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This chapter will review studies that are significant considering our research questions and purpose. The first section of this chapter will cover the different types of sales promotion within the limitation followed by sales promotional importance in the automotive industry.
According to Low & Mohr (2000) manufacturers continue to spend a large amount from their communication budget on sales promotion. They allocate around 75 percent of their marketing communication budgets to sales promotion. It is very important for the manufacturing firms to focus on promotion and marketing in order to create an image in the minds of the consumers and perceive them to buy the product.
The sales promotional tools companies are using are divided in value increasing and value adding tools. Value increasing tools are such as price deals, coupons and refund offers while value adding Promotions are leaving the price and quantity of the core product untouched. Instead value are added to the product, for instance a free gift could be added. (Peattie & Peattie, 1995)
The advantage of value adding is that they do not risk being involved or starting any price wars. Trying to put effort on value adding and value increasing promotions often lead to success but there is no guarantee. The main difficulty for companies trying to be competitive through the use of sales promotions is to choose the tool most appropriate to the company’s brand and to the market where the company’s products exist.
Alvarez & Casielles (2005) say research is telling that sales promotion activities should be done infrequently, when the customers do not expect it. If the customers are aware when the sales promotion activity will be headed, then the results will not be as successful.
Alvarez & Casielles (2005) continues it is also crucial for the companies to decide what the objectives for the sales promotion are. When the objectives are decided, the choice of promotion technique can be decided. The sales promotion activities chosen will depend on the objectives.
2.1 B2B Strategy:
Any successful B2B strategy has to help the customer to be loyal and supportive to the firm and its products. The customer do not just get a need, the B2B marketer have to help the customer though getting him to feel a need and then buy the product and finally become loyal. (Hellman, 2005)
When a B2B marketer wants to develop strategy driven promotions that motivate B2B customers, they have to find a solution to the problems with purchase barriers. First some key questions have to be answered; who is the true decision-maker at the targeted company; what excites the decision-maker; what is holding the buyer back. When these questions have been answered then the type of promotional strategy can be chosen and the sales promotional technique derived will be depending on the company’s objectives. (Hellman, 2005)
In order to develop a successful sales promotion strategy a clear definition of the targeted market must be included. It is important to understand why the potential customers are not buying the products and develop a specific program to overcome these barriers. To understand the customer’s mental process the Customer learning curve can be of importance. There are different types of sales promotional tools and they affect sales, profitability and value added to the brand in different ways. (Srinivasan & Anderson, 1998).
Therefore, it is appropriate to study sales promotion from a B2B perspective and further investigate the impact that different sales promotional tools have in an Automotive industry.
Saying of the writers which is collected in literature review will inform whether the promotion and branding is important in marketing within the Automotive Industry.
Sales promotion is a marketing tool which is used by the organization to ensure that the sales of the organization are promoted. The promotion of the products and the services are surely bound to increase the sales and hence the profits for the automobile organization. Sales promotion schemes can also be used by automotive industry to promote the launch of the new vehicles and the automobiles by the organization. (Paul H. Selden,1997)
2.2 Sales Promotion Techniques:
The sales promotion techniques vary according to the need and the requirement of the customers and the product.
The various sales promotion techniques that can be used by the automotive industry are illustrated below:
- a) Media: The automobile industry now needs to take the support of the new media for the promotion of their vehicles in this competitive world. For example the Volkswagen has recently launched the program called blue to complement as well as communicate the brand essence of the VW. The promotion had a huge success; more than 2 million people attended the concerts under this promotion program of the VW. The VW also joined hands with the Universal Studio to ensure the promotion of the brand.
As the internet is increasing its presence in the modern era so the companies are looking such new ventures where they can attract youth towards their products, for this purpose various online surveys are also conducted by many companies these days so that they can better understand what consumer wants from the product and after knowing their needs they can design the product and market it accordingly. (marketingteacher.com)
- b) Customer Offer:In today’s competitive world it is imperative that the offers to the customer are according to the needs and the requirement of the customer. The organization may even have to customize the products according to the needs of the customer. The VW for example makes lucrative customer offers such as giving free guitar, I pod and other musical programs to the customers. The VW also provides the different schemes and offers to the college graduates. Recently, the VW Brazil even offered suborbital space flight to the customers.
