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Creating a Marketing Strategy for a New Product

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Creating a Marketing Strategy for a New Product


INTRODUCTION

This coursework entitled “Marketing” is about creating a marketing
strategy for a new or existing product.

die VW und Audi Seite befindet sich noch im AufbauThe product I have
chosen to do is the new Audi A6, the latest model of car to be made
available for order in the UK in April 2004 for delivery on the 12th
of June which is set to sell from £24,175 to £42,775 (including VAT).

Audi history

The Audi badge – the 'Four Rings' – is the emblem of one of the oldest
car manufacturers in Germany. It symbolises the 1932 merger of the
four independent motor-vehicle manufacturers: Audi, DKW, Horch and
Wanderer. Together with the NSU brand, which joined in 1969, these
companies are the roots of the present-day AUDI AG. The Audi Company
currently have a reputation for producing high quality, long lasting
cars. Their slogan is “Vorsprung durch Technik” which means “Progress
through technology”. They made net profit of €816 million in 2003,
€5.4 million more than in 2002.

Audi UK

Audi UK is the most successful Audi importer in Europe and its
consistently increasing sales reflect this. Having increased sales
each year since 1999, the brand broke through the 65,000 sales barrier
in 2002 and sold 70,107 in 2003. Their market share in this year was
2.7%, a 0.6% increase on the previous year. Audi UK has been operating
as a separate company in the United Kingdom for over 10 years,
following wholesale separation from the Volkswagen brand in 1993,
although remains part of the Volkswagen Group based at its
headquarters in Buckinghamshire. There are currently 131 Audi Centres
in the country. Audi UK has helped establish the reputation of the
Audi brand making it a member of the prestige group.

The new Audi A6

The Audi Company say about the new A6:

“The creation of a class-leading executive saloon calls for a broad
range of abilities. Supple ride comfort, but with precise and clear
feedback; power, but with fuel efficiency; an exhilarating driving
experience, but with luxurious accommodation for four. The new A6
triumphantly reconciles these apparent opposites through advanced
technology and design. From the first glance, you know that the A6
marks a significant step forward for the class. A blend of opposing
qualities; but a compromise in none.”

The car made its first appearance at the 2004 Geneva Motor Show on the
2nd of March. It has been announced that prices of this car will range
from £24,175 to £42,775 which is only a 1% price increase on the old
model. The car has many new features both aesthetic and functional
such as leather seats and upholstery, V6 and V8 petrol units, six
speed gear box and improved dynamic suspension.


INFORMATION GATHERING

To find out about the new Audi A6 I must gather information about it
and also marketing theory to enable me to come up with a suitable
marketing strategy for the car.

The ways that I have gathered information about the new A6 are:

· Product brochures – I collected a product brochure and price list
from an Audi showroom. These contain information about the car; the
various types, specification, possible colours, extras, prices, etc.

· Audi website – the Audi UK website is www.audi.co.uk. This contains
information about Audi cars including the new A6. It contains a lot of
the same information about the car, but also tells you about the
company in general and has regularly updated information.

· Audi annual report 2003 – this has background information about the
company and financial, marketing and product information from the past
year. I downloaded this from the Audi website.

The sources of information I used to find out about marketing are:

· Text books – the text books I used most is Intermediate Business by
Carysforth, Rawlinson and Neild and The Complete A-Z Business Studies
Handbook by Lines, Marcouse and Martin. These both contain information
about all aspects of business theory including marketing.

· Websites – there are numerous websites, such as www.bized.co.uk,
that contain information about business theory. I mainly used these
for information not found in other sources as it is more time
consuming.

· Handouts – the three handouts given to me are Marketing, Marketing
Mix and Marketing Objectives, Strategy and tactics.

· Notes – class work notes provide background information about the
topic of marketing.

I will also carry out primary research to find out more about what the
consumer wants from the A6. This is done in the section beginning on
page 8.


INTRODUCTION TO MARKETING

Marketing – identifying, anticipating and fulfilling the customer
needs and wants in a mutually beneficial process. It must be
beneficial for both sides; it involves meeting the organization’s
objectives as well as the customers’.

Identifying customer needs is done through market research.

Anticipating customer needs is done through forecasting.

Fulfilling customer needs is done through the four P’s:

· Price – selling at the psychologically right price.

· Production – selling a range of products with appropriate features
and branding.

· Promotion – may involve adverts, sales promotion, PR, etc.

· Place – making sure the product is sold in the correct outlets.

Orientation

Market orientation – the organisation focuses on customer needs and
wants. The starting point is planning what the customer wants.

CUSTOMER à ORGANISATION

Product orientation – the organisation focuses on what it wants to do
and hopes customers will buy it.

ORGANISATION à CUSTOMER

Asset led marketing – marketing based on the strengths of the company.
Planning starts by considering company’s assets as well as customer
wants. It is a middle ground between market and product orientation.

Product orientation can be successful in uncompetitive markets (i.e.
monopolies), but market orientation is much more common as it focuses
on the customer. Market orientation is becoming more important for
business due to increased competition, shorter product life cycles,
more demanding customers, competitors know customer needs, customers
are more informed so can make a better choice and more open markets.

Audi is a highly market orientated company and the A6 is no different.
People want high quality, long lasting, efficient cars and this is
what they have aimed to produce. The car market is highly competitive
so if the company ignored the wants of the consumer they would loose
out on sales.

Marketing and other business functions

Marketing links in with every other function in the business. It both
influences them and is influenced by them. Some examples of influences
are:

· Marketing helps production determine what to produce, when to
produce it and what it will cost.

· Marketing generates revenue for the firm to make profit.

· Marketing will influence the number and skills of employees needed.

Some ways in which marketing is influenced by other functions are:

· The size of the firm will determine how much it aims to sell.

· The skills of employees may influence what the company can produce
and offer to the market.

· The finances of the firm will influence the price of the product and
the marketing budget.

Marketing mix

This is the marketing tactics deployed by a company to help achieve
its marketing strategy and objectives.

[IMAGE]The four elements of it are:

1. Price – how much the product will sell for.

2. Product – what it will do, what it will look like, etc.

3. Promotion – how the consumer will find out about it and be
persuaded to buy it.

4. Place – where the product will be sold.

It is important to have a marketing mix in which all elements
compliment each other. For example products such as Rolex which are
associated with high price are also associated with exclusive
distribution. All elements must work together to provide customer
satisfaction.


MARKET RESEARCH

Market research – gathering, recording, analysing and presenting
information relevant to the marketing process. It is part of marketing
planning at the gathering information stage.

The purpose of market research is to:

· Identify opportunities and threats (such as changes in the market)

· Analyse alternative approaches (such as changing the price)

· Review progress (such as monitoring changes in sales after a
promotion)

Before a firm start their market research they will first identify a
problem; in Audi’s case what people want from a car. As I have already
said, they are a market orientated firm so will take great notice of
this. They then decide a method of gathering data – primary or
secondary. They will then gather the data and analyse it. The findings
will be used to try and make the final product, in this case the A6,
as profitable as possible. They may also carry out further market
research after this to find out how popular it is.

Types of market research

There are two types of market research:

1. Primary – research that is gathered first hand. It is expensive,
but more likely to meet the precise needs of the company. It is
gathered by field research.

2. Secondary – research which uses existing data. It is cheaper, but
may be in the wrong format and available to competitors so it does not
give you an edge. It is gathered by desk research.

My market research

For this project I have undergone my own market research which will
allow me to evaluate Audi’s current marketing strategy and make
suggestions. As I have already said in the information gathering
section (page 4), I have collected product brochures and price lists
of the Audi A6 and looked on the company website to gather information
about the car. I also downloaded a copy of the annual report 2003.
This is secondary research as it is from a pre-existing source.

