Marketing Innovations in the Automotive Industry: Meeting the Challenges of the Digital Age

202 Pages·2019·2.033 MB·English

by  Elena Candelo

International Series in Advanced Management Studies
Elena Candelo
Marketing
Innovations in
the Automotive
Industry
Meeting the Challenges of the Digital
Age
International Series in Advanced Management
Studies
Editor-in-Chief
Alberto Pastore, Sapienza University of Rome, Rome, Italy
Series Editors
Giovanni Battista Dagnino, University of Catania, Catania, Italy
Marco Frey, Sant’Anna School of Advanced Studies, Pisa, Italy
Christian Grönroos, Hanken School of Economics, Helsinki, Finland
Michael Haenlein, ESCP Europe, Paris, France
Charles F. Hofacker, Florida State University, Tallahassee, FL, USA
Anne Huff, Maynooth University, Maynooth, Ireland
Morten Huse, BI Norwegian Business School, Oslo, Norway
Gennaro Iasevoli, Lumsa University, Rome, Italy
Andrea Moretti, University of Udine, Udine, Italy
Fabio Musso, University of Urbino, Urbino, Italy
Mustafa Ozbilgin, Brunel University London, Uxbridge, UK
Paolo Stampacchia, University of Naples Federico II, Naples, Italy
Luca Zanderighi, University of Milan, Milan, Italy
Assistant Editor
Michela Matarazzo, Marconi University, Rome, Italy
More information about this series at http://www.springer.com/series/15195
Elena Candelo
Marketing Innovations
in the Automotive Industry
Meeting the Challenges of the Digital Age
123
ElenaCandelo
Department ofManagement
University of Turin
Turin, Italy
ISSN 2366-8814 ISSN 2366-8822 (electronic)
International Series in AdvancedManagementStudies
ISBN978-3-030-15998-6 ISBN978-3-030-15999-3 (eBook)
https://doi.org/10.1007/978-3-030-15999-3
LibraryofCongressControlNumber:2019934784
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If you want to do something new, you have to
stop doing something old
Peter Drucker
Preface
Since the outset, marketing strategies in the car industry have been evolving con-
stantly. The best manufacturers have managed to adjust their marketing strategies,
often quickly, in response to variations in technology, demand and competition.
In the marketing literature, the evolution of marketing strategies has been
analysed mainly across the phases of production orientation (or production
approach), sales orientation (or sales approach) and marketing orientation (or
marketing approach, sometime defined as the result of the marketing revolution).
Thisbookwillprovideanin-depthdiscussionoftheseapproaches,whileplacing
a broad emphasis on the impact of technological innovation, and changes in buyer
behaviour and the structure of competition on the industry.
Whystudytheevolutionofmarketingstrategiesinthecarindustry,specifically?
The car industry is a context with all the essential elements for researching how
changes in technology, buying behaviour and competition have influenced mar-
keting strategies. It is a mature industry that makes use of well-established tech-
nology, which is vulnerable to the unexpected rise and fall of demand, prone to
overcapacity, and has high barriers to both entry and exit and a widespread,
increasing focus on short-term financial returns.
Many other industries, such as aerospace, agricultural machinery and industrial
equipment, have faced the same kinds of variations and challenges: frequent
technological innovation generating new paradigms, cyclical markets with deep
fluctuations in demand, changes in buyer behaviour and relentless new models of
competition. However, the advantage of studying the car industry is that there is a
largeamountofup-to-dateinformationaboutmanyfirmswithdifferentdimensions,
financial resources and organisational structures.
This large amount of up-to-date information about many different companies
(carmakers,dealers,advertisingagencies,suppliers,logisticsfirmsandsoon)from
various countries have been collected and analysed using a mixed qualitative
methodology which leveraged on several data sources.
vii
viii Preface
First, a broad literature review about the evolution of marketing strategies and
innovationmanagementintheautomotiveindustrywasperformed.Thisreviewwas
enrichedwithapersonalreworkingoftheinformationtoidentifythelinksbetween
innovation and changes in marketing and industry stakeholders.
