American Automobile Industry

Executive Summary

The automobile industry has been one of the significant users of integrated marketing strategies. Cars are not a frequent buying product and usually involve strict differentiation and high involvement by the customer. Lately, the automobile industry has experienced negativity due to the global economic crisis. This is a time when a true marketing strategy stands out; a factor that can make or break a company.

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The American automobile industry is the third largest in the world. With increased globalization, fierce competition has increased significantly over the past few years. This gives the automakers a chance to market and advertize their products at a global scale and reach out to a wider audience. Also, with the advent of internet technology, new media channels had vehicles have come up for automakers to market their cars throughout the world with greater ease. Amidst all of this, the American automaker General Motor’s brand Chevrolet has been a key player in the American auto industry.

With competition from Japanese rival Toyota, Chevrolet has to clean up its act and develop and market its cars efficiently. By capturing the local market through using psychographic segmentation and a combination of emotional and technological appeal in its marketing communication objective, Chevrolet has been able to bounce back and is on the road to take on the technologically advance rival, Toyota.

Introduction

This paper is based on the American automobile industry’s recent integrated marketing communication strategies. The industry has been facing hard times due to the current economic crisis and increased international competition by companies producing more affordable and efficient products.

The industry analysis section briefly looks at the overall global scenario of the automobile industry and then specifically discusses the American automobile industry, how customers are segmented and what type of products and marketing strategies are developed to cater each type of segment. To focus on a particular segment, the sports car segment is chosen to highlight the marketing approaches used to appeal to customers from that segment, analyze key players in that segment and identify their common and unique approaches of marketing their cars.

To explain the marketing strategies of a particular brand, the example of American automaker General Motor’s brand Chevrolet has been taken and an in depth analysis at its recent marketing efforts and strategies to counter competition and regain market share, has been done through the analysis of various aspects of the IMC concept, including segmentation, promotion, strategic positioning, creative message development, communication objective, target customer profiles, analysis of media channels and concluding with the campaign evaluation.

Research Methodology

Research done mostly consisted of secondary research through online websites, industrial reviews, official company web pages, online customer forums, textbooks, and online business and news articles.

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Scope and Limitations

The information used in this paper is limited to the information released online by General Motors, Chevrolet, Toyota and any other third parties involved. No information is confidential or acquired through illegal means. The scope is limited to the American automaker GM’s Chevrolet brand with a brief overview of the global and US auto industry.

Industry Analysis

The automobile industry is one of the biggest manufacturing, marketing, service and promotional companies in the world with over 72 million automobiles sold in the year 2007. Of that, over 19 million were sold in the US, making it the third largest automobile buyer in the world after, Europe and Asia Pacific. Over the past few years, the American automobile industry has seen hard times. The companies have tried to make a come back, with GM moderately successful with its new Camaro, Ford coming second but in a bad state and Chrysler is up for sale, deeming it a failure. (Noyes, 2009

SWOT Analysis of the US automobile industry

Strengths

  • Third largest automobile market in the world with a variety of customer preferences and choices.
  • Abundance of skilled labor and skilled employees for industry growth
  • Technological opportunities for market strategy development and promotion
  • Internet and electronic media center of the world with great opportunities for advertising and international promotion
  • Attractive target for investors and great market potential for companies all over the world to expand to

Weaknesses

  • High interest rates in car financing
  • High fuel and oil prices
  • Lacks technical expertise as compared to European and Japanese competitors
  • Lacks quality and fuel efficient technology
  • Notorious for inefficient manufacturing and product development
  • Epicenter of the economic crisis due to the infamous credit crunch

Opportunities

  • Fresh new market of young customers and teenagers to take advantage of
  • New generation is internet and technology savvy. This creates newer and more efficient channels for product promotions
  • More skilled and educated workforce on the rise. Opportunity to research and developed efficient products
  • Increased globalization giving more opportunities to collaborate with international companies and improve development and increase promotion
  • Opportunity to reach a global market easily and create new customer perceptions