In order to provide better services which is a part of the promotional strategy companies are appointing customer relationship officer to make the customers aware about the new offers and also to solve all their problems in order to create a strong brand image in the minds of the consumers. (marketingteacher.com)
- c) Web Promotion: Internet has become an important source of the information. Hence it is very important for the organization to ensure that the organization websites and other websites are able to provide satisfactory and important details about the various automobiles and vehicles manufactured. The potential customers must be able to assess and ascertain the information about the features and the facilities embedded with the vehicle. The automotive industry is laying special focus on promotion of vehicles and automobiles through the internet. For example VW uses the web technology of the podcasting to promote the brand via internet. It uses the anytime anywhere marketing strategy campaign with the aid of the MSN network. (marketingteacher.com)
(d) Discounted prices: The discounted pricing is an important marketing and promotion strategy used by the organization. The automobile industry have some certain phases and time during the year when the demand for the automobiles and the vehicle is at the peak. The organization can reap in the increased desire of the customers to purchase the vehicles by providing lucrative discounts. For example the demand of the vehicles increases significantly in India during the festival of diwali and in Europe the demand of the vehicles increases during the Christmas season. The automotive industry can increase their sales significantly if the customers are provided the discounted prices.(marketingteacher.com)
- e) Finance deals:The automotive industry also has to focus on the fact that financing of the vehicles is a major issue for the customers. So the organizations need to ensure that the customers are able to avail the financing for the automobile or the vehicles from the financial institutes with a deal that is suitable to them. For example zero percent finance of the vehicle for the period of the three years for a customer. It is very imperative for the customer to get the right financial deal for the automobile being purchased. Various attractive financing schemes are also provided by automobile companies such as 0% financing in order to attract customers to buy the product.
- e) Trade Sales Promotion:The organization also needs to do the trade sales promotion to ensure that the distributors are also motivated to promote the sales of the automobiles and the vehicles for the organization. The various techniques and the promotion tools that can be used by the organization to do the trade sales promotion are illustrated below:
- Trade allowances: Trade allowances are the short term allowances that are offered by the automotive organization to ensure that the distributors keep a proper stock of the automobile or the vehicle of the organization because if the distributor does not keep enough stock then definitely the company’s sales will be affected which will badly hit its performance.
- Dealer loader: The dealer loader is an incentive that is provided by the organization to the dealer to ensure that the dealer shows the interest in purchasing the automobiles from the organization and do the promotion of the sales for the organization. By providing such incentives the organization makes sure that dealer promotes the sales for the organization.
- Trade contest: The organization can provide rewards and benefits to the distributors who have sold the maximum number of the vehicles and the automobiles for the organization. The trade contest develops a feeling of competitiveness among the distributors and helps increasing the sales volume for the organization. By providing such rewards and recognition to the well performing distributors it creates a sense of belongingness such as Hero Honda has a policy that if there is any occasion such as wedding in the family of the distributors then one person from the top management will go to attend wedding of the distributor. (Joshi, Rakesh Mohan, 2005)
- Training programs: The dealers and the employees of the distributors should be properly trained. The distributors and their employees should have a proper knowledge about the specifications of the vehicle and the automobile they are selling. For example the marketing executive of the distributors must have a proper knowledge of the engine specifications, luxury facilities, and power of the engine and other features of the vehicle. If the dealer has proper information about the product then they will be able to convince the customer to buy the product in a more appropriate manner. (Kotler, Philip; Kevin Lane Keller ,2009).
2.3 Sales Promotion
Need for Product Promotion
The product promotion in the automotive industry is required for:
- a) The introduction of the new automobile in the market.
- b) To influence the general public and seek their attention and help know about the new uses
and the significance of the automobile.
- c) To develop a proper brand image and to increase the sales of the automobile.
- d) To withstand the competition from the rivals and to ensure that the market share is not lost to
the arch rivals
- e) To provide the proper training to the distributors about the special features of the automobile.
(Paul H. Selden ,1997).
2.4 Effects of Promotion
- The promotional marketing has become imperative in the current competitive world. There are numerous players in the automotive industry such as Toyota, Nissan, Honda, VW, Daimler, Maruti, BMW etc. All the players are fighting fiercely to ensure that they can get the maximum market share in the automobile sector. Hence it becomes imperative that a proper promotional marketing is done by the organization.
- The promotion of the vehicle ensures that the customer is able to ascertain the price, benefits and the features of the automobile. The promotion of the vehicle helps the customer to know about the vehicle and make good decision.
- Another important effect of the promotion is that it helps to increase the sales performance by bringing the product in the eyes of the consumers.