I have also carried out primary research in the form of a
questionnaire. I asked a sample of forty people eleven questions. A
sample is a small group which is thought to represent the market as a
whole. My sample of forty obviously will not be an accurate
representation of the whole market at it is so small and all those
questioned are from the same area. However, it was the largest sample
that I could practically do. The possibilities to make the results
more reliable are to do a census which involves surveying everyone in
the country, but this would be very costly and unpractical even for a
large firm such as Audi. My sampling method was convenience which
means I simply questioned people who were available for interviewing,
including my family and friends. This is the easiest sampling method
which is why I chose it, but can be unreliable as a sample
representing the whole market is not likely to be found.

The results were as follows:

[IMAGE]


1. Do you own a car?

(If yes answer questions 2 to 6, if no go to question 7)

Yes 32 No 8

[IMAGE]


2. What make is it?

Ford 6 Vauxhall 4

Volvo 3 Hyundai 1

Skoda 3 Volkswagen 2

Toyota 4 Mazda 1

BMW 3 Mercedes 2

Audi 2 Jaguar 1

[IMAGE]


3. How did you hear about it?

Television advert 10

Radio advert 2

Magazine advert 6

Other form of advertising 1

Friend 4

Review 7

Shopped around 2

[IMAGE]


4. What was the approximate value of your car when you bought it?

Less than £10,000 13

£10,000 to £20,000 10

£20,000 to £30,000 8

Over £30,000 1

[IMAGE]


5. What colour is it?

Red 10 Blue 8

Black 4 White 3

[IMAGE][IMAGE]Silver 5 Green 1

Yellow 1

[IMAGE]


6. Is it petrol or diesel?

Petrol 27 Diesel 5

[IMAGE]


7. What are the most important factors when buying a car?

(May choose more than one)

Price of
purchase
31

Cost to run (e.g. fuel consumption, cost to service) 26

Quality
30

Reputation of
company 7

Features (e.g. CD player, alloy wheels)
11

Engine
size
9

How many people can fit in
it 4

Do not
know
2

[IMAGE]


8. Would you consider buying a car over the internet?

Yes 9 No 31

[IMAGE]


9. What is your opinion of Audi cars?

Quality Price

Very high 17 15

High 16 18

Medium 3 5

Low 1 0

Very low 0 0

Not sure 1 0

Never heard of them 2

[IMAGE]


10. Did you know Audi were bringing out a new car? (The A6)

(If yes answer question 11, if no end questionnaire)

Yes 7 No 33

[IMAGE]


11. Where did you here about it?

Advertising 2

Review 3

Internet 1

Car show 1

[IMAGE]


END OF QUESTIONNAIRE

[IMAGE]


Here are some of the results shown graphically:

[IMAGE]

[IMAGE]There are a number of conclusions that can be drawn from these
results. They give a good idea what the marketing mix should be like
as many of the questions relate to the four P’s – price, product,
place and promotion.

Question four relates to the price of the product. It shows most
people bought cars for less than £20,000 – 23 out of 32. The price
range given to the A6 by Audi is above this so lowering it should be
considered. However, question two shows that very few people own a car
from Audi or one of its main competitors – BMW and Mercedes. This
means that many people in surveyed are not in the target audience of
Audi so are not as relevant to the questionnaire. This demonstrates
the unreliability of my information so brings its significance into
question. The other side of this argument is that Audi should try to
bring these people into its target audience as their existing one is
small and so should listen to their wants and needs. In my opinion if
Audi bring out a cheaper car it will demean their reputation for
producing high quality cars so is not a good idea. It may mean they
lose their existing audience so would be a great risk. Question nine
also relates to price as it shows people generally think Audi’s prices
are high. They also think the cars are high quality though so this
means in the consumers’ eyes they are still providing value.

Questions five and six relate to the product itself. Question five
shows people like a variety of colours, but the most popular are red,
blue and silver; ten red, eight blue and five silver. A range of
colours should be offered for the new A6 particularly those which are
most popular. Question seven shows petrol cars are more popular than
diesel; 27 people own a petrol car and only five diesel. The Audi A6
will definitely be offered as a petrol car and there are sufficient
people who prefer diesel to also make this an option. Audi will be
offering the A6 with both petrol and diesel engines.

There are no questions that relate to the place of the product as this
will be the same as it is for the A6 as it is for all other Audi cars;
they are sold in the company’s showrooms all over the country. This is
no real alternative to this approach.

Questions three, ten and eleven relate to promotion. Question ten
shows that currently very few people have heard of the A6. This
suggests that up to this stage promotion of the new A6 has been
insufficient. However, the car is not released until June so the firm
have time to put this right. It is likely they will advertise much
more frequently closer to the release date. The main ways people have
heard of the A6 are advertising and reviews. This shows that the car
has already been reviewed in a number of car magazines and there has
been some advertising. There will need to be more in the future to
increase awareness amongst consumers. Question three shows that there
are a variety of ways in which people find out about cars. Television
adverts (ten people), magazine adverts (six people) and reviews (seven
people) are the most common ways for people to find out about cars.
This gives an indication of what forms of promotion, particularly
advertising, I should chose for the A6.

Surveys like this are useful as they are designed specifically for the
purpose they are being used for. However, there are some problems.
Most notably, I have used a small sample size so the results will not
be particularly reliable. There may also be some bias in the results
as most of the people asked are people I know so will probably not be
representative of the whole population. Also, of the people I asked
many would not be in the target audience of the Audi A6, such as
people who do not own cars or who own cheaper cars.

Firm’s market research

If a survey is carried out by a large company, such as Audi, they will
use a much larger sample of thousands of people. This will make their
results more reliable and more likely to show the truth. They will
also use more sophisticated statistical methods in the way they choose
their sample and represent results. As I have said, I used convenience
sampling which can be unreliable. Audi would be more likely to use
quota sampling which is only asking people with certain
characteristics. This means they can select their target audience for
interviewing. They may also choose cluster sampling which is surveying
people from a small geographical area. If this is chosen it should be
done from the area(s) of greatest sales. The drawbacks are it may not
represent the whole population so may be biased.

They would also be likely to carry out a wider range of types of
research, both primary and secondary. Primary research can be gathered
either through surveys face-to-face, by post, on telephone, etc or
experimenting by selling the new product in small test market. Using a
test market is unpractical for a product as expensive to produce as a
car as the cost would be too high to build a prototype and then
redesign after it was unsuccessful would be very expensive.

The secondary research I have done was actually produced by Audi so
theirs was obviously different. They would have used:

· Back data – past sales figures, production records, etc. These show
the firm its previous successes and failures so allowing them to see
what the consumer liked, what their strengths are and what they need
to improve.

· Government – government data such as census results, social trends,
etc. These can allow the firm to see information about the consumer so
they can find out how to appeal to them. For example, in an economic
recession people will have less money to spend so it would be
advisable to lower the price of goods to maintain sales.

· Independent forecasting groups – this means that another company
does the research which is specialised in research. An example is the
Henley Centre which is an international strategic marketing
consultancy, focusing on identifying and unlocking customer value from
consumer insight.

Although firms have to spend a lot of money on market research, it is
a worthwhile activity and it gives the firm an idea of what the
consumer wants. The costs of not carrying out market research are
often greater as products are more likely to be unpopular and so make
a loss. It reduces the risk of failure.


ANALYSIS OF CURRENT MARKETING STRATEGIES

All firms in the world have a marketing strategy for their products as
it is one of the most important factors in determining whether a
product is successful or not.

Nike – a successful marketing strategy

Nike Logo

In my opinion Nike have one of the most successful marketing
strategies in the world. They have a symbol/logo which is a tick. This
is very well known that they often do not include the name Nike on
products or advertising as people will know what it is. They also have
slogan, “Just do it”, which is also well known. They compete in a mass
market with much competition from firms including Addidas and Reebok.
They have a good range of products covering all areas of Ansoff’s
Matrix – market penetration, new product development, market
development and diversification.