Threats

  • Fluctuating oil prices, increasing cost of production and economic uncertainty
  • Increased international competition
  • High interest and financing rates
  • Terrorism and political unrest

PESTEL

Political

  • Economic aid given to US automakers has been helpful to GM and Ford while Chrysler could not capitalize
  • Emission laws by the new Obama administration
  • Increase in tax rates

Economical

  • International trade disturbed due to currency exchange rates and policies of changing governments
  • Taxes and finance interest rates increasing
  • Inflation due to high input costs
  • Unemployment due to economic crisis
  • Low income levels and decreased buying power
  • Stock market instability

Social

  • Newer generation demands high tech and efficient products
  • Informed buyers with access to competitors
  • Changing trends due to globalization
  • Higher customer expectations
  • More educated white-collar work force

Technological

  • Hybrid fuel technology development
  • Research on alternative fuels
  • High cost of research and development of alternatively fueled products
  • Increased access to internet and global communications
  • Increased exposure to media and customer/buyer awareness

Environmental

  • International emission laws and quotas enforced
  • Exhaustion of fossil fuels
  • Concerned customers demand environmental friendly products
  • Opportunity to improve brand image by focusing on the environment
  • New promotional opportunities

Legal

  • New safety laws
  • Customer awareness about safety laws forcing companies to abide by them
  • Laws against unfair competition and monopoly

Porter’s Five Forces

Substitutes

Substitutes for cars exist in the from of public transport, i.e. busses , subway, taxi etc. substitutes are popular because of high costs of car ownership in the US and increased traffic conditions.

New competitors

New competitors at this point face a tough time. Earlier when Toyota came in, it capitalized on efficiency and had a better market offering. Today, new competitors like Chine face a tough time in any country.

Intensity of competitive rivalry

Competitive rivalry is intense with competition from companies all over the world. Toyota, Honda, Nissan, Ford, Mercedes etc. all compete for the same customer and often the same customer segments

Bargaining power of customers

Bargaining power, although customers are powerful, is low. Cars prices are fixed and companies try to lower prices themselves in order to increase sales and market share.

Bargaining power of suppliers

Supplier bargaining power is low due to a large number of suppliers. There have been cases in which the company has sued the supplier for delayed supply of raw materials and parts.

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Segmentation and Positioning

Segmentation in the industry can be seen along a number of lines, broadly divided in to demographic, psychographic and somewhat behavioral. Demographic segmentation dominates with vehicles for people with different income groups, family size, family lifecycle stage and even gender (Kotler, 2008).

Demographic

Vehicles are manufactured and marketed for all income groups, starting from the affordable Japanese hatchbacks such as the Toyota Yaris, costing a few thousand dollars, to expensive German luxury sedans manufactured by Mercedes-Benz priced at over a hundred thousand dollars.

Family size is another demographic on which cars are segmented. Vehicles are available for families of all sizes; 11 seat mini-vans, station wagons with extra trunk targeted towards mid-sized families, smaller family sedans and of course, two-door/two-seat cars for singles and/or couples. Family lifecycle stage is similar; with smaller two seat/two door cars targeted towards young customers, like the Toyota Supra and Nissan 350-Z, while the family wagons and sedans, like Toyota Camry and Chevrolet Optra, are targeted towards much mature customers having finished their studies, having a job and possibly a family.

Psychographic

Although this type of segmentation was not so prominent in the past, it is being used far more today. Psychographic segmentation is done on the basis of social class, lifestyle and personality. Social class is similar to income group with cheaper vehicles like the Toyota yaris and corolla targeted towards the middle and lower-middle classes. Cars like European luxury sedans and Italian sports cars are expensive and can only be afforded by upper class customers.

Lifestyle is broad factor for segmentation and companies often use it to create an emotional appeal towards the customers. For example, an Italian sports car like Ferrari would be for a customer with a high profile lifestyle and a passion for speed and exhilaration. On the other hand, a Ford pickup truck would be more suited for someone with a more rugged out-doors lifestyle. Personality is something similar to lifestyle, customers with a reserved and subtle personality will prefer a car like that; probably a sedan. While an active young teenager will want an active car that makes a statement. (Kotler, 2008).

