Marketing Overview
1.
Introduction
The automobile industry is a backbone to the economy and indicator of the advancement
of the technology. The industry is facing dynamic environment and will have to contend with:-
1.
Turbulent markets that change rapidly and unpredictably
2.
Increase in highly fragmented ‘niche’ markets
3.
Ever greater rates of technological innovation in products and processes
4.
Shorter product life-cycles
5.
Growing demand for tailored products - ‘mass customization’
6.
The delivery of complete ‘solutions’ to customers, comprising products and
services.
And all of the above to be achieved at less cost!
Currently, there are many automobile manufacturers in the world at any size, suggesting
the increasing level of competition in the marketplace. Thus due to environment factors
discussed above, an automobile manufacturer must design distinctive and leading products that
differentiate it from their competitors. According to Fortune, it’s extremely vital that companies
constantly reinvent themselves and develop and sustain flexible business models to remain
competitive in an information-based economy and also in order to win competition, a company
should fulfill customers’ needs by designing products that match their characteristics, which
result in the increased revenue and profit margin.
However, at this time, producing superior products does not guarantee a company
success. This is because, customers may buy a product based on emotional or intangible value
rather than tangible value. This situation suggests that a company should conduct various
initiatives to embed the desired brand equity of its products in customers’ minds. This initiative
refers to media strategies that involve target audience identification, selection of media and many
others. Due to the variety of media that is available in a market, the initiative evolve into new
term, integrated marketing communication method, that involve public relation, advertising,
trade events, to name a few.
Concerning the media strategies, this paper will discuss the strategies for a company. The
selected company is Daimler Chrysler AG, a well known automobile manufacturer that targets
high-end customers by delivering products such as sedans, sport utility vehicles (SUVs), trucks,
etc. that are completely different from their competitors.
Prior to determining the integrated marketing plan for Daimler Chrysler, this paper will
elaborate the global automobile industry, profitability performance that suggests the
communication budget.
2.
Daimler Chrysler AG: Corporate Background
2.1.
Industry
The appropriate industry to analyze will be automobile industry. Further we can narrow
down to the High end of the auto industry. Automobile industry is one of the most competitive
industries. As per the case globally there are 25 big players. There is a considerable pressure on
the companies to reduce the costs which is affecting the profit margins. This pressure is mainly
coming from Japanese car manufacturers. Moreover the companies have to keep up with industry
wide trends towards increased use of new organizational orientations and methods of "just in
time" production. Mercedes has to focus resources on its labor training programs, total quality
management to reduce the costs. Labour too is an important cost which makes more than 5% of
the cost.
The major competitors of Daimler are Ford, GM, Toyota, Honda, Audi, BMW and Hyundai. The
investment returns on equity, capital and assets has been marginal. Also if we compare to its
competitors in the following table, its performance has been inferior to the Toyota.
General Motors Toyota Motors DAIMLER CHRYSLER
Return On Equity (5-Year Avg.) = -1.7%
12.4 %
4.9%
Return On Assets (5-Year Avg.)= -.2%
4.4%
0.9%
Return On Capital (5-Year Avg.)= -.2%
6.8%
1.5%
Reference
www.moneycentral.com
Bargaining power of buyers
The buyer that is the purchase of the car has considerable bargaining power which is
driving the industry to innovate and to reduce the costs. Thus this force is high.
Bargaining power of suppliers
The industry depends upon several kinds of accessories and material. The cost of material
depends on the business cycle and the competition. Thus this can also put considerable pressure
on the margins and hence efficient supply chain management is required.
Government regulations
There are regulations regarding import and export, price regulations, taxation, subsidies
and other legal matter which can create entry barrier for the export of automobiles.
Conclusion
Going forward, we foresee increasing competition in the industry but the form of
competition will be different. It will be between large players (with economies of scale) This is
owing to the fact that the industry will move towards consolidation. The larger players in the
industry will survive with their proprietary products and strong franchisee. The barriers to entry
will increase going forward. The players with huge capacity will be able to influence substantial
power on the fringe players by their aggressive pricing which will create hindrance for the
smaller players. Economies of scale will play an important part too.
This model gives a fair idea about the industry in which a company operates and the
various external forces that influence it. Thus Mercedes is facing adverse industry scenario
because of oversupplies, reduction in prices and other factors as discussed above. However, it
must be noted that any industry is not static in nature. It's dynamic and over a period of time the
model, which have used to analyze the industry may itself evolve.
(Reference: www.equitymaster.com and Michael Porter’s 5 forces model)
Corporate Background
The global address for Mercedes Benz is http://www.mercedes-benz.com which further
can reach other local web sites such as www.mbusa.com for customers that reside in the USA.
The market segment where Mercedes Benz competes is high end segment. In the luxury cars
