The Audi history begins with a man called August Horch, and in 1899, he established the Company HORCH and CO. He invented his first car in 1901. But in 1909 Mr. Horch leaves his company and founded another company called Audi. “Audi ” is the Latin translation for “Horch” and he took that name. In 1910, the brand “AUDI Automobilwerke GmbH” was registered. In 1931, the AUTO UNION was founded some members were DKW, HORCH, WANDERER and AUDI. Moreover, the new companies insignia to show the union of the four companies was the now familiar 4 rings, that what still used by Audi today. After the 2nd world war, there were again many cars produced, the most important for them were the DKW Munga, a four-wheel jeep with 3-cylinder 2-stroke engine. Invented in 1956 for the German military, there have produced 250 cars for testing purposes. And these cars made a trip around the world and drove more than 240 000 km also without major problems. This was the beginning of the later concept called Quattro and it had nearly 57 000 Mungaswere built until 1968. In the following years, they have many different engine- and car types were invented and produced in large amounts. There also improving, rallying and testing the first real ur-quattro with the new coupe body was build in 1980. And the power has been raised to 200hp in the testing time, and most of the other car producer did with a 2.2l engine.
Audi, the core brand that the Audi has been focusing by the Audi Group in adopting its Strategy 2020 on the challenges of the future. The mission ‘We delight customers worldwide’ was explored in greater depth during 2011 where the strategy took on firmer contours. Heightened environmental awareness, growing uncertainty about the future availability of fossil fuels and increasing urbanization are the results of giving more weight to new issues that have emerged.
The Mission of this company is “We delight customers worldwide”. The Audi brand’s products are famous of the brand values sportiness, modernism and sophistication. The brand with the four rings aims to suggest customer delight in many other ways and thus can lead to building technologically advanced vehicles. The mission statement which is “We delight customers worldwide” plays a main role on the path to becoming the leading first-class brand. The Audi brand has well-defined its understanding of customer delight in greater detail in the following four areas of action. That are “We define innovation”, “We create experiences” , “We live responsibility” and “We shape Audi”.
In this company there have three objectives. First is to create impact and drive awareness of Audi Q5 launch. Second is demonstrating Audi’s core value proposition of “Progressive Performance”. And then last is communicate Audi’s prestige offering. Those three objectives is what Audi company execution in this few years. On the other hand, in this few year the Audi Company’s target market are predominantly males between 40-50 years old, married with a household income between $137K – $265K. And women who are a key influencer in the purchase process of the Q5.
Chapter 2: Analysis of Marketing Mix Strategies
2.1 PRODUCT STRATEGIES
2.1.1 Product Classification
Audi car are known as the wants or desires that less frequently bought by the consumer so Audi car is classified as luxury product in the category of consumer product. Consumer product is defined as the products and services bought by final consumers for personal consumption.
Audi car is known as one of the well-known car that less frequently bought by the consumers due to the price is expensive which is within the range of RM 179,900 to RM 1250,000. Therefore, consumers will do a survey and planning before they actually want to buy it. Wisely consumers will collect a lot of information that relevant to Audi and do price comparison with other car in the market with their main competitors which are BMW and Mercedes-Benz.
Furthermore, Audi car is also selling in high price that seldom consumed by the consumers. It is a branded product that having mass advertisement in magazines, television and personal selling by reseller and producer in order to convince consumers to buy it and remind the consumer about their product in the market.
Branding plays an important role in identifying the seller and buyers of Audi. It differentiates them from their competitors. Audi is design with four interlinked rings that represent one of Germany’s oldest automobile manufacturers. The first ring from the left represents Audi, the second represents DKW, third is Horch, and the last ring is Wanderer. Its similarity to the Olympic rings caused the International Olympic Committee to indict Audi in International Trademark Court in 1995. In addition, this is a simple logo and made a lot of people to recognize and remember. With the current type of branding, it had brought the product identification to the consumers with its unique design. This will not only ease the consumers to differentiate their product but also help to segment markets.
In addition, it also symbolized the inseparable unity of the four founder-companies which are Audi, DKW, Horch and Wanderer. Each of the four companies was allocated a specific market segment within their group. DKW was responsibility for motorcycles and small cars. Wanderer built midsize cars and Audi manufactured cars in the sumptuous midsize class. Horch produced deluxe top-of-the-range automobiles. Besides, it provides product quality and consistency as the consumers know that they will get the same benefit, feature and quality each time they bought the Audi product.
