Marketing_on_Volvo_Fro_Brazil

To: The marketing director (Mo Willan) From: The marketing executive (Pedro Junqueira) Subject: Marketing activities for Volvo in Brazil Date: 21st of October of 2011 1 Executive summary We will be discussing marketing strategies for Volvo cars on Brazil. Volvo has grown on Brazil on last few years, according to Vício Motor (2010), in 2006, 400 cars were sold, up to 882 in 2007, 1,098 in 2008 and 2,150 in 2009. This is a 96% grown in 2009 and that is mostly because of the XC60 that were introduced on January of 2009 on Brazilian market. In Brazil, Volvo doesn’t sell all models that it produces. According to Volvo Cars website, the available models now are C30, XC60, XC90 and S60, but other models can be imported from other countries. First we will discuss about environmental analysis, doing the swot analysis, porter’s five forces and finally pestle analysis. This study will give us an idea of the economy and society and comprehensive analysis of markets, competitors and the company itself. Then we will do the segmentation, targeting and positioning to find what is our target market and how we will position to the market. Finally we will do the application of promotion mix that is how the company will exchange information with the consumer. On this we will chose the type of advertisement that best reach our target market. 2 Environmental analysis 2.1 Swot analysis Volvo is known on Brazil for its safety, strong brand name, high quality cars, high technology and good customer service. But also for high prices, parts high prices and difficulties for an owner to sell a used car. Brazil is one of the biggest consumers of cars in the world, according to Globo (2011), after hitting record production and sales of cars in 2010, Brazil started 2011 ranked forth in worldwide sales of cars, behind only of China, United States and Japan. Brazil is one of the emerging markets and the average income of the population is increasing, leading to a bigger demand on higher quality and with better technology cars. According to UOL (2008), the number of families with monthly income over R$ 16.6 thousand grew from 0.8% to 1% between 2003 and 2008, and according to Terra (2011), between 2003 and 2009, the middle class double on the north of Brazil, going from 3 million to 6 million, and this class is already 50.5% of the population of Brazil. This is a great opportunity to us, because the market for cars is growing and especially high quality ones. Also we don’t sell all models in Brazil, only few, and launching other models could increase the number of sales. In Brazil there is a car magazine and website called Quatro Rodas, and every year they make a selection of cars and elect the best purchase on each category. The Volvo C30 got the award on 2008 and the XC60 got the award for 3 years in a row (2009, 2010 and 2011) on their category. This magazine is very popular and respected, so this is a strong point for us not only for the advertisement but also to have a company witch is opinion making and reliable electing our cars as the best option on the market. The threats for Volvo are the competitors like BMW and Audi (See appendix1 for chart), witch have stronger brand name; import tax that is very high and just went up, according to Bom Dia Brasil (2011), it was increased from 13% to 43% last September and could influence on imported car prices by an increase from 25% to 28% on retail price; flex fuel cars, because gasoline is more expensive and pollutes more than ethanol and is very common on cars that are produced in Brazil. Volvo thought marketing, could lose the image of having high prices, because actually compared to BMW and Audi has lower prices. On appendix 1 we can see a chart with sales of C30 compared to BMW series 1 and Audi A3. Even with lower prices than BMW and Audi, Volvo had a lower number of sales that it competitors. Other strategy would be sell flex fuel cars that now are only being sold in Europe, because Brazil has a huge market for flex fuel cars and neither Audi or BMW has a flex fuel car being sold on Brazil so far. 2.2 Porter’s five forces The bargaining power of buyers is not too high because they don’t have a big number of choices on the category of cars that we sell. On Brazil, there is an Oligopoly on market for the category of cars sold by us, because most cars produced on Brazil are cheaper and with less technology. For example, for the C30, the only competitors are BMW series 1 and Audi A3. There are other cars on same category but with less technology and prestige what make tour cars different from the others. There is no bargaining power of suppliers because all cars are imported. The bargaining power of suppliers would apply on the country where the cars are produced and according to Investopedia (2011) the threat of disproportionate suppliers bargaining power is typically a problem for small companies, so we shouldn’t have problems with the them, but could avoid future problems by paying fair prices and on time and by maintaining more than one supplier. The threat of substitutes products is actually what affects us the most because BMW and Audi (on C30 model) have a bigger share of the market. Threat of potential entrants is not big because we sells car of high quality and very safe and entrants usually go on the market of low price cars and don’t affect sales from us on Brazil. There