Acura came roaring into the U.S. luxury market in 1986, and things haven't been the same since. It was an audacious experiment by Japan's Honda Motor Co. to see if Americans would pay a then-unheard-of $20,000 for a Japanese car. Its pitch? A premium car at a bargain price compared with European luxury imports. The first TV ads from Acura talked of "precision-crafted automobiles" and pictured shocked German executives reading the news in their papers. For four years in a row, Acura topped the prestigious J.D. Power & Associates Inc. customer-satisfaction awards, and it quickly became the best-selling premium import brand.
But the road has become a lot rockier since then for Acura, which accounts for 15% of Honda's North American unit sales. With results off 25% in the first eight months of 1995 and headed for their worst full-year showing ever, Acura is desperately trying to retool its image. New advertising stresses luxury and prestige instead of engineering and performance as a way to justify prices that are no longer markedly below the competition. But the first ads infuriated dealers, who demanded and got a share of the regional ad budget. And Acura is still searching for a way to get dealers, pinched by falling sales, to spruce up their 10-year-old showrooms. Meanwhile, the line's well-established brand names, Legend and Integra, will soon be replaced by models identified by letter-and-number combinations in order to shift the brand focus to Acura.
HEAVY TRAFFIC. As long as it could underprice competitors in the luxury market, Acura's sales hummed. But in 1992, European luxury brands such as Mercedes, BMW, and Audi started slashing their inflated prices. That, along with the rising yen, wiped out much of Acura's advantage. Archrivals Toyota Motor Corp. and Nissan Motor Corp. had launched their even-more-upscale brands--Lexus and Infiniti--in 1989 with full-size sedans starting at $35,000 and dealers famous for coddling buyers.
The combination slammed the brakes on Acura sales, which peaked in 1991. "Acura led the Japanese charge into the premium luxury segment," says Susan G. Jacobs, president of market researcher Jacobs & Associates Inc. in Rutherford, N.J. "But they've been outmaneuvered by Lexus and Infiniti, and they didn't anticipate the resurgence of the European luxury brands." Adds Thomas G. Elliott, executive vice-president at American Honda Motor Co.: "We came to find out that, in the luxury-car market, performance isn't enough. The buyers want status, prestige, comfort, and luxury."
So far, though, Acura has had a hard time convincing buyers that they'll get enough of those attributes to justify prices that can top $40,000 on the Legend. Acura dropped the old "precision- crafted performance" ads with the 1994 models in favor of a campaign that featured mansions with cobblestone driveways and a towel-draped woman getting a massage in a gazebo. The new tag line: "Some things are worth the price." Dealers dubbed them the "Chanel" ads. Nissan rushed out a parody that claimed its $13,000 Altima was "worth far more than the price."
Ads for 1996 models continue to hit hard on the luxury theme. "Acura gets extremely high marks for quality, dependability, and value, but it doesn't perform well in categories like luxurious, expensive-looking, and prestigious. We have to change the image," says Timothy W. Hart, executive vice-president of Ketchum Advertising in Los Angeles. New promotions, such as an 18-month tour with Cirque du Soleil, are meant to get the word out, too. But customers are likely to get a mixed message. To appease dealers, Acura is shifting one-third of its $40 million regional ad budget to regional dealer associations, which traditionally run hard sell, rather than image, ads.
Acura is also changing and renaming its products. The Legend name will disappear next spring, to be followed in a year or two by the Integra. Acura will replace the Legend with the 3.5RL, a bigger, more luxurious car designed to compete with top-of-the-line, $50,000-plus Lexus and Infiniti models, though with a smaller engine the RL will sell for $10,000 less. Acura introduced its new TL series this summer, including the $28,000 2.5TL and the $33,000 3.2TL. The idea is that Legend buyers, in shock over prices that start at $36,000, can trade down to the TL series without leaving the Acura brand. Acura will also introduce a luxury sport-utility, a gussied-up Isuzu Trooper renamed the Acura SLX, for about $30,000 in December, and next spring will add the CL coupe at about $25,000.
CUSTOMER-HANDLING. It will take luxury service as well as new luxury products to win over customers. But getting a commitment from the dealers who provide that service could be the most difficult part of Acura's transformation. Last year, it started awarding top dealers free trips based on customer-handling scores rather than pure sales numbers. This year, it hired Sandy Corp., which trained Saturn and Infiniti dealers, to teach Acura dealers how to wow buyers. So far, more than half of Acura's 283 dealers have gone through the voluntary program. It's working: Acura has rebounded to No. 4 in the J.D. Power satisfaction rankings that it once dominated: It's after Lexus, Infiniti, and Saturn but ahead of Mercedes, BMW, and Cadillac.
Now, Acura must persuade dealers to upgrade to the wood-and-marble look of today's luxury dealerships. "If we're going to be a luxury franchise, we've got to look like a luxury franchise," says Stephen P. Cushman, president of Cush Automotive Group, which owns Acura dealerships in San Diego and Escondido, Calif. "We've got to deliver the image that they're projecting." That will be tough when dealers' sales are at an all-time low and a quarter of Acura dealers are losing money. Acura hopes to develop an upgrade program it can roll out in stages.
But Acura will soon have one major advantage over its Japanese competition: production in the U.S., starting with next spring's CL coupe. Avoiding the strong yen will give Acura a price edge over Infiniti and Lexus, which are both made in Japan. The new names and new image can't hurt, but in the end, it may be plain old lower prices that rev up sales at Acura.