Subaru's Slim Product Line Drives Record Sales

(MoneyWatch)  The best brand positioning is so simple it can be summed up in a phrase. For Volvo the sell is safety; Mercedes-Benz is Engineered Like No Other Car; and BMW is the Ultimate Driving Machine. After years of trying to be a Jack of All Platforms, Subaru is enjoying a spike in sales thanks to branding itself as the automaker for those who want all-wheel drive.

Subaru's long-term strategy is to stick with all-wheel drive as its core product attribute.

That has required Subaru to forget front-drive, even though two-wheel drive would lower their entry-level price point. Subaru has also resolved to keep incentives competitive, but not to "buy" market share by going overboard on discounts. It has opted to spend more on advertising, to raise awareness and get on shopping lists. In addition, Subaru is devoting resources to cultivate loyalty among existing Subaru buyers.

If that sounds like basic advice, it is. But historically it's been hard for automotive brands to pass up a potential sale, if a lower price would seal the deal. The car companies also have a hard time leaving well enough alone with regard to brand positioning. For instance, Volvo keeps trying to add "performance" to its "safety" product image, while the "performance" brand, BMW, at times tries to add "safety" to theirs.

Subaru, a subsidiary of Fuji Heavy Industries (FUJHY.PK), learned the hard way of mixing its branding message, when it tried to compete head-to-head with Toyota (TM) and Honda (HMC) with front-drive cars in the 1990s.

With deeper pockets, much larger sales volumes and better-known, more valued brands, Toyota and Honda could afford to compete on price, but Subaru couldn't. More than a decade ago, Subaru wisely settled for being a smaller but profitable car company that offered all-wheel-drive cars exclusively.

It's taken some years, but the effort is finally paying off. Most conspicuous is Subaru's record sales year in 2009, when most other brands fell. But Subaru is gaining in less obvious ways, too. For instance, Automotive Lease Guide in December said Subaru was the best mainstream brand for the retained value of its used cars. Acura was the highest-ranked luxury brand.

Lincoln Merrihew, managing director, automotive and transportation, for Boston-based Compete said recently his research firm's analysis of online shoppers showed that Subaru simply "generated more shoppers" by advertising more aggressively, rather than cutting prices.

He said Compete found Subaru didn't get any better at closing the deal, it just got better at getting people to shop the brand.

"By providing customers with vehicles that represent a long-term value, Subaru continues to outperform the industry," said Tom Doll, Subaru executive vice president and COO.