Fiat’s Attempt to Re-Enter the North American Market

Fiat, a leading Italian automobile manufacturer, has established a solid reputation in Europe for aesthetic and stylish vehicles. Fiat’s car models are typically small, but designed to look sturdy, visually pleasing, and full of flair.


However, in spite of its impressive performance in the European car market, the company did not have a meaningful presence in North America for several years, as it had been absent from the US automobile market for more than two decades.

Although Fiat’s small cars recorded considerable sales in the United States in the 1970s, the significant drop in gas prices in the early 1980s caused the small-car market to stall, and Fiat was forced to pull out of the North American market shortly after due to increasingly poor sales.

Its abrupt withdrawal from the United States was not caused by the slowdown in small-car demand alone, but also by the unfavourable reputation it had earned for turning out cars widely perceived as unreliable and rust-prone.

By the time Fiat pulled out of the US market in 1984, its brand image was in tatters, and it seemed that the company would struggle to re-establish itself in North America in the foreseeable future.

Decades later, American consumers have become more eco-conscious and concerned with rising gas prices, leading to a resurgence in demand for small cars. Recognising the changing trend in the American market, Fiat indicated interest in re-entering the market in 2011.

Decision to stage a comeback to America puzzled many industry observers who wondered whether American car buyers have forgotten — or can be persuaded to forget — Fiat’s poor brand reputation in the country prior to its withdrawal in the 1980s.

What was certain, however, was that Fiat was quickly forgotten after its departure, and this meant that its comeback efforts required a strong pitch that not only assures consumers that a lot had changed over the last two decades, but also indicates how it was a better alternative to the well-established rival brands in the US market.

Having made the decision to re-enter the American market, fiat faced a major challenge: it was entering a highly competitive small-car market dominated by big competitors such as Toyota, Honda, Nissan, Chevrolet and MINI and its decades-long absence from the American market had created a large group of car buyers who were not familiar with the Fiat brand.

According to Casey Hurbis, Head of Communications, Fiat Brand North America,

“After being out of the US market for 28 years, the challenge was to introduce the brand to generations that had little to no awareness of the Fiat brand, and to rekindle the baby boomers who remember Fiat from their youth”.

Besides, industry watchers predicted that Fiat would face a steep climb in its comeback bid.

“It is difficult to reintroduce a brand once it has failed in the U.S.,” notes George Peterson, president of the consulting firm Auto Pacific, owing to “lots of old baggage left in the memories of consumers. Plus, they wonder if they can trust the brand to stick around for the long haul, since confidence is a big part of the buying decision”.

Fiat faced the challenge of devising an effective strategy to reintroduce the brand into the market and facilitate brand awareness and acceptance among American car buyers. The fact that Fiat, in its comeback attempt, is still a relative newcomer in the United States rather than the established brand it is in Europe allowed the company to try new things without the intense pressure that comes with being a market leader.

The company hoped to make headway in the American market based on a re-launch of its heritage model, the Fiat 500.

The Fiat 500, a diminutive model that competes with the Mini Cooper, as well as cheaper compact models such as Toyota Yaris and Hyundai Accent, seeks to appeal especially to car buyers who tend to make buying decisions based on design, fashion, and style.

The model was positioned as a car designed for young professionals, eco-conscious individuals, and any potential car buyers who appreciated European styling as an aesthetic statement. In order to further enhance the appeal of the model to American buyers, Fiat made minimal changes such as bigger cup holders, an armrest for the driver, and an optional automatic transmission, as most American drivers are not accustomed to shifting their own gears.

A strong advertising program was integral to Fiat’s attempt to successfully re-enter the US market and a major aspect of Fiat strategy was targeting younger consumers though social media.

The strategy seemed heavily tilted in favour of social media and digital platforms on the internet because the company’s executives believed that one of the fastest ways to reach their target market was to take cognisance of the increased media fragmentation and dynamic media consumption patterns of present-day America.

The Fiat brand had a strong presence on Twitter and Facebook right from the start. Fiat also released an iPad application early on, as well as a music video featuring a rocked-up version of Vivaldi. The brand even got experiential, unveiling pop-up drive-ins around the country where it would screen original versions of films that had since been remade — a strategic allusion to the fact that its return to the U.S. was itself some kind of ‘remake’.

In addition, Fiat reportedly struck a deal with the popular gossip website, TMZ, in which the automaker would pay the website to photograph high-profile celebrities who were set up to drive the Fiat 500.

Contrary to the popular belief that people only use search engines to find information, Fiat was convinced that they are also a powerful way to increase brand awareness and influence perception of a brand.

The company adopted an internet search-based two-fold approach to connect with individuals already looking for them through the popular search engines and to gain the attention of new customers and undecided car shoppers.

Fiat hoped that this strategy will help establish a strong brand presence in segment search for small cars, and early results indicated that through its presence on the search results page on small car queries, the Fiat brand’s awareness and favourability increased which helped drive undecided shoppers’ consideration of the brand.

