MG Rover: The Resurrection

A succession of owners, dips in market share and huge losses have led many to write off MG Rover, but its marketing strategy augurs well for the future. Robert Gray reports.

"The whole corporate history of Rover has tainted the Rover brand in the UK." This is an uncomfortable opinion, all the more so as the words come from MG Rover sales and marketing director John Sanders.

Once a giant of the UK car industry, Rover has fallen on harder times.

Its ownership has changed six times in the past three decades, most recently in 2000 when Phoenix Venture Holdings paid the trifling sum of £10 to acquire the business from BMW.

The German luxury car-maker was only too pleased to offload a business that had become an impediment to its financial health, clocking up £800m a year in losses. It chose, however, to retain the Mini marque for itself, seeing opportunities here where it saw none for the rest of Rover Group.

At least MG Rover, as Phoenix rechristened the business to mark its new start, began life under its latest owners debt free. But it is making annual losses - £227m in 2001, with this year's performance projected to be somewhat better with losses of "tens of millions" of pounds.

Moreover, its market share is down to a little under 4%, below its share of around 5% under BMW's control, and massively down on the 15% to 20% it enjoyed in its heyday as a high-volume manufacturer that competed head-to-head with Ford and Vauxhall.

Last year MG Rover sold about 170,000 vehicles, 10,000 short of its 180,000 target. This year the picture is even worse, with a projected sales total of a mere 150,000. Voluntary redundancies have been made at its Longbridge plant.

"It's been left in a bit of a no man's land following the incident with BMW," says the UK marketing director of a major rival. "There's a lack of confidence in the solidity of the company behind it and that's affecting the perception of its brand."

As if all this weren't bad enough, MG Rover has found itself in hot water with the Advertising Standards Authority for the third time. This happened when a print ad created by M&C Saatchi for the MG range drew a complaint for placing an undue emphasis on speed, which might encourage irresponsible driving.

The ASA compliance team met with MG Rover in October and it is understood the company has to clear its ads through the ASA's copy advice service for a period of time. MG Rover has also withdrawn from advertisers' body the Incorporated Society of British Advertisers as part of its cost-pruning.

Reviving the brand

Taking all of the above together, MG Rover would appear to be in dire straits. And yet there are some grounds for optimism. Rover's obituary has been penned many times, but so far the brand has refused to lay down and die.

"I don't think Rover is the basket case that many analysts thought it was," says Robert Macnab, managing director of automotive industry analyst MFBI. "BMW got it wrong with Rover because it didn't allow it to compete with the prestige sector."

"The Rover brand is not as damaged as some people had thought and the MG brand has been successfully widened," adds Garel Rhys, director of the Centre for Automotive Industry Research at Cardiff University Business School.

The strength of its product line will ultimately save MG Rover - or condemn it to oblivion. Without the deep pockets of some of its bigger rivals, the company will have to be smart and selective about the niches it occupies and the new products it develops.

It has already shown an encouraging commitment, as Rhys has intimated, to making greater use of the MG brand. While maintaining classic roadster the MG TF as its brand icon, it has broadened the range by creating higher-performance versions of its standard Rover models - the 25, 45 and 75 - known as the MG ZR, ZS and ZT.

This was a necessary step as the Rover brand has, Sanders concedes, come to be seen in some quarters as a cautious 'pipe and slippers' choice.

MG, on the other hand, has youthful credibility and sporty values. MGs now account for about 30% of the company's sales.

"There were fears that by using the Rover platform we were creating an MG Maestro, but our engineers have made the MGs sufficiently different.

So much so that the motoring cognoscenti have given them rave reviews," says Sanders.

At the British International Motor Show this autumn, the company unveiled a high-performance sports car named the MG XPower SV, which is capable of reaching speeds of more than 200mph. With prices starting at £65,000, MG Rover is not expecting to sell the XPower SV in any great volume and arguably the car has been developed as much to add to the sporty image of the MG brand as anything else.

Interestingly, XPower is being developed as an important MG sub-brand, applied to kits for car enthusiasts who like to customise their vehicles.

It has also recently been extended to a range of clothing and accessories available through dealers and online. The viability of extending XPower into the energy drinks and foods markets is also being explored.

Sanders says MG's advertising has not deliberately set out to court controversy and is aggrieved that a popular campaign has hit trouble.

However, he acknowledges that MG's positioning - including the brand line 'Life's too short not to' - is all about appealing to people who enjoy dynamic driving and freedom. "We've got to push it to the limit that's acceptable because I'm selling performance sports cars," he admits.

Minor difficulties aside, it is fair to say MG Rover has been very successful in the way it has developed the MG brand. The greater problems lie with the Rover brand. In part, these are tied up with the corporate problems of the past - and present. But some blame may also be attributed to previous marketing strategies. Campaigns such as 'Relax, it's a Rover' have helped foster the perception that the brand is so blandly comfortable it verges on sleepy.