2.5 Promotional Strategy
- Deciding Promotional Mix
It is quintessential that the right promotional strategy is chosen by the organization to promote the automobiles and the vehicles manufactured by the organization. The various promotional tools that can be used by the automobile industry are personal selling, sales promotion and the advertisement. The sales promotion uses the mix of two or more than two of the strategies to promote the sales at most of the times. The ideal promotional mix is a promotional strategy where in the total expenses that is incurred for the promotion is minimum and the sales of the goods are maximum. The ratio of the expenses that are to be spent at the various strategies must be ascertained meticulously and arduously. Deciding the right promotional mix is very important for the management so that it can do the marketing and the promotion in a proper manner. The management must properly find out the total expense that has to be made on the promotional activities. (Laermer, Richard,2007)
The promotional mix for an organization is influenced by the following factors and parameters:
(a) Nature of the automobile:
The promotion strategy to be used largely depends on the automobile being promoted. The promotion strategy for the bus, car, bicycle, motorcycle, truck etc. will vary from each other. These vehicles and automobiles target the different segment of the consumers in the society. The promotion should be done such that the promotional strategy has direct and efficient impact on the key and potential customers. For example the promotion of the Ferrari cars should be done in high net worth customers and the promotion of the tractors should be done to entice and seek the attention of the agriculture sector.
If the proper promotional strategy is not decided according to the nature of the automobile it is sure that the promotional strategy will not be successful and it would not be able to meet the desired results. (Laermer, Richard,2007)
(b) Nature of the Customer
The promotion strategy to be employed also greatly depends on the nature of the customer. The promotion strategies need to be varied according to the demographic, social, political and economic parameters of the customers. Suppose customers in a particular area are highly cautious about experimentation of any change so its better to market already established products in such markets rather than experimenting any change in such markets. (Adcock, Dennis, 2001)
(c) Nature of the Market
The market for the products also plays a very important role for the promotion strategy. The marketing strategy can be mass marketing or niche marketing according to the demand of the product. So it is very important for the company to decide in which segment of the market it is operating and then design the marketing and promotion strategy according to market segment, hence it is clear that there has to be different marketing strategy for different market segments and there cannot be a single fit strategy for all the market segments. For example Royal Royce car needs niche marketing and the promotional strategies should be done to entice and persuade the rich people. The cars such as Maruti in India needs mass marketing as they have to cater to the needs and the requirements of the middle class people. . (Laermer, Richard,2007)
(d) Availability of Funds
The funds that are available with the organization also play a very important role in deciding the promotional mix. The funds available with the organization are a major constraint with the organization which should be assessed by the organization before the marketing and promotional mix is being decided for the organization. If the funds available for the purpose of marketing and promotion are less then definitely it will not give the desired results as the products cannot reach to the consumers in a proper manner, so it is very important that the firm has enough funds with it to spend sufficiently on the promotion and the marketing. . (Laermer, Richard,2007)
2.6 Avoiding Brand Myopia:
Brand Myopia is the practice of shutting out all the possibilities for your brand because of a preconceived notion that the only lessons applicable to your category are those learned from other companies in your category. You see it all the time: Car companies study other car companies, restaurants copy other restaurants. Because of this myopia, car companies all end up making essentially the same car with same service contracts and the same warranties. (Mike Moser (2004); United we brand: how to create a cohesive brand that’s seen, heard).
In order to avoid this companies have to focus on customer’s needs and design the product which suits the needs of the customer because if the product is according to the needs of the consumer then definitely the consumer will buy the product and thereby building a very good reputation of the brand. (Baughman, J.,1974)
Branding is the name, sign, slogan or a symbol that is used to distinguish and identify the specified service or product. Today, every organization wants to have brand. Beyond the natural brand world of producers and distributors of fast moving consumer goods, whose brands are competing head to head, branding has become a strategic issue in all sectors; high-tech, low-tech, commodities, utilities services and non-profit organizations all see a use of branding. The new strategic brand management: creating and sustaining brand equity. (Jean-Noel kapferer, 2004).