This branding strategy may have paid off soon after implementation, as it was reported that Fiat recorded year-on-year sales growth of over 120% between 2011 and 2012.

But not everyone is convinced that Fiat’s digital and social media-centred marketing strategy will produce the required results for the company.

Many in the auto industry, including some of Fiat’s own dealers, lamented the lack of a broad-based marketing strategy with a strong television component — television advertisements were scarce or almost non-existent during the initial stages of the company’s re-launch effort.

Observers agreed that social outreach and experimental efforts were useful strategies but they argued that these strategies failed to make a sufficient impact since few prospective buyers even knew the Fiat brand was back in the market.

In response to these concerns, Fiat USA CEO Laura Soave insisted that social and digital media will carry the messages Fiat needed to propagate to potential buyers.

“We are going to build up this business and brand from the bottom up through social media and events”, says Soave. “The people we are targeting tend to live the kinds of lives where they are not watching a lot of television anyway”. Based on this assertion, it is clear that Fiat’s marketing strategy was developed based on the assumption that the key market segment that Fiat targeted with its Fiat 500 car model consists of individuals who spend more time on the Internet and social media in particular than on other traditional media.

While this assumption might have been valid, various data sources indicated that a large proportion of Americans still watch television daily, and it soon became clear that it was a strategic mistake to miss out on the opportunity to reach this significant audience. The brand seemed to excel at peripheral marketing programs, while ignoring the bigger brand-building picture.

When Fiat determined that its marketing effort was not achieving the degree of success previously envisaged, it carried out a radical change in strategy and approach — embracing a more dynamic approach meant to create nationwide brand awareness. Championed by Fiat’s Olivier François, the new strategy involved a celebrity-driven advertising campaign featuring big-name stars and mildly risqué concepts in television advertisements conceived to create a buzz and earn media attention.

The popular actress and musician Jennifer Lopez as well as Hollywood star Charlie Sheen were signed up for separate advertisement campaigns to project the stylish and practical essence of the Fiat brand. While some critics questioned the believability and impact of the television commercials, evidence shows that following the Jennifer Lopez commercial for the Fiat 500 show that it catapulted the Fiat name into public consciousness and brand awareness increased substantially from 9 percent to 45 percent in the weeks following the advertisement’s launch towards the end of 2011.


Projecting a Stylish Brand Essence

Like the old social media campaign approach, the new television advertisements and celebrity endorsement-based marketing effort tended to emphasize style and design more than reliability and the more pragmatic aspects of the overall driving experience.

A number of observers have criticized Fiat’s heavy emphasis on design and style in its promotion of the Fiat 500, noting that for most Americans looking to buy low-priced small cars, reliability and functionality are often the most important considerations as opposed to the whimsies of owning a stylish Italian car. However, Fiat insists that the projection of style in its advertisements go hand in hand with understated practicality, which are integral to the Fiat brand.

In spite of the criticisms of Fiat’s style-centric brand message, the company’s marketing executives maintain that it is a deliberate and strategic way of propagating a captivating brand essence. “We have a small car selling in a niche segment, so we can’t pitch it here the way we pitch a mainstream brand in Europe,” Fiat’s Chief Marketing Officer François explains. “We cannot pitch it as a car you need, but as a car you want. It is not a commodity, not mainstream. It is a great design. It is cool. The language is youth, fun, and trendy”.

The use of fashionable celebrities such as Jennifer Lopez and Charlie Sheen to advertise the brand is part of the attempt to associate the brand with trendiness, fashion, and style. “We looked at it as style on wheels,” explains Rob Strasberg, co-CEO and creative chief at Doner, the agency that handled Fiat’s revised advertising campaign. “You’ve got icons playing with icons,” he adds — the cars were made “cool” and “fun” by association with larger-than-life celebrities. A number of branding experts believe that this approach was the most effective that Fiat could have possibly chosen. This is based on the idea that the car business is somewhat analogous to the fashion business, in the sense that these products are hardly sold as commodities, but as passions that play to the self-image, desires, and style perceptions of the typical buyer.

Many observers admit that Fiat’s second coming to the North American market has been moderately successful thus far. However, it is also clear to industry watchers that the comeback attempt has not progressed as expected, particularly in light of automotive news reports that only about 45 percent of the approximately 210 Fiat dealerships in the U.S. are profitable as at the end of 2013. A number of challenges have been cited as possible reasons for the slow progress of the comeback attempt, including factors such as Fiat debuting with a single subcompact model in a market where size impresses consumers; and a failure to get dealers on board. Fiat initially insisted on separate showrooms, and this made it difficult to add Fiat franchises to existing stores for other automobile brands. The broader implication of these challenges and drawbacks is that even though the Fiat’s market re-entry strategies may have helped the brand find its footing earlier, the company’s future in the North American market remains questionable given the fact that fast forward to 2019, its iconic 500 was pulled off the American market due to its poor demand.

The debate is still on whether Fiat’s failure to succeed with the 500 model was a ‘market fit’ problem or the failure of its strategy in a market that wanted more.