Differentiation and Communications Strategies: Mercedes Benz AG Case - Essay Example

? Differentiation and Communication Strategies I. Introduction This report is a detailed analysis of the marketing communication strategies of Mercedes Benz AG. Mercedes Benz AG is one of the leading luxury car brands in the world. From being the pioneer in the automotive industry, the company has many innovations to its credit. The immense recognition of the Mercedes Brand is the result of revolutionising innovations and clearly focussed branding strategies. But the recent setbacks in the market share of the company shows that Mercedes Benz will have to rethink about many of its existing strategies. The rival companies BMW and Audi are selling more cars per year than Mercedes Benz. The recent sales reports of Audi show that it will soon overtake Mercedes-Benz as the world’s number two premium brand. Thus, the once number one brand is expected to be pushed to the third position. (MSN, 2011) The present marketing strategies of the company will have to be analysed in the light of existing competitive environment in the industry. There are various factors that affected the market share of Mercedes Benz. It includes factors like design, price, power, and various other consumer specific factors. This report will primarily deal with the role of marketing and communication strategies of Mercedes Benz. Mercedes Benz has always been very keen on introducing newer varieties of promotional methods for challenging the tough market conditions. The current marketing strategies cannot be concluded as a failure for the brand. To a major extend, it can be considered as a success as the sales have considerably increased. But the marketing and communication strategies of rival brands make it imperative for Mercedes Benz to analyse its current strategy. This report will make a detailed analysis of the existing marketing strategies of the company and will suggest the changes if any should be made on the same. II. Strategy Review II.I SWOT Analysis Strength: The greatest strength of Mercedes Benz is its brand name. The company is a renowned luxury car brand with its market spread across most countries. A Mercedes car is the dream of any aspiring car buyer. The brand value that the company developed over the past 125 years has been a greatest contributor to its success. The second major strength of Mercedes Benz is its strong Research and Development facility. Mercedes has one of the world class R&D facilities and R&D teams among the major automakers. Because of the strong base in R&D, the company is able to introduce world class cars in the market. Mercedes Benz is a pioneer in various technologies in the automobile industry. It was Mercedes Benz that introduced the first internal combustion engine, airbags, 7 speed automatic transmission, electronic stability programme and many other technology that are available on various cars today. Weakness: The main weakness of Mercedes Benz is the comparatively low sales growth in the recent months. The fall in sales of the brand has affected the profitability of the parent company Daimler. “The company said that while all of its divisions had been shipping more vehicles, earnings at its Mercedes-Benz Cars division had been hit by changes in the product mix, higher raw material costs and charges due to upcoming model changes.” (Reed, 2011) The next weakness of Mercedes Benz is the lack of youth oriented design. Compared to the latest BMW and Audi cars, Mercedes Benz’s models are not very appealing to the younger generation. Moreover, they are not very sporty compared to that of BMW and Audi. This is one of the major reasons why BMW or Audi is preferred over Mercedes Benz. Mercedes is also slow on development of new models. Audi and BMW have already launched a sedan that is placed below their A4 and 3 Series models. But Mercedes is still in the development stage of their model on the range. Opportunities: The major opportunity for Mercedes Benz is the highly potential luxury car market. The luxury car market of the world is growing at a tremendous rate keeping apart the temporary setbacks due to recessionary situation. Developing countries are one of the most promising luxury car markets of the world. Though Mercedes Benz has performed less compared to BMW and Audi, individually, the company has recorded huge increase in sales. Mercedes Benz also has the opportunity of the need for technologically advanced products in the market. Mercedes Benz has huge R&D capacity that can be utilized well for meeting the expectations of the customers. Mercedes Benz also has the opportunity to utilize its R&D facility for developing fuel efficient cars. Threats: The primary threat for Mercedes is the stiff competition from rival brands BMW and Audi. Both the companies have individually sold more cars than that of Mercedes in the previous quarter. Competition from Japanese car makers is also a threat for the company. The current economic situation is a major threat for Mercedes. The economic situation has resulted to poor sales in many countries. Stringent emission and fuel efficiency norms are other threats for Mercedes Benz. (Weihrich, 2011) II.I.I Core Competencies As per the above analysis, the core competencies of Mercedes Benz are as follows: 1. Undisputed brand value in the luxury car segment 2. Strong Research & Development facility 3. Holder of patents for almost 80% of technologies in the automobile industry 4. Unmatched luxury and comfort. II.I.II Key Success Factors As per the SWOT analysis and the general industrial overview, the following factors can be considered as the key success factors of luxury car industry. 