Audi slips into the mainstream

The German car firm is changing gear with the cheaper A3 as it seeks to bring the status symbol to a new niche

Audi's move into the small-car sector with the launch of the Audi A3 marks a radical departure and challenge for the German-owned car brand: just how to balance its upmarket image with an unashamed move into the lower-priced mainstream.

The launch of the A3 at the London Motor Show this week is supported by a pounds 5m advertising campaign that begins on television on Tuesday. It is part of a long-term strategy designed to reposition Audi, which is owned by Volkswagen, as a viable stand-alone brand.

Neil Burrows, the head of marketing for Audi in Britain, says: "Between 1974 and 1993 Audi was closely tied in terms of distribution, sales and marketing to Volkswagen (known across Europe as VAG). Since the early Nineties, a global strategy has been introduced to tease apart VW and Audi at point of sale and service."

In 1993 VAG restructured into two separate UK divisions, each focusing on one brand. A dedicated Audi dealer network is now being created. "Success will depend on Audi standing on its own two feet," Mr Burrows says. "In the past, it relied on the product cycles of both brands. From now on, it must be backed up by its own growing range of models."

Which is where the A3 comes in. The A3 is a three-door hatchback, priced at pounds 13,795 for the standard 1.6 litre model. Audi is carefully positioning it not as a cheap Audi but as an upmarket sports hatchback. It is a niche already occupied by the BMW Compact and soon by Mercedes' "Baby Benz".

All traditional prestige car brands must address a trend in the UK market: downsizing, says Mr Burrows. While there will always be a demand for luxury models from Jaguar, Mercedes and Audi (with its own A8), the executive class just below, which includes Ford's Scorpio and Audi's A6, is in sharp decline.

"An emerging pattern is the fragmentation of sales between volume brands, such as Ford, and prestige brands like BMW and ourselves," Mr Burrow adds. "There is a desire to go for smaller cars but with a feeling of comfort and added value."

downsizing is also affecting the small-car sector already occupied by the likes of the VW Golf, he says. This is why the A3, which will sell alongside the top-end Golf, will be positioned as being for "people who want to downsize without going downmarket".

So the A3 buyer will be younger than an existing Audi owner although still a professional, and more likely to be a woman, claims Oliver Lewis- Barclay, the account director at Bartle Bogle Hegarty, Audi's British advertising agency. "Someone who could buy a BMW saloon but who is reluctant to admit they are a saloon person." With the specifications of the A3 close to the top-end Golf GTI, such fine distinctions are critical. Audi must tread carefully and not only so as not to dent its distant cousin's sales. For by bringing the Audi within easier reach of more people there is a danger that the company's upmarket brand values will be undermined.

"It is a potential pitfall for all prestige brands," Mr Burrows admits. But he claims that Audi is better equipped than most. "People's perceptions of Audi were never bad, just at times unclear. We have never been an overt statement or symbolic of ostentation."

In fact much of the brand's marketing has relied on understatement. In BBH's campaign for the A4 an abrasive yuppie test drives the car spouting all manner of grating Eighties cliches before he finally concedes it is not his style. The approach is evident again in the launch campaign for the A3.

Core to the A3 launch campaign is a television advertisement shot in Iceland depicting the car driving towards a gauntlet of advertising cliches ranging from falling rocks to fire and brimstone.

Instead of continuing on his course the A3 driver turns back. Poster and press advertisements continue the theme with the catchline: "If you want stunts, go to the circus." BBH calls it an antidote to traditional car advertising.

The A3's launch campaign also includes an innovative direct marketing push that includes an audio tape and action transfers. "It is as far as we have ever gone with the Audi brand," Mr Burrows concedes, insisting: "The opportunities offered by this launch far outweigh the potential pitfalls for the Audi brand."

The A3 is as much an opportunity to talk about Audi as a whole as it is the new product, he adds. "To adequately compete on the world stage we must develop products to extend our range and evolve the Audi brand." In this way Audi hopes to increase the brand's British market share from its current level of 1.4 per cent to at least 2 per cent (sales), with annual sales of 40,000 units by 2001.

Even so, Mr Burrows insists that the focus will remain on Audi's core lines. "The sector of the market where the A3 will sit is a very small one - we predict between 5,000 and 6,000 a year will be sold." Meanwhile the A4 and A6 will remain the bulk of Audi's sales, for quite some time to come.