Labeling are using in describing several things of the product. Audi car will offer an instruction book for every buyer. This instruction book encompasses the information of the brand, details about the car, and instruction in how to use and control the car.
Almost all of the products in the market needed packaging. Packaging is essential in term to market the brand and protect the products to ensure the product is safety. Audi car usually covers the seating of new car with plastic to prevent dust will stain the cushion. Furthermore, a protective film will cover on the scene of indicator. This is to prevent the scene to be scratched. Thus, this can protect the product safety.
Product Support Services
Product support services are to enhance customer service and satisfaction by assess the value of current services and obtain idea for adding new services to delight the customers. For a new or potential customer, Audi will offer free test drive for them. This is to make sure the customer satisfy with their product. They also provide after-sale services included 2 years warranty and 6 months of installment completely free after customer purchase the car to make sure the customer not just satisfy and also happy when use their product because their product performance is greater than the consumer expectation. There are many Service Centers of Audi Company in Malaysia such as Audi Centre Glenmarie, Audi Juru, Audi Johor Bahruand so on. These services will add up the customers’ satisfaction with the brand of Audi and increase in brand positioning.
2.1.2 Major brand strategy decision
The Audi slogan is VorsprungdurchTechnik, which means the Progress through Technology. Audi is using the German language tagline as many other country used it such as European countries and United Kingdom. Recently, Audi had updated the slogan into “Truth in Engineering”. Audi is place in the product benefit because Audi automobiles want to provide the most authentic, truthful driving experience in the luxury segment through their slogan.
Brand Name Selection
The company name is based on the surname of the founder August Horch, the name itself an English similar with the English word “hark”, meaning listen.Audi is known as the good brand name selection because it can translate easily into foreign languages and distinctive from other brands. The brand name also easy to pronounce, recognize and remember in the world.
Audi is consider as manufacturer’s brands that also call national brands in the brand sponsorship. This is because Audi sell their output under their own manufacturer’s brand names. For example, the spare parts of all the Audi car can obtain it from German Motors in Petaling Jaya, Malaysia.
We consider Audi company is using line extension strategy which means existing product and brand for the brand development. Line extension occur when a company introduced additional product in a given product category under the same brand name into the new forms, colours, sizes, ingredients, or flavour of an existing product category. For example, existing Audi S1 is upgrade to Audi S2 and Audi S3 which have a better and advanced performance. Audi S3 that’s been tuned by TS Racing. This race car that not only packs an aerodynamic kit, but it was tuned specifically for racing purposes. The kit includes a front splitter, modified bumpers, a rear diffuser, extended wheel arches, and a roof-mounted scoop.
2.2 PRICING STRATEGY
Narrowly, price is the amount of money charged for a product or service. Broadly, price is the sum of all the values that consumers exchange for the benefits of having or using the product or service.
2.2.1 Factors affecting pricing decisions
Audi is using cost- based pricing method. Audi added a standard makeup to the cost of the product. It is a simplify pricing, which is based on the cost. It is also fairer to both sellers and buyers as the price set is reasonable.
Audi is under oligopolistic competition but not monopolistic competition because there are only few companies those producing automobiles such as Mercedes Benz, Porsche, and BMW in Germany. Audi car is a differentiated product. Customers can easily differentiate Audi from the other brands. This is because of the unique logo of Audi which in four rings. The high quality products produced by Audi have developed a very clear image of technology in the minds of their target customers. Besides, Oligopolistic competition market has high barriers to entry. Therefore, Audi is able to earn economic profit in both short run and long run. Audi is price maker which has the power to set its own price. However, it has to be aware of the actions of the others because it is mutual interdependence. Audi shapes its policies with an eye to the policies of the competitors such as Mercedes Benz and BMW. Audi has to observe the actions of them from time to time because the actions of Audi’s competitors will affect Audi’s profit. Audi spends a large amount of money in advertising to convince customers.
2.2.2 New Product pricing strategies
Audi practised market penetration pricing when the new product was introduced in the market. Market penetration pricing is a quick- entry price strategy that assumes low price will gain high sales volume which will result in lowering costs. It set a low initial price which is lower than the eventual market price in order for the brand to “penetrate” the market quickly and deeply. By using this method, Audi expect to attract a large number of buyers quickly to the new brand as the product demand is highly price elastic. It also assumed that the lowers price will win market share. Once the marker share is gained, the price of Audi will be raised.
