Porsche: The Cayenne Launch
RSM458
Prof. Scott Hawkins
Case Write-Up
12 February 2015
Problem Statement
At the time of the case, Porsche had recently launched the Porsche Cayenne, the brand’s first SUV. As this is
Porsche’s first category expansion, Porsche must consider how to position the Cayenne while preserving its
established brand equity, which has historically been associated with its sports cars. This problem has manifested
itself in online consumer-to-consumer conversations, such as those on Rennlist, which have largely been negative
toward the Cayenne. While senior management is not strongly concerned, Porsche must determine how much
weight to place on the opinions of its most loyal consumers, whether these opinions will negatively affect potential
Porsche consumers’ associations and Porsche’s brand equity, and the implications for Porsche’s long-term strategy.
Market Analysis
The SUV market gained traction and grew throughout the 1980’s and 1990’s, as they came to be associated with
‘American’-ness, and provided an alternative to station wagons/minivans for stay-at-home moms and young
professionals. Macroeconomic factors such as low gas prices and a strong economy fuelled demand from consumers
who aspired to own a larger, more spacious, and powerful vehicle (SUVs could weigh more than double that of a
car)1. Exhibit 4 in the case shows that the fastest growing group of SUV consumers is the upper middle class.
However, in the 2000’s, SUVs and SUV owners began to be criticized. In particular, the “perception of enhanced
driver visibility and safety”2widely associated with SUVs was debunked, and concerns about global warming led to
a trend toward smaller, more fuel-efficient cars. It was at this time (2003) that Porsche entered the SUV market with
the Cayenne. The fact that these associations were strengthening at this time can help explain the level of negativity
that Porsche encountered among its enthusiasts on Rennlist. Posts that criticized soccer moms and their associated
uses of a car are very similar to the comments made by Keith Bradsher in his book, which painted these associations
as opposite to Porsche’s target demographic of male sports car enthusiasts.
Company Analysis
Porsche operates in the luxury automobile business. Prior to the launch of the Cayenne, it focused production
exclusively on luxury, high-performance sports cars. Throughout its recent history, Porsche has had to make several
adjustments to remain competitive in the automotive industry, often compromising its historical legacy by necessity.
For example, introducing a water-cooler engine in 1992 or cutting costs in the mid-1990s to avoid bankruptcy. The
company’s current objective is leveraging its legacy and positive associations to new markets by expanding vehicle
offerings. In this regard, its historically narrow focus on luxury sports cars can represent a weakness: in producing
the Cayenne, Porsche realized very high costs3. However, the brand’s positive associations can present an
opportunity to differentiate in a highly competitive SUV market.
Porsche’s differentiating point is summed up by this quote from senior management: “Porsche is in the business of
making fun cars… This SUV will be fun to drive. It will be an SUV [that] sports car lovers will love.” This stands in
contrast to the more functional benefits provided by other SUV manufacturers, for example, large storage space,
multiple cup holders, and perceived safety. Porsche can add an emotional element to the more functional focus that
other SUVs have provided to families, while offering the same functional benefits to those who want the prestige of
a Porsche.
Porsche sold 20,603 units of the Cayenne in 2003, which just exceeded their sales forecasts of 20,000, and therefore
helped Porsche boost total sales by 50%.4 The Cayenne represented 10% of vehicle sales (Exhibit 2 in Appendix) in
its release year, which is a greater share than the Domestic Porsche and the Boxster. This suggests that the Cayenne
can successfully help diversify Porsche’s offerings and mitigate the risk of a decline in sports cars.
Competitor Analysis
Porsche’s current competitors included Ford, which introduced the Ford Explorer and reaped first mover advantage
in the SUV market by “[legitimizing] the SUV as the quintessential American family vehicle,” as well as all the
Japanese and German manufacturers who wanted to capture the demand for SUVs. Because of the consumer
demand due to economic conditions described in above sections, the SUV market was very competitive in the
1990’s. While this possible saturation in the market was a threat to Porsche, there was a potential opportunity in that
most of the SUV manufacturers did not carry Porsche’s strong luxury associations.
However, in the late 1990’s, competitors closer in positioning to Porsche were developing luxury/high end SUV’s
($43-49k)5, which meant that Porsche wasn’t be able to differentiate based on luxury alone. While this high threat of
new entrants suggests that this may not be the best choice of market for Porsche to expand into, it also shows that
there is demand for higher quality, luxury SUVs. This presents an opportunity for Porsche to leverage its SUVspecific points of differentiation to drive sales: love of driving, and an SUV for sports-car enthusiasts.
Consumer Analysis
Porsche’s consumer market for SUVs can be split into two segments: Porsche purists and non-purists, or all other
regular automotive customers. Porsche purists are the most loyal Porsche consumers, who not only own Porsche
cars, but also identify with the brand such that they participate in a brand community with other Porsche enthusiasts.
For these customers, Porsche has reached the highest point of the Brand Resonance pyramid.
