming just a tired brand because you’re not impacting people’s lives with meaningful products is extremely dangerous, and particularly dangerous for companies that are built on innovation and on doing something surprising and new.

The Sony tale is it’s a different tale than the Kodak tale but Sony is an interesting one because I was really excited when I first heard that Sony builds a car finally together with another meaningful Japanese brand – but instead, because the product wasn’t good enough, the brand wasn’t powerful enough, the problems that the product was trying to solve was not the right problem, not at the right price point. So this is basically a brilliant textbook example of like all the things that can go wrong when you neglect your brand, neglect the market and neglect the product and the design.

Wolfgang Philipp: Yes they need a new Walkman, fast.

Felix Kilbertus: Yes and arguably the new Walkman was the iPod and then later the iPhone. So yes, they’ve really missed a couple of boats.

Wolfgang Philipp: It’s a terrible way to end this episode, but we still have to come to an end today. So thank you, Felix. I think we’ve covered a lot of interesting points today.

Felix Kilbertus: Yes, very emotional.

Wolfgang Philipp: I hope we could answer at least partially this question. It’s hard to get hold of this question because to me, it’s if you have to ask it, already something has gone wrong in my mind.

Felix Kilbertus: It is, as we said, it’s like the brands are dynamic, they live and die. And I think you only as relevant as you impact. So the question should almost be, how do we impact people meaningfully? What can we do to improve people’s lives? Is it because I drive something that gives me more joy? That was probably Porsche’s approach when he set out to do something light and crazy.

Or do I do something that really serves all sorts of circumstances? That’s the Toyota RAV4 approach, probably, be prepared and so on. But yeah, it’s a difficult question, but I think it’s about relevance, impacts and helping people do something that they can’t do without that product.

Wolfgang Philipp: So let’s continue our conversation next time. Thank you for listening.

Felix Kilbertus: All right. Thank you.