Brand is the image which the product has in the market. The brand has two aspects viz psychological aspect and the experimental aspect. The experimental aspect of the brand consists of the sum total of all the aspects of the product and is known as brand experience. The psychological aspect of the brand is referred as the brand image. (Birkin, Michael,1994)
The brand is one of the most important and valuable element in the advertising theme for the product and it tells what the brand owner has in it to offer to the market. The art of creation and the maintenance of the brand are known as the brand management. The organization also needs to have a proper orientation towards the brand. (Gregory, James,2003)
If the brand of the product is maintained properly, then the product can target the right customers and the right target audience. If the brand management is done efficiently, then the customers are ready to pay high prices for the brand. The brand creates a value to the product and this consists of the manipulation of the projected image for the product. The customers see the value of the product of the worth which the advertiser wants him to see. It may be possible that an automobile whose production cost is say GBP 25,000 may have a brand image of GBP 20,000 and hence the customer will be willing to pay GBP 45,000 for the automobile. Hence, if the brand management of the product is done effectively, the profitability of the product can be improved significantly.
For example the brand value studies place the Mercedes at the tenth place. The brand Mercedes has a total brand value of US$ 21 billion in the market. The BMW ranks at the nineteenth number and it has a total brand value of US $ 15 billion. However, VW still lacks behind in the brand management and the brand value of the VW is merely US $ 7 billion. Hence VW needs to seriously look at its brand management and plan and implement effective brand management strategies. (oliverwyman.com)
The automobile industry needs to make and set up their brand management and marketing management boards. These management boards must take the responsibility of developing and maintaining the brand value of the organization. For example the Opel was able to face the tough times and come up with good results with the help of proper branding of the organization. The new comprehensive branding strategy helped the organization to swing back to growth path.
The branding is imperative to ensure that the target market is being tapped. The objectives of the brand management include:
- Delivering the message clearly
- To maintain the credibility
- Connecting the target prospects emotionally with the brand
- Develop the user loyalty
- Motivation for the buyer (Miller & Muir, 2004)
The success in the branding depends on the understanding of the needs and requirements of the customers and the prospects.
The brand resides in the heart and the minds of the customers, prospects and the clients. The brand is the total sum of the experiences, perceptions of the customers, some of which can influencive and some of which cannot influence. (Gregory, James, 2003)
With the increase in the competition it has become important to have a strong brand image. The organization need to spend more time and money in the researching, defining and the management of the brand. (Holt, DB ,2004)
2.8 Focusing on your Target Audience
The value proposition must be relevant to the target customers. The organization first needs to define the target customers properly. If required, the organization must refocus and revisit the targeting strategies and the targeted customers, especially if they were not defined clearly at the beginning phase of the business.
2.8.1 Importance of the target market in the branding:
The band mission should be to identify and gain the devotion and the attention of the target audience. The brand marketing goals can be achieved only when the target market is known inside and out. Hence a proper market analysis is required to know the target customer. If the target audience is known, then the steps to connect to the target customers can be ascertained more efficiently. The power of the brand lies in the ability to focus. Hence defining the target market strengthens the effectiveness of the brand. (Gregory, James ,2003)
2.8.2 Brand Strategy:
When the brand strategy is created for the products and services of the organization, we need to do a careful analysis to ascertain the principal barriers for the branding. These barriers are the market conditions that can put an obstacle in the path of success for the product or service rendered by the organization.
For example the potential barriers for the branding strategy could include following:
- Lack of Demand
The organization needs to do a proper analysis to ensure that these barriers are identified and removed. The analysis should be used for the development of the brand as well as the positioning of the product and services of the organization. (Birkin, Michael,1994)
The following questions must be answered for the brand strategy formation:
- How shall be the price of the product or service be determined?
- Who are the potential customers and how should they be tapped?
- How can we do better than the potential customers and have a better brand image then the potential arch rivals?
- What should be the advertising strategy? Which mode of the media should be used for the advertisement? (Philip Kotler ,2004)
2.9 Determining Your Brand’s Objectives
The objectives of the brand should be clearly defined. The clear definition of the brand objective is very important to ensure that the brand management is done efficiently. The organization should be very clear with the objectives that need to be achieved by the brand.
The brand of the organization should comprise of the company personality, core competencies, image and the characteristics. The impression that is made by the organization as well as the words that are used by the people to describe the organization makes the basic frame work for the brand. . (Birkin, Michael,1994)
When a strong brand is created, the credibility of the organization becomes very high. The organization can make greater impact and can influence the market significantly. The strong brand helps in motivating the customer to purchase the goods and services from the organization. If the brand management is done properly and the brand objectives are defined properly, then the organization is looked upon as a leader and not as a follower.
To determine the brand objectives of the organization properly, we need to ask the following questions:
- What is desired by the organization to attain from the brand image?