segment, there are many well known players such as Audi, BMW, Jaguar, Honda, and Lexus.
Some of them only produce high-end products but the rests also produce low-middle class
products.
Figure 1
Mercedes Benz USA website
Unlike consumer goods industry, the number of company serving high-end automobile
products does not change so much. However, in order to increase the competition level, there are
some mergers and acquisitions between automobile manufacturers to improve competitive
advantage like occur between Renault-Nissan and Daimler-Chrysler.
Another interesting part that occurs in high end automobile industry is the fact that
although the industry experience unfavorable sales decline by 3-percent due to external factors
like the rise of oil price, the surge in materials etc, Mercedes-Benz keep recording string growth
during the past several years.
2.2.
Overall Market
Mercedes Benz is targeting the upper middle class and upper class. Thus its target
segment is the high-end market. This market is characterized by social status representation and
fulfilling the self esteem and actualization needs. There are five kinds of needs as per Maslows
theory. Humans meet their basic needs first and then they seek to satisfy successively higher
needs that occupy a set hierarchy. (2003 Maslows hierarchy) The five needs are “physiological,
safety, social, esteem and self-actualization” (Robbins, 2003) The lowest needs are basic
survival of the human being. Everyone needs to eat for survival and live in an environment
where one is protected from nature’s extremities. The highest needs are internal or intrinsic
needs where one strives to gain social acceptance, esteem and eventually reach self-actualization.
Thus Mercedes Benz is striving to satisfy the highest needs of the human beings.
According to Mercedes Benz, the company was able to sell more than 1,232,600 units,
representing a significant increase than previous year when the company recorded the sales about
1,229,700 (Automotive Intelligence, 2003).
In many details, in passenger cars segment, the company is able to maintain their figure
in which during 2002, Mercedes Benz sold 1,110,300 passenger cars, a considerably decline
from 1,113,500 sold units in the previous year (Automotive Intelligence, 2003).
Meanwhile, in other raising segment, the SUV (Sport Utility Vehicle) where Mercedes
Benz sells M-Class, the company also maintains their superior performance by selling more than
102,000 unit in 2002, a 2% increases from 2001 that sold about 100,000 units (Automotive
Intelligence, 2003).
2.3.
Marketing Mix
The marketing environment has been changed tremendously in the last five years than
when compared to the last fifty years. Consumers have also changed beyond doubt. Their
behavior is considered to be more complex, their media habits have now become varied, and
they are found to be more outspoken than ever before.. In most of the instances, their demand is
considered to be defined in terms of “brands” which are being identified with certain levels of
quality and types of images and the manufacturers in order to sell their brands use modern
methods of marketing. (Is Anybody Out There? The New Blueprint for Marketing
Communications in the 21st Century).
The marketing mix approach to marketing is one model of creating and implementing
marketing strategies. It stresses the "mixing" of various decision factors in such a way that both
organizational and consumer objectives are attained. The most common variables used in
constructing a marketing mix are price, promotion, product and distribution (also called
placement). In this situation, marketing mix becomes the heart of any marketing plan that
composes of product, price, promotion and place.
Figure 2
Mercedes Benz Product Lines
2.3.1. Product
Mercedes is constantly expanding the product offer to meet new demands of the market.
Currently our focus is on premium segment. They maintain the current line of products
and are added new, specialized products as designed or specified by our customers.
Concerning Mercedes Benz products (Figure 2), there are six categories: Sedans,
Wagons, Convertible, Coupe, Roadsters, and Light Trucks. The cheapest segment in the
Mercedes Benz product lines is C-Class sedans that sold from $30,000 in the USA.
Meanwhile the expensive product lines are SLR McLaren that sold above $452,000 in the
USA (Mercedes-Benz USA, LLC, 2007).
2.3.2. Price
This is based on positioning strategy which is projecting us as premier and high quality
car manufacturer. As leasing luxury cars producers, Mercedes Benz continues pricing leadership
practice in order to differ their perceived value on their products. In the figure, we find that the
cheapest segment is the C-Class that sold at $30,000. Meanwhile, other products like S65 AMG
are sold at $182,275 and SL65 AMG at $186,775 (Mercedes-Benz USA, LLC, 2007).
2.3.3. Promotion
Advertising is an effective parameter to ensure how the product is being
marketed toward the customer. The company has a huge budget for advertising. The Mercedes
will advertise on various mediums but also looks at an effective rate of return for themselves.
The advertising returns and the communication strategies will be very effective for the company
in targeting all stakeholders. In this manner, promotion strategy relates to communicating and
selling the company’s product to customers. It includes TV and online advertising, trade shows
etc.
2.3.4. Place
Place deals with the way a company approach a customer. In this mix, the company may
approach a customer in order to describe a product, its features, the benefits and many other
things to convince customer and close the sales (“Marketing Mix”). Concerning Mercedes Benz,
they have a wide distribution network of dealers globally.
2.4.
Basic Information On Their Size And Profitability
I have discussed the margins in the industry segement.