To explain the strategies, competitive structure and promotion within a single segment, I will use the sports car segment as an example.

The Sports Car Segment

This particular segment is regarded as the most exciting and competitive segment in the automobile industry. Over the last decade, automakers all over the world have been competing neck-a-neck in building their flagship performance cars. During this time, new companies and cars from existing companies from all over the world have sprung up, posing as a serious competitive threat towards the industry giants, the Germans and the Italians.

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The key players in this segment are of course Ferrari and Lamborghini from Italy, Mercedes-Benz and Porsche from Germany, Ford and Chevrolet from USA and Nissan from Japan. These performance cars are usually very expensive with almost all automakers providing similar specifications, yet differentiation is done on the basis of branding and even a minor competitive edge. In the past, when it came to a high performance car, price was not a major deciding factor.

But with the recent economic crisis, price has become a major factor even in the performance car segment. That is the exact reason why giants like Lamborghini and Ferrari have been facing decreased profits and even losses, while the cheaper Nissan supercar, the GT-R, with its European car performance is being preferred over the top sports cars.

Key players and their communication trends

As far as positioning within the segment is concerned, the key players are segmented similarly with all of them focusing on the driving experience, performance and quality. However, customers see Ferrari being the pedigree exotic sports car, Lamborghini as the true competitor of Ferrari with its own unique style and unmatched performance. US brands such as Chevrolet, promote their supercar, the Corvette, as an American Ferrari and the recent ZR-1 model is deemed as giving Ferrari Enzo-like performance at a fraction of the price, resulting in much positivity from critics and customers. It seems as if the changing economic trends will change the generation long marketing strategies of automakers, forever.

Brand Level Analysis – Chevrolet

Role of Chevy within GM

Chevrolet or ‘Chevy’ is a car brand under the General Motors Corporation. As understood, the brand is American and is currently the main brand of GM. It is also the most important GM brand as it is the home to the legendary Corvette supercar and the newly revived legendary Camaro muscle car. 13 vehicles are produced under the Chevrolet name with the Silverado being the best selling pickup truck in the USA. Chevrolet was found with GM in 1908, whose headquarters are located in Detroit, Michigan.

After leading the world as the number one automaker for 77 consecutive years since 1931, GM is now the second largest in the world, losing its first pace to Toyota. As mentioned before, Chevrolet is the flagship brand of GM. (Chevrolet.com, 2009) Over the past few years, automakers all over the world have been facing a tough crisis. The US automakers, known for producing uneconomical, high consumption and inefficient automobiles, have suffered the most with Chrysler declaring bankruptcy in mid 2009. In a time like this, Chevrolet has been able to make use of the government aid provided to the automakers and capitalize by understanding the customers’ needs.

With competition from Toyota in the form of cheaper, high performance and quality, fuel efficient cars. Chevrolet has adopted the same strategy by reviving its legendary Camaro muscle car is great fashion and excellent marketing, which will be discussed further on. Apart from the camaro, Chevrolet will be introducing smaller and more fuel efficient cars to compete with Japanese hatchbacks in the US and has taken various steps to save costs, such as discontinuing their high performance engine lines and closing down unprofitable dealerships across America. (GM Facts and Fiction, 2009)

Chevrolet – Imc

Chevrolet has adopted a rich integrated marketing communication program. It has developed an ingenious marketing mix and has been able to achieve high sales volumes despite the dominating presence of the Toyota brand. Let us analyze Chevrolet’s marketing scenario.

Segmentation and target Customer profiles

It is difficult to identify a single target profile for Chevrolet as the brand produces several types of automobiles ranging from pickup trucks to sports cars. Chevrolet currently has the following automobile lines:

Pickup Trucks

These are off-road vehicles that have a back storage compartment used to store heavy and bulky material. Pickup trucks are mostly used commercially. An example is the Chevrolet Silverado. (Chevrolet.com, 2009) They are used privately as well but on a smaller scale than commercial. A typical customer profile would be an out-doors workman (construction, landscaping, transport, logistics etc.) who requires extensive and intense use of the vehicle to load, unload and transport physical material such as wood, tools, raw material or just about anything that does not fit in a normal car. Such customers are usually young/middle-aged men, mostly working a blue-collar job and demand durability, performance and affordability from the vehicle.

