MC53: Positioning & Creative Strategy Exam project spring 2012 CPR. Nr. 280880-3030

Table of content
Part one: Category Background .............................................................................................................. 2 Presentation of chosen product............................................................................................................ 2 Market background information´s ....................................................................................................... 2 Part two: Analysis of Competitive Advertising ........................................................................................ 4 General characteristics of the car industry .......................................................................................... 4 Skoda Citigo advertising analysis ....................................................................................................... 4 Seat Mii advertising analysis ............................................................................................................... 6 Part Three: Brand Advertising Strategy ................................................................................................... 9 VW Up advertising analysis ................................................................................................................ 9 Potential new advertising for VW Up ............................................................................................... 10 Reference .............................................................................................................................................. 12 Appendix................................................................................................................................................ 13 Appendix 1 – Skoda Citigo print ad .................................................................................................. 13 Appendix 2 – Seat mii print ad .......................................................................................................... 14 Appendix 3 – VW Up print ad .......................................................................................................... 15 Appendix 4 – Hypothesized Mapping ............................................................................................... 15

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MC53: Positioning & Creative Strategy Exam project spring 2012 CPR. Nr. 280880-3030

Part one: Category Background
Presentation of chosen product The exams project takes its focus on the newly introduced VW Up, belonging to the Volkswagen brand. Grouped under the subcompact cars category, it received the annual World Car of the Year 2012 award at the New York International Auto Show (Autoblog 2012). The VW Up is part of the Volkswagen group, a successful Germany vehicle manufacturer, which has positioned itself as the largest vehicle manufacturer in Europe. It is the smallest car in the
VW portfolio, powered by a tiny 1.0-litre, three-cylinder petrol engine that will put out either

44kW or 55kW. It starts out to be available as a three-door with a price from $12.856, is it the cheapest car in the VW portfolio (Press Association, 2012).

Market background information´s Due to a troubled economy, high fuel prices, and heightening environmental concerns, the subcompact cars enjoyed a popularity surge over the past few years. The small size and modest engine power makes the subcompact cars the most fuel-efficient and affordable cars on the market. The cars in this category attract budget-conscious shoppers and young, firsttime new-car buyers. These customers are looking for an affordable vehicle for daily commuting. Furthermore, the size of the cars makes them interesting for buyers who drive and park in congested urban areas (Consumer Guide Automotive 2012). In December 2011 Volkswagen introduced the newest member of the family the VW Up. Mid-year 2012 the sisters Skoda Citigo and Seat Mii are following. All three cars belong to the subcompact category and have the same size and features. Despite they all are from the Volkswagen group family, they are the main competitors to each other. The triples compete in price, with the Skoda Citigo as the cheapest of the three to a price of $12.269. Next in line is the Seat Mii accessible for $12.614, and with a price at $12.856 the WV Up is in the top of the price scale (Press Association, 2012). Hans Dieter Pötsch, Member of the Board of Management at Volkswagen AG, presented the company report of 2011, comparing the key numbers with 2010. In his presentation, new market opportunities have been revealed. The deliveries to customers are specially increased in Central & Eastern Europe by +31%, North America by +21.5%, and in Asia Pacific by 20.1%. The key sales markets between 2011 and 2018 are India with a substantial growth opportunity of +96% and China at +65% (HDP Presentation 2012).

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MC53: Positioning & Creative Strategy Exam project spring 2012 CPR. Nr. 280880-3030

From 2010 to 2011 there has been an increase of vehicle sales for all three brands. VW had an increase of +13.1%, Skoda +15.3%, and Seat 3.1%. This development is also represented through the sales revenue. VW has increased its revenue from €80.251mio. in 2010 to €94.690mio. in 2011. Skoda increased from €8.692mio. to €10.266mio. and Seat increased its sales revenue from €5.038mio. to €5.393mio. The numbers makes it clear that Volkswagen financial is the strongest brand of the triples. From January – February 2012 there has been some changes in vehicle sales for the competitors. Skoda is moving upwards, with an increase in deliveries to customers by +11.6%, VW has +8% and Seat is losing deliveries with -12.2%. Despite the fact that Seat has decreased in vehicle sales, the Seat Mii is still a main competitor, as the car offers the same benefits as its sisters. All three brands have the opportunity to increase their deliveries to customers when their new cars arrive on the market. The marketing budget for each brand could not be defined, but the Volkswagen group had an annual ad budget of around $250 million to $300 million in 2010, which is distributed across the individual brands belonging to the Volkswagen Group (AOL Autos 2010). For 2018 the Volkswagen Group has developed a strategy plan. The main points are Sustainable growth combined with sustainable profitability. Other objectives are (HDS Presentation 2012): Leading in customers satisfaction and quality Volkswagen Group profit before tax margin > 8% Volumes > 10 million units p.a.2 Top employer

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MC53: Positioning & Creative Strategy Exam project spring 2012 CPR. Nr. 280880-3030

Part two: Analysis of Competitive Advertising
General characteristics of the car industry The car industry is characterized through high-involvement products, because the purchase is linked to fiscal risks as a lot of money is involved. But it could also be psychological risk because of personal or social involvement associated with the product, like driving a small and cheap car could give the impression that you belong to a lower social class or give you a lower social status. Customer behavior toward high involvement products shows that there is an information collecting process, which leads to attitude building and finally trial. This is important to have in mind when creating advertising as the processing of the advertising will need to create attention, learning and finally acceptance. Furthermore, it is important for cars to be likable, as the first thing you notice with a car is its appearance. If you don’t like it, you don´t buy it. Moreover, it is relevant analysis to notice that cars, as one of the only products, are both positive and negative motivated. The positive motivation brings you to fall in love with the car, as it met your personal or social desires. The negative motivations are used to justify the purchase. Finally, it is important for high involvement and informational product to be believable and accepted. To extreme advertising wouldn´t work in this case, as the target audience wouldn´t see the advertising as real and trustful. All three cars are in the introduction phase of the product life cycle. This requires that brand awareness is one of the communication objectives, as it is important that the target audience notice the product and its benefits, to create brand recall when the need for a smaller car arise.