Meeting marketing challenges

Sanders wants to convey that the brand is refined, elegant and luxurious.

To this end, next year will see the revival of this year's Who Wants to be a Millionaire TV ads, which position the Rover 75 saloon as providing 'affordable luxury'.

This is in no way a hollow claim. The 75 has won many plaudits for its looks and performance. Of greater concern is the ageing 45, which sells fewer units than either the larger 75 or the super mini 25. A replacement for the 45 is expected in 2004.

"The main marketing challenge for it is to get through the period from now until the first quarter of 2004 when the replacement for the Rover 45 is due to be launched," says Rhys. "It will have to keep interest in existing products by introducing variants, special editions and imaginative financial packages. It has got to keep the product line attractive. Other manufacturers are giving pots of money away. Rover can't afford to do that. A disaster for the 45 replacement will set off the alarm bells."

So Rover has to get its "new medium car" right if it is to sustain confidence in its products. In an effort to keep a ceiling on costs it has entered into a joint venture with Chinese manufacturer China Brilliance. Unfortunately, this alliance has already hit problems. Shares in China Brilliance were recently suspended as one of its former executives is believed to be under investigation by the Chinese government for asset-stripping.

Another possible joint venture - this time with India's Tata - is also under consideration. And in Poland MG Rover is looking to take over a former Daewoo factory with a view to using it to produce Rover 45s for the Eastern European market, once they have been replaced in Western Europe by the new model.

Continental Europe has posed difficulties for MG Rover of late. The exchange rate with the euro has hampered the company's competitiveness and it has deliberately cut back on the number of cars it sells to the continent rather than sustain losses on each unit. This is one of the main reasons why corporate losses will be significantly lower this year than last.

Streamlining production

MG Rover is also managing production more tightly. Under BMW it had anywhere between 30,000 to 60,000 cars in excess stock. Now it is under 10,000.

Also, all nine of its models are now made at the Longbridge plant. Should demand for one model decrease and demand for another rise, it is possible to 'flex the line' to meet the needs of the changed situation.

In an effort to boost UK sales, MG Rover has become the first major car company to offer new cars for sale via the Virgin Cars web site. This is being done with the participation of two of its dealers - although one of these is fully owned by MG Rover.

Rhys believes the move is a sign of the firm's frustration with its dealers and is intended as a wake-up call. MG Rover denies this, but it is clearly looking to its 267-strong dealer network to improve its performance.

Mystery shopping has been introduced on a quarterly basis and agency PPS has been brought in to help the dealers get more appointments, work their databases harder, analyse which postcodes perform well and why certain models sell better at some dealers than others. "We've really been getting stuck in over the past six months," says Sanders.

Displaying cars in shopping centres is being trialled and a small outlet at the Welcome Break Oxford services on the M40 is due to open soon. MG Rover has struck a deal with hairdressing chain Toni and Guy to promote the MG brand on in-store TV screens and via staff endorsements, while the Rover 75/MG ZT are being promoted through packages with caravan makers as ideal towing cars.

Other marketing activities include rallying, sponsorship of football club Aston Villa and a link-up with girl band Atomic Kitten.

MG Rover is a long way away from being in rude health. Yet it is doing far better than most people predicted at the time BMW baled out. If it can continue to develop stylish, exciting product and maintain the positive progress it has made with its marketing, who's to say the MG and Rover brands don't have a future as long as their illustrious past.

UK SALES PERFORMANCE

Year MG Rover total % of market

2000 103,663 4.67

2001 97,202 3.95

2002 84,669* 3.77

* January-October

Source: The Society of Motor Manufacturers & Traders

TIMELINE

MG ROVER

1884: Rover pioneers modern safety bicycle.

1903: Rover begins car production.

1924: First MG car advertised by Morris Garages.

1966: Truck maker Leyland buys Rover.

1968: Leyland merges with MG's owner BMC.

1988: Rover 800 series launches - the result of joint development

between Rover and Honda. British Aerospace takes control of Rover Group.

1994: BMW buys Rover Group.

1998: The Rover 75 launches at the Birmingham Motor Show

1999: Rover 25 super mini and 45 models make their world debut.

2000: BMW splits Rover Group, keeping ownership of Mini brand. The

Phoenix Venture Holdings consortium, led by John Towers, buys Rover for

the nominal price of £10, an renames it MG Rover.

2001: MG Rover sells 170,200 vehicles, falling short of its 180,000-unit

target. Launch of Monogram programme, which allows buyers to personalise

their car, choosing from a range of exterior colours, interior trims and

technical components.

2002: Launches high-performance sports car the MG XPower SV at

Birmingham Motor Show. Projections show overall MG Rover sales will be

lower than 2001 at about 150,000 and under the break-even level.

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