Sport Utility Vehicles

SUV’s are off-road performance vehicles that have a larger seating capacity of five to six people and a covered storage trunk larger than regular vehicles. An example is the Chevrolet Yukon. SUV’s are very popular among US customers and American SUVS are of great demand in the Middle East as well. Lately, the demand for SUV’s has gone down since fuel prices have gone up and people are more concerned about the environment. SUV’s that run on alternative fuels and electricity are being developed.

The target customer for an SUV is not fixed. Nowadays, SUV’s are used more as street vehicles and a fashion/status statement than an off-road vehicle. (Chevrolet.com, 2009) With after-market modifications available, people (especially African-Americans) customize their SUV’s to great extents. Therefore the customer profile for an SUV could be anyone from a 16-year old girl getting her first car to an off-road enthusiast who demands performance on the rough terrain.

Sedan

A sedan is a four-door car normally used as a family car. It does not feature high performance or off-road capability and is designed for everyday use. An example is the Chevrolet Impala. (Chevrolet.com, 2009) Sedans have been affected the most due the competition from Japan, since Toyota produces one of the most efficient sedans, the corolla and the Camry. A typical customer profile for a sedan would be a working/middle-aged man or woman, employed; family is an optional but likely factor. Sedans come in different price ranges to accommodate different social classes and income levels. Chevrolet’s sedans are mostly mid-ranged cars targeted towards the middle-class family.

Hatchbacks

Hatchbacks are a new addition to Chevrolet’s vehicle line. They are smaller more efficient cars in terms of performance, fuel economy and space and are clearly distinguishable by the lack of an extended trunk compartment. An example is the upcoming Chevrolet Spark. These days, with fuel prices going high, people facing an economic downturn and lower income levels, Toyota’s Yaris and prius are much in demand. Chevrolet’s hatchbacks are set to compete with these import vehicles in terms of price and efficiency. A typical customer profile would be young men/women, students or working a full time job, single or couples with one or no child.

Performance vehicles

Chevrolet, although closing down its high performance sector, will retain two of its top high performance vehicles; the Camaro and the Corvette. (Chevrolet.com, 2009) The corvette is a supercar, set to compete against European sports cars like Ferrari and Lamborghini. The camaro is an American muscle car, which is also a performance car set to compete against Ford’s mustang and international sports cars such as the BMW M3 and Nissan 350-Z, that was popular in the 1970’s and ‘60’s, it was discontinued in the 90’s but has been revived again and has received an immense response.

A typical customer profile for a performance vehicle would young/middle-aged men and women to some extent, with a passion and drive for excitement and thrills. This description refers to the behavioral segmentation used as an emotional appeal to attract and segment customers. (Business Resource Software, Inc., 2009)

Communication Objective

Chevrolet’s communication objective greatly revolves around patriotism. General Motors faces its greatest competitive threat from Toyota, therefore creating an emotional appeal in the form of patriotism is a technique used by Chevrolet. Americans are driven by anything patriotic, anything that takes them back to their roots; Americana – “a slice of apple pie and base-ball”. Chevrolet not only puts across the message to “buy American” but also revives that tradition and heritage of classic American car appeal with new age benefits such as better fuel economy, modern day comforts, technology and high quality performance.

Other objectives include bringing the retro-new age appeal to its products for customers more familiar with classic American cars and the technological appeal for the younger generation. These concepts are further explained through theories of how communication works.

Theories on how communication works

Chevrolet’s retro-new-age image is not restricted to just promotional messages but the brand communicates the objective through its products as well. For example the new best-selling Camaro has been a huge success mostly because of its looks that pay homage to the 1969 Camaro’s styling, but does it in a very modern and futuristic way. That is something that the customers notice as ‘a company living its own values’.