- What does the organization wants the people to perceive about the products and
services offered by the organization?
For example the organization may have following objectives:
- Being recognized by the people and the key customers of the organization by receiving a specific award.
- The organization may have an objective of picking up of a certain number of chosen projects.
- The organization may want to enter new market segments to increase the sales or it may want to increase the number of the customers in the same segment.
- Positioning of the organization as the industry leader. (Philip Kotler ,2004)
The objectives of the organization can be met properly only when they are defined properly at the first place.
Let us take an example that our organization wants to place itself as the industry leader. So the various brand management strategies which can be used and implemented by the organization are:
- The members of the organization team can promote the organization at the trade shows, public functions and at the various other important social events.
- The lectures should be scheduled at the professional group gatherings within the concerned industry.
- The organization must use the advertisements for the promotion of the organization and to increase the awareness of the customers about the products and services rendered by the organization.
- The organization must publish the articles in the newspapers, magazines and on the internet to increase the brand awareness and to leave a positive impression on the key customers and clients.
Once the objectives of the brand management are defined properly, the next step is to build a proper brand strategy. The function of the brand strategy should be to implement and attain the brand objectives for the organization. (Wernick, Andrew,1991)
2.10 Brand Packaging:
Branding is the identity of the organization in the market place. It is what you have to say about the organization and the products of the organization in the market. It is also important to realize that the packaging of the brand should be done effectively. The brand can have a positive impact as well as the negative impact on the customer. The special attention should be paid to the brand packaging when a new brand is being launched.
It is imperative and important to understand that the packing of the brand should be done as the integral part of the business and to develop a strong brand image. It is a vehicle that carries the company’s brand and image in the minds of the customer. The packaging of the brand of the organization can be represented and evaluated by very simple business tools such as:
- Website of the organization
- Business cards and stationery
- Answering system
- Email address
These business tools may seem insignificant in the everyday business and transactions, but in long run they leave an impression on the minds of the customers. These business tools also put a brand image in the minds of the customers and stake holders of the organization. So it is important that they are regarded seriously by the organization.
These business tools must reinforce the confidence in the organization that organization is strong. These tools reflect the dynamics and the operational and the marketing efficiency of the organization.
The website of the organization must have the clear information about the vision, mission of the organization. The website of the organization must also have the detail about the history of the organization and the past performance of the organization. The website of the organization must also illustrate the various markets in which the organization is present and the resources and the infrastructure of the organization. The website of the organization must also give the information about the special achievements of the organization in the recent past. The organization’s website must also tell about the products and services offered by the organization to the potential customers. The price of the various products and the services should also be defined clearly so that the customers can chose the product according to their needs. The website should be customer friendly, innovative and should provide online services. (Philip Kotler ,2004)
2.10.2 Business cards and stationery:
The business cards and the stationery used by the organization are also important as they also come in the notice of the people. The business cards of the employees of the organization must be properly designed and they should depict their designation and key responsibilities in the organization. (marketing.about.com)
2.10.3 Answering system:
The answering system should be user friendly and should be able to satisfy the needs and the requirements of the organization. The answering machine should also have an option to talk to the customer care to assist the existing customers and the new customers. (marketing.about.com)
2.10.4 Email address:
The email address of the employees of the organization is used to make the B2B communication. Hence it is very important that the email address of the employees is professional and carry the reference of the organization. (marketing.about.com)
These simple and small things can make big change in the long run and hence should not be neglected by the organization.
2.11 Industry-wide Trends Create a Need for Action:
The recent development in the automobile industry is causing a greater requirement of the brand management in the sector. The automobile industry now needs to keep the branding of their product at the top in their management agendas. Recently there has been consolidation of the equipment supplier industry, production projects, interchangeable parts policies of the manufacturers and joint development which allows no room for the differentiation of the automobiles in the same segment and same class. The differentiation on the basis of the technology has become very limited and focuses for the differentiation is on the perception of the customers.
2.11.1 Market Analysis
The market analysis is required to ascertain the right target market and the right target audience for the organization. The various questions which must be answered by the market analysis are:
- Who are the target audience for the organization?
- Where is the target audience located for the organization?
- What does the target audience think about the current brands in the market?
- What does the organization want the customers and the target audience to perceive about the brand?
- What are the strategies that can attract the target audience to the products and services provided by the organization?
- Who all are the competitors fighting for the brand loyalty and devotion with the organization?
