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. 2. 3. 4. 5. 6. 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, its 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. Turbulent markets that change rapidly and unpredictably Increase in highly fragmented niche markets Ever greater rates of technological innovation in products and processes Shorter product life-cycles Growing demand for tailored products - mass customization The delivery of complete solutions to customers, comprising products and

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% Return On Assets (5-Year Avg.)= -.2% Return On Capital (5-Year Avg.)= -.2% 12.4 % 4.4% 6.8% 4.9% 0.9% 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 Porters 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 natures 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 2.3.1.

Mercedes Benz Product Lines 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 companys 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 . After.Taxes Sales

Net. Pr ofit .M arg in =

= 149,776,000,000
= 1.90%

2,846,000,000

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 companys 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 2 3 Communication Plan Communication Activities Corporate Open House Public Relations Brochures, case studies, Budgets () 18,000,000 32,000,000 32,776,000 Time Schedule Once every two months in the first year White papers of E320

4 5 6

white papers Website Updates Direct Mail Automobile exhibitions/shows(inclu des souvenirs etc)
TOTAL

2,000,000 12,000,000 50,000,000

CDI Any time November 8-13

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 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 with the chosen business model

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RD Marketing. (2006). Creating an Integrated Marketing Communications Plan. The Analysis of Financial Statements. Retrieved March 23, 2007 from www.ey.com