For a marketing strategy to be successful it must match the right
products with the right market, build on the firms strengths, defend
against weaknesses, exploit opportunities, protect against threats and
achieve the firm’s marketing objectives. In my opinion they do all of
this very well.

The products they produce are high quality, fashionable and affordable
making them appeal to the intended market, younger people mainly
teenagers. Their advertising campaigns and other promotions also
appeal to this market, which often include celebrities such as
Ronaldo, Ronaldinho and Figo who are all known for their high sporting
ability so help maintain the company’s image and creates product
differentiation. They also design and manufacture the football kits of
these players’ countries (Brazil and Portugal) and others which is
another form of promotion.

They often hold sporting events such as the football tournament held
inside the Millennium Dome after its closure which promotes the
company and is taking advantage of an opportunity. They protect
against threats such as changes in the market and increased
competition by offering such a wide range of products including sports
clothes, casual clothes, trainers, caps, balls, sports events and
more. From all of this I am sure they achieve their marketing and
corporate objectives which are likely to be increase market share,
high levels of long term profit and diversification into new markets.
These targets will have exact values in percentage or dollars.

BMW – a rival company’s marketing strategy

Logo BMW

One of Audi’s and therefore the A6’s biggest rivals is BMW; they offer
similar style, quality and price cars. Both aim for product
differentiation through a highly reputable brand name, BMW slightly
more so allowing them to set the price of their cars high.

BMW are currently a successful company so must have a good marketing
strategy. Last year the BMW group sold 117,804 cars an increase on the
106,972 sold the year before; an increase of over 10%. This is more
than the 70,107 sold by Audi. BMW spend a lot of money on research and
development for their cars to improve the quality and safety of the
final product. They are currently undergoing the “H2ague Project”
which is attempting to design a car fuelled by hydrogen, but at the
moment this is simply improving the company’s image as one which tries
to be environmentally friendly.

They advertise a lot on television with adverts trying to show the
quality of their cars. They also advertise in other ways including on
billboards and on the radio. They have a slogan “Sheer driving
pleasure” which fits in with the image they try to create. They appear
to have a successful marketing strategy so aspects of this can be used
for the Audi A6.


EXTERNAL INFLUENCES

External influences – the factors outside a business over which it has
no control. These are often called the PESTE which stands for
political/legislative, economic, social, technological and
environmental.

[IMAGE]

There is also another major influence not mentioned in the PESTE –
market conditions:

· Structure – degree of competition, conduct

· Market size – value, volume

· Rate of growth – expanding, stable, shrinking, saturated

· Capacity – degree of utilisation, shortage/excess

· Rate of change – customer/consumer demands, supply of materials

· Rates of return – profit margins, rate of capital employed

· Power of buyers

· Power of suppliers

All of these factors affect businesses, but in different ways, and to
different extents. Also, not all directly affect marketing such as
health and safety legislations in the production plants, but they do
have an effect. In this example more will have to be spent in
factories to ensure they are up to standard which means less can be
spent on marketing including promotional budget, the price the product
must be sold for and the quality the product can be made to.

One of the most influential to marketing the Audi A6 is the economic
environment. The A6 is an expensive car so if the economy is in
recession and people are earning less they will not be able to afford
such cars and will have to find a cheaper alternative. Being sensitive
to changes in income, means that the A6 is an income elastic product.
The formula for income elasticity is:

Income elasticity = % change in demand

% change in income

[IMAGE]The A6 is highly income elastic, very sensitive to change in
income, and is a normal product, meaning if income increases, demand
increases. The opposite are inferior goods for which demand increases
if income falls. This occurs for products that are a cheaper
alternative to another. For example, if income falls, Audi may lose
sales to Volts Wagon.

[IMAGE]

[IMAGE]

Changes in economic condition and so income occur in a cycle which is
shown in the Business Cycle.

[IMAGE]

Recessions in the economy may happen as a result of high inflation,
high interest rates, high unemployment and high taxation. Audi UK
would also be positively influenced by a strong pound as they can
import goods for relatively less and so spend more on other things
such as marketing. However, this may also discourage foreign
investment.

Income is closely linked to the business cycle; during slumps wages
fall and during booms they increase. As the A6 is an income elastic
product they must pay close attention to the business cycle. If there
is a boom they can afford to charge higher prices for their cars as
demand will be higher, but if there is a slump people will not be able
to afford the high prices.

The actual changes in real GNP which have occurred over the past six
years are shown below.

Real GDP Quarterly Growth (%)

This shows there has been consistent growth since 1997. This suggests
to that the price of the A6 can be set high as people will be better
off. This allows Audi to produce a higher quality car by using higher
quality parts and production processes as they can afford to spend
more. It also allows a greater marketing budget if predicted revenue
is greater.

[IMAGE]

The above image shows the current FTSE 100 index from the London stock
exchange. As you can see, there has recently been a recession so the
exchange is currently in a slump, although looking at the scale on the
time axis, I cannot tell if this is only very short term. This
suggests that Audi should lower prices to gain sales as it is a time
of slump. However, there has been a slump for a considerable length of
time now so a recovery may occur. This would suggest to Audi that they
should charge a high price in the near future and as the A6 is not
released until June, it seems a good idea to stay with the initial
idea of charging a high price.

Currently unemployment is at a record low, only 4.7%, as can be seen
in the graphs below.

[IMAGE]

This again gives the impression that the current economic climate is
good and so a higher price can be set for the A6 and more spent on
production and promotion. As the A6 is income elastic this is very
important. This graph proves that the trend shown in the previous one
is only very short term.

Another important one is market conditions. For example if the market
became more competitive they would have to undertake more promotion
and lower prices to gain a competitive advantage. This would affect
profits, probably in a negative way. The growth rate would be
important as an expanding market would mean the company has a bright
future, but in a shrinking market they would have to try and
diversify. All of these factors would have to be considered when
producing and marketing the car (or any new product).


MARKETING PLANNING AND AUDITING

It is important for a business to plan for the future effectively if
it is to be successful and likewise it is important to have a clear
marketing plan for products to sell well. It is done by every firm,
including Audi, from when the company is first set up but is not
always as formally done. This can be done systematically using the
marketing model.

Marketing model – this sets marketing objectives, audits the firm’s
present position and develops and implements plans to achieve
objectives. It works as follows:

[IMAGE]


[IMAGE][IMAGE] Set corporate objectives e.g. profit, growth

[IMAGE]


[IMAGE] Gather information using market research

[IMAGE]Assess existing situation (known as market analysis) produce
SWOT analysis (strengths, weaknesses, opportunities, threats)

Set marketing objectives e.g. market share, revenue

[IMAGE]


[IMAGE] Select marketing strategy using Ansoff’s Matrix

[IMAGE]Implement marketing plan using marketing tactics i.e. marketing
mix and budgets

[IMAGE] Review using market research

The first thing done by the marketing department is to carry out
market research. This has already been explained in the market
research section (page 8).

They then have to assess the current situation by performing a market
analysis which is usually done by performing a SWOT analysis. SWOT
stands for strengths, weaknesses, opportunities and threats. The firm
must evaluate all these areas and consider them when creating a
marketing strategy and tactics.

Here is a current SWOT analysis for Audi:

Strengths

· Reputation of company very good.

· Spending power – to produce quality cars and large marketing budget.

· Success of previous models of car including the old A6 which had a
good reputation.

· Quality of cars – can charge higher price and builds company
reputation.

Weaknesses

· Have to charge a high price for A6 to cover costs (but potential
customers will realise this).

Opportunities

· None of main competitors have released a similar price car recently
so chance to gain market share.

