Audi Small Car in Australia - Opportunities and Threats - Case Study Example

Audi Small Car in Australia Name Institution Date Audi Small Car in Australia Introduction Marketing in every business is the key to success of the business product. It is through marketing that the products can be made known in the market. It is also through marketing that the performance of the product can be assessed and reviewed so as to find out the best way forward for the product. While carrying out the review, the appropriateness of the product has to be analyzed for a particular target segment. The review is used to investigate how the product can be made to perform better by reviewing some of the market-related issues that shall be identified. This paper shall assess the appropriateness of the Audi Small Car in Australia. The focus of the report will be on the small car category; or the super-mini segment which has become a wide market segment in recent times. Background The Audi brand organization operates in the auto motive industry, mainly manufacturing cars. The company carries out the design, engineering, manufacturing and distribution of automobiles and motorcycles. It supplies automobiles that are technologically advanced and innovative. In addition to that, the company’s aim is to generate the delight of customers in a number of other ways. One of the ways is to produce the small car category. The Audi Small car category was invented in the year 1996 owing to the desire by Australians to move away from large cars and have small ones. The types of cars that are manufactured include motor sport cars and other sports utility vehicles. Among the iconic German car makers, the Audi was the first company to scale down the size of their cars to small cars that are relatively affordable and comfortable. The Audi has a variety of models that form the range of small cars. The models are grouped in alphanumeric models like from A1 to A8, Q series, R series among other models. The super-mini small car category of vehicles is fast growing and has become a wide market category. This category has also been identified as the specialty goods category and it commands high loyalty from its customers. The customers are willing to pay premium prices for the brand that they prefer. It is for this reason that the Audi Small car category was developed so as to suit the needs of Australians who preferred small cars to the larger ones. While their preference was on small cars, they did not compromise their desire for comfort. The Audi small car category of vehicles has fierce competition from other automobile manufacturers like the Mercedes, BMW and Opel. Audi has been the leading manufacturer of small and luxurious cars. However, as noted in an online article by ET (2013), the competition for small and luxurious cars is getting stiffer with the other automobile players working to manufacture small cars. For instance, the Mercedes is working on the A class of vehicles while the Volvo has been working on the V40 model that will work to counter the Audi small cars like the A3. This competition has become stiffer because the current market in Australia has set its preference to the luxury hatchback. Opportunities and threats The development of the small car category by Audi has had a lot of opportunities. This was presented by the need by some residents in Australia to have small cars that are not only affordable but those that suit their lifestyle too. These are the people who wanted small cars that were not just cheap. They had other considerations that included fuel efficiency, low carbon impact and low tax. In addition, they had the belief that the large car was just an extravagance that was not necessary in the city. This group of people considered the small car as befitting of their emotional and rational needs better than how the large prestigious car would do. This drive by the group of people presented an opportunity for the Audi small car category to be accepted widely in the market. It also presented an opportunity for the company to develop the small car and upon monitoring its performance in the market, the company developed more small cars that made it rank as the leading small car manufacturer (ET, 2013). In addition, the company had the opportunity to develop small and luxurious cars in a market that had a different perception about prestige. The challenge was to convince the market that small could also be luxurious and it could also meet their personal demands in terms of luxury and class. This was a great opportunity for the company to utilize and manufacture small cars that would suit the new and upcoming demand for small vehicles. Along with that, newer markets away from Australia include China and India. For instance, the projected sales in India are stated to be above $40 billion by 2015. In China, the sales are expected to be above 250,000 million vehicles within the same period of time (Marketingteacher, 2013). More opportunities are presented to the company by its drive towards innovativeness and the global shift towards greener cars like the hybrid electric vehicles. The main challenge that the company faced was the stiff competition from the larger and more prestigious vehicles from other car manufacturers like BMW and Mercedes. The challenge was to develop a product that would be appealing to consumers and convince them to change their perception on prestigious vehicles. In addition, the company faces threats from regulations on safety and emissions. Trading in the global market has also presented the threat of fluctuations in the price of commodities hence keeping costs steady is a threat. Market segmentation and marketing strategy Market segmentation is a widely known tool for enhancing customer satisfaction. According to Epetimehin (2011), it involves grouping of similar needs of customers and their purchasing behaviors in segments. Each of the segments has to be reached using a unique marketing programme. The concept of market segmentation is obtained from the economic pricing theory that states that maximum profits can be obtained when the prices that discriminate particular segments are set. Therefore, it is vital that a segment is identified and the prices for the segment set. Competition for the small cars in Australia has become stiff. To attain a competitive advantage in such a business, Hunt and Arnett (2004) stated that market segmentation has been one of the marketing concepts that have been widely accepted. The fundamental thesis behind the concept is that competitive advantage and subsequent superior