Ford Ka Hbs Case free essay sample

The Ford Ka cannot be marketed to a specific demographic segment, as defined by traditional variables such as income, age, or marital status. Willingness to purchase the Ka was for the most part not dependent on membership in these traditional segments. Alternatively, we propose Ford develop a campaign toward a certain segment defined by attitudinal and psychographic variables. We plan to target this segment with tailored advertising campaigns addressing their unique worldview, and adopt higher-end pricing to maximize profit from what ultimately must be a niche product with a small number of loyal followers. Segmentation of the overall car market The overall market in France, in 1995, was segmented almost exclusively by primary demographics. The industry served this market with ten different product categories breaking cars down by economy, size, features, and utility. However, during the 1980s and early 1990s, changes in French tax law raised the price of fuel dramatically, making smaller, more fuel-efficient cars more desirable. This effect was amplified by increased road congestion, parking difficulty in urban areas, and a growing number of women drivers, leading a new trend for smaller cars to be increasingly popular choices for drivers at all income levels. By 1995, 71. 7% of all cars sold were in the mini, small, or lower medium car categories. This rapid movement of customers to the small category attracted drivers who had been accustomed to the premium features of the mid-sized and large cars. Their demand drove the development of small cars that would have the features, performance, or handling characteristics that customers preferred. Four new product categories emerged within the small car category matched to customers’ needs: A—economy, practical; Basic-B—stylish, good value; Trend-B—high performance, features; Other-B—luxury and sports derivatives. Ford’s Strategy By 1992, the success of the Twingo had redefined the entire B category and forced others to redesign and include better style, functionality, and more interior space in order to compete. Ford’s solution was the Ka, which was quickly developed, borrowing the Fiesta’s chassis to save costs. Restrained n time and design, the Ka differentiated itself with unique styling, features, and maneuverability. Cars are normally designed as a solution for an existing and identified need in the market, but Ford took a backwards approach and produced the Ka without a specific market in mind. This presented the unique challenge of having to find a market for a hastily formulated product, rather than tailoring a p roduct for an identified high-demand segment. This was doubly challenging in the case of the Ka. Its main differentiating feature was its styling. Based on the technical designs of existing products, the Ka would be hard pressed to appeal to customers on any utilitarian features such as fuel mileage or handling. Finding consumers who would purchase a car whose main selling point was unique styling necessitated studying consumer attitudes towards on a deeper level. Armed with market research data, our team identified a target market for the Ka under different criteria than ones used for the established demographic segments. The following paragraphs outlay our approach. Demographic variables for Ka We ran a multiple regression analysis with the dependent variable of respondents listing the Ka in their top 1/3 of car choices and the independent variables the demographic data: gender, martial status, household status, income level, and age. We found that not one of these data are predictive of whether or not a respondent will like the Ka. Each variable had low P-values, indicating that none are statistically significant. A table of correlations and a series of chi-squared tests also shows that no variable is particularly correlated with the Ka choosers with any statistical significance. See figures 1-6 for all tables and cross-tabs. ) This confirms our intuition that the Ka, with its unique styling, would have polarizing appeal cutting across traditional demographics. Psychographic question responses identify distinct attitudinal segments The survey included 62 questions designed to capture the respondents’ attitudes about cars, car features, car manufactures, car buying h abits, and general consumer tendencies. First, we ran a factor analysis to reduce those 62 questions into a smaller set of core underlying issues. Our scree plot indicated there were 4 key factors: â€Å"Form Over Fashion†, indicating the extent to which consumers preferred technical features over a stylish car; â€Å"Sport Car Junky†, indicating the extent to which consumers were willing to sacrifice practicality for a car with more zip; â€Å"Car Avoidance†, indicating the extent to which consumers were enthusiastic about cars and the automotive industry; and â€Å"Frequent Driving†, indicating the extent to which consumers expected to make heavy use of their car. We categorized the 62 questions to these four factors based on which one had the strongest factor weighting. Segmentation approach and target buyer identification To identify attitudinal segments, we used a K-means cluster on the same 62 attitudinal questions, and generated 4 clusters. The four clusters can be described by the following groups that summarize how each group responded to the attitudinal questions, as summarized by their average factor score (see figure 7. ) 1. Pragmatists: Not fashion conscious; just wants a reliable car with solid features that will get them from A-to-B. Spends the greatest amount of time in their car, and sees it as an extremely practical tool. Would never buy a sports car. 2. Car lovers: Likes functional cars with strong performance. Loves their car, and loves rolling up their sleeves and changing their own oil. More likely to take their car out for a weekend joyride than to spend all day shuttling kids to and from soccer practice. 