Chevrolet doesn’t only differentiate itself from its Japanese competitors but also compares its products by boasting new technology such as the all-wheel independent suspension design introduced in American Muscle cars with the camaro, but an old technology for international automakers. Chevrolet also communicates its competitive advantage; high performance at low duty free prices. Imported vehicle prices are high because of customs/trade duty charges. New Chevrolet cars, since they are American made, are priced much lower and provide performance similar to imported cars at much lower prices.

GM is also trying to appeal to a younger more modern audience. The younger generation customers, Generation-Y, are much more high tech and educated. These well informed young people are demanding and have access and knowledge about all competitors and their products. In such a case, the buyers have more power than the sellers. To promote its products to this segment, Chevrolet is developing newer and bold designs.

Since the younger generation has a perception about imported cars being better than American cars, Chevrolet has developed a whole new communication objective which is being put across through a whole new medium. The communication objective here is highlighting the improvements and technology aspects of Chevy’s products. Newer Chevy models feature, iPod compatibility, high-tech sound system, fuel efficiency, computerized mechanical performance and as a move to collaboratively market with its suppliers, GM promotes its products with the freedom to customize and modify company fitted parts on their cars with a wide range of options provided by GM suppliers. This is the main appeal used by Gm for the younger generation by understanding the modern day street-culture.

Strategic Positioning

Chevrolet aims to position itself as the number one car manufacturer again. Currently, the scenario is a little different. Relative to its competitors, Chevrolet is strategically positioned quite strongly. Chevrolet’s value proposition of ‘same for less’ and ‘more for less’ highlights that ‘buying American’ will save the customers money and give them the same or better performance than its international counterparts. Perception in the minds of the customers, however, has not fully changed yet. Smart buyers today are still opting for the highly evolving Japanese automobiles that run on alternative fuels and boast better economy.

To counter that move, Chevrolet is set to promote its newly developed hybrid cars known as the Volt. Technology is one area where the patriotic appeal does not work well for Chevrolet. That is why GM is adopting a newer strategy to go along with it emotional appeal; smarter buyers need smarter products with promotion methods. (about.com: Marketing, 2009)

Media Channels and creative message development

As mentioned earlier, despite its $200 million dollar marketing budget cut, has been able to market its products better than any automaker in the world. GM understands that most of its future customers, the people who will take GM cars to new levels, are still young. These young people are not familiar with the classic American car heritage that their parents and grand parents are aware of.

These young people are more familiar to the concepts of import cars and their tuning/racing as portrayed in movies such as ‘Fats & the furious’. Driven by the modern pop/hip-hop culture, their tastes differ than that of their parents. Apart from that, the young people are more exposed to modern day international media and technology such as the internet that gives them access to competitor knowledge from all over the world.

As of late, GM has been getting immense attention from audiences, before the cars are even introduced at annual auto-shows. Chevrolet cars, today instead of debuting at auto-shows, make their appearances in summer blockbuster movies such as Transformers. (2010 Chevy Camaro Coupe) The movie that featured the Camaro as the transformer robot named Bumblebee, has been one of the biggest driving forces behind its success so far. Due to the popularity, GM has even announced a visual package consisting of paint and other body fixtures that match the Bumblebee camaro from Transformers.

Due to the movie’s success, GM decided to unveil three new Chevrolet concept cars, the Spark, the Beat and the concept Corvette Stingray, in the sequel to the movie coming out in June, 2009. Chevrolet understood that such media channels reach a far wider audience than just local TV commercials, magazines and auto-shows. The promotion of Chevy’s cars does not end with the movie but carries on with the promotion of the movie itself. Movie merchandising in the form of toys, action figures, trailers, TV commercials, apparel and other media vehicles further promote the company’s products.

The cars are not just featured as cars in the movies, like Aston martin in the Bond films, but are given characters that match the car’s personality that Chevrolet aims to portray. These cars then become symbols that signify those characters and customers don’t just buy a car, they buy memorabilia backed by fan following. Many buyers would pick a Camaro over a Mustang just because a Bumblebee is a Camaro.

