Current Marketing Trends in the Automobile Industry - Term Paper Example

Current marketing trends in the automobile industry Contents Contents 1 Executive summary 2 Automobile Market Trends 3 Automobile Marketing Trends 4 Digital marketing 6 Digital marketing in the automobile industry 7 Digital marketing prospects for the auto industry 8 Combination of product placement and advertising 8 BMW case Study 9 Audi case study 10 Ford case study 10 Brand recognition and equity 11 Impact of the integration on consumer behavior 13 Accessing new digital marketing opportunities 13 Recommendation 15 Conclusion 16 References 18 Executive summary The automobile industry has continued to transform over the years. There are numerous forces influencing the industry’s future, which has changed the business from just manufacturing and selling cars. For manufacturers to succeed, they are required to focus on more than the traditional economic factors. The current trends in the business have transformed both the manufacturing and marketing trends, and manufacturers cannot achieve sustainable and profitable growth by simply addressing these with short-term solutions. To differentiate themselves from other manufacturers in the international automotive market, vehicle producers must come up with multi-faceted and long-range strategies that match the transforming market forces. This paper examines various market trends, and the resulting marketing trends with a focus on the implementation of digital media and strategic product placement to reach consumers. The final section of this paper shows how a vehicle manufacturer can get started on using digital marketing by employing the consumer decision journey (CDJ) to segment the consumers. Current marketing trends in the automobile industry Automobile Market Trends The market trends in the automotive industry today have been largely influenced by the change from traditional to emerging markets, which has, in turn, influenced product development, investment and marketing strategies. In addition to a change in growth drivers in the automobile industry, the attitude of the market has also been influenced by societal concerns regarding the environment, material usage, urban congestion, and energy efficiency. Over the years, the business of the automotive industry was focused on simply producing and selling car. However, car producers have now realized the importance of meeting the consumer requirements (Nassif & Valsan, 2012). Another significant trend in the automotive industry is the rapid change of technology devices. Technological advancements in this business led to the incorporation of high-profile features such as telematics, and vehicle-to-vehicle communication, as well as compatibility with personal electronic devices. Moreover, the technologies associated with the enhancement of safety, reduction of exhaust emissions and better operating efficiency have continued to change with time. These features have been observed to play a vital role in the purchase of a car, in as much as consumers also take into consideration the size, styling, and price of a car (Nassif & Valsan, 2012). In general, the primary trends in the automotive industry include collaborations; alternatives to car ownership; non-automotive entrants; involvement of sub-tier suppliers’ become more strategic; increasingly stringent and environmental regulations; influence of social media on marketing; and shifting the competitive landscape (KPMG, 2012). The most important trends in the next two decades are illustrated in the figure below. Figure 1: Global trends in the automotive industry (KPMG, 2012). Current marketing trends in the automobile industry take into account a variety of techniques including traditional and digital advertisements, promotions and product placement. This paper looks at various digital marketing technologies that are applicable to vehicle manufacturers, as well as the value provided by product placement, and how the integration of these adds value to the customer with regard to the customer purchase journey. Automobile Marketing Trends As mentioned above, car producers have changed their focus to emerging markets where the demand for new car ownership is significantly high. The primary need for cars is a combination of the satisfaction of the transportation need, and as a status symbol. However, these needs are not as easy to satisfy for mature markets, compared to emerging ones. As such, a number of manufacturers are trying out new marketing techniques that appear to be relevant for the mature markets. One such technique is the subscription service. This strategy enables car buyers to identify the car they would like to use for a given period of time without being required to purchase it. Another strategy that appears to do well with mature markets is the ability for consumers to acquire integrated mobility services as opposed to just providing them with private vehicles. The basic marketing strategy for most car manufacturers involves their emphasis on enhancing their core functions. This does not, however, imply that they will be less affected by other processes in the vehicle value chain, such as the inability of subtler suppliers to deliver in a variety of products, causing them to increase the cost of various car components. To avoid been reliant on the success of suppliers to cut on supply costs, various manufacturers have opted to work with traders who are not in the automotive industry. The involvement of external parties such as local governments and utilities has allowed them to develop the requisite infrastructure and enabling technologies that are capable of supporting new-energy vehicles. Marketers spend millions of dollars every year on devising ways to strategically place their brands in multiple advertising mediums including TV programs, movies, video games and print media. Studies show that product placement is as important as advertising when it comes to influencing consumer behavior and the purchase decision journey in the automobile industry. Brondmo (2000) suggests that the effectiveness and impact of product placement on