Automotive
Marketing In (U.K.)
Developing
Marketing Strategy
A review of the auto marketing scenario, and formulation of a business strategy for a change in the way the business is being conducted and the management skills required changing from a strategic viewpoint.
University
of Central England Business School
In
Partial Fulfilment of the requirements
For
the degree of
MASTERS
OF SCIENCE IN MANAGEMENT
UNIVERSITY
OF CENTRAL ENGLAND
BUSINESS
SCHOOL
September
2002
MSC
2001-2004
Outlook for a New Century: Three Predictions
1. The Automotive Industry
Will Move Closer to the Consumer.
2. The Auto Industry Will Be
Increasingly Driven By Technology and Innovation.
3. Larger Companies Will Be More Flexibly Organized
The Industry, The year 2000 has been a bad year for the UK car industry, with closures at Vauxhall and Ford and an uncertain future for Rover and Nissan. It has not, with the best will in the world, been a good year for the British car industry.
Questionable Explanations, The strength of the pound against the euro hasn't helped the profitability of plants in the UK, which have to sell on Continental Europe. But it is also the case that car giants are some of the companies most able to manage international currency movements.
But the changes in the world's car markets did not end with the sound of Big Ben at midnight on the 31st that year. The New Year came with new challenges for the industry.
Car makers take to the Net, more and more companies started to use e-commerce to gain competitive advantage and to attract customers but with this came more competition as e-commerce brings with it a new bread of consumer better informed and more empowered than ever before. Automotive retail industry is therefore now put to the challenge to survive this fierce competition to win increasingly demanding customers. In fact carmakers were already using e-commerce to sell their products, as long back as in 1999 when on 1 November that year Vauxhall became the first to sell to customers directly over the Internet.
The Consumers Association said: "It's a start.
We want to see prices come down across the board. So pressure must be kept
up." The organisation has recently launched a service to help UK car-buyers
purchase their vehicles from other European countries where cars are often
substantially cheaper. (BBC new bulletin publications1999)
Increasing consumer demands, with the continuous technological improvements brought in by the car manufacturers to stay in the competition the expectation of consumer are also continuously rising, consumers are more and more asking for better value for money, “they want more reliable cars for less money”. The improved reliability being achieved by all makes is now broadening customer consideration. Other factors are also coming into play –design, equipment, performance, and brand image etc. car manufacturers cannot afford to be uncompetitive on price- consumers are rejecting models seen to be even slightly over priced. In this intensely competitive environment, an attractive product is not the only sole factor to attract customers. The way sales service is handled, the quality of information provided, the attention to the individual’s requirements, will all play a role in customer satisfaction. And with the competition commission report in over pricing of cars could also force price cuts on UK manufacturers, the ending of “block exemption” could lead to a host of low-priced car retailers, supermarkets like tesco has already shown some interest. Technological changes have shifted consumer expectations of personal service, the successful retailer should be able to offer customers a wide choice, well displayed and clearly labelled. Customers expect to do more for themselves- but when they need advice they should be provided with accurate and up to dated information’s within the least possible time. During the period of retail revolution, the car retailing industry has held on to its traditional structure of “niche” retailing, service and particularly sales facilities, have been upgraded to mirror customer experience in other retail environments. Customer handling has been greatly improved, but all these changes represent a minor revolution for the industry, major structural changes have not yet taken place.
Branding, increasing competition has intensified the importance of brand identity. The strongest car brand names have major impact on the financial performance of their dealers.
The big competition is yet to come, The European Commission has adopted new rules covering the way cars are sold and repaired across the EU. The new rules, which should narrow the gap in pre-tax prices paid for cars by consumers, have angered both the automotive industry and politicians. Consumer groups, however, are backing the change - as is the new generation of car supermarkets and online car dealers. The new rules will replace the current "block exemption on motor vehicle distribution and servicing agreements" which has protected the automotive industry from free market competition for two decades. The exemption agreements will expire on 30 September this year, though carmakers will not have to comply fully with the new rules for another year.
Consumer groups have long argued that the car industry's exemption from European competition law has allowed a rigid network of national or regional dealers, selected by car manufacturers, to flourish. This has robbed consumers of choice and restricted competition in the supply of new cars and after sale services, according to the independent motor industry analysts MFBI.
British car buyers have been
particularly hard hit.
During the summer of 2001, the pre-tax price of a Fiat Marea, for example, was £9,197 in the UK compared with £5,752 in Greece and £5,583 in Denmark, the European Commission said.
Empowering consumers, Momentum for change has been building for years. When, in May 2000, Mario Monti entered the podium at the Forum Europe Conference in Brussels, his message to the car industry was clear. "It should be the consumer who is in the driving seat," "Most motor vehicles are distributed in the same way, via exclusive and selective dealers who are subject to the same types of restrictions." One restriction has been the assumption that car dealers must also provide after-sales services. "In competition jargon, this is tying, which is normally considered a serious restriction on competition," Under the new rules, carmakers will no longer be allowed to demand that an authorised mechanic also sells new cars, and manufacturers will not be allowed to limit the number of, or decide on the location of, any authorised repairers. Independent garages will be given better and fairer access to technical information, training, tools, repair shop equipment and original spare parts.
Consumers will be given greater
freedoms to chose between original parts and parts made by independent
specialists.
New dealers, Under the new regime, dealers will: Have to choose between two distribution methods:
Selective, where they may sell actively to consumers in any location and in any EU country, but not to independent resellers.