Thesecondstepconsistedingatheringinformationfromthecarmakers’archival
data (press releases and corporate documents), annual reports, institutional web-
sites, top managers’ public speeches and direct company observations, including
visits to several manufacturing plants, units and research centres to reconstruct the
impactandimportanceoftechnologicalinnovationinrelationtomarketingstrategy
development.
Subsequently, quantitative and qualitative data were collected through direct
interviews with corporate managers of various stakeholders. A number of criteria
were used to select the respondents: extensive tenure in the automotive industry
(carmakers or others companies), direct interaction with technological innovation
and/ormarketingactivities,andfunctionalandhierarchicalrelevanceanddiversity.
Thus, knowledgeable informants were selected as they are, were or had been
directly involved (in various periods) in the phenomena being investigated, thus
providing direct experiences and perceptions. Semi-structured, open-ended inter-
views were used. Using this type of research instrument allows for the possibility
that the discussion might also include areas not planned by the interviewer. The
entire data collection phase, including both interviews and the various aforemen-
tioned information sources, lasted three years (2015–2018).
Theultimateobjectiveistoforesee,onthebasisofpastandpresentindications,
the likely future developments in competition in the car industry (consolidation
among firms, market fragmentation, disruptions by newcomers) and in marketing
strategies. This book focuses on two factors: progress in technological innovation
(particularly the advances of the digital revolution) and current changes in con-
sumer and organisational buying behaviour.
In relation to the car industry, this publication has four main objectives:
1. To retrace/run through the evolution of marketing strategies, and of the related
business models of which such strategies were an integral part.
2. To identify the factors that influenced this evolution and carmakers’ responses
during the various stages.
3. To situate the stages of the evolution of marketing strategies in relation to
technological innovation in the industry, changes in consumer and organisa-
tional buying behaviour, and alterations to the structure of the sector.
4. Toexplorethelikelyfutureevolutionofmarketingstrategiesinthecarindustry
and the main innovative factors that could impact them.
Thisresearchlooksatthreepartiallyoverlappingphases/periodsintheevolution
of innovation and marketing, each of which has its own drivers and marketing
strategies: (1) the mechanical age (from its early years to the late 1960s); (2) the
electronic and software age (from the 1970s to the mid-1990s); and (3) the digital
age (from the late 1990s onward).
Preface ix
PartIandPartIIdealwiththemechanicalage,coveringaperiodstretching
from its early days to roughly the end of the 1960s.
In both Europe and the USA, the first cars were sold to rich individuals who
were passionate about innovation and set on standing out and showing off their
status. Vehicles were built at the specific request of individual buyers, who gen-
erally purchased the chassis from one manufacturer and the body from another.
Since they were built by hand, also using components from other products, they
were almost all different from one another. In the early days of the car industry,
manufacturers earned recognition through success at competitions with
long-distance races which selected the most robust and fastest cars.
A first turning point occurred in the USA in the first decade of the last century.
Henry Ford understood that the potential marketfor a means of transport affordable
by the masses was enormous. The price could be kept down by producing large
volumes of identical cars to take advantage of economies of scale and reduce the
product costs per unit. Mass production and mass marketing were born. In those
years, the main factors that influenced marketing were the emergence of new tech-
nologies, economic development (constantly growing average income per capita),
and the advent of mass consumption, as well, first and foremost, as the capacity of
new entrepreneurs to understand the trends of potential demand and coordinate the
use of the technological and management knowledge available in various sectors.
Towards the end of the 1920s, a second turning point occurred in the evolution
ofcarmarketing.GeneralMotors(GM)overtookFordintermsofsalesvolumes.It
offered more attractive cars. Contrary to Ford’s approach, GM concentrated much
moreonthestyles,coloursandexternalappearanceofitsvehicles.GM’smarketing
strategy was geared at segmentation: “a car for every purse and purpose”. The
strategy was based on the class divisions that were coming to shape American
society. For the different social classes, GM offered different products at different
prices,seeking toattractpotential clients from different segments through different
advertisements. It offered high performance for Pontiac, cutting-edge technology
for Oldsmobile, reliability for Buick, and a symbol of wealth and power for
Cadillac owners.