· In high growth market.

· Good current economic climate (discussed in external influence
section, page 16).

Threats

· Competitor may release a new car shortly after so attracting many
customers away from Audi.

· Reputation of competitors such as Mercedes and BMW will cancel out
the advantage this would give Audi.

· A6 is an income elastic product so falls in income will result in
large loss of revenue.

After a SWOT analysis has been produced, the firm can take one of two
paths:

1. Matching – this involves building on the firm’s strengths and
taking advantages of opportunities.

2. Conversion – this involves creating strategies that turn the
company’s weaknesses into strengths and threats into opportunities.

As well as producing a SWOT analysis a firm will have to examine
market conditions before producing a marketing strategy. The main
things which examined are:

· Market size – the total size of the market the firm is working in.
it is measured in terms of volume or value (volume x price). The car
market is currently a large one.

· Market share – the percentage of sales one brand has compared to the
total market. In 2003 Audi had 2.7% market share in the UK which seems
small, but it must be taken into account how many car companies there
are and Audi’s market share in Germany, the home country of Audi, is
three times this.

· Market growth – the rate at which the size of the market is
increasing. From 2002 to 2003, Audi UK had increased sales of 6.9%,
but only increased market share of 0.6% so the market must be
expanding and at quite a fast rate.

· Segmentation – appealing to different sections of the market in
different ways by changing the marketing mix. For example, changing
features of the product so it appeals to different people – more
luxuries for those better off, different size engines, etc.

The next stage is to set the marketing objectives considering the
corporate objectives. This provides targets for the department. I have
not been able to find out the marketing objectives of Audi, but they
are likely to be increase market share and revenue (both with
quantitative values). My marketing objectives for Audi would be these
things and also to enhance the brand reputation which I believe is a
vital part of Audi’s success; it provides them with a unique selling
point and so is important to differentiate the product from those of
competitors.

After this, a marketing strategy is selected taking into account the
marketing objectives, findings of the SWOT analysis and market
conditions. This will then be implemented through marketing tactics –
the marketing mix. So to achieve the marketing objectives all aspect
of the marketing mix must be right – the car must be sold at the right
price, in the right places, promoted well appealing to the target
audience and designed and produced well.

My SWOT analysis of the A6 shows that one of Audi’s main strengths is
the company’s reputation. This should be built on through producing a
high quality car and using premium pricing. They also have a very
large spending power as they are a large multinational company who
have been very profitable in the past. This means that they can spend
a lot on promotion of the A6 to give it a competitive advantage. This
would give them an advantage, but all of their main competitors can
boast equal or greater spending power making it a necessity to spend
highly on promotion and making the product as good as is possible by
adding additional luxury features. Audi also have strength in the
success of their previous cars, including the old A6. This enhances
the company image and makes it easier to launch a new product, like
the A6, as people know it will be good quality. A high price will have
to charged for the A6, but this is likely to be less important as to
the target audience this is not the most important factor. A high must
be charged to cover production, transport and promotional costs.

The final part of the process is reviewing the marketing plan after it
has been implemented. This is something to be done at a later date
after the product has been on sale for a suitable length of time. It
can be done through further market research into customers’ opinions
of the car and how well it has sold. To properly evaluate the
marketing plan, there must have been clear targets with time
restrictions. This shows the importance of having set good objectives.
The information from this is then used to set new corporate objectives
and the company’s position must also be reassessed.

The value of having a good marketing plan, created through the method
shown above, is:

· Ensures continual evaluation of objectives and strategies

· Ensures efficient use of resources

· Establishes criteria for success; this helps motivate and makes it
easier to monitor progress

· Improves decision making

· Involves people in discussion so helps improve their commitment

· Involves analysis so makes organisation better prepared for change

· Coordinates activities

· Avoids wasteful or conflicting activities

· Involves rational decision making based on quantifiable data.

The marketing plan will affect other functions within the business.
One example is the marketing plan determines what is produced, how it
is produced and when it is produced which affects the production
department. It determines the number and skills of employees required
which affects human resource management. Also, it determines the
design of the product, the cost to make the product (through choice of
material, production methods, etc) and the price of the product which
affect the finance department.


DEVELOPING A MARKETING STRATEGY

There are many different marketing strategies that may be adopted by
the company and often many are used at the same time for different
products. For example the marketing strategy of the new A6 will e
different for that of the A3 which is a cheaper car and is already
well established in its market. The marketing strategy greatly depends
on what type of product it is for. This can be assessed using the
Ansoff’s Matrix.

Ansoff’s Matrix – this it can be used to analyse marketing strategies
as shown in the marketing model, page 21.

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Existing New

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Existing Market penetration New product development

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New Market development Diversification

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As you can see there are four areas to the Ansoff’s Matrix:

1. Market penetration – attempt to gain a greater market share of an
existing market. Involves changing marketing mix.

2. New product development – developing a new product for an existing
market.

3. Market development – launching an existing product into a new
market.

4. Diversification – entering a new market (one which that firm is not
yet in) with a new product. This is can be very risky.

The Audi A6 falls into the category of new product development as it
is a new product that has been developed, but is in a market where
Audi already compete. The new product development process begins with
idea generation both internally from research and development and
externally from investors, competitors or consumers. They then analyse
the ideas to assess their feasibility and develop them through
prototypes. These are then tested for safety and quality. In the case
of cars there are vigorous safety checks as the car must meet certain
requirements. There is then test marketing in selected outlets before
the launch nationally.

Another influence on the marketing strategy employed is the type of
market the product is competing in. There are two main types of
market:

1. Niche market – a small market in which major producers are not
concerned.

2. Mass market – market with a large volume or value of sales.

The main advantages of a niche market are it fits with limited
resources, avoids competition with major firms, returns are relatively
high and fits with a unique selling point (USP). The advantages of
mass marketing are higher returns, can exploit a brand name, economies
of scale and less vulnerable to changes in market.

The car market is clearly a mass market as the value of sales is high.
However, there is a wide range of quality and price available and Audi
is in the upper range so this market is a highly differentiated mass
market. The main competitors to the A6 in this market are BMW and
Mercedes, who also produce high value cars.

As Audi are competing in a mass market, it is vital for them to
undergo extensive promotion. This will attempt to give the A6 a
competitive advantage over its rivals as consumers become aware of the
advantages the A6 offers. They should promote using the brand name as
it is currently has a good reputation and so will help improve sales.
If the brand name is enhanced through the A6, it will help Audi in the
future.

There are also a number of business models and diagrams that can be
used to help determine the marketing strategy chosen by the company.
Two such models are the Product life cycle model and the Boston Matrix.

Product life cycle model

This is represented by a line graph as shown below.

1. Development 2. Introduction 3. Growth 4.
Maturity 5. Decline

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The shape and length of the line will vary from one product to the
next as different products have different life spans. For example,
Cornflakes have a long life cycle, but Yo-yos had a short life cycle.
The stages shown on the product life cycle are:

1. Development – product is developed and tested. In the case of a car
such as the A6 this may take years to ensure the car meets safety
requirements and is made the best it possibly can.

2. Introduction – sales start slow. Some distributors may be reluctant
to take on an unproven product. (This will not affect the A6 as Audi
have their own showrooms.) Heavy promotion is necessary, the product
is high risk and the firm cannot take advantage of economies of scale.
This stage will be short for the A6 as customers can order it before
long release and it is a proven product (the old A6) so people will
not be put off buying it.

3. Growth – sales begin to grow rapidly. Cost per unit falling due to
economies of scale. Profits usually made.

4. Maturity – sales growth is slower. Promotion often tries to
differentiate to gain new customers. Brand loyalty is important here.

5. Decline – sales decline. Profits fall and subsidiaries appear. The
product is often withdrawn from the production line. Decline in sales
of the old A6 may have been the reason for Audi releasing a new one.

