BMW vs. Mercedes-Benz vs. Audi: Whether to Fight Back Depends on Whether the Challenger Measures Up | The Ad Wars, Part 4

When a company changes the target of its ad attacks, it is because its competition has changed.

"There is no final defeat."

That is how Roger A. Enrico, then general manager and chief administrative officer of the cola division of Pepsi-Cola Company, summed up the "ad war" between Pepsi and Coca-Cola in the 1960s.

This is more or less the earliest case in the history of marketing, and still one of the best. By challenging Coca-Cola, Pepsi won itself second place in the market, and Coca-Cola grew stronger through the fight. Consumer attention ended up expanding the whole market.

But as Enrico also said, the trick is that the "cola war" has to be fun. If the war starts to look as though one company is on the brink, dogged by bad luck and beyond saving, the mood of the game turns dark at once.

The war has to feel bloodless and never-ending. Everyone's interest lies in keeping the public curious: fine, this is what Pepsi did today — now can you imagine what Coca-Cola will do tomorrow?

Ad wars between big companies, full of rivalry and attack, have in fact never stopped — Microsoft and Apple, Burger King and McDonald's, Nike and Under Armour, Mercedes-Benz and BMW.

And there are subtle differences between each pair. Apple ran a series of ads taunting IBM in the 1980s; by the 1990s the target of its mockery had switched to Microsoft, and now Apple is the one being challenged. The style of the "ad war" between BMW and Mercedes-Benz is more like a pair of best frenemies. Working out these differences is an interesting process.

That is one reason we started this series. The more important one is that behind an "ad war" sits corporate competition — sometimes an even match, sometimes a new challenger on the rise. Through this window you can watch the market change and see who is gaining the power to set the terms.

In their ads they open fire on each other's blunders. The fights between them are fought with live ammunition.

We are talking about advertising, but it is never only advertising.

The best defense can sometimes be a powerful offense.

Early this year, a video of Mercedes-Benz congratulating BMW on its 100th anniversary spread from Facebook all the way to WeChat Moments. In its birthday message, Mercedes-Benz wrote: "Thanks for 100 years of loving to hate each other! The 30 years before that (without BMW) were a bit boring. So, happy 100th birthday! Here's to another 100 years of loving to hate each other."

With this, Mercedes-Benz was reminding consumers that a 100-year brand history is impressive — but that it got there a full 30 years earlier! The BMW and Mercedes-Benz brands were founded in 1916 and 1926 respectively. (What Mercedes-Benz was really invoking here was the seniority of its parent company Daimler, founded in 1886.)

This lightly teasing birthday greeting set off a collective carnival among car brands, with Audi, Volkswagen and Bosch all piling into the ad brawl — though many of the versions circulating online in fact came from enthusiastic fans spoofing the original. That powerful fan effect is exactly another reason the auto industry is so fond of competitive advertising.

People care far more about talking up their own car and taking its side on social media than about whose burger they ate tonight, and car companies know it.

By riding a rival's centennial, Mercedes-Benz created a marketing opportunity for itself. The intent was not kind, but the result kept its humor and its dignity, and can fairly be called a well-fought marketing battle.

Compare that with the first three pieces in this series — Under Armour against Nike; Burger King and McDonald's in fast food; Apple and Microsoft in tech — where smearing or mocking a rival is the norm, and you will find that the ad wars between the auto giants smell far less of gunpowder. They usually keep their dignity and their sense of humor, and sometimes even show a kind of mutual respect.

Call it a best-frenemy relationship. But this is also probably the industry that cares most about its "circle": to play together you have to be evenly matched, or at least not too far apart.

And the price of admission is a willingness to spend big on advertising. According to Adage, one of the authoritative U.S. advertising outlets, 3 of the top 10 among America's 200 biggest advertisers in 2015 were car companies; the rest came from consumer goods, telecom, finance and electronics. eMarketer forecasts that the auto industry's digital ad spending will keep growing at double digits through 2020. In 2015, U.S. auto industry spending on digital advertising grew by nearly 22%.

Mercedes-Benz, Audi and BMW are the big players in the industry's ad wars. Because the three have long held nearly 80% of China's luxury car market between them, they are known collectively as "ABB." The amusing part is that even among these three German luxury brands there is a wall between the tiers.

Run back through the past rounds of these ad wars and Mercedes-Benz is the one that usually stands on its dignity and rarely picks the fight; Audi is more often in the challenger's stance — the ad line for the Audi A8, for instance, was "luxury beyond the old era" — and BMW is the one most eager to go to war. So what we see most of is BMW trading blows with Mercedes-Benz, and BMW with Audi.

In 2009, Audi put up a billboard for the A4 on a street in California: "Chess? No thanks, I prefer the thrill of driving." (Chess was a jab at BMW, whose badge looks like a checkerboard.)

Afraid that was not blunt enough, within days Audi swapped in another billboard naming the rival outright: "Your move, BMW."

BMW's answer was to rent an even bigger billboard directly across the street, put up a photo of its high-performance M3 coupe and reply: "Checkmate!" The agency Juggernaut Advertising designed the counterattack for BMW's Santa Monica dealer, and wrote on BMW's blog: if anyone thinks of a better comeback, we would love to publish it here!

Audi did not flinch either. It opened a Facebook page encouraging fans to post their own comeback ideas. The widely circulated "Check yourself" and "Think again" versions were in fact both fan Photoshop jobs.

Not to be outdone, BMW's fan camp eventually Photoshopped a blimp above the billboard, printed with a BMW F1 car and the words, in huge type: "Game Over."

This silent street fight in Santa Monica is regarded as one of the finest brand duels between Audi and BMW, and much of its success came from the heated discussion on social media. One outlet ran a poll asking who the real winner of the ad war was; the two came out neck and neck.