- Who should be targeted- business or the consumer sector?
2.12 Brand Management in Automotive Industry
The branding in the automobile sector depends on the following attributes:
- The brand management in the automobile sector depends on the quality and reliability which are key parameters for any brand. But with the increasing competition in the automobile industry the brand management will also depend on the servicing, luxury and the performance of the automobile.
- In the automobile company, every department of the organization plays a very important role in the brand management of the organization. Hence the brand management is an all encompassing task. Each department must add value to the brand of the organization. The development, production, workshop and the dealer all play an important role in the brand management.
- The future focus of the organization should be towards the changing needs and the requirements of the customer. The products and the vehicle should be developed according to the changes in the technology, traffic requirements etc.
4.The customers have firm expectations from the auto brands, the expectations are generally derived from the past of the brand and the performance and the value of the brand. The customers are highly dissatisfied if the brand fails to meet the standards promised and met in the past. Hence it is very important that the brand value is maintained by the organizations.
5.The organizations also tend to make various brand ambassadors to promote the brand of the organization. These brand ambassadors play a very important role in the brand building of the organization. Hence the brand ambassador should be selected apt fully. The brand ambassador should have a high reputation and esteem in the society and the key potential customers which the organization is targeting.
6.The organization in the automobile sector also need to focus on the customized and the integrated communication with the dealers and the workshop and carry out the direct marketing strategy to ensure the brand is promoted effectively. (just-auto.com)
2.13 Porter’s Five Forces Analysis of the Automotive Industry
Porter’s Five Forces
The five forces analysis of the organization is important to ascertain the branding and the promotion strategies required for the automotive industry. The globalization has left a great impact on the automobile industry. The market players are now facing a stiff competition from the global market players even in the various local markets.
As cited in the book “Techniques for analyzing industries and competitors” by the Michael E. Porter all the industries of the world need to deal with the five competitive forces of the industry. The five forces model helps us to find the profitability of the industry.
The global markets in the automotive industry have been in general been dominated by the big three i.e. General Motors, Ford and Chrysler. But in the recent past these companies have faced stiff competition from the automotive industry such as Honda, Toyota, BMW, VW, Maruti, Tata Motors, Nissan and various other automobile sector players.
The porter’s five forces analysis of the automotive industry is as given below
- Threat of the New Entrants
The automotive industry is a booming industry. The huge opportunities in the automotive sector are seeking the attention of various large organization as well as the small organizations. The sector will see various new entrants in the time to come. The major threats to the new entrants are the huge infrastructure and investment required for the automobile sector. The technical knowhow and the requirement for the efficient human capital is also a barrier to the entry to the new entrants. The customers have a loyalty and brand recognition of the well established brand. But recently the Honda Motors have broken the belief that the big three are invincible in the automotive industry. (plunkettresearch.com)
- Power of the Suppliers
The automotive industry has a very limited and few suppliers to provide the equipments. The automotive industry depends greatly of the OEM (Original Equipment Manufacturers) for the production of the vehicles on the assembly line in their plant. Sometimes the alternatives available to the automobile sector players are very costly. Hence, the suppliers have a upper and better position in fixing the deal and have higher bargaining power. The automaker have greater dependence on the suppliers, but of the suppliers do too much bargaining then the supplier can be discontinued and the organization will do the back end integration with some other supplier.
- Power of Buyers
The power of the buyers is increasing as the competition is increasing in the automotive industry. The sector now has various major players and the customers have a wide range of the products and the prices of the vehicles from which they can choose the desirable automobile. The smaller number of the buyers, price sensitivity of the customers is the major factors which influence the buying decisions of the customers. The globalization has increased the power of the buyers by opening up of the local markets for the foreign players and hence inducing fierce competition in the automotive industry.
- Availability of Substitutes
The substitutes available for the automotive industry are constrained. The probability of the customers to switching to the alternatives and the substitutes is constrained by the cost and the convenience factors. The public transportation is a major substitute for the automotive industry especially cars, bicycles and motorcycles. But, the establishment of the public transport needs huge infrastructure and investment by the private and public enterprises. The public transport can also not meet the customized needs of the travelers and conveyors. However the rising prices of the fuel are increasing the propensity of the travelers towards the public transportation system.