The main point of the product life cycle model is to highlight the
typical stages of a products life so allowing the company to prepare
for the future and adjust its marketing strategy. The A6 is currently
in the introductory phase. At this stage the marketing objective is
likely to be to attract new customers and promotion is informative.

There stage of the model can be very costly for a company. There must
be heavy spending on promotion to make consumers aware of the product.
A range of form should be used, including heavy advertising. The
pricing method also needs to be carefully considered. In this type of
market, a differentiated mass market which is growing quickly, they
can set a high price as this is unlikely to deter consumers. However,
if the price is set too high, it will price the A6 out of the market
meaning it will not be competitive and so will fail.

Many people believe that the decline in sales of a product is
inevitable. The reasons for this are changing social climate, changing
tastes, developments in technology and new product innovation.
Arguable though, much decline in sales is due to poor marketing which
does not react to changes in the market. The lifecycle of the product
will be shorter if there is rapid technological change, a high degree
of innovation, customers’ tastes change rapidly and the product is
badly marketed.

In my opinion the life of the A6 will be of a decent length with
adequate marketing – probably a number of years. This is because new
cars in its class are not designed very often and so it does not have
a large number of competitors. However, I also believe that its
decline is inevitable as there is constant change in the car market in
both taste and technology.

As with any model, the product life cycle model has problems. Firstly,
it only represents one product and does not consider the firm as a
whole so may mislead the firm into their future prospects; if they see
they have a product in decline they may think the future will not be
prosperous, but if they study all products and find they also have
some in the development or launch stage the outlook will be very
different. It also can only be used to look back so the firm cannot
tell when a product will go into decline until it happens. Finally, it
leads firms to believe decline is inevitable so they let it happen
through lack of investment in marketing. If extra marketing through
promotion for example where undertaken the product life cycle could be
greatly extended. Rather than the traditional life cycle, a product
with greater investment late on will look as follows:

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Boston Matrix

The Boston Matrix is a method of product portfolio analysis. This is
used to examine the existing position of the organisations products in
their markets to enable better decision making on aspects including
marketing strategy. The value of it is that it examines all the firm’s
products together, provides an overview and helps with marketing
planning.

The Boston Matrix shows what percentage of the market each product has
and the rate at which the market is growing.

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The car market is a fast growing one and the A6 is a new product, so
would currently be considered a question mark. However, it is likely
that it would soon become a star if it sells well. The Boston Matrix
shows us that the A6 will need investment (much will already have been
spent on design and production) in promotion and other areas.

In general, after a firm have evaluated a product in the Boston Matrix
they can do one of four things:

1. Hold – attempt to maintain the existing market position (with
strong cash cows).

2. Build – invest to develop position in market (with question marks).
Involves sacrifice of short term profit.

3. Harvest – aims for short term profit to get the most out of the
product (possible with cash cows).

4. Divest – get rid of the product (with dogs).

It is likely that and advisable for Audi to build for the A6. This
will help increase market share and result in long term profit and
targets being met. This will involve major short term investment so
reduce short term profit. One way to develop market position would be
through heavy promotion. Making the consumer aware of the product and
persuading them to buy it. They must also set a price which is
competitive and right for the product’s market, the company’s image
and considers external influences.

It is important for a firm to have a balanced portfolio i.e. an
appropriate mix of question marks, stars, cash cows and dogs. This
allows the company to “milk” cash cows to provide money to invest in
question marks and support stars such as the new A6. If a company has
too many dogs it has a high risk of failure as it has no products for
the future. The old A6 was a dog so the company decided to divest and
focus on new products. This is important to keep the future prospects
of Audi good. If a company has too many cash cows it is likely to be
profitable in the short term, but it is not building for the future.
If a company has too many question marks it is high risk and they will
drain finances. Audi also has stars such as the A4 which has been its
best selling model over the past few years. This means Audi have a
well balanced portfolio so are in good condition now and should be in
the future. The A4 is a slightly cheaper model than the A6 so this
shows that price is important to the consumer.

This model relies on two things which do not always hold true:

1. If a product’s market share increases it has been successful:

This will not be true if the market itself is shrinking. For example,
if the firm increases its market share by 5%, but the size of the
market has fallen by 10% the firm has actually sold less.

2. A rapidly expanding market is the best place to be:

For a small company with only small spending power this will not be
the case as they will receive too much competition and so be forced
out of the market. They would prefer to be in smaller, niche markets.

Overall, these two models have limited use in helping develop a
marketing strategy. They are both oversimplified and so do not
properly reflect the real world. They are good for showing a general
pattern and may be good for giving some guidance to a firm, but should
not be used too strictly. The market changes regularly and so does
competition, so a company should be ready for this and not for example
rely on the recommended style of promotion from the product life cycle
model (informative in introduction, persuasive in growth,
differentiating in maturity and reminding in decline). For example, if
income fell then, as Audi’s products are income elastic, demand would
fall greatly. This would change the expected pattern of either model.
However, current economic conditions are good and unemployment is at a
record low (4.7%) so it does not appear this will be a problem in the
near future. There is therefore likely to be the opposite effect;
there will be higher demand as people are better off so look for
higher quality goods. As a result Audi should make the appeal of their
promotion slightly more widespread as they are trying to appeal to new
customers. The price of the A6 can also be set higher to gain the
maximum possible profit as people are willing to pay more.

There are also other things that must be considered when setting a
marketing strategy. Two of these are market segmentation and cost
leadership vs. differentiation.

Market segmentation

This is identifying groups of similar needs and wants and then the
firm develops an appropriate marketing strategy for each segment. The
aim is to meet the customers’ needs more precisely, but the problem is
it can cost more to develop different versions of a product or
service. It is part of the market analysis stage of the marketing
process.

Method of market segmentation

Examples

Audi’s use

Age

Magazines for different age groups, adult snacks, car insurance, club
18-30 holidays.

Target audience is mainly middle aged people as they are likely to be
able to afford the A6

Gender

Certain cars targeted at women, toys aimed at boys or girls.

It is mainly males who Audi appeal to which is common for cars in this
class. However, they must also appeal to women as they do also buy
Audi cars.

Socio-Economic group*

Newspapers.

Audi will target mainly the upper groups (A, B and C1) and in the A6’s
case mainly B as it is in the middle of Audi’s price range of cars.

Location

Board games sell better in colder climates, outdoor games are more
popular in warm regions.

Certain areas which are wealthier should be targeted as it is mainly
middle class the A6 will be sold to such as Surry.

An individual’s stage in the life cycle

The housing market consists of first time buyers, people trading up
and retirement buyers.

Audi buyers are likely not to be first time buyers as they are
expensive cars. They must therefore appeal to a more knowledgeable
audience.

Family size

Family packs of food, design and houses.

Audi do not sell family cars so must not target their promotion at
families.

Usage rates

Frequent wash shampoo.

The usage rate of any car is low, many years, and it for Audi it is
likely to be even longer as they make high quality cars. This fact
should be communicated in promotion.

Lifestyle

Convenient, microwavable food for young, single people.

It will be mostly wealthy,

Benefit

Toothpaste for different benefits, including taste, fresh breath and
white teeth.

The benefits of Audi are the company reputation and high quality.
Therefore, they must target people looking for this rather than low
price.

Psychographic (motives for buying)

Reasons why people buy chocolate.

Brand name is a psychological reason for buying an Audi and so people
who this is important to, wealthy people, should be targeted.