are few companies that already entered the Brazilian market like Cherry and Jac Motors from China, and some other like Chana and Haima that are entering the Brazilian market but on a different category that us. Competitive rivalry is not too big but is also a problem, and even that is forbidden on Brazil aggressive and discriminatory advertising, there is a little bit of price war and it can affect the price on our cars. 2.3 Pestle analysis The political factors that affect us are government stability and taxation policies. Government stability because sell imported cars on a country that doesn’t have a stable government can affect the sales and even in worse scenarios that government can prohibited the company to enter the market or create barriers to imports. According to Ministério da Fazenda (2011), Brazil is attractive for economic strength and institutional stability. For Brazil the taxation is a big influence because it is very high. According to Bom Dia Brasil (2011) it was increased from 13% to 43% last September and could influence on imported car prices by an increase from 25% to 28% on retail price. The economics factors that affect us are disposal incomes and demand. Usually it would be interest rates and employment level, but on Brazil our cars are expensive and bought by people with high income, so employment level is not that important because even with high unemployment level, our main consumer can still afford it. Interest rate is not important because people with high income on Brazil usually don’t finance their cars. Disposal income actually influence because to afford to buy our car, that is an expensive car, the consumer need a high disposal income. Demand is important because will define how many people want to buy a car and that affect our sales. The social-cultural factors that affect us are life-style, level of education and attitude and values. The life-style affects us because our cars give the owner a high status and position of being successful. Level of education and attitude and values affects us because our consumers are people with better income and on Brazil that usually mean people with better education and values, and we ear know for producing safety, high quality and high technological cars that attend this market share. The legal factors that affect us are health and safety laws and foreign regulations. Health and safety laws can affect Volvo in cases of accident generating lawsuits, and foreign regulation may hinder the entry of cars on the country. We are world leader in safety on cars, so it very difficult to get a law suit and even that Brazil have high taxes to import cars, there are no other regulations that disrupts us to sell cars on Brazil. The technological factors that affect us are transport infrastructure and communication infrastructure. Transport infrastructure because our cars are imported and need to get to Brazil and be transported inside the country. Most of the cars are imported to Brazil by the sea and get there on Santos port, which has a good infrastructure. Also São Paulo and Rio de Janeiro that are the mainly states where Volvo is sold have a good road infrastructure so the cars can easily get to the consumer. Communication infrastructure because our consumer have high income, and to advertise to these consumer we needs to use all types of communication as TV, radio, Internet and many others. The environmental factors that affect us are green issues, social responsibility and consumerism. Green issues and social responsibility because on Brazil is very common use of ethanol as a substitute of gasoline because it pollutes less and its can be found in every gas station, and consumerism because that affects the demand and sales of expensive cars. 3 STP 3.1 Segmentation We are known worldwide by our safety. According to Kotler, P. (2001), for each chosen target market, the company develops a market offering, and the offering is positioned in the minds of target buyers. Volvo for example develops their cars to target markets buyers who have as one of its main security concerns. Therefore, it positions as the safest car that customers can buy. On Brazil is also known for high technology and status. Usually the first thing that comes in your mind when we are doing segmentation is looking for a segment that concern about safety, but also we have to consider that different cars will have different targets and in some of them the safety might not be the most important factor to buyer. The C30 is a car focused to young single or recent married people. According to Motorclube (2006), the new C30 is a modern car that aims for a group of young singles or just married with an intense urban lifestyle. These people prioritize excitement in sport design and easy driving. That means that the safety is not a priority on this consumer, the technology, design and engine are. The XC60 is a bigger car, usually bought buy families and on this case, the priorities are comfort and safety. Design, engine and technology are also important but not as important. The segmentation of C30 should be a demographic segmentation based on age, income and gender. We can segment age from 18, that is the age allowed by law to get a drivers license until 35, then from 35 to 50 and from 50 to elderly. The segmentation should take into account the income because Volvo has expensive cars. They are