1. New technology 2. Advanced safety features 3. Brand value 4. Luxury and comfort 5. Consumer satisfaction II.I.III Competitive Advantage The SWOT analysis shows that Mercedes Benz possesses the following competitive advantage in the industry. 1. Engineering excellence 2. Safety features 3. Excellent customer service 4. Heritage of innovations II.II Marketing Communication Strategies Mercedes Benz uses one of the best marketing communication strategies in the industry. Mercedes Benz exercises extreme control over the marketing activities even at the dealer level. The company intends to maintain uniformity of marketing activities all throughout in a particular region. “Daimler AG have chosen BrandMaster as their global supplier dealer marketing solutions, currently rolled out in 15 Mercedes-Benz markets comprising some 70% of all worldwide Mercedes-Benz Passenger Cars point of sales.” (Brandmaster, 2011) This strategy is adopted in order to ensure consistency in the marketing activities in a particular market. Brandmaster will be the single point of contact for the marketing activities of dealers and suppliers in the region to which Brandmaster is authorized. The online portal Mercedes Benz TV is a good platform for the company to build brand relationship with the customers. Through the portal, Mercedes Benz is presenting a lot of information about its cars. The portal is mainly focussed on ‘behind the scenes’ approach. It contains the videos of almost all the present models of the company. All videos provide required information to the customers about the car models. Another notable move from Mercedes Benz is the change in the approach of its US marketing approach. The later part of 2010 witnessed Mercedes Benz focussing more on safety of the cars over luxury or efficiency. Through this strategy, Mercedes was just utilizing the change in the mind-set of potential customers. Mercedes realized that the financial crisis has led to change in priorities of the customers. Value for money is given priority over luxury features. The advertisements of newly launched E-Class have seen more focus on the safety features of the car than that of luxury. (Andrew, 2010) Mercedes Benz have spent huge amount on its recent marketing campaign as part of its 125th anniversary. The company introduced a new mantra ‘The Best or Nothing.’ Most of the marketing communication exercises by the company were focused on this core message. “As part of its global marketing strategy, Mercedes is always concerned with five areas: fashion, corporate social responsibility, golf, motorsports, and heritage.” (Fangfang, 2011) Mercedes is focusing on these core areas in order to give a varied dynamics to the brand. Fashion has been a focus area of Mercedes Benz for more than 10 years now. Mercedes is also partnering with major events of all the markets either to change the brand perception or to improve the brand visibility. Mercedes Benz is using social media effectively to reach to more customers, especially the youth. Facebook is the major social media used by Mercedes Benz to reach to the customers. II.II.I Competitors’ positioning The main direct competitors of Mercedes Benz are Audi and BMW. Both the companies have adopted different positioning strategies compared to Mercedes Benz. All the big three have recently made a makeover in their positioning strategy. Audi’s design and marketing philosophy is focused on positioning the products as sporty vehicles. All the new launches of the company are models with sporty features in terms of design as well as under the hood. Even then Audi gives due importance to luxury and technology. It is evident from the recent sales and growth figures of the company that the positioning strategy worked well for them. Audi ties up with celebrities of various countries for promoting their brands. The celebrities are mostly film stars of the respective countries. Therefore, Audi has positioned them as a brand meant for young. BMW is as aggressive as Audi when it comes to brand positioning. BMW’s core philosophy in the recent positioning strategy is ‘Joy’, the joy that comes with owning and driving BMW cars. (David, 2011) For years BMW was focussed on power and performance. BMW is trying to link emotions to the brand. The marketing team states that being able to establish emotional contact with the customers is the best strategy for success and sustainability. But BMW has not yet given away its message of power and performance. The only difference is that focus is given on joy while retaining the message of ultimate driving machine. “The company went back to and refreshed the "joy" concept partly because they wanted to say something positive amid the global economic crisis.” (Yang, 2010) II.III Marketing Mix Product: The product range of Mercedes Benz includes Sedans, Coupes, SUVs, Roadsters, Convertibles, Super Cars, Crossovers, Hatchbacks and Wagons. The flagship products of Mercedes Benz are its sedans. Mercedes Benz has products in almost all range for competing effectively with their core competitors. Mercedes