Exclusive, where they are still allocated exclusive distribution areas, though they will also be free to sell to independent resellers and to customers from outside the area who contact them directly be allowed to exhibit cars of different brands in the same showroom but in separate sales areas
Carmakers will retain their right to select dealers and to protect their brand image.
In the Belgian city of Antwerp, the car dealer Autos Cardoen has started selling cars at a 25% discount to shoppers at the Colruyt supermarket in anticipation of the lifting of the block exemption.
Online car dealers are also gearing up ahead of the market changes. Consumers will no longer "have to flog around lots of different dealers to be able to do their searching, (“so we believe there is greater choice", said online car dealer jamjar.com's Justin Skinner.)
Pleased consumers, consumer groups have welcomed Mr Monti's intervention. Indeed, one of the reasons why he took action in the first place was a pile of 20,000 protest notes signed by UK consumers and sent to him by the British Consumers' Association. Two years ago, the European Commission found that British drivers paid on average 10% too much for their cars. Prices in the UK have fallen about 5-10% over the last year, after the government ordered the industry to stop "ripping off" consumers. Even so, cars still cost more in the UK than elsewhere in the EU. With the new rules coming in to effect and technological advancement has brought fierce competition among car sellers in attracting customers by providing them with best possible value for their money.
This has definitely pleased customers as they are able to get best of the technological advancements and more flexible financial options, but in the view of competition commission’s report the customers are actually now waiting for the car prices to fall. This had a bad impact on the sell as the annual sell of cars has fallen by over 2% in a year (1997 to 1998).
Addressing the key issues, surviving in fierce competition, providing better value for money with more flexible financial plans, fashionable cars, more customized choices for different age group of buyers.
PESTEL Analysis, Porter’s Five Forces Analysis. Etc.
There can’t be a single tool that can be used to analyse the full spectrum of the environment of an organization in which it performs, a proper balance of tools can be used to analyse its environment. Environmental influences and trends can be thought of as being in layers around an organization. The most general layer is the macro-environment where an understanding of political, economical, social, technological, environmental and legal (PESTEL) can provide an overall picture of the variety of forces at work around the organization.
It is very important that an organization considers its environment before beginning the marketing process. In fact, environmental analysis should be continuous and feed all aspects of planning. The organization's marketing environment is made up from:
1. The internal environment e.g. staff (or internal customers), office technology, wages and finance, etc.
2. The microenvironment e.g. our external customers, agents and distributors, suppliers, our competitors, etc.
3. The macro-environment e.g. Political (and legal) forces, Economic forces, sociocultural forces, and Technological forces. These are known as PEST factors.
Political Factors
The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. One must consider issues such as:
How stable is the political environment? Will government policy influence laws that regulate or tax your business? What is the government's position on marketing ethics? What is the government's policy on the economy?
Economic Factors
Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at: Interest rates, the level of inflation Employment level per capita, and Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on.
Sociocultural Factors
The social and cultural influences on business vary from country to country, region to region. It is very important that such factors are considered. Factors include:
What are attitudes to foreign products and services? Does language impact upon the diffusion of products onto markets? How much time do consumers have for leisure? What are the roles of men and women within society? How long are the population living? Are the older generations wealthy?
Technological Factors
Technology is vital for competitive advantage, and is a major driver of globalisation. Consider the following points:
Does technology allow for products and services to be made more cheaply and to a better standard of quality? Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc? How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc? The answer to these questions is yes.
Analysing the environment - Five Forces Analysis
Five forces analysis helps the marketer to contrast a competitive environment. It has similarities with other tools for environmental audit, such as PEST analysis, five forces looks at five key areas namely the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry.
The threat of entry.
Threat of entry depends on the extent to which there are barriers to entry. This depends on various factors such as cost of entry in to the market, knowledge of the market etc.
The power of buyers
This depends on the buyers, if the buyer has only been using a particular supplier, makes the supplier reliant on the buyer.
The power of suppliers
This is exactly opposite, as
being relent on a supplier also gives him the power over the buyer.
The threat of substitutes
Substitution reduces demand for a particular ‘class’ of products as customer’s switch to the alternatives.
Competitive Rivalry
This is most likely to be high where entry is likely; there is the threat of substitute products, and suppliers and buyers in the market attempt to control. This is why it is always seen in the center of the diagram.
Keeping in mind all these issues, my recommended strategy would be developing short-term customer service and marketing strategies with long term focus, this will save the cost of frequent changes of strategy, as a few tweaks in the strategy once in a while will take it for a long time. But what we don’t want is a paradigm.
Providing Branded Customer Service- this means developing a range of customer service and brand it, this will develop customer confidence and hence attract them.
Customized, Flexible Financial Package for Different Age Groups- if a customized financial package can be developed keeping in mind the different age groups and their requirements. For example a young person will want a more stylish and technologically advanced car under low price with lower monthly instalments, in fact the tactics could be to give them the idea of how much they will be paying each month than to tell them the total amount payable at the end.
Providing Free Check Servicing At An Regular Interval.
Simplify The Buying Process-
give the customers what they want; formulation of different strategies to
customize the need of different types of cutomers from different backgrounds can
be helpful. Providing them with a comparison table can also work for
immediate decision making. Give them what they need, don’t over load them
with information’s”
Be More Accessible- wide spread interconnected service centres.
Use of IT- internet technology can be used to collect different data’s about the customers buying habit in order to formulate more personalised strategies.
The approach being “if you can’t beat them, join them- then beat them.