cheaper than its competitors but still more expensive than most classes can afford. In this case there is sub-segmentation because there are 4 models, with different characteristics to attend different customers. There are 7 classes on Brazil (see appendix 2) Also we segment by gender that are male and female. The Volvo XC60 in other hand has a total different approach. We can use demographic segmentation on classes, witch are 7 and we segment also by single, married without children and families. We can take into account some psychographic facts like values and opinions, segmenting people worried by the environment and safety and people that do not. 3.2 Targeting We should use a differentiated targeting strategy with customized targeting strategy because every model will have different targets and the company sells basic models and has a whole host of optional extras and accessories, boosting final selling price and providing a certain level of customization. For the Volvo C30 the target will be young and single or just married without children from 18 to 35 years. Starting at 18 years because that is the age allowed by law to get a driving license and until 35 because the number of singles in that age has grown on Brazil in last few years. A study from Solteiro Social Clube (2011) shows that 36% of population of Brazil is single. From an interview done in São Paulo they found out that 19% were from 19 to 24 years old and 71% single and they have an average income 14% higher than married. From 25 and 29 years 13% were single and from 30 to 39, 25% were single. Also they found out that 30% of the people interviewed prefer ethical products, valuing a socioenvironmental commitment. Our target is mainly people from classes A (1 and 2), B (1 and 2) and C. Those are people who can afford our cars, and people from higher classes would chose the top models and from lower our cheaper with less accessories. We target mostly males because in Brazil sports cars are mostly sold to them. According to Adriane Hagedorn (UOL website), the biggest buyers of sports cars are man; women in other hand use their car as a mean of transport. For women cars mean practicality and for men it means status and power. This range a very big number of possible consumers but it make a lot easier to advertise to the right audience. For the XC60, our target will be families because this is a big car design to carry a couple with children and a lot of luggage and for it safety. According to PGprime (2011) the XC60 got the 2010 award on China of safest car. Our target is also people from classes A (1 and 2), B (1 and 2) and C mainly. 3.3 Positioning We should use price and quality and benefit strategies as our positioning strategies. Price because we have lower price than our competitors; quality because we are known on Brazil for our high quality cars; and finally benefit because we are known world wide for producing the safest cars. We are known for our technology, quality and safety but still seen as expensive. We have to position ourselves to show that we are not as expensive as our competitors and we can give our consumer with the same quality, higher safety but in lower prices. We are a premium brand that charge high prices for high quality, but we still have lower prices than other cars in same category. 4 Application of Promotion Mix For the promotion mix we are going to choose advertising, sales promotions, direct marketing and sponsorship. The objective of advertising is create awareness, interest, desire and to sell the car. For advertising we have to use different approaches for different models. We can’t have the same add offering a car for young singles and a car for families but we can use the same media to advertise all of them. The advertising media has to be different for different models, but sales promotions, direct marketing and sponsorship can be done to all of them at the same time. The usual advertising media used to reach out target market on Brazil is broadcast, print and outdoor media. Mobile media doesn’t reach our target market or have the effect desired. Broadcast media is a good way to reach our target market but it has to be done on cable or satellite channels not open ones. The open channels only reach the lower income class on Brazil. Print media also can reach our target market if used right. Our consumers are people who read magazines or financial newspaper not regular newspaper and leaflets. Even though there are many kinds of magazines, most of magazines on Brazil are either with news and reach people working on financial or big corporations with high incomes or women magazines that can reach married woman with children that are also our target market. Outdoor media is prohibited in the city of São Paulo since 2007 what take away a big share of our target market, but in other cities is still very common to advertise cars on outdoors. We have to advertise it near our stores, near big corporations and financial areas and on neighborhoods where our target market lives to be effective. We can’t offer a usual a sales promotion techniques because its an expensive product that is impossible to give vouchers, free samples or offer buy one get on free. In this case what we can do is offer extended guarantees and planed service prices. On direct marketing our best option is use the Internet to reach our consumer and give information. We