* Socio-Economic groupings:

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A upper middle class high managerial
profession e.g. lawyer

B middle class middle
managerial/administrative/professional e.g. manager

C1 lower middle class supervisors, clerks,
juniors managers e.g. shop assistant

C2 skilled working class skilled manual worker e.g. mechanic

D working class semi
skilled/unskilled manual e.g. cleaner

E subsistence level unemployed or state
pensioner

Segments are attractive to a firm if they are:

· Accessible – the firm can provide the goods and services which are
required

· Profitable – the rates of return justify the investment and risk

· Sustainable – will justify long term involvement

The advantages of using the segmentation method in the marketing
strategy are the firm can identify requirements of different groups
more precisely, meet the needs of groups more effectively than
competition and it avoids wasteful marketing activities not targeted
at that group. The disadvantage is it may reduce possibilities of
economics of scale if the firm produces for many different markets.
However, it can be seen that Audi only target one market segment –
wealthy people who are looking for a high quality car with a good
reputation. These people are likely to be middle aged, without large
families and probably male. This has allowed the target audience of
the A6 to be identified and so promotion can more effectively appeal
to them.

Audi uses market segmentation in the current marketing activities.
They target mainly the upper class groups (i.e. A, B and C1). They do
this by creating an impression of quality and therefore charge high
prices. Also, their promotions, which include television adverts,
posters and magazine adverts, target these people by again trying to
emphasise quality over price and so still aim to provide value. They
use location as they have most of their dealerships in the firm’s home
country, Germany, as this is where they get most sales. Their
dealerships in the UK are in desirable locations with high class
residents such as Surry and areas of London.

Cost leadership vs. cost leadership

Cost leadership – firm attempts to produce similar products to the
competition, but at a lower cost so they can sell for a lower price
e.g. Tesco

Differentiation – firm attempts to provide more benefits than the
competition so it can justify selling its products at a higher price
e.g. Ferrari (a differentiated niche market). Within mass markets,
this is used to gain market share.

Problems will occur if these strategies are not adopted properly. For
example, if a firm charge a higher price, but do not provide extra
benefits or a firm charge less for their goods, but they are lower
quality. In both these situations the customer does not get good value
for money. As I have said, the A6 should aim for premium pricing, so
it is vital that extra benefits are provided to make this successful.
The car has already been designed with leather seats, CD player air
conditioning as standard in an attempt to do this. There should also
be numerous optional features for people who want even more from their
car.

Overall, the factors that affect the choice of marketing strategy are:

· Resources – financial, marketing, human resources, etc. Audi are a
large multinational company with extensive resources at their
disposal.

· Findings of SWOT analysis – firm’s strengths, weaknesses,
opportunities and threats in the market.

· Market conditions – type of market, level of competition, level of
growth, emerging segments, etc. Audi compete in a differentiated mass
market.

· External factors – PESTE (political/legislative, economic, social,
technological and environmental influences).

· Marketing objective – what are they? My marketing objectives for the
A6 were long term profit, gain in market share and enhance the Audi
brand name.

The marketing strategy adopted by Audi is new product development
through the A6 (this is a new product placed in an existing market).
In the past their marketing strategies have aimed at differentiating
their cars from those of competitors in mass market. This ties in with
the marketing objective of trying to gain market share and will
hopefully result in profit as well. This is the same strategy I will
use for developing tactics for the A6 through the marketing mix.


MARKETING MIX FOR THE AUDI A6

Price

The factors that influence the price of a product are:

· Costs – the firm will want to cover costs to make a profit. The
costs for making and testing a car such as the A6 are very high;
therefore the price is likely to be high.

· Price elasticity of demand – how sensitive the product is to change
in price. If it is sensitive then lowering the price will result in an
increase in turnover. It is probable that products of a highly
reputable company, such as Audi, will be price inelastic as the market
they appeal to price is not the most important factor. This means
price should be quite high.

· Competition – are there any similar products currently available?
There are no new direct competitors to the new A6, but there are
existing competitors. This means they should try and set the price
similar to or lower than those.

· Stage of product life cycle – it is likely a product in the growth
phase will have a higher price than one in the decline phase. The A6
is a new product so the price can be high as it has cutting edge
design features.

· Government – government adds tax to products making them more
expensive which must be considered. VAT is charged on cars.

· Other external factors – PESTE (political, economic, social,
technological and environmental factors). These have already been
discussed in the External Influences section, page 16.

· Rest of marketing mix – the price must compliment other elements of
the mix.

The pricing method chosen will also be affected by the price
elasticity of demand of the product. This measures the responsiveness
of demand for a product to change in price. (Both measured as
percentage of total.) It is calculated using the formula:

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Price elasticity = % change in demand

% change in price

If percentage change in demand is greater that percentage change in
price then the product is price elastic. Raising the price will result
in a loss of revenue. If the percentage change in demand is less than
the percentage change in price then the product is price inelastic.
Raising the price will result in a gain of revenue.

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The A6 will be price inelastic because it is a highly differentiated
product. This means that people will be willing to pay more for the
benefits it provides – reputable brand name, added luxury feature,
good performance, etc. Also, they are regularly purchased as company
cars so if someone else (i.e. the company) is paying for it price will
not be so important. Selling price inelastic is generally considered a
good thing by a firm as it allows them to increase the price and gain
revenue. If a product is price elastic lowering the price should
result in an increase in revenue, but this is a risk as it relies on
demand increasing. If this does not happen as a result of external
factors, the firm could lose a lot of money. As a result of being
price inelastic, Audi have increased prices by 1% on average from the
old A6 which should result in increased revenue. Also, this price
increase is only small so people will not feel like they are being
overcharged, so it is psychologically the right price.

Audi will charge a high price which seems a good idea. High price is
usually associated with:

· Heavy branding – Audi is a reputable brand.

· Few competitors – no new cars in the A6’s class.

· Unique selling point – brand reputation, no new competitors, quality
design features such as the latest in-car technology and new engines.

· High unit cost – building prototypes, testing and production are all
expensive.

· Limited distribution – only sold in Audi showrooms and on website.

There are various possible pricing methods for a new product:

· Price skimming – price is initially set high to gain maximum short
term profit then lowered. This is unlikely and company history shows
car prices stay constant.

· Penetration pricing – low price set to gain market share then it is
raised. This will not be used as cars are very expensive to produce so
it would be too costly.

· Competitor based pricing – in competitive market prices are set the
same as competitors. This will be considered to ensure the A6 is
rejected by customers in favour of competitors, but will not be a huge
influence as the market is not the most competitive.

· Demand based pricing – firm estimates what people are willing to
pay. This will be used form past sales figures of the old A6.

· Cost plus pricing – the firm adds an amount to the unit cost. This
is simple and popular. This may be used as it will ensure the cars are
never being sold at a loss and is simple to put into practise.

· Predatory pricing – price is set low to undercut and remove
competitors then price is risen. This will not be used as a car is too
expensive to get into a price war. All firms will lose out.

· Price discrimination – charging different prices to different market
segments. This is used more on services (e.g. senior citizens’
discounts, peak/off-peak train fairs) so will not be used by Audi.

· Psychological pricing – focuses on the consumers perception of
price; if it is too high people will feel they are not getting value
for money, if it is too low people will think the product is very poor
quality or faulty. This must be considered.

Typical use of pricing schemes:

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From my analysis of my questionnaire, the external influences and
Audi’s strengths, premium pricing appears the best pricing strategy
for the A6. Audi have a good company reputation so this provides
differentiation which is huge advantage in a mass market. The
questionnaire shows that most people believe Audi cars in general are
good value so keeping high prices is the sensible option. Having
analysed external influences, the most important appears to be the
economic climate which is closely linked to wages. Audi cars are
income elastic so as there are currently good economic conditions,
there will be high demand and consumers will be willing to pay higher
prices. Audi already have a highly reputable brand which means people
will be more willing to pay a high price for a new product as they
know what to expect from it.