financial performance can be attained through identification of demand segments, targeting the specific segments and developing certain marketing mixes for each of the market segment that has been targeted. This implies that the Audi small car has to undertake market segmentation for it to attain a competitive advantage in the market. One segment that has been targeted by the Audi small car is the class of compact sedans. To enhance the performance of the small car products in the market segment, the company used two divergent approaches. One of this is that the small car had to be used in redefining prestige so as to suit the Audi. For instance, during the launch of the A1, the strategy was that “A1 must help redefine prestige for Audi. Audi must not be redefined by the A1.” Through this strategy, the product was used to create a new meaning of prestige that would suit the Audi. Another strategy that is used by the organization is the European marketing strategy where the strategy is to substantiate the price premium. The concept used was that the small car is good because it was an Audi. This concept implied that the car would automatically be considered to be good because it was an Audi (Audi, 2013).This was the differentiated marketing strategy because the company targeted to create small cars that would be appealing to not just a specific people but to a group of people who would want to try out a new sense of prestige. The characteristics, needs and buying behaviors of this market segment are as follows: Geographic segmentation has been used by the Audi to determine the type of cars for specific places. For instance, the push by Australians to have smaller cars has been the reason behind the development of Audi small cars in Australia. Small Audi cars are also used in Europe as compared to Canada. The segment is also used in selecting the best cars for rural and urban areas. For instance, the Audi A3 is more likely to be used in rural areas than the Audi A7. Demographic segmentation is also used in determining the target age for cars. The small Audi A7 is flashy and more likely to be used by young people in their twenties or thirties as compared to those in the seventies. The income of individuals is also used in selecting the segment since the young people who are only beginning to get an income will have a different ability to purchase as compared to those already working with higher incomes. Psychographic segmentation has been used in determining the class, lifestyle and personality characteristics of buyers. The Audi is a luxury brand and therefore aims for the middle class and upper class in the social class. The lifestyle of people who would like to have small cars that are flashy would also draw them to the Audi. Behavioral segmentation has also been used by the Audi in determining how the behaviors of buyers would influence their purchases of the Audi vehicles in Australia. The targeted customers by the Audi are loyal customers who know about the brand. Therefore, they are more likely to purchase again. Specific offer To better increase the value offered to customers, the orientation of most firms has shifted to function rather than product. The product/service offer has been used by companies to meet the needs of customers more than just providing the physical product itself (Isaksson et al, 2008). The product service offer is aimed at providing a mix of products and services and not just focused on the traditional provision of products. This was done due to the recognition that when combined with products, services provide more profits. The Audi small car provides servicing offers to the clients so that their experience with Audi does not end when they exit the dealership. They also provide comprehensive plans for vehicle protection as well as restricted warranty coverage so as to exceed the expectations of the clients. The company provides a prepaid scheduled maintenance plan that would give the user peace of mind. This is termed as the Audi Care and Audi Care Plus (MyAudit, 2013). An analysis of the product life cycle would reveal the current state of the company. The product life cycle refers to an analysis attempted at identifying common stages during the life of a product so as to map the product’s lifespan. It is a tool that is used to analyze the demand of the product at the industry level (Volpato and Stochetti, 2008). These include four stages that are the introduction stage, growth stage, maturity and decline stage. The Audi small car is at the growth stage because it is still undergoing a lot of development with more and more features being developed so as to effectively redefine prestige. The company is analyzing the needs of customers in Australia so as to develop more prestigious products for them. To better perform in the market, the products should shift to the maturity stage where the product is accepted by people without too much extra effort by the company in marketing. This can be achieved once the brand of the company has been effectively sold out. Branding refers to the process of creating an exceptional name and image of the product to the minds of the consumers (Shahri, 2011).Branding is important for the Audi customers because it is a source of promise to them that Audi is the only promise to their demands of prestigious small cars. The branding experience that is used by the Audi small car is defining innovation through mobility solutions and innovative vehicles. In addition, the company also develops a corporate self-perception including social and ecological aspects. Through this, they target to live responsibility and this makes the company an outstanding brand. It is also vital to note that the company seeks to use the products to define the aim of the brand. For instance, the Audi A1 was used to redefine prestige. By doing this, the company provides the brand values of sportiness, sophistication and progressiveness. Audi’s pricing strategy Pricing is done by companies to determine what the company will get in exchange for the product it offers. In an article by Tellis (1986), it was stated that a pricing strategy is used in making a reasoned choice based on a set of price alternatives with the aim of maximizing profits within a planned period of time. To obtain the best pricing strategy for the organization, the pricing objective of the firm will be the key guideline to the best strategy. The Audi Small car is governed by the corporate objective of qualitative growth. It is through this objective that the company pursues efficiency in structures and processes along