Operating . Pr ofit.M arg in 
Operating . Pr ofits( EBIT )
Sales
=
(Gross. Pr ofit  Marketing. Ad min .Cost )
Sales
=
5,185,000,000
149,776,000,000
= 3.46%

Net. Pr ofit.M arg in 
=
Net. Pr ofit. After.Taxes
Sales
2,846,000,000
149,776,000,000
= 1.90%
The company is having low profitability.
3. Media Strategies
3.1.
Marketing Mix and Media Strategies
Understanding the consumer
Our goal is to provide excellent products and services to the customers. For this we have to
study the consumer behaviour. The differences in consumer behaviour can be due to culture,
habits, tradition and psychology. A marketer must understand the following issues:
* The psychology of how consumers think, feel, reason, and select between different
alternatives (e.g., brands, products);
* The the psychology of how the consumer is influenced by his or her environment (e.g.,
culture, family, signs, media);
* The behavior of consumers while shopping or making other marketing decisions;
www.consumerpsychologist.com/
Mercedes Benz sells luxurious and classy cars in their communication or media strategies,
the company should develop appropriate representation of the classy Mercedes Benz. This is in
line with Pennington (2005) saying than culture or customers’ behavior is one influential factor
in communications strategies (Pennington 2005). We will follow strategy of niche marketing
which is usually used as they can concentrate on establishing a strong image and position in
their niche. Today's customers perceive themselves as having unique needs and interests, and
they demand that businesses understand and meet those individual needs. For this Mercedes
invest large advertising budgets to assist in attracting and maintaining customers. This can be
seen through their various media mix such as billboards, television, newspapers, banner ads and
e-portal sights. Below are some media strategies for Mercedes Benz.

Web Site
The key method to inform visitors virtually via website is Mercedes Benz should
clearly define what customers expect when visiting Mercedes Benz web sites. Its official
website http://www.mercedes-benz.com or www.mbusa.com clearly show customers
what is Mercedes Benz and other enriched features that lessen customers to look at
Mercedes products.

Advertising. It composes of several initiatives such as print (newspaper, journals, and
magazines), radio, TV.
Figure 3

Mercedes Benz Fashion Week 2007
Trade shows. Trade shows typically held annually to enable Mercedes Benz to display
recent breakthrough in their product lines. Since customers who visit trade shows have
intention to buy a car, therefore, the company must design and built exhibition booth that
represent the luxurious car they offer. Another type of show are Mercedes fashion shows
to integrate the image of luxurious cars and luxurious fashion design (Figure 3)

Direct mail and Marketing Collateral. It involves the distribution of marketing kits like
brochures and mail which directly sent to customers. This is more personal approach to
target loyal customers (RD Marketing 2005).
In 2002, the company’s revenue €149,776,000,000, if we assume the communication plan
for Mercedes Benz is 0.2% of revenue, therefore, budget for Mercedes Benz advertising is about
€146,776,000
Table 1
No
1
Communication Plan
Communication
Budgets
Activities
(€)
Corporate Open House
18,000,000
Time Schedule
Once every two months
in the first year
2
Public Relations
32,000,000
3
Brochures, case studies,
32,776,000
white papers
White papers of E320
CDI
4
Website Updates
2,000,000
5
Direct Mail
12,000,000
6
Automobile
50,000,000
Any time
November 8-13
exhibitions/shows(inclu
des souvenirs etc)
TOTAL
146,776,000
Source: (RD Marketing, 2006 & Canada Business, 2005)
In conclusion, in my opinion, the process of media plan development can be complicated. The
specialists in the marketing departments research specific details and take into consideration the
needs of the customers or their target audience. If the media planning process is created well, the
money a company invests will return several times.
Conclusion
The challenge as discussed above that Chrysler face is to build durable, world class organizations
that are truly innovative. Be innovative, challenge the status quo and in organizations build a
mindset that reveres innovation and creativity. Thus this kind of approach is required to achieve
success. Thus there are key strategies that Chrysler should focus:
•
Focused alignment of resources and performance metrics throughout the organization
with the chosen business model
•
Targeted sales and marketing focused on capturing profitable business
•
Extreme attention to cost and capital management
•
Improving the robustness of business processes to scale the business
Reference:
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