consumer behavior varies in different markets depending on the values, behaviors and perceptions of the masses in different nations. Digital marketing Digital marketing can be classified into pull and push promotion of commodities or services using digital tools that are readily, conveniently and cost effectively accessible by consumers. Digital marketing entails all the marketing techniques involved in online marketing, as well as other offline channels that allow marketers to relay information to consumers through their mobile phones in the form of SMS and MMS, display and banner advertisements, and digital outdoor, which is a direct marketing strategy that involves the use of digital means to address an audience. Digital marketing techniques are most effective when combined in a marketing campaign. Pull marketing involves the use of channels such as blogs, advertisements, personal interactive television and smart ads, while push marketing comprises all forms of mobile advertising and multimedia marketing (Morozan, Enache, & Vechiu, 2009). Each of these types of marketing has advantages and disadvantages. Some of the advantages of pull digital marketing include the absence of regulations or restrictions for viewing and relaying content in terms of the quantity of information respectively, and the fact that it does not require any technology to relay the information, with the exception of a display. Some of the demerits include the considerable effort required to publicize the content to users, limited ways of assessing the impact, and no means to personalize the content for users. The advantages of push marketing include its ease of personalization for different audiences, easy and detailed tracking and reporting, and high return on investment. Push marketing also has some disadvantages such as the challenges faced with compliance of content for various devices, the requirement for technology to relay the content, and the possibility for a user to reject the message before its delivery by blocking ads (Morozan, Enache, & Vechiu, 2009). Digital marketing in the automobile industry Car manufacturers were among the first businesses to identify and utilize the value of an online presence to attract more clients by developing web sites and car configurations. Despite their initial reaction, they have fallen behind in using the digital opportunities to reach their clients online by insisting on using offline marketing and managerial systems. Car manufacturers have only recently began to promote the sales of their products through mobile ads and other digital marketing platforms. As of 2012, studies suggested that car manufacturers dedicated less than 50% of their marketing budgets to digital advertising. This is considered an increase of about 50% from 2011, which translates to an expenditure of roughly $12 billion. Most of the digital marketing techniques employed by car manufacturers are online banner ads, paid search and print media. Kostring (2012) suggests that car manufactures have realized the great potential that lies in reaching potential consumers on their mobile devices. In this regard, studies conducted on the key global advertisers who use mobile ads to reach their target market revealed that car manufacturers were among the top five (Kostring, 2012). Car manufacturers have also realized the relevance of capturing the attention of possible clients at various stages of a consumer purchasing journey. An understanding of the process that a consumer goes through before making the final decision to purchase a particular make and model of a car has presented marketers with new opportunities and means for ensuring more sales without having to wait at the physical store for buyers. One of the ways that marketers in the auto industry have exploited this opportunity is by conducting campaigns for brand awareness through leads and mobile ads. Studies show that this strategy has the ability to reach about a quarter of the potential consumers while still at the research stage of their purchase journey (Morozan, Enache and Vechiu, 2009). Marketers have also employed search based digital advertising techniques to make sure that consumers get to see their content and products first, whenever they use specific key words in their search during the research phase (Mathwick, 2002). This has allowed various car manufacturers to get sufficient exposure and draw the attention of consumers towards their brands. Digital marketing prospects for the auto industry Studies show that the most influential thing that gets a car buyer to purchase a particular kind of vehicle is the live experience (Nassif and Valsan, 2012). This claim is supported by a variety of other researches, which claim that car buyers spend a lot of time conducting online researches of the car that they would like to buy, but very few of them make the actual purchase without interacting with the vehicle at a personal level. These studies also arrived at an interesting conclusion, claiming that digital marketing provides consumers with an online experience that influences their perception of a particular car, which ultimately leads to their decision to buy the car (Kostring, 2012). This is an indication of the huge role that digital marketing plays, and more importantly, maintaining a meaningful online presence. Advertising the car brand and model in a manner that the consumer can access easily and even get more information about the product provides the digital experience, which drives the buyer to the physical store for a live experience, and a purchase. Combination of product placement and advertising Current marketing trends in the automobile industry employ an integrated marketing communication (IMC) approach in order to make the most out of the combination of product placement and digital marketing. IMC enables marketers to integrate multiple communication functions in a strategic manner instead of allowing them to function independently. If done effectively, the synergistic approach creates efficient and effective marketing communication programs without redundancy (Günnemann, 2008). BMW case Study The