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Marketing Analysis of The Ford Motor Company and the UK Motor Vehicle Industry
This report aims to provide analysis of the marketing environment of the UK motor vehicle industry. Ford's marketing response to this environment is discussed. The second part of the report aims to segment the market, primarily using benefit segmentation. Finally, Ford's brand is analysed, using BMW as a comparison.
The brand leaders in the motor vehicle industry are:
The main additional brands are Volvo, Citroen, Mazda, BMW, Nissan, Land Rover, Audi and Skoda (Competition Commission, 2000).
The PEST model is used to analyse recent developments in the UK motor vehicle industry environment. PEST is a method of analysing the macroenvironment in four distinct categories; political, economic, social and technological.
In April 2002 there was a fundamental change in the way company cars are taxed to help protect the environment. Linking the tax charge to the car's exhaust emissions rewards cleaner, more fuel-efficient cars. This is in contrast to the previous tax breaks for large amounts of mileage in a company car. This has led to consumers who are buying a car largely for business-use to consider the tax liable as an additional criterion. The policy change was as a result of an increasing interest in environmental issues.
Recently the internet has become the facilitator of change in auto retailing. The increasing popularity of internet buying and selling is due to the perceived benefits of convenience and time saving. Waldron (1998), cited in Hoofer & Urban (1999), has estimated that 300,000 new and used vehicle sales were "transacted" on the Internet in 1997. In addition J.D. Power and Associates, Inc. reported that 16% of new car buyers used the web for shopping in 1997, up from 10% the pervious year (Armstrong and Kerwin, 1998).
Women now buy more than forty per cent of cars in the UK, and have a major say in the decision making process of many more vehicles (Auto Industry Statistics, 2001). A report in the publication Motor Industry Management, says that women are better at shopping and tend to be much more aware of prices - as well as being more capable of identifying best buys. Land Rover has introduced a 'Women's Panel' into the development process, to ensure the views of female customers are being fully considered at every stage of development (Car Pages, 2005).
Safety has been a major focus of technological advances in the motor vehicle industry. A number of vehicles come with front and rear sensing technology. This technology alerts drivers to solid that are located anywhere near the vehicle's bumpers. Adaptive headlights, integrated with the vehicle's speed and the steering system, aid night driving by adjusting to changing conditions. Automatic sensor window wipers work in a similar way.
Ford has responded to these changes in its macroenvironment by adapting its marketing to suit specific trends identified.
Ford forged a partnership with Breakthrough Breast Cancer in 1999 and through a variety of campaigns and initiatives under the 'Drive Towards a Cure' banner, has raised money for the charity (Ford, 2005). This campaign clearly targets the increasing number of female car buyers.
Ford has also responded to the increasing number of women drivers by developing an innovative marketing campaign. In 2004 Ford commissioned British novelist Carole Matthews to include a Ford Fiesta in her book - The Sweetest Taboo (BBC News, 2004).
On their website Ford boast about the programs they have developed to address environmental issues. These include complete vehicle recycling a program, encompassing design-for-recycling guidelines, increased use of recycled material, and reducing hazardous materials. Ford is also at the forefront of alternative fuel vehicle research and technology and market vehicles that run on a wider range of alternative fuels than any other manufacturer. These include Compressed Natural Gas, Liquefied Petroleum Gas, methanol, ethanol and electricity (Ford, 2005). Ford uses its website to convey this information to the public. It does not specifically mention these details in any of its print adverts or television adverts. People who would be attracted to Ford because of its environmental policies would be most likely to look these issues up, and the internet is increasingly becoming the place to do this.
The Intelligent Protection System fitted to the new Ford Focus provides an example of Ford's response to the social changes outlined above. A network of sensors feeds impact information to a processor that selects and activates the appropriate safety devices (Ford, 2005). Ford incorporates this safety feature into its car adverts by using the tag line 'one of the safest places to be'.
Jobber (2001) defines market segmentation as 'the identification of individuals or organisations with similar characteristics that have significant implications for the determination of marketing strategy.' Segmentation is therefore at the heart of strategic marketing since it forms the basis by which marketers understand their markets and develop strategies for serving their chosen customers better than competition.
Benefit segmentation is an essential method of segmentation because the whole purpose of marketing is to offer consumers the benefits they value. Benefit segmentation criteria can be applied when people in a market seek different benefits from a product. In the motor vehicle industry this is particularly true.
Evidence of the differing benefits derived by different car owners is provided in a study by Sampson (cited in Jobber, 2000, p189). 'Based upon psychological research across Europe, Sampson has shown how the benefits sought from a car can predict car and motor accessory/consumables buying;
- Pleasure seekers: driving is all about pleasure (freedom, enjoyment and well-being).
- Image seekers: driving is all about image. The car provides feelings of power, prestige, status and self-enhancement. Driving is important too, but secondary.