Online fan forums such as Camaro5.com, feature many members who have stated that they bought a Chevrolet car because their children watched the Transformers movie. The movie also turned out to be great international advertising as it was shown all across the world, creating brand awareness and recognition internationally – something companies cannot survive without in this globalized business environment. (2010 Chevy Camaro Coupe)

The cars having characters in movies are certainly a new creative message development move by GM’s Chevrolet. But movies are not the only media channels used by GM. Other more conventional promotion methods still exist; TV commercials, magazines and print ads, although they have been reduced in number due to the budget cut. The auto-shows have started to get bigger crowds in the form of movie fans.

Seeing this, the production company DreamWorks, Hasbro and GM collaborate to provide a multimedia experience to auto-show goers with life size models of car character robots and promotional material. So, GM and Chevrolet have revolutionized the concept of automobile advertizing and at the same time saved millions of dollars on marketing budget, a strategy that unmatched internationally. (Kotler, 2008).

Other promotional movies by Chevrolet include city-by-city ‘invasion’ of Chevy’s latest product; the Camaro. In this, dealership employees drive 50-100 camaro’s around town promoting their products by invading the streets. It has been an exciting activity and people in different cities have been waiting for their turn to be ‘invaded’. GM is really thinking out of the box in promoting its new products and is getting positive results so far.

Campaign Evaluation

With all competitive advantages highlighted, ingenious promotional moves and marketing efforts, the results are clear. Despite GM’s $200 million cut in marketing budget, its production plant in Oshawa, Canada has been running over time to meet the demand of the new Camaro, bookings for which have been flooding in since months in advance. Current production rates are at 1100 cars a month. (Ryan, 2009) over seven thousand have been produced through March and April 2009 and orders are still being fulfilled. (April production #’s for Camaro, 2009)

Many say that this might be the car to save General Motors. Chevrolet understands the average American’s wants and needs and realizes their difficulties. Through this, GM has been able to capitalize and survive while other competitors such as Ford and Chrysler are facing a hard time. The message of efficiency, affordability, economy and performance is an effective communication objective and if continued properly, could lead GM to be number one again.

Conclusion and Recommendations

The American automobile industry has a lot of potential and a vast market at its disposal. Unfortunately for the Americans, international automakers have recognized the opportunity before the Americans themselves and have taken over through their incredible product development and marketing strategies through brand promotion.

Great opportunities exist and with the help of increased globalization, technological advances and new media outlets, the US automakers, especially GM”s Chevrolet, can not only regain local market share but also dominate international markets. The US has already set a standard for media promotion and marketing through technology on the global stage, with international collaboration and efficient product development that is all the company needs to satisfy customers and create delight.

GM needs to carry on with its current marketing approach as it is cost effective and efficient. Plus it reaches a global audience more effectively than conventional marketing methods. With smarter product development, sharper segmentation and by catering to the young and demanding customer segment, GM will be able to regain its leading market share and open up new markets that stay hidden even in this day of global coverage.

Bibliography

About (2009) about. Web.

Admin. (2009) Demand April Production #’s for Camaro [Internet]. Web.

Business Resource Software, Inc. (2009) Marketing Plan. Web.

Camaro5.com [Internet]. Web.

Clark, A. (2009) White House orders GM chief’s exit in return for cash lifeline. Web.

Chevrolet (2009) Chevrolet. Web.

Chevy Camaro (2009) 2010 Chevy Camaro. Web.

General Motors (2009) GM Facts and Fiction. Web.

Kotler, P. (2008) Principles of Karketing. Twelfth Edition. Pearson education.

Noyes, T. (2009) Tough love for GM and Chrysler. Web.

R. (2009) Demand for 2010 Camaro prompts extra shifts at Oshawa plant.

Appendix

Production in 2007 – country wise

Production in 2007 – country wise

Production in 2007 – Company wise

Production in 2007 – Company wise

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