with a systematic investment in management so that costs are optimized. The Audi small uses the competitive pricing strategy where the prices of the products are set so as to exploit the competitive position of the product in the market. In addition, the company also considers the product line pricing strategy. Through this strategy, the company’s brands that are related get sold at prices that will exploit the mutual dependencies of the products. The company uses a top down or a bottom up approach in establishing its luxury brands. Through this, the company uses the halo model to build a demand that is inspirational for its potential customers. The importance of pricing for the company is seen in the way it helps in marketing the product. The price has to be determined correctly since it affects the performance of the product in the market as well as affecting the profits attained by the company. This is because the decision of the buyer is influenced by the price they see. The demand for a product can be increased or reduced through the price. While setting their prices, the company has considered factors such as product acceptability. In Australia, people want a product that is small because they believe it will be cheaper. Other than that, they want a prestigious product. Therefore, the company considers the fact that it has to provide a better offering for a product more than just the numbers. This is because the company represents aspiration and class. Distribution strategy The distribution strategy of the company is used in creating a plan that will be used in specifying how the company management plans to transfer its products to the market. It is the method that the company uses to its product to the end users. Understanding the place for the company is important because it enables the company to understand how it will reach its target market, how it will warehouse the stock and how it will transport the stock. The Audi group uses an indirect strategy where it uses dealers and service outlets worldwide to distribute its products to the market. In fact, the company intends to expand its deliveries to 2.0 million Audi vehicles by the year 2020. To achieve this, the company intends to increase the number of dealers and service outlets across the word so as to increase the market share of the Audi small car across the world. Since the production network of the company is also expanding, the company is expanding its distribution channels so as to reach as many people as possible. The company uses the horizontal network approach because it provides an opportunity for the market to understand the product better from the dealers through references made to them by the loyal customers. In addition, the dealers help the company in marketing of the product hence the company product can be known to a wider extent. Upon repositioning of the offer, the indirect distribution will still be the best option because it offers reduced overall costs in marketing and provides a wider channel of accessing the products (Audi, 2013). Promotion Promotion is considered to be the way in which the company spreads word about its product. Smith and Schultz (2004) stated that promotion is the way in which extra ways are used by the company to promote the sales of the product. It involves use of motivational tactics that are strategic so as to promote a predetermined action by the end users. This requires that the organization develops a marketing communication strategy that will enable the product to be identified and accepted in the market. This marketing communication strategy enables the company to develop awareness of the brand. Through this, the consumers of the product will be able to translate the information of the Audi product into perceptions on the attributes of the product and the position of the product in the larger market. In essence, the marketing communication strategy defines the business plan of the company in terms of the disseminating product information and development of the brand awareness. The promotional objective set by the Audi is to sprint to the number one luxurious vehicles class. The company is set to be the number one provider of prestigious vehicles and it sets to achieve this along with favorable prices for the consumers as well as assured comfort. It therefore intends to ensure the Audi Small car is widely known among the Australian people so that they can identify with the Audi brand in the automobile industry. Various promotional tools can be used in promoting of products. The Audi Small car brand uses some of the promotion tools. One of the tools used is the digital technology. The internet has been widely used by the Audi in promoting its products. Along with that, Audi small has developed a free iPhone game known as the A4 driving challenge. This is because the company recognized the wide use of the iPhone by the rich. Therefore, the game is used in promoting the features of the Audi and this enhances information about the product. In addition, the company has used public events in promoting the Audi products. One such event was used during the launch of the Audi A3 in 2005 through a Heist Campaign. Public relation tools like press releases and press conferences have also been used by the Audi small in promoting its products. The promotional tools have been successful in making known the product to the people and are therefore effective in communicating to the target people. This is because the selection of the tools is based on the best way to reach the people. Conclusion The analysis of the Audi small car reveals that the small car has been targeted to the people who are out to get luxurious vehicles that are cheap, small and comfortable. It is for this reason that the Audi has targeted to redefine prestige through their Audi products. The tactics used by the company in reaching to the customers through the dealers is effective because it reaches a wider range of people. In addition, the offers made by the company in terms of product/ service offers attract them back and makes the customers loyal. Promotion of the product has been done through use of digital technology and since the company is out to be leading in innovation, it uses the technology in reaching out to a wider range of people. Therefore, the Audi small car is appropriate for the targeted market segment. 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Volpato, G. & Stocchetti, A. 2008, Managing Product Life-Cycle in the Auto Industry: Evaluating Carmakers Effectiveness, 16th Gerpisa International Colloquium, Italy. Read More