benefits of proper product placement as a marketing strategy are apparent for many car manufacturers. BMW, for instance, was involved in the cross-promotion of the movie “James Bond: Golden Eye”, which featured BMW’s new Z3 roadster. In this endeavor, BMW spent about 3 million pounds on movie promotion and advertising, via multiple channels including print ads, TV and website. Studies show that this strategy resulted in the Z3 roadster being the most known of all BMW cars resulting in a brand equity worth 184 million pounds. This implies that BMW would have spent this amount to produce the same result had it employed traditional marketing techniques. BMW’s marketing team did not leave it at that. They featured another one of their cars in another movie, but prior to its premiere, they launched a website termed BMWFilms.com. They also conducted a low-profile public relations campaign by placing news and other content, referring to the project, in fan sites, chat rooms and internet movie news sites. The website was also promoted via print media including movie posters and newspapers, and short movie like TV ads that showed a link to the website. In just one year, the BMW films had been viewed by over 3 million people. A majority of these people requested for more similar movies, and an even greater number either shared or recommended them to others (Günnemann, 2008). More than two-thirds of the people who visited the website provided their email contact details, which helped in the development of a target market database. In addition, close to 50,000 people requested for notifications and the number of visits to BMW outlets increased significantly, leading to a considerable increase in vehicle sales (Günnemann, 2008). Audi case study Audi has also been involved in cross-promotions similar to those of BMW as seen in the “Transporter” movies and series. The second “Transporter” movie that was released in 2005, for instance, featured the Audi A8 W12, which was its newest luxury sports sedan. Other vehicles featured in the movie were the Lamborghini Murcielago and the Audi A3 Sportsback. Audi also promoted the movies on their website (Günnemann, 2008). Ford case study Another company that takes advantage of the integraion between marketing communication tools and product placement in Ford motor Company. In the popular TV show “Smallville”, Ford featured one of its brand, the Fusion, by incorporating it in various episodes and having the characters talk about it and its features, something that Campbell and Kevin (2003) refer to as plot connection congruence and prominence. During commercial breaks while airing the episodes, Ford’s advertisements of the Fusion were played. Product placement and advertising is not the only combination that Ford has employed to increase its sales. The commercial-free streaming of one “American Dreams” episode was a project sponsored by Ford in order for the show to feature the 1966 Mustang in its plot. This was a combination of product placement and promotion as the strategy was employed when Ford was preparing to launch its 2005 Mustang. While the episode did not have any commercials, the plot involved a television set where a Ford commercial ran, and at the same time, one of the characters was reading a magazine with a Ford print ad. The show also featured a two minute intro and a four minute short-movie at the end showing the soo5 Mustang (Günnemann, 2008). Brand recognition and equity While BMW appears to have made good use of the “James Bond” film to push the sales of one of its models, other car manufacturers have also benefited from similar marketing tactics as seen above. A more recent association between vehicles and characters is the use of an Aston Martin as a superior car for mobility by “James Bond”, in his more recent movies. It is evident that a combination of marketing communication through advertisements and promotions, and product placement enhances brand recognition and recall. The integration of the two also helps to create a particular image that influences the behavior of the consumer, resulting in better sales. The pattern of consumer behavior is illustrated in the figure below (Aaker and Erich, 2000). Figure 2: consumer based brand equity framework (Aaker and Erich, 2000) Brand equity is established by a marketer using various brand elements including brand name, logo and slogan, as well as the marketing programs, which include the 4Ps, IMC and PPL. The marketer can also employ secondary associations that consumers can relate the product to such the country of origin, or the background of the company (Aaker and Erich, 2000) in order to establish brand awareness and brand image. Aaker and Erich (2000) define brand awareness as the elements that deal with depth such as brand recognition and recall, and breadth, such as purchase and usage of a product, with regard to the consumers. Brand image, on the other hand pertains to the effect of a consumer’s association with a brand, which is supposed to be strong in terms of relevance and consistency, favorable, in terms of deliverability and desirability, and unique, in that it offers points-of-difference and points-of-parity (Aaker and Erich, 2000). The significance of both brand awareness and brand image is that the two influence consumer brand attitudes. This refers to the cognitive components such as knowledge and judgment of a brand, affective components, which involve the emotions and feelings towards a brand, and the behavioral components, which reflect on the tendency of a customer to react in a particular way with regard to a brand (Aaker and Erich, 2000). The ultimate effect is brand attitude, which is the primary determinant of consumer outcomes. In an ideal situation, the consumer is supposed to have achieved a sense of brand loyalty, making him or her less vulnerable to crises and competitor actions. Positive brand attitude is also supposed to result in larger margins, more elasticity to price decreases in terms of acquiring more customers, more inelasticity to price increases by losing less customers, brand extension opportunities, better perceptions of