The price for the A6 given by Audi is £24,175 to £42,775 which seems
sensible and I believe is the best price for the product after having
considered all the influences. This is the price that is likely to
gain Audi the greatest market share and make the most profit. It is
psychologically right as it has been proven people will pay this in
the past, it is similar to competition such as BMW and it has not used
unsuitable pricing methods such as predatory pricing. Also, the A6 is
price inelastic so a higher price (these prices are up 1% from the old
A6) will result in an increase in revenue and hopefully profit.

Audi’s main competitor is BMW, so the A6’s main competitor is the 5
series which is priced from £26,100 to £42,350. The A6’s starting
price is below this by £2,000 so they may appeal to people looking for
a slightly cheaper car. This is a good idea for Audi as they are
appealing to a slightly larger audience and if the A6 does not offer
more features than the 5 series, it has a lower price so will still be
better value for money.

Product

The product must have quality. The level of quality depends on:

· Performance – speed, economy, acceleration, etc.

· Features – air conditioning, CD player, cruise control, etc.

· Ease of servicing (how easy it is to fix) – service by professional
mechanics at company garage.

· Reliability – very reliable as Audi are high quality cars.

· Aesthetics – choice of colours, choice upholstery, alloy wheels,
etc.

· Brand name – Audi, highly reputable.

A product can be examined for these things and others on three levels:

1. Core – benefits of the product.

2. Tangible – the features of the product (e.g. appearance,
performance).

3. Augmented – other services or benefits that are obtained (e.g.
servicing, guarantee).

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The A6 should aim for product differentiation. This means Audi should
try to distinguish the car from its competitors in the eyes of the
consumer. This will be an attempt to get customers from the
competition. It will be done by adding features to the car which add
value. Something which adds value will increase the price of the
product by more than it costs to produce. Examples of this are alloy
wheels, CD player, sixth gear. If a feature costs more to produce than
it adds to the value of the product it should be removed.

Audi have added features to the A6 to improve its performance
enjoyment to drive. It uses a new engine design which is renounced for
its responsiveness and high speed cruising ability. There are numerous
safety features on the A6 including anti-lock brakes, traction control
system and automatic tyre pressure monitoring. These features appeal
to people’s emotion of fear so gives the car another selling point.

Compared to BWM, a main competitor, many of the features are similar,
but use different names. This shows both company’s are aiming for
differentiation. These features add value, particularly as they are
unique, so are good for the product. In my opinion the A6 should have
limited features as standard as it allows a lower basic price for the
car and people can choose to pay for only what they want. However,
there should be some standard features as it improves Audi’s image of
producing high quality cars.

The A6 is an example of a speciality good; it is unique and so
consumers are willing to make a special effort to buy it. This is
often linked to exclusive distribution. The other types of good are
convenience items (consumer searches for nearest shop, extensive
distribution) and shopping goods (consumer shops around and takes time
to buy, looking for the best value).

There are a number of thing a company will do to try and keep its
unique selling point of brand name and ensure no-one else uses the
company’s ideas:

· Copyright © - creator’s or legal owner’s rights to a creative work.
This occurs automatically and so does not need registering.

· Trademark ™ - a symbol used by the producer, Audi, to identify their
product. It is legally protected under the 1938 Trade Marks Act
(amended 1984). Trademarks must be registered at the Patent Office.

· Patent – a licence lasting for 15 years that prevents copying of an
idea. It aims to protect the inventor and so encourages research and
people/companies to develop their own products.

· die VW und Audi Seite befindet sich noch im AufbauLogos – visual
representation of a product or organisation. Audi use four rings.

Here are some pictures of the A6:

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Place/distribution

The channel of distribution describes how the title of ownership
passes from manufacturer to consumer. A firm is likely to set
distribution targets such as number of areas and outlets the product
is sold in and number or value of sales in each region. The first two
will be the same for the A6 as they are for every other Audi car. Audi
are a well established company in all of their markets so expansion
into new markets or number of outlets in existing areas will not be
required. The number or value of sales will be determined by supply
(must be equal to demand), other aspects of the marketing mix and
external factors (e.g. income).

There are various levels of distribution:

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0 levels

1 level

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Audi, like most other car manufacturers, use zero level distribution;
they produce the cars in factories, display models are put in
showrooms for consumers to look at and test drive, and they are then
sold to the consumer. Although there is a middle stage here, the
ownership of the cars does not change and the cars people actually buy
are shipped directly from the factory on order.

In recent years major retailers, including large supermarkets, have
become more important. They have reduced the need for wholesalers as
they buy directly from producers. However for minor retailers such as
local green grocers or butchers, wholesalers are useful. They buy
large quantities from producers and sell to retailers. They help
reduce the number of transactions.

Without wholesaler – 9 transactions. With wholesaler – 6
transactions.

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As I have said Audi do not use wholesalers to help distribute their
cars. This is because they sell their cars in their own showrooms so
no distribution to retailers is needed. This helps reduce costs and
have selective distribution.

The firm must choose a distribution channel. The options are:

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When choosing the firm must consider:

· Costs – high cost of a product fits in with exclusive distribution
which Audi chooses (only distribute through own showrooms).

· Alternatives – for example in Audi showrooms only or car
supermarkets or internet. The new A6 will be sold on the internet as
well as Audi showrooms from the Audi website which was not previously
possible.

· Type of product – an industrial product is likely to be sold through
shorter distribution channels as they have fewer customers.

Audi will choose exclusive distribution in their showrooms and from
their website. This fits in with speciality and high value goods, like
the A6.

Promotion

Promotion involves communication about a product or service so
customers and consumers know about it. The aim of promotion is the
make consumers aware (new product), to remind consumers (existing
product) and to persuade consumers (new and existing products).

The promotion may have a rational appeal (appeals to consumers’ self
interest), emotional appeal (e.g. guilt, fear, love) or moral appeal
(what the consumer thinks is right). The last method is used mainly by
charity companies trying to get people to give donations. Audi’s
promotion should have a logical appeal as the car is a product with
many good features that will appeal to people. Also, they do not
really have an emotion to appeal to. If they did this, it would not
match the company’s image, particularly as they are a German company
who are associated with efficiency and logic.

The amount a company will spend on promotion will depend on the
marketing budget set by the finance department, the promotional
objectives, stage in the product life cycle and spending of
competitors. Audi will have a large marketing budget as they are a big
multinational company so can afford to spend a lot on promotion. Also,
the A6 is at the launch stage of the product life cycle so more should
be spent on promotion to make consumers aware of the product and to
promote its good points.

There are two types of promotion:

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Above the line: ADVERTISING

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Below the line: all other forms of promotion

apart from advertising

Above the line promotion activities are direct advertising through
independent media. Below the line promotion activities are all other
promotional activities other than advertising including special
offers, direct mail, store displays and personal selling.

It is important for a firm to use the right promotional mix for its
products. For consumer goods, such as the A6, advertising to the final
consumer is common as personal selling is important to get the product
distributed to the retailer, but not to the consumer. However,
industrial goods are generally sold to fewer, professional buyers so
advertising is less important. They have a small target audience so
most advertising will not be cost effective. Personal selling is more
important as customers will buy large quantities of a single product,
such as steal, so they must be convinced they are making the right
choice. The materials Audi buy to produce their cars are all
industrial goods.

Personal selling is also an important part of promotion of expensive
consumer goods, such as cars, for which people shop around. It is
important to have friendly and persuasive salesmen in the dealerships
to convince customers to buy the A6. It is important to have ample
staff so all potential customers can be assisted.

Audi will advertise the A6 heavily. This advertising should seek to:

Increase Awareness – make the consumer know the product exists.

Create Interest – make customers want to know more.

Develop desire – make customers want the product.

Lead to Action (purchase) – make customers buy it.

This is the AIDA model. When deciding the appropriate medium to
advertise on the firm must consider cost (can they afford it), target
audience (will they see/hear it) and appropriateness (if it reflects
the image of the company or will reach enough people).