In Europe and Japan, the history of the industry and theevolution of marketing
strategies took a very different path from that of the USA.
In western Europe, one cannot talk about marketing in the modern sense of the
term until the 1920s. Cars were mainly produced on a commission basis, at the
request of audacious rich individuals who mostly wanted to show off their high
socialstatus.Thebestmanufacturerswereselectedthroughcompetitionsinvolving
endurance and speed. Such races were the main promotional tool. European
supremacy in automotive constructions was confirmed by the fact that rich
AmericanspurchasedvehiclesinEuropetocompeteinraces intheirown country.
In 1905, a Fiat 90 cv won the world record over a mile in Long Island.
Between the two world wars, the evolution of marketing strategies was con-
siderably behind compared to developments in the USA. Various factors con-
tributed to this. First and foremost, the middle classes did not have the necessary
x Preface
resourcestopurchasenewcarsandthefewcustomersthatcouldaffordthemcalled
forpowerfulcarspossiblywithuniquecharacteristics.Itwascustomaryforthemto
purchasethechassisfromonemanufacturerandthebodyfromanother,requesting
innovation and distinction. Secondly, even in the biggest markets, car sales were
somewhat modest. No market in Europe, except for Great Britain, was sufficiently
largetojustifymajorinvestmentsinassemblyfacilities.Lastly,Europewasdivided
into several national markets, separated by barriers of various types. After the
Second World War, several years of closed borders and governments’ desire to
defend national identities and industrial traditions contributed to maintaining
markeddifferencesbetweentheproductsandstylesofEuropeancarmanufacturers
for a long time yet.
In the 1950s, convergence towards similar forms of distribution began in the
main European markets. The introduction of regulations set by the European
Community contributed to this. The distribution model that, with few variations,
still exists in western Europe was born. Starting with the need to offer clients a
guarantee that repairs carried out in dealers’ garages were safe, the national
authorities permitted manufacturers to assign exclusive sales areas to their dealers
and to require the use of original spare parts and standards for premises used for
sales purposes (design, layout and size), staff qualifications, equipment at repair
shops and the key elements for services offered to clients. In practice, the same
dealercouldnotservemorethanonemanufacturer,norcouldcarsbesoldthrough
otherdistributionchannels.Structuresnonethelessremainedverydifferentfromone
nation to the next in terms of the concentration of dealers.
In the 1960s, substantial differences began to emerge in the main markets
between the marketing strategies of three types of manufacturers: mass market;
“high-end”; and niche (sports cars and luxury cars). Mass market manufacturers
chosemassmarketingstrategiesbasedontheexpansionoftheirshareofthemarket
to create and sustain economies of scale and scope, maximum standardisation of
parts and components, a high degree of modularity, and low and medium price
rangesgearedattargetswiththegreatestpotentialforoveralldemand.Fiat,Renault
and Opel were among the most active.
Basedon“high-end”(or“premium”)strategies,ontheotherhand,therewasthe
searchfordifferentiation,aprerequisiteforcharginga“premiumprice”.Thegreater
the differences perceived by the buyer, the more the manufacturer could establish
demand, maintain customer loyalty and charge a premium price. Many of the
elements for creating differentiation were associated with marketing, from the
qualityofpre-andafter-salesservicestothebrandimage.The“premium”German
brands began to emerge: BMW, Mercedes Benz, Audi and Porsche.
Niche manufacturershadinheritedtheoldartisanal productionmethods,having
survived a strict selection process (including Aston Martin, Ferrari, Lamborghini,
Jaguar, Rolls Royce and Bentley). They managed to impose their “product con-
cepts” on the market and to preserve their clients’ loyalty they kept it unchanged.
They controlled consumer access by increasing prices and limiting production
volumes to heighten the sense of exclusivity. There were drawbacks, however, as