2.2.3 Product Mix Pricing Strategies
Product line pricing is a pricing strategy used to sell different products in the same product range at different prices based on features or benefits. In another words, it is when a company must decide the price differences between the upgrade of the product or service. Audi has different type of model of car.The purpose of using these strategies is to maximize the profit of the company. For example, there is a huge range price different between Audi S3 and Audi TT.
2.2.4 Price Adjustment Strategies
Discount and allowance pricing reduces the product prices to reward customers responses. Discount can be classified in to cash, quantity, functional and seasonal whereas allowances can be divided into trade-in and also promotional. For example, the Audi buyers can get the spare part from Germany Motor located in Petaling Jaya that comes with rebates and warranties.
Dynamic pricing is known as time-based pricing or third-degree price discrimination. It occurs when consumers are divided into two or more groups with separate demand curves, and different prices are charged to each group. When done successfully, price discrimination practices like this enables the firm to capture more consumer surplus and thus, increase the profit of a firm. Dynamic pricing adjust the prices continually to meet the characteristics and needs of individual customers and situations. Wide range of goods would be priced according to what the market will bear. If the demands of Audi car increase, the price of it will decrease, vice versa.
The location pricing has a different price for different location or sitting arrangement. Audi car will be priced higher in Malaysia due to the location and high government import taxes.
2.3 PLACE STRATEGY
2.3.1 Market Channels/ Distribution Channels
Market distribution channel is a system of market institutions that enhances the physical flow of goods and services, along with ownership title, from producer to consumer or business user.
Audi is promoting their products by using indirect sales marketing channel. Audi is performing as producer only so it needs other channels like retailers and wholesalers in order to facilitate the exchange process by cutting down the number of contacts necessary. The intermediaries will also help Audi to promote their products to the final consumers with the help of intermediary, Audi manage to focus on produce innovative products rather than busy on promoting their products.
2.3.2 Retailing/ Wholesaling
Among the sales channel, Audi is using wholesaler channel to promote their products to the consumers. Wholesaling is known as all activities involved in selling goods and services to those buying for resale or business use. Since Audi is the company that involve in manufacturing products only, so it needs to undergo wholesaling process to promote their products by using developing and spreading persuasive communications.
Therefore, Audi has form a strong wholesaling base to promote to the final customers and it need to grasp the real issues facing the wholesalers in order to implement the appropriate growth measures. With the strong wholesaler channel, Audi will able to focus on their innovation for products to keep competing in such high competitive market since this market is known as oligopolistic competition.
2.4 PROMOTION STRATEGIES
Audi Company is playing its role very well in the marketing promotional activities through the concept of integrated marketing communications. Audi Company is using a multifaceted promotion mix as its tools to increase the sales of its car and also achieve a higher performance. Those promotional activities of Audi Company are trying their best to attract consumers’ attention and to make communication with them in order to reach them in a coordinated manner through integrated marketing communication.
2.4.1 Direct Marketing
One of the elements in Audi Company’s integrated promotional mix is direct marketing. It is offering a very special surrounding for its consumers to make them feeling good in all the way of purchasing their new expectative cars. After stepped in the Customer Center, consumers will be welcomed by Audi Company’s staffs and they will consult with the consumer to plan their schedule for the day according to the objective they want to do. The schedule will be included a highlight activities, factory tour. The tour guide will show them how to produce the Audi Cars by using advance technology and accuracy workmanship way. Another highlight activity is visit to Audi shop and Audi museum shop. Audi shop stocks top-quality branded goods and up market lifestyle articles. In the Audi museum shop you are able to browse all the attractive tradition collection and a range of model historical cars are stored in it. At the end of the day that is the moment of the consumers to pick up their new car.
2.4.2 Sales Promotion
There is a sales promotion conducted by Audi Company is called as “Happy Anniversary” and “Happy Oktoberfest”. This program is available for all the range of the Audi owners. To let more consumers join for this program, Audi Company has provided all the styles, sophistication and performance of its cars in the exceptional prices. Furthermore, consumers also able to test-drive an Audi of their choice to discover which Audi are suitable for them.