- Functionality seekers: driving is only a means of getting from A to B. They enjoy the convenience afforded by the car rather than the act of driving.'
Evans (cited in Engel et al, 1995) attempted to predict automobile brand ownership by personality. He used twelve objective variables in his study, including age of car, income and other demographics. He was attempting to test the assumption that 'automobile buyers differ in personality structure'.
Although Evans was successfully able to predict a Chevrolet or Ford owner on 70% of cases, he concluded that, 'personality is of relatively little value in predicting automobile brand ownership.' Engel et al (1995) explain that this is due to the fact that personality is only one of the many variables used in the process of consumer decision-making. Pleasure seekers are likely to have an outgoing and lively personality.
The pleasure-seeking consumer is targeted by BMW with the repeated use of the slogan, 'the ultimate driving machine'. A recent advertisement campaign even states 'driving first, BMW always puts', clearly attempting to appeal to pleasure seekers.
The image seeker is most likely to buy their car at or just after a new plate change. This is because they enjoy the prestige associated with owning a brand new car.
Most studies on the subject show that country-of-origin stereotypes have some impact on product evaluations and purchase decisions (Haubl, 1996). Crissy and Cunningham (1972) conducted a study in the US car market to determine if the origin of a car affected buyer behaviour. They found out that foreign compact car owners were of a higher social class and were in the earlier stages of the family lifecycle than those who owned American compact cars. Image seekers are more likely to buy cars that are originate from Germany, such as BMW.
Geographical variables can be used to describe the image seeker profile. Those in the South of the UK are more likely to be image seekers as they have more disposable income.
Lifecycle is probably the most useful demographic variable on which to base a profile. Many vehicle manufacturers offer a product range with models that cater for the needs of all phases of a customer's life cycle. Peugeot offer the 107 as a first car for early teens. The 206 is offered as a fun car for young professionals. The 307 is offered as a car suitable for young families.
The people who are profiled as being functionality seekers are more likely to be young and female. They are interested in a car's capacity to transport children and/or shopping. They may also be interested in the cost of ownership of the car.
Brand equity research is an attempt to put a value on the strength of a brand in the market. This refers to the extent to which a consumer holds strong, positive, and unique associations with a brand in memory (Keller, 2000, p67). Brand equity is formed of brand awareness, perceived quality, brand associations and brand loyalty (Aaker & Joachimstahaler, 2000, p87).
Ford is the leading brand in the British motor vehicle industry. The British Brands Group (2001) calculates that Ford's brand equity, as a percentage of market capacity, is 66%.
The author has calculated this figure thus:
The British Brands Group (2001) calculates that Ford's brand value is $30bn. What Ford's brand offers its customers is to reduce the risk of buying a car. Ford's brand has a long-standing history. Ford has been trading for 102 years. It is a trusted brand, which has reliable and safe associations. The Ford brand enables consumers to try a new model of car, for example the new Focus, whilst knowing that it will have similar attributes to other Ford models the customer already knows.
Both Ford and BMW are strong brands, however Ford is the most well known of the two. Ford is most likely to be a 'first mentioned brand' - Ford comes up spontaneously when people are asked to think of a car brand. In contrast, BMW is most often part of the consideration set, so is less well known.
The BMW brand personality is based on four core values: quality, technology, performance and exclusivity. Ford's brand personality is based on the more value for money and build quality values. Where BMW's brand personality is sophistication, Ford's is accessible.
Ford has a good product so it could be asked 'why does it need to spend money on advertising and promotion?' Ford's marketers intend to inform and persuade people to buy Ford's products. Advertising and promotion is necessary to differentiate Ford's offerings from their competition.
The UK motor vehicle industry is a market that, more than many others, is characterised by change and innovation. Social factors mean that what is required in a car product changes over time and Ford's advertising and promotion demonstrate how Ford meets these changing needs.
The potential for internet marketing is huge. Kavanagh (1999, p53) suggests that internet marketing can save twenty percent of marketing costs.
Ford's website shows off its vehicle collection in a lively and interesting manner. The car configurator feature allows a customer to see the finished car with all their chosen options. This is positive in allowing the customer to research and plan their car purchase.
Ford also provides all kinds of information about itself, its history, its environmental initiatives and sponsorships. It provides information on current promotions.
The site is well thought out and useful to the consumer. The only recommendation from the author for improvements to the site is to include more high tech methods of demonstrating the vehicles. Customers should be able to zoom in and out of various parts of the cars. This feature would both convey the high technical ability of Ford and allow customers to find out more specific details about the cars.
It can be seen that the UK motor industry is a useful case study when studying the marketing environment. It is a unique market that relies heavily on marketing activity. Ford is a powerful brand and it is therefore excellent for analysis.
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