product performance, enhanced trade cooperation, licensing opportunities and better marketing communication effectiveness and efficiency (Aaker and Erich, 2000). Impact of the integration on consumer behavior The best marketing approach should be aimed at influencing the consumer by appealing to the abstract, visual, verbal and contextual elements so as to make the message memorable (Aaker, 1997). In the BMW case study discussed earlier, the marketing strategy involving advertising and product placement was identified as successful since it resulted in increased traffic to the manufacturer’s website and more sales of not only the car model advertised, but also other BMW cars. This is due to the elements of recall and brand recognition, which enable a person to reconstruct the stimulus from memory, and differentiate it from other stimuli (Baldinger and Rubinson, 1996). Studies on the impact of product placement on memory and attitudes of consumers revealed that plot congruence was as important as modality in influencing a positive reaction to the brand. Accessing new digital marketing opportunities For marketers in the automobile industry to deliver a good marketing strategy that will increase their sales, they need to have proper understanding of consumer behavior (Barnes, 2001) as portrayed in the purchase decision making model below. Figure 3: purchase decision-making process (Barnes, 2001). The model is only applicable to high risk products that require high involvement such as the purchase of a car, as opposed to buying regular household items (Barnes, 2001). Before any marketing message can influence a consumer, the individual has to be aware of an existing problem, such as the need for a vehicle. Based on this need, the consumer then embarks on finding information that can lead to the eradication of that problem. At this point in the consumer purchase decision, the automobile marketer can use a good combination of advertising and product placement to develop awareness and recognition in the consumer’s mind. For instance, the advertisement of the Audi sports car and its placement in the “Transporter” movie could have been effective in influencing consumers who prefer sporty luxurious cars. Basically, the marketer is supposed to focus on the strong points of the car that are likely to solve various problems experienced by the consumer, such as less fuel consumption and less pollution in a green era. The information search and decision making phase is often influenced by peers such as friends and family members (Batra and Ray, 1986). In this regard, studies have shown that close to 60% of parents seek the opinions of their children when they are about to buy a car. Recommendation It is clear from the above discussion that car manufacturers have multiple digital avenues which they are able to reach their buyers. It is worth noting that for a digital marketing plan to be successful it depends on the content and the strategy used when it is being communicated to its audience. As per the trends mentioned in the report, it is evident that digital interactions are critical in influencing shopping experience. Therefore, marketers are urged to use a holistic approach in implementing digital tools. This could be done by personalizing video postings like in the You Tube channel; they should also endeavor to taking part in care reviews of print and video by use of mobile applications as well as strategically placing banners in the website to acquire full benefits. This should be done while checking on the costs involved while embarking on customer relationship management (CRM) and loyalty programs CDJ framework can be used to conduct a marketing survey from which car manufactures can benefit from. Further to this, necessary information should be availed to the consumers to enable them to make informed decisions while purchasing. At this point, the car dealer should focus more on satisfying the customer and in helping them make proper decisions on the digital tools. This as compared to the traditional marketing strategies results to an additional expenditure in the facilitation of the shopping experience. However, the traditional strategies are no to be done away with, but instead the car manufacturers should explore the possibilities of having a digital interaction of the dealer and the customer. By having this in place it will enable the consumers to have an online dialogue and give their views, opinions and recommendations as well (Kostring, 2012). Online and offline communication strategies should be integrated effectively and efficiently for the companies to have an effective marketing. This will lead to a reduction in redundancy means and the savings from the halting of these activities redirected to more productive and meaningful marketing activities. (Morozan, Enache, & Vechiu, 2009).Digital marketing is to be monitored closely so that a balance is struck between the funding availed to a specific customer segment and the relevance to the consumer purchasing behavior. There has been reluctance from the automobile industry to tap into the numerous opportunities presented by digital marketing. Car manufacturers should therefore reconsider the impact and savings of using digital tolls in increasing sales and incorporate digital marketing to their marketing strategies in this digital age. Conclusion Car manufacturers do appreciate the opportunities which are presented by the digital media as compared to the traditional strategies and this evidenced by the allocation of close to 50% of OEMs marketing budget to digital methods. Research in the past suggests that the choice preference of marketing by OEMs is dependent on the effectiveness of digital media as a marketing strategy and its reduction of marketing expenses. In the future, it is projected that a higher budget allocation will be for the marketing following the reaped benefits of engaging in marketing activities. The global recession has affected the car manufacturing industry I that it begun to change so as to improve on the efficiency of their value chains. 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