has the most advantage on its sedan segments. The sedans from Mercedes’ stable are C Class, E Class, S Class and CLS Class though the company had placed CLS as a four door coupe instead of sedan. Mercedes’ flagship sedan S Class and the entry level sedan C Class are still the best selling models in their respective segments. In fact, the higher sales of Mercedes Benz S Class in developing countries have helped to boost the overall profitability of the company. (Reiter, 2011) Audi and BMW were not able to surpass Mercedes’ sales in these segments. Though the company has edge over their sedan segments, its SUV range has lost over the new and better models from Audi and BMW. Refer Appendix 1 for the comparison of competitive model ranges of Mercedes, Audi and BMW. The comparison included only the segments that generate maximum volumes. Price: Mercedes Benz had adopted a huge scale of discounting strategy in the recent months to drive sales in the economically distressed situation. Except for these event driven discounts, the products of Mercedes Benz are mostly priced at the upper band of the segment price range. This higher price tag had recently worked against the company’s strategy of market leadership. The aggressive pricing strategy of BMW and Audi has led to the failure of the Mercedes’ pricing. A comparative analysis of the prices of all the three companies show that Mercedes’ models starts at a higher price tag than that of Audi or BMW. This is leading to more customers settling down for less pricier rivals. Refer Appendix 2 for a comparison of prices of the Sedans and an SUV range of all the three companies. Place: Place mainly refers to the distribution strategy of a company. Mercedes Benz, being a first mover on various fronts has many advantages in terms of distribution. The company has wide network of distribution in most countries. Mercedes has almost equal number of distribution chain in the developed markets where all three brands were established for years. But Mercedes experienced major setbacks in the developing countries which are their growth engines. Mercedes was the first mover in most of the developing nations like India, China Brazil, etc. They ruled the market for years before the entry of Audi and BMW in those markets. Mercedes only had their dealer networks in major cities of these countries. But Audi and BMW were aggressively expanding to Tier II cities as well ever since their entry. This weakened the distribution network of Mercedes. But recently, Mercedes has again shifted its focus for expanding the dealer and service networks in almost all major markets. Promotion: The promotional activities of Mercedes Benz consist of TV Ads, Internet Ads and Print Media. But Mercedes Benz is now giving increased focus on its internet advertisements in order to reach more customers. Mercedes Benz TV is one important interface that the company is using to maintain frequent interaction with the customers. Social Medias like Facebook is also effectively utilized by the company. Apart from these marketing activities, Mercedes is maintaining owners club and other customer delight programs. This is helping Mercedes to assure a large portion of returning customers. Mercedes’ strong focus on Motor Sports has given them good visibility compared to Audi and BMW. III. Evaluation of the Strategy The previous section of the report has given a clear analysis of various marketing communication aspects of Mercedes Benz. Apart from analysis of the company, a comprehensive analysis of competitor’s strategy was also performed. The marketing communication strategies discussed previously can be evaluated based on the following parameters. 1. Communication objectives 2. Differentiation 3. Message design 4. Communication tools 5. Consistency with other elements Communication objectives: The main objective of the existing communication strategies of Mercedes Benz is to change the existing perception of the brand. The company wanted to reach more customer groups with the focus of placing it as the best luxury brand. But a comparative analysis of the strategies of all the three brands shows that the focus of Mercedes is comparatively weak. ‘The best or nothing’ seems to be a broad idea for many people to digest. BMW was very effective in their ‘Joy’ campaign and so is Audi with their sporty focus. Differentiation: Mercedes was successful in their marketing strategy in terms of differentiation. All the marketing communication activities of the company were successful in portraying an image that is entirely different from that of Audi and BMW. The major differentiation strategy put forward by Mercedes Benz is innovation. Mercedes launched a worldwide brand promotional campaign, ‘125 years of innovation’ as a mark of the 125th anniversary of the company. With this campaign Mercedes was able to re-emphasize its image of innovator in the automobile industry. Message Design: Mercedes use various kinds of advertising media for the promotional activities. In all these areas the message design was effectively delivered in terms of the creation of 125th year campaign. Communication tools: Mercedes was most successful in terms of the usage of communication tools. Mercedes has effectively utilized tools like Facebook for marketing of the products. Internet has been used very strategically by Mercedes Benz in order to reach