3. Fashionistas: The only cluster that prefers fashion to form. Leans towards sporty cars over hassle-free cars. Isn’t in love with cars, or the concept of owning one, but if she has to has one, wants it to be stylish. 4. Reluctant Car Owners: Scored the strongest on form over function and on car avoidance. Sees cars as a necessary evil. Will buy one, but doesn’t want to get too involved in it. We decided to target segment 3, for the following reasons (see figure 8 for full table of relevant data): 1. Market size. We calculated the â€Å"returns† for each segment, based on their likelihood of purchasing the Ka, and their prevalence within the sample. (Returns = hit_rate * size. While segment 3 actually had the lowest hit rate, it was the largest market, and was nearly tied for highest returns. We are not troubled by the low hit rate – we recognize the Ka has a unique styling that won’t appeal to every consumer. 2. Competitive advantage. Segment 3 is the only segment willing to buy a car based on its form, rather than its function. The Ka’s only competit ive advantage in the market is its unique style. If we attempt to pursue segments that make purchase decisions based on other features, the Ka will eventually lose to better positioned competitors. . Financial Attractiveness. In addition to their size, segment 3 has other attractive features. They are the most frequent car buyers, as measured by their short average time since last purchase. They have among the highest income levels in the sample. And they are the least brand loyal – making it easy for us to initially win their business (though harder to keep it). Together, these variables paint a picture of a consumer that treats cars like fashion accessories, willing to buy a new one each season to fit their style needs – a potentially lucrative market. Potential implementation problems with approach It may be difficult to find and reach these consumers. Because traditional marketing channels like paid television and media advertisements segment their audiences using traditional media, we are unable to target our segment, which cuts across traditional demographic variables. This would mean either a weak advertising campaign that fails to reach our targets, or spending inefficiently on expensive mass market advertising that covers the entire population. One alternative would be extremely targeted media buys in specific TV shows and magazines that we imagine our target cluster would frequent – for instance, fashion magazines. Key target ad campaign Because Segment 3 is slightly skewed towards a higher income level, we recommend pricing the Ka at a level slightly higher than its competitors. Because $750M were already saved in development costs, we feel that an extra effort in advertising, especially in television ads, would be appropriate to give the Ka a better chance of success. It should be positioned as its design suggests: stylish, urban, and sophisticated. We want to create a campaign based around Daft Punk’s song â€Å"Harder, Better, Faster, Stronger† (Daft Punk is a French electronic music band and the song features an up-tempo beat with a blend of electronic and organic drum sounds and snappy, to-the-future synth leads, with appropriate and repeating lyrics â€Å"Harder, Better, Faster, Stronger† giving it an exciting, age-less appeal). The flagship component would be a 30-second television ad various shots of the Ka maneuvering effortlessly through traffic in an urban setting and parking right next to a hip restaurant between two larger cars. The car would be displayed driver-less so as not to appeal more to one age group than another. This ad would be aired during programming with a mainstream audience. Next, we would place full-page ads showing a driver-less car and a reference to the song in the publications of our where our trendy segment resides (we admit ignorance in knowing which French magazines these might be). An online presence would be very appropriate today for this segment, but it only applies to the extent that the internet was utilized in 1995 France, which was during the first massive internet adoption period. The goal of these ads is to capture the attention of Segment 3 drivers and catch them with the stylish look of the car joined with the â€Å"Harder, Better, Faster, Stronger† theme to create an desirable image of a car worthy to buy without a test ride. Appendix Figure 1 Figure 2 NOT statistically significant NOT statistically significant Figure 3