can have our website with information of all our cars and interactive options to see all features of the car, including change the color and see it on a 360 and inside°. Also we can publish articles about our cars and all features like our safety programs and technology and put videos on line of our advertisement with no extra cost. Finally we can create an interface where our consumer can login and find information about their car, schedule their car maintenance, make notes, complains and tell us about their experience with our company so we can have a database of what our consumer want us to improve and what made them satisfy. For a sponsorship we can sponsor small golf and tennis tournaments. These 2 sports are sports done by people from higher classes, and that our target market. There are a lot of small golf and tennis tournaments on clubs on Brazil and that’s a good opportunity to take our cars and show them ta a big number of possible customers. We can realize test drives and make a showroom to introduce all our cars. 5 Conclusion Brazil is a growing market that offers us a lot of opportunities. Our sales have grown a lot and there is still a share of the market that we can take if we show to our consumer that our cars are cheaper than our competitors. We have to focus on the consumer and what are they needs, bringing flex fuel cars to the market and offering it before our competitors. We also have to make an effort on our promotion mix to get more publicity and get more awareness on the market. If we follow this steps we will be very close to grow even more on Brazilian market. 6 Bibliography Vício Motor, 2010. Volvo cars cresceu 96% em 2009 [on line]. Available from: http://www.viciomotor.com.br/index.php/carros/2155-volvo-cars-cresceu-96-em-2009 Globo, 2011. Confira mais de 50 lançamentos de carros confirmados para 2011 [on line] Available from: http://g1.globo.com/carros/noticia/2011/01/confira-mais-de-50-lancamentos-de-carros-confirmados-para-2011.html Uol, 2008. Pobreza diminui, número de ricos aumenta e classe media cresce, afirmam estudos do IPEA e da FGV [on line]. Available from: http://noticias.uol.com.br/ultnot/2008/08/05/ult23u2584.jhtm Terra, 2011. Número de pessoas na classe media dobra no Norte em 6 anos [on line]. Available from: http://invertia.terra.com.br/novos-consumidores/noticias/0,,OI5282715-EI18402,00-Numero+de+pessoas+da+classe+media+dobra+no+Norte+em+anos.html Bom dia Brasil, 2011. Aumento de imposto sobre carro importado não intimida consumidores [on line]. Available from: http://g1.globo.com/bom-dia-brasil/noticia/2011/09/aumento-de-imposto-sobre-carro-importado-nao-intimida-consumidores.html Investopedia, 2011. Using Poter’s 5 forces to analyze stocks [on line]. Available from: http://www.investopedia.com/articles/fundamental-analysis/11/using-Porters-5-forces-for-stock-analysis.asp#axzz1aglUR9C9 Ministério da Fazenda, 2011. Brasil é atraente por solidez econômica e estabilidade institucional [on line]. Available from: http://www.fazenda.gov.br/portugues/releases/2011/junho/r070611b.asp Kotler, P. 2001. Administração de marketing: a edição do novo milenio. 10ed. São Paulo: Prentice Hall. Motor Clube, 2006. Moderníssimo Volvo C30 será produzido até o final do ano [on line]. Available from: http://www.motorclube.com.br/materias/modernissimo-volvo-c30-sera-produzido-ate-o-final-do-ano.aspx Solteiro Social Clube, 2011. Esquisa detecta hábitos dos solteiros no Brasil [on line]. Available from: http://solteirosc.com.br/2011/08/17/pesquisa-detecta-habitos-dos-solteiros-no-brasil/ Adriane Hagedorn, Uol website. Objetos masculinos X Objetos femininos [on line]. Available from: http://www2.uol.com.br/modabrasil/leitura/carros/index.htm PGprime, 2011. Volvo XC60 se torna um dos SUV mais consagrados da história [on line]. Available from: http://www.pgprime.com.br/novidades/volvo_xc60_se_torna_um_dos_suv_mais_consagrados_da_historia/43/ Logistica Descomplicada, 2011. As classes sociais e a desigualdade no Brasil Available from: http://www.logisticadescomplicada.com/as-classes-sociais-e-a-desigualdade-no-brasil/ 7 References The Marketing communication or Promotion mix: http://www.davedolak.com/promix.htm Volvo website: http://www.volvocars.com/br/Pages/default.aspx Globo website: http://www.globo.com/ Quatro rodas website: http://quatrorodas.abril.com.br/ Terra website: http://www.terra.com.br/portal/ Uol website: http://www.uol.com.br/ Motor Clube website: http://www.motorclube.com.br/ Vicio Motor website: http://www.viciomotor.com.br/ 8 Appendix Appendix 1: Chart of sales of C30, Audi A1 and BMW 1 series Appendix 2: Classes on Brazil According to the website Logística Descomplicada (2011), the classification of social classes used in Brazil follows the provision of the Brazil Economic Classification Criterion or Criterion Brazil. Criterion Brazil defines social classes on the basis of purchasing power and consumption of certain items. If a family has access to each item, it gains points, witch are summed and compared to a table. The class of a family is determined by the number of points that that family can add up. There are 7 different economic classes (A1, A2, B1, B2, C D E). They also say that the number of people on lower classes is getting smaller and the number of people on higher classes is getting bigger as we can see on chart: Appendix 3: Chars of sales of Volvo on 2009, 2010 and 2011.