"BMW is considered one of our main competitors, so there is always going to be some back-and-forth," an Audi spokesperson told The New York Times. A BMW spokesperson said much the same: "We are defending our position as market leader. BMW does not see this as a war; we would describe it as a competitive spirit with great benefits."

Yet in 2006, when BMW made the first move on Audi, outsiders found it "rather unexpected."

Audi's standing in the market then was still a long way behind BMW and Mercedes-Benz. That year BMW sold 1.358 million cars worldwide and Mercedes-Benz 1.26 million, while Audi had yet to break a million, at 905,000.

Audi was not about to pass up the opening BMW had handed it. It hit back at once with its title of six consecutive wins at the 24 Hours of Le Mans, then launched a series of ad offensives openly mocking BMW. With onlookers egging them on, BMW had no choice but to pull itself together and fight back with everything it had.

Audi had in fact long wanted to break into the private world shared by BMW and Mercedes-Benz — by any route available.

Audi's predecessor was Auto Union, and the four rings in the Audi badge stand for the four companies that merged to form it: Horch, Audi, DKW and Wanderer.

As early as 2000, Audi built an ad around those four rings — a 25-second spot that in one stroke mocked four luxury brands: Alfa Romeo, Mercedes-Benz, Volvo and BMW. A real classic 👇

After World War II broke out, Auto Union was forced to stop making civilian cars and served only military needs. After the war, its production lines and related facilities were confiscated and dismantled by the occupying Soviet forces.

In 1958, Daimler-Benz, then at the height of its power, bought 88% of Auto Union for a mere 41 million marks. The reorganized Auto Union hit a severe financial crisis in 1964 and was sold off in stages by its parent to Volkswagen AG. Nobody then could have guessed that half a century later, in 2011, the once-untouchable Mercedes-Benz would be passed by Audi in global car sales.

In 1980, Audi's proprietary Quattro permanent all-wheel-drive system went on sale, and this is where Audi truly established its place in the market: the first mass-produced full-time all-wheel-drive cars caused a sensation. Audi still wields Quattro proudly to beat down its competitors 👇

(Audi mocks BMW for lacking Quattro full-time all-wheel drive — poor stability in corners, easy to fly off the road; BMW sneers that Audi should not get cocky just because it has Quattro, or it will crash anyway.)

Quattro made Audi unbeatable in motorsport. For a stretch afterwards Audi was everywhere on the racetracks, testing every aspect of the permanent all-wheel-drive system. In 1982 it took first place among German brands in the prestigious World Championship for Manufacturers; in 1983 Hannu Mikkola drove an all-wheel-drive Audi to the World Rally Championship; in 1984 Audi swept both the manufacturers' and the drivers' titles.

So it is easy to see why, when BMW waved a world championship title at Audi, Audi threw back its record of six straight world endurance titles without hesitating.

BMW seems to have taken to "provoking" rivals in its advertising around 2003, though until then its targets had been Mercedes-Benz and Jaguar. But just as BMW once did not count Audi as a competitor, Mercedes-Benz in the 1980s did not deign to treat BMW as one. Back then Mercedes-Benz meant maturity and wealth, and only young people without much money bought a BMW.

BMW's response was to aim at the new postwar generation, catching the shift in the international car market and the rise of the American middle class to turn the tables. Unlike their parents, who were used to driving a Mercedes-Benz, these younger buyers wanted individuality and a new brand to stand for their own values. The handling BMW emphasized fit that appetite for thrills exactly, and the BMW 3 Series was the model that embodied it.

In 2005, BMW passed Mercedes-Benz to become the world's best-selling luxury carmaker, and held the lead for a full decade.

The historical ties between Mercedes-Benz and BMW are closer still than those with Audi, which Mercedes once owned outright. In the 1950s, today's two top luxury brands were bound tightly to a German business family named Quandt for more than twenty years. In 1974, this most secretive and wealthiest of German families transferred its Daimler-Benz stake to in-laws as part of a division of family property, and that 15% holding was later resold to the Kuwait Investment Authority. From then on the Quandt family, holding 46.7% of BMW, focused on BMW, and the two luxury brands formally began their long war of attrition.

That may explain the subtle "couple energy" between BMW and Mercedes-Benz. Even in China you often see the two giants exchanging courteous, respectful marketing gestures.

Right now the relationship between BMW and Mercedes-Benz looks like a return to where it stood a decade ago. In the first three quarters of this year, Mercedes-Benz sold 1.5379 million cars worldwide, up 11.7% year on year, passing BMW's 1.4799 million and far outrunning BMW's 6% growth. Audi sold 1.4 million, in third place.

At the 2011 Frankfurt Motor Show, the global president of Mercedes-Benz promised that the brand would be back on top before 2020, with the three-pointed star expected to retake first place around 2017. Its ever more aggressive ad attacks are one expression of that fight.

In the Chinese market, which nearly every carmaker treats as its first priority, Audi still led over the first nine months of this year with 440,200 cars sold, ahead of BMW's 356,200 and Mercedes-Benz's 344,800. But Audi grew only 6.2% year on year, against 11.1% for BMW and 29.5% for Mercedes-Benz.

If the trend holds and Audi does nothing about it, "ABB," the label people have used for years, may well have to become "BBA." BMW, caught in the middle, is in an awkward spot of its own: in March 2015, when former BMW Group CEO Norbert Reithofer handed the baton to his successor, Harald Krüger, he admitted at his farewell that, MINI's numbers aside, BMW might not beat its rival Audi on sales. That prediction has now come true.

Barring surprises, we are likely to see still more frequent exchanges between BMW and Audi, or BMW and Mercedes-Benz. BMW may well remain the more active party — only now from the challenger's position.

But as we said at the start, in every ad war, there is no final defeat.

Cover image source: Jaguar 2014