- Competitive Rivalry
The competitive rivalry has increased significantly in the recent past. The automobile sector has seen the growth of the various small players in the recent past. The profit margins are also decreasing with the increasing competition in the market. The automobile companies are now tempted to provide the value added services to ensure that they can sustain their market share in the competitive situation. The automobile industry now has to provide the facilities of the easy finance and extended warranties to seek the attention of the customers. But the competition has definitely decreased the profit margin and hence has increased the benefits for the customers. The competitive rivalry also entices the automotive industry to bring in the innovation and improve the performance of the automobiles.
2.14 The marketing strategies and the current situations:
World over the competitive nature of the automobile industry has forced the companies globally to come up with new and innovative marketing strategies to withstand the competition globally which has risen very much after the globalization started. The world over the new upcoming free trade areas which have made the different markets just related to each other have forced the organizations to either come up with innovation or to give up the race from the market. The most selling and the most margin providing segments have been heavily competitive although the other segments have been comparatively less crowded.
As a part of their marketing strategy all the companies are offering the vehicles in the each segment to ensure that the customer is driving their vehicles only. They all try being present in each segment of the industry in every market across the globe.
The advertising of this is done through almost each possible media in this competitive world. When the flashy cars sell through the flashy advertisements and the visual advertisements on the television, on the other side the journals and the print media also helps the selling of the finer car models. The print media also enables the companies to elaborate the functions in even more details. (automotiveworld.com)
The online floor for the advertisement gives the companies even more space to give their details along with the easily available options to the customers. The Web Space for the car makers are like the best medium for them. But this also has its limitation of the non-accessibility to the remote areas where the news and the radios can reach.
Along with this the usage of the world wide famous game players and the movie stars as the Brand ambassador, has also increased a lot. This has given another bas for the companies to set the name of brand in the customers by attaching brads along with them.
Furthermore the organizations in the global market are rather now trying to be more specific as their competency. This may be taken as the Mercedes in the high-end comfort segment, BMW in the sports car segment etc. So the companies have different strategies according to their scenarios and the environment around them.
In this Global Market when the organizations are becoming the global, they are also opening their manufacturing plants in the foreign countries as well. This may be a part of their hedging techniques which would save them from the exchange rate fluctuations.
The rising living standards in the different countries in the world over have increase the potential in the global market. This increase in the potential has also increased the competitors as well in the global market as well. (automotiveworld.com)
2.15 Promotion and branding changes by few major automotive players:
- Volkswagen (VW) which is one of the famous international brands was associated with the mass marketing. The famous car model Beetle is used by the organization for the mass marketing. However, the organization wants to change its brand image with new automobiles and is attempting to move into the prestige and the luxury car segments which are basically dominated by the Mercedes and BMW.
- Mercedes which is a luxury car and targets the high net worth individuals is also trying its hand in the middle income segment people in India by launching the Mercedes Benz C Class priced at approximately INR 27 lacs approximately. (mercedes-benz.com)
- All the major car and automobile industry are providing easy finance facilities to the customers to ensure that the sales of the company can be sustained in the competitive market conditions.
- Honda motors recently made the world’s costliest advertisement which was also the winner of the year’s best ad of the world. The ad took more than six hundred takes and retakes. The total cost of the ad was whooping $ 6.2 million for just a 90 second commercial. Everything in the ad was real and no graphic and stills were used in the advertisement. This shows how seriously the automotive industry is taking the promotional activities.
- Similarly the marketing strategy of the GM is to sustain its competitiveness and to ensure that the profitability and the growth is maintained. The marketing strategy of the GM also focuses on the technology, design and the quality of the cars to attain the customer satisfaction. (gm.com)
- Most of the organizations have a tag line attached to them to create a brand image and brand positioning in the mind of the potential customers. For example the VW has the tag line of the Das Auto which is English means “The Car”. Similarly the Maruti Suzuki the largest small car producer of the world uses the tag line “Count on us” ( marutisuzuki.com)
- The organizations are looking for the repositioning and change in the perception for the brand. For example, the Honda City went for a repositioning in the Indian Markets and the prices of the car were reduced considerably to ensure that it can target the middle segment people of the nation.
- The major automobile organizations of the world are launching the new brands and new automobile to increase the product line for the organization and increase the market share of the organization and to cater to the changing needs of the customers.
- VW is implementing innovative marketing strategies. The VW has designed the site where in the people can book the test drives for themselves in the real time. The booking will be done by the direct access to the retailer’s booking system. Many other automotive players are coming with the online support to their customers with the increase of the prevalence and the importance of the internet. (volkswagen.com)