2.4.3 Public Relations
Public relations refer to a firm’s communications and relationships with all types of its customers, such as publics. A very good news which is bring from Audi Company is that Audi will organizes the INI and HIN events, which serve as an education forum for everyone. And the INI.JUGEND.KOLLEG and the HIN.JUGEND.KOLLEG is just focus on the youth which are talented and interested in the promotion of technologies. During the series of the events, those participants will gain an opportunity to discuss and obtain some information about the current social and technical topics. A clear and accessible of the knowledge will be brought by a team of well-known speakers from Audi partner universities. With it, Audi Company is able to get more employed with young talent. At the same times, it can gain a good image from its customers and stronger its Brand Name throughout the country or the world.
2.4.4 Product Placement
Another promotional mix element using by Audi Company is product placement. It is a non-personal selling marketing strategy. This approach is not only a lower cost-spending but also a very efficient way to gain more patron exposure to the users. Recently, Audi Company is using this approach by launching a free iPhone game which is called “A4 Driving Challenge 2.0”. By choosing iPhone to expend Audi Company’s customer flows as iPhone has gain a high performance of sales in the market segmentations from upper-upper to upper-lower. Audi Company is just a newest brand in using this non-traditional selling method in order to extend sales and to draw in more future clients as well.
2.4.5 Official Web Site
On the other hand, it is a new trend that all companies will use advance technology to connect with their existing or incoming customers like social wed site or their own official web site. Same as other company does, Audi Company also having their own official web site which is http://www.audi.com/com/brand/en.html. By browsing their pages, customers are able to obtain latest information, latest improvement and whether there is any latest new product is introduced into market. If consumers are wish to buy a new Audi, there is a fast and convenient way to check in the website, it has uploaded a list of details for all types of the Audi.
Chapter 3: Analysis of Market Opportunities
3.1 Technological Opportunities
One such opportunity in the future was the concept of a hybrid car that was first introduced in the 90’s by Toyota. It would be a great technological opportunity for Audi to explore this as it would be perceived as a core segment of the automotive market of the future. The meaning of hybrid car, as quoted by Jeffrey Orloff (2007), is a vehicle that uses an on-board rechargeable energy storage system (RESS) and a fuel based power source for vehicle propulsion. These vehicles useless fuel than their counterparts and produce fewer emissions. Hybrid vehicles recharge their batteries by capturing kinetic energy through regenerative braking. Some hybrids use the combustion engine to generate electricity by spinning a generator to either recharge the battery or directly feed power to an electric motor that drives the vehicle. This takes place when cruising or in other situations where just light thrust is needed.Besides technology, several other environmental factors will also be discussed on how it presented such an opportunity for Audi AG and on how Audi could affect those environment.
Although there is now in existence of many hybrid cars that are successful like Prius or Tesla, but none has dared to produce an elite and luxurious hybrid car which is currently being developed by Audi AG. Such an innovation could help Audi to dominate the automotive market for the next 25 years as quoted by the company because it would give them a great competitive edge. So far, Audi has developed 3 hybrid concept car which are Audi e-tron, Audi e-tronSpyder and Audi A8 Hybrid. Each of those cars are being researched independently in several workshops that follows on the new hybrid technologies like full hybrid, plug-in hybrid and parallel hybrid respectively. Besides, Audi also monitors all other innovation for a competitive advantage for example new alternative fuels called cellulosic ethanol for the hybrids or even Quattro drive system in correspondent to hybrid technology. With all technology combined and utilized with maximum effectiveness, it helps Audi to address not only the social concerns but also the economic concerns in the market environment.
Focusing on Audi, their hybrid concept cars in the future market is able rival all luxurious sports car and luxury cars existed in the market now.Audi will embrace this opportunity and continue to advance in it technologically by making better hybrid cars and would eventually help pave the way for a more advanced environmentally friendly technology. As quoted in a CNN article by Phil O’Sullivan (2004), “In the future we see this (hybrid cars) as an interim technology. In the future — long-term — fuel cells (may be) the best alternative”.
3.2 Social Market Opportunities
Besides, Audi also seeks opportunities in the social of the Asian market as Asian market is new and having vast development in automobile industry. The new emerging markets of Asian markets, especially China and India, are huge opportunities for Audi. By 2015, the Audi Indian car sale is estimated to be reaching more than $40 billion. In China figures indicate that sales will be in excess of 250,000 million vehicles in a similar period of time.The car sales in both of these countries are growing, as people in these countries are getting wealthier and more discerning, they need more high-class brands such as Audi. According to MrMichealPerschke, Head, Audi India, the young generation, especially those who return from overseas, want more and their fathers are handling over the reins of business a lot faster, unlike the past, today’s global Indians have different mindset. This kind of mind- set has made India a potential market for Audi to expand their market, giving them the opportunity to be the leader in automobile industry.