the intended audience. Mercedes Benz TV was a good interface for potential customers to have hands on information regarding the products of the company. It gives the most updated information to the customers regarding the products and their details. Consistency with other elements: It was seen in the marketing objectives that Mercedes wanted to place the product as the best premium car brand. But the marketing strategy of the company is not properly linked to the other elements mainly the marketing mix. The primary issue is that Mercedes has not completely changed the design philosophy to attract the young customers. Also, the product portfolio of the company has become less competitive compared to that of Audi and BMW. Another aspect is price. The justification of higher price for the products has become weaker when better products were introduced by BMW and Audi at much lower price than that of Mercedes. IV. Conclusion The report gives a comprehensive analysis of the marketing strategies of Mercedes Benz. Mercedes Benz is one of the most reputed luxury car brands in the world. The company has been ruling the segment for several decades until the aggressive strategies of rival brands Audi and BMW. Mercedes is now pulled down to the second position. Analysis says that the company will again be pulled to the third position by the rival brand Audi. What happened to Mercedes was the over reliance on market presence, brand value and experience. The marketing team believed that always brand value will sell the product. But when Audi and BMW utilized this weakness of Mercedes Benz for their strategy, Mercedes could not make a sudden makeover on the brand image. A perception of the brand that is built over for years is difficult to be changed with an immediate campaign. It is a gradual process. Mercedes is currently undergoing this process. It can definitely regain the lost market share if they properly identify the strategic areas that can help the company. V. Recommendations Based on the analysis, Mercedes can adopt the following strategies for revamping its marketing communication and overall brand strategy and regain the lost market share. Synchronize marketing and design philosophies: Mercedes should establish better synchronization of the marketing strategies with that of the product offerings. This will help the customers to better relate the marketing promises with the product. The design strategy should be changed to equip more of sporty features on all product categories. Change the pricing strategy: Currently, Mercedes Benz is the pricier model among all three luxury brands. Instead of justifying the higher price with product features, Mercedes should introduce models at the lower band of the price range giving the customers an option to go for higher end model or the low priced model. Improve the product development time: Mercedes usually takes more time to roll out a model to production. The speed of product development should be improved for launching the products before the competitors or along with the competitors. BMW and Audi have introduced a small sedan and a small SUV and Mercedes is still in the development stage of its products in the range. References MSN, 2011. Audi Set to Overtake Mercedes-Benz as World’s No. 2 Premium Brand. [Online] Available at: [Accessed 10 December 2011] Reed, J., 2011. Daimler Held Back by Mercedes Weakness. [Online] Available at: [Accessed 10 December 2011] Weihrich, H., 2011. Daimler-Benz’s Move towards the Next Century. [Online] Available at: [Accessed 11 December 2011] Brandmaster, 2011. Brandmaster present in 15 global Mercedes-Benz markets. [Online] Available at: [Accessed 11 December 2011] Andrew, C., 2010. Mercedes-Benz changes marketing strategy to improve its U.S. sales. [Online] Available at: [Accessed 12 December 2011] Fangfang, L., 2011. Mercedes marketing: global with Chinese characteristics. [Online] Available at: [Accessed 12 December 2011] Davidid.com, 2011. BMW’s New Brand Positioning. [Online] Available at: [Accessed 13 December 2011] Yang, T., 2010. New branding campaign for BMW. [Online] Available at: [Accessed 13 December 2011] Reiter, C., 2011. Daimler Profit Rises on Mercedes-Benz S-Class Sales in China. [Online] Available at: [Accessed 14 December 2011] Mercedes Benz UK, 2011. Passenger Cars. [Online] Available at: [Accessed 14 December 2011] Audi UK, 2011. Explore Models. [Online] Available at [Accessed 15 December 2011] BMW UK, 2011. [Online] Available at: [Accessed 15 December 2011] Appendix 1. Product Portfolio   Mercedes Audi BMW Sedan C Class A4 3 Series   E Class A6 5 Series   S Class A8 7 Series   CLS Class A7 5 Series Granturismo         Hatchback A Class A1 1 Series   B Class ? ?         SUV M Class Q7 X5   GLK Class Q5 X3   ? Q3 X1         The above table indicates only few of the model range. Only the high volume segments were considered for the analysis. 2. Price Comparison   Mercedes Audi BMW Sedan C Class - From ?25,925.00 A4 - From ?23,625 3 Series - From ?22,695   E Class - From ?29,120.00 A6 - From ?30,145 5 Series - From ?30,030   S Class - From ?60,605.00 A8 - From ?56,010 7 Series - From ?57,420 SUV M Class - From ?42,265.00 Q7 - From ?39,995 X5 - From ?45,055 Only the sedan and SUV range were considered for making the comparison. The price details of models were taken from the UK websites of all the three brands. Read More