Skoda Citigo advertising analysis The Skoda Citigo (app. 1) is a high involvement product and informational advert. As mentioned earlier the motivation is both positive and negative. The brand is nicely symbolized with the Skoda logo at the right upper corner. The ad is consistent with the Skoda colors green and white, which make the brand easy to recognize. The further analysis will be based on the Five-Step Strategy Planning Process Model. It looks at: selecting the target audience, understand the target audience, positioning the brand, look at the communication strategy, and the media strategy. Step One: For selecting the target audience the method of Antonides and van Raaij is going to be implemented. They group the target audience in terms of their overall descriptive characteristics (Percy & Elliott 2009). The target audience is grouped into: consumers living
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MC53: Positioning & Creative Strategy Exam project spring 2012 CPR. Nr. 280880-3030

in urban areas, who drive short distances and park in crowded areas. They appreciate a small sized car, which makes it easy to maneuver in the crooked roads of a city. The advertising underlines these arguments by saying “A small Skoda for the city”. Furthermore, the target audience are budget-conscious shoppers and young, first-time new-car buyers, as the Skoda is the cheapest of the triples in the subcompact category and also belonging to the cheapest category in the car industry. Step Two: The advert uses just a few words, requiring a certain knowledge and intelligence from their target audience. After describing the characteristics of the target audience and understanding their motives for purchasing a car like Skoda Citigo, is it also necessary to look at who are involved in the purchasing process, and the roles of each involved. The five potential roles for participants to play are: Initiator, influencer, decider, purchaser and user. As the purchaser has brand purchase intention as communication objective, which is not part of Skoda Citigo´s objectives, it will not be considered. An example to illustrate the decision process could be: a young boy (John), who is going to buy a new car for the first time. The initiator is John, who has saved all his money to buy his first new car. John is influenced by his father, who prefer Skoda and recommend John to look at one. The decider is the father, as he has promised to pay half of the car, if he could choose the best offer for his son. The user is of course John. In this case Skoda needs to aim their message toward the father as the decider and influencer. Have in mind that the roles changes, depending on the situation and roles of the involved people in the decision making process. Step Three and four: The advertising is defined as central positioning in the product category. This can be explained through the lack of differentiated benefits compared to the product category. The general model of positioning is part of the brand oriented positioning. It helps the potential buyer to define the brand, who it is for, and which benefits it offers. The model includes the two communication objective: brand awareness and brand attitudes. Which always are the goals of effective brand positioning strategy.
Convenient Transportation

Skoda Citigo

Small car Fuel-efficient Low price

Brand awareness

Brand attitude

The category need in the Skoda advertising is very clear, as the car is the only product in the advert. It is not enough to look at it from a marketer’s perspective, as it is very important that the potential customer at least have some interest in the product category, if not there
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MC53: Positioning & Creative Strategy Exam project spring 2012 CPR. Nr. 280880-3030

wouldn’t be any need for purchasing. The question “what is it?” helps the marketers to link the need for convenient transportation to the Skoda brand in the mind of the consumers. By establishing awareness of Skoda Citigo´s existence through brand recall. In other words, using the product and the symbols for the brand (logo/car) to create awareness, which the Skoda Citigo advert do nicely. Next question is “what does it offer?” This question helps to associate the benefits the target audience is longing for (a small car that is fuel-efficient and can be purchased to a low price), to the Skoda brand. The brand attitude (positive or negative) helps to link this together. Step five: As mentioned earlier the communication objectives are brand awareness and brand attitude as it is new on the market. The brand awareness strategy is brand recall, which makes all media appropriated for advertising. But Skoda Citigo is also a high involvement informational advertising, which requires that television and radio are excluded, due to the time limitation they have for processing the message. This leaves Skoda with media´s such as: Newspaper (limitations in visual content), magazines, posters, internet, and direct mail.

Seat Mii advertising analysis The Seat mii advertising (app. 2) is a high involvement transformational advert. The motivation is primarily positive as the ad transfers positive emotions, through the happy couple and the nice environment, towards the target audience. By positioning the mii parked in front of green trees in the center of a town and with people looking happy towards the mii, the positive emotions are very clear. Using a transformational perspective has the advantage that the emotional part of the brain has more power to influence behavior than the rational part (Percy & Elliott, 2009). Placing the Seat brand logo in the left upper corner is a strategically good move, as the visual direction goes from left to right. Seeing the brand logo as the first thing helps increase brand awareness. Step One: The target audiences of Seat mii are the same as with the Skoda Citigo: people living and driving in urban areas, as the advert ilustrate clearly by being parked in the city. Also in this case the Target audience is engaged in the environment and prefers fuel-efficient cars, which is nicely ilustrated with the green areas behind the mii. Finally, the target audiences are budget-conscious shoppers and young, first-time new-car buyers, as the mii is belonging to the cheapest category in the car industry. This makes it clear that Skoda and Seat compete in