Another reason for Audi to choose China and India as their target market to expand their automobile industry: China and India are countries which have the most population of people, hence, providing them a great source of labor force, and, the cost of production is much cheaper than in Europe countries because the cost of labor force is much cheaper. China and India have provided a great market opportunity for Audi, as the level of living in these countries is getting higher, thus increasing the demand of luxury cars, and also, people in these countries are able to provide Audi a great source of labor which could enhance the production.
Chapter 4: Recommendations
The electro rheological (ER) fluids used in the hybrid cars’ engine require high voltage to operate, that is, the breakdown voltage of air is 3kV/mm. Audi can modify the ER fluid, by using different combination of electrodes which can reduce the voltage requirement of ER fluidto function. Suspension, which particles may tend to clump or settle, is also one of the major problems of using ER fluid in hybrid vehicles. Audi can tackle this problem by matching the density of the solid and liquid particles in the components, to ensure the effectiveness of the operation. Or, Audi can use nanotechnology-the nanoparticles, which the particles are very tiny in size, hence, reducing the suspension. To overcome the problem of settlement of particles in the engine, Audi can add lubricant to enhance to lubricity of the engine, which can help to discourage the gravitational settling and promote particle suspense. Lubricant helps to reduce friction, thus, enhancing the smoothness of operation, modifying the viscosity and inhibiting wear, improving the problem of suspension.
Next, it could be considered a right choice for Audi to expand its production in China and India because the labour cost in those potentially developing countries is much lower compare to its original country. However, low labour cost might affect the production of the company. A low wage paid to a worker would discourage a worker to put in effort to do his part perfectly. Audi can prevent this problem by increasing the wages or maybe give bonus to its workers who show their initiative to perform well in their job. It would not be a wise decision to have a great number of unskilled or unknowledgeable workers in an operation. Hence, it is suggested that, Audi chooses its crew wisely. Choose skilful and knowledgeable people to join the crew through a careful interview. Otherwise, provide training to those unskilled workers, or provide time- to- time skill- up courses and practical training, so that the workers are equipped with relevant and up- to- date knowledge and skills. Besides, the Board of Directors has to do its duty checking the employees from time to time, distinguish the problem faced by employees and company, so that improvements can be made to ensure the quality of production is maintained.
There is a research shows that Asia countries, especially India is a highly potential developing country, as it attracts many international investors to invest in the country, meaning India has potential to become a high class country. This means that people in India will be able to owe luxury cars like Audi in future. However, presently the purchasing power for luxury goods of people in the country is still limited. Actually, Audi can refer to this present situation, come out with the concept of producing low cost cars or ordinary cars, to meet the needs of people in the countries. In this case, people with less income will be also able to own a car themselves. This will not only expand the market and increase the income of the company;it is also beneficial to the people who are having a moderate income.
Chapter 5: Conclusion
In my opinion, I think the current marketing mix which Audi has is satisfactory to customer needs. Because for a new or potential customer, Audi will offer free test drive for the customer and to make sure there are satisfy with their product. On the other hand, customer also can easily to obtain latest information from the website. Because Audi Company having their own official web site which is www.audi.com/com/brand/en.html.
In providing a wide range of products and with high quality, Audi has by far influenced most of the customer’s perception favorably towards its products. From time the company was created till now, the quality of the products that Audi offers is improving each year. But the well-known car that less frequently bought by the consumers because the price is too expensive which is within the range of RM 179,900 to RM 1250,000. The price will expensive is because Audi do price comparison with other car in the market with their main competitors which are BMW and Mercedes-Benz. And it is a branded product that having mass advertisement in magazines, television and personal selling by reseller and producer in order to convince consumers to buy it and remind the consumer about their product in the market.
Even though the prices imposed by Audi seems to be fair with consideration of the quality of the products offered. The only problem is that, Audi has priced its products too expensively for a middle or lower class customer to afford to buy those products. Apart from that Audi has targeted its market mainly to urban customers as are the only customers who can afford such expensive products. In my opinion, I think Audi has to create also some of low end products with low prices which can be affordable to low income users.
As I have mentioned above, In the case of place (distribution), Audi is using wholesaler channel to promote their products to the consumers. With the Audi have strong wholesaler channel, it will able to focus on their innovation for products to keep competing in such high competitive market since this market is known as oligopolistic competition.
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