For purists, the brand is a socio-economic status symbol. This can be seen in the way that Rennlist posts shown in
the case bemoan the fact that the Cayenne will make Porsche less scarce: “Today, when you say you have a Porsche,
people will reply: oh, those trucks? I got one of those too.”6 In addition, the association with soccer moms and
“poseurs” suggests that Rennlist users feared the erosion of their Porsche ownership status as an ego-expressive and
masculine identification tool. However, Porsche enthusiasts do not like to openly express this, perhaps due to the
fact that interest in status or luxury seems to be exactly what they are accusing “poseurs” of. Instead, Porsche purists
emphasize the manufacturing quality, history, and value of community as aspects that Cayenne owners wouldn’t
understand. For example, they were against Porsche’s partnership with VW and Japanese manufacturing processes,
as this took away from the purity of all-German design and engineering.7
While many companies may face the challenge of needing to find ways to appeal to new segments of customers,
Porsche faces a unique problem in that one segment is hostile towards the other. As evidenced by Rennlist posts,
Porsche purists did not embrace the Cayenne and ostracized those who purchased the car from the Porsche
community. When asked to write down thoughts and feelings associated with the Porsche brand or SUV category
(Exhibit 6 in the case), the most common identity meanings that came up showed that these two groups were viewed
as opposites. For example, “risk taking” and “danger/dangerous” was associated with Porsche, while “safety
conscious” was associated with SUVs. “Wants attention/to be noticed” was associated with Porsche, while
“Follower/’me too’” was associated with SUVs. This latter example shows the extent to which the hostility towards
SUV owners has extended from online communities to the real world. (See Exhibit 1 in Appendix for detailed list).
Recommendations
Looking ahead, Porsche has a spectrum of options to consider. The two extremes of this spectrum are (1) to
discontinue the Cayenne and return to a sole focus on sports cars, or (2) to continue improving the Cayenne,
introduce the Panamera, and continue to diversify Porsche’s product portfolio and customer base by introducing new
types of cars. By extension, this is also a choice between focusing solely on Porsche enthusiasts and switching focus
to new customer segments. As explained in earlier sections, there is a small element of cannibalization in this choice
as Porsche enthusiasts are not receptive to non-purists.
However, historical precedence suggests that negative reactions tend to be over exaggerated around the time of a
change, then fades away with time. In 1992, Porsche purists did not like the change from air-cooled to water-cooled
engines. Similarly, Exhibit 5 in the case shows us that the majority of the outrage on Rennlist came around the
Cayenne’s release in 2003. By late 2005, there are less than 50 posts about the Cayenne. This suggests that time
withers down outrage as Porsche enthusiasts accept that fact that the Cayenne is going to be in the marketplace.
Furthermore, Porsche was also able to meet its sales target of 20,000 Cayennes sold in its first year, despite concerns
about the company’s ability to do so given the competitive nature of the SUV market. The fact that 18% of firstwave buyers of the Cayenne were Porsche owners8 also suggests that the Rennlist sentiments were not very salient
in the actual purchasing process.
For these reasons, Porsche should continue with its plans to introduce the Panamera and continue to diversify its
product offerings. This does not mean Porsche should completely ignore its Porsche purists, rather, it should
implement lessons learned from the Cayenne launch to try and mitigate future risks that may damage brand equity.
For example, Porsche could introduce new models first to influencers, who could positively shape online discussions
by writing blog posts or posting on Rennlist to generate positive buzz about the new models.
Word Count: 1,710 Appendix
Exhibit 1 – Identity Meanings (from Exhibit 6 in case)
Identity Meanings -‐ Common Descriptors between Porsche, SUV Rich/wealthy Male Young Adventurous Trying to impress/trying too hard, Insecure/Napoleon complex Identity Meanings -‐ Opposite Descriptors Porsche SUV Risk taking, Danger/dangerous Safety conscious Playboy/womanizer Female/feminine Wants attention/to be noticed Follower/"me too" Fun/fun-‐loving Practical/serious Car guy/car lover/likes to drive Family, Parents, Mom Exhibit 2 – Vehicle Sales in 2002-2003 (from Exhibit 3 in case)
2002-‐2003 Porsche Vehicle Sales DomesXc Porsche Cayenne 7% 10% Boxster Export 9% Porsche 911 27% 14% Vehicle Sales Porsche 33% 2002-‐03 Vehicle Sales Model Units Domestic Porsche 13896 Export Porsche 52907 Vehicle Sales Porsche 66803 911 27789 Boxster 18411 Cayenne 20603 Endnotes
1
Case, pg. 4: “SUVs weighed 4,000 to 6,000 pounds; cars 2,000 to 4,000 pounds”
2
Case, pg. 4
3
Case, pg. 4: “R&D alone amounted to $390 million, and the capital expenditures that would be necessary for a new
plant and equipment tripled between 2000 and 2002”
4
Case, pg. 3: “By building 20,000 SUVs a year, Porsche could boost its total sales by 50%”
5
Case, pg. 4: “Sales of high-end SUVs—those costing between $43,000 and $49,000—were expected to reach
300,000 in 1998 (up from 75,000 in 1995)”
6
Case, pg. 7
7
Case, pg. 8: “Enthusiasts were distressed to find that the Cayenne had a Japanese transmission. They saw this as a
further decline in build quality that came when Porsche switched to Japanese manufacturing processes and away
from its handcrafted heritage”
8
Case, pg. 12: “Not all sports car owners were hostile to the Cayenne. Indeed, 18% of the first wave of buyers
owned Porsche sports cars. As time passed, postings began to appear on Rennlist embracing the Cayenne.”