It is important for a firm to properly assess their advertising to see
if it is effective. This is done through the DAGMAR model:

Defining

Advertising

Goals for

Measured

Advertising

Results

It is important to define what the firm is trying to achieve through
their advertising so they can then measure how successful it has been.

The firm must chose the form of media they use to advertise. This will
depend on:

· Coverage – the number of potential customers the medium will reach.

· Frequency – how often the consumer will see the message

· Cost – can the firm afford it?

Some of the possible forms of media that can be used are:

Media form

Benefits

Drawbacks

Suitability for Audi

Television

· Large audience

· Message can be repeated very frequently

· Uses both images and sound – likely to be more memorable.

· Expensive to film advert

· Expensive to buy air time for advert

· Can afford large costs

· Want very large audience

· Very suitable

Radio

· Fairly large audience

· Uses sound and music – can be catchy

· Listeners may not take notice

· Decent size audience

· Fairly suitable

National newspaper

· Fairly cheap

· Large, national audience

· Can contain more information in small type

· People may not bother to read it

· Often black and white only

· Advert may be lost in a whole page of adverts

· Can appeal to right socio-economic group

· Large audience

· Suitable

Regional newspaper

· Cheap

· Can contain more information in small type

· Smaller audience

· Greater cost per reader

· Message can only be repeated weekly

· Small audience

· Not suitable

Relevant magazine (in this case car/motoring)

· Can contain more information in small type

· Target audience will see the advert

· Readers will be more interested in topic so more likely to read the
advert

· Competitors products being advertised alongside

· Message only repeated weekly, bi-monthly or monthly

· Target audience see advert

· Suitable

Cinema

· Images and sound can be used

· Great impact on audience as they are there to watch something

· Market segments can be targeted (e.g. age, gender)

· Must be repeated very regularly to have great effect (maximum 100
people will see it each time)

· Expensive to make, but can use same advertisement as for television

· Limited audience

· Not target audience

· Reasonable suitability

Billboards

· Cheap

· Can show image of product

· People will look while waiting at traffic lights or a roundabout

· Many people will drive past

· To an extent appealing to target audience – car owners

· People likely to forget message

· Cannot include much detail

· Will get damaged from weathering or erosion

· Image of A6 shown

· Drivers see A6

· Quite suitable

Flyers

· Cheap to produce

· Can contain a lot of information

· Must pay someone to distribute them

· People likely to just drop them

· One off advertising (better for events)

· May make company seem tacky

· Does not reflect company image

· Limited audience

· Very unsuitable

Internet

· Cheap

· Can have link to website

· Image can flash to attract people’s attention

· Easy to measure effectiveness (how many people click on it)

· Limited audience – not everyone has access to the internet or will
visit the website the advertising is on

· Pop-up adverts annoy people so this may reflect badly on the company

· Limited audience

· Can link to site where A6 sold

· Fairly suitable

Audi promote and sell their products under the company brand name.
This helps to create brand loyalty which may earn higher profit, help
keep customers, launch new products new easily and extend the brand.
The Audi group also produce cars under other names, Lamborghini and
Volkswagen, but these clearly use their own brand name. This is
because these two brands have completely different images, Lamborghini
of quality and style and Volkswagen of value. These have different
target audiences so this strategy is an attempt to keep both.

There are controls on advertising that all firms must obey. These are:

1. Advertising Standards Authority – this is a voluntary body which
seeks to ensure adverts are “legal, decent, honest truthful and do not
cause widespread offence”.

2. Independent Television Commission – control advertising on
television and radio.

3. Laws – one is the Trades Description Act whereby the goods
advertised must be as described.

These must all be obeyed otherwise the advert will not make it into
the media or the company may face law suits against them.

Audi must use both above and below the line promotion to promote the
A6. In my opinion the most suitable ways to the A6 are on television,
in magazines, in national newspapers and on billboards. I have chosen
television as it has a very large potential audience and uses both
images and sound so will be more memorable. Audi are a very large
company so can afford the high costs associated with it. The most
suitable time would be the evening as this is when most people are
watching. The main benefit of magazines is the advert will be seen by
the target audience. It is also cheaper so can be done more often.
More information can be put in adverts as people can spend longer
reading them. Newspapers have the same advantages. They still appeal
to the target audience as different newspapers appeal to different
socio-economic groups. Broadsheets such as the Times and the Financial
Times would be most suitable. Billboards are cheap and show the
aesthetics of the car. They will be eye catching to people,
particularly if they use bright colours. They are not the best way to
communicate information about the A6, but will make potential
customers aware of it and will get the car in their minds.

As you would expect from a company with a large marketing budget and
they also promote through product brochures and on their website. The
A6 may also get promoted at special car shows such as the Geneva Motor
show where it was unveiled to the public. They also ensure they appeal
to the target audience and must assess the effectiveness of their
promotion.


SUMMARY OF MARKETING STRATEGY

The following table shows the choices I have made for the marketing
mix for the new Audi A6:

Decisions for the marketing mix

Reason for decision

Should be customer orientated.

The product should appeal to the wants and needs of the consumer so
they do not chose competitors product over the A6.

Primary market research will be done in the form of a questionnaire.

This is feasible method of market research for me, an individual, to
carry out and I can make it relevant for the task. This can then be
analysed to help devise the marketing mix.

The price of the A6 should be set high (the company chose £24,175 to
£42,775).

This is because it is price inelastic, is a high quality product and
has a reputable brand. It has been derived using a combination of
competitor based pricing (similar price to BMW and Mercedes similar
cars), demand based pricing (what they have found people were willing
to pay for the old A6) and psychological pricing (this price is
neither too much nor too little). Premium pricing is used due to the
reputable brand name, particularly in the current good economic
climate (higher income, A6 is income elastic).

The product should aim for differentiation through the brand name Audi
and features, including new engines and the latest in-car technology,
which add value.

Audi have always aimed for product differentiation rather than cost
management so this should be continued. It can be done through a
reputable brand name and a high quality product with many additional
features. Differentiation is likely to lead to increased market share
and so increased turnover and profit.

Distribution of the product should be limited to exclusive Audi
dealerships and website.

Exclusive distribution is associated with high quality, high priced
speciality goods such as the A6. This maintains this image. The
website will provide an extra market for sales and targets for this
should be set.

Audi should use zero level distribution.

Zero level distribution cuts out the middle man so reduces costs and
helps exclusive distribution.

The A6 should be advertised frequently and in a wide range of places,
mostly television, billboards, magazines and radio.

The firm has great financial resources at their disposal so can afford
a large advertising budget (found from last years spending in annual
report). Advertising in this way will ensure people, particularly the
target audience, here about and know the benefits of the product.

Other forms of promotion, including personal selling, are to be done
less.

The A6 is a consumer good so advertising to the final consumer is most
important. Personal selling is not as important as this is used to
sell products to retailers. However, Audi do need to use personal
selling in their showrooms to persuade perspective customers.

All elements of the marketing strategy and marketing mix compliment
each other so they work together effectively to achieve the marketing
objectives.


BIBLIOGRAPHY

Audi product brochures entitled A6 with subsections: The new A6 saloon,
A6 details, A6: Saloon and Avant and A6 and S6 quattro Saloon and
Avant price list.

Audi website – www.audi.com

Audi annual report 2003

Business studies websites including www.bized.co.uk

Lines, Marcouse, Martin, A-Z Business Studies handbook third edition,
1994

Carysforth, Rawlinson, Neild, Intermediate Business, 1995

Nike website – www.nike.com

BMW website – www.bmw.com

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MLA Citation:
"Creating a Marketing Strategy for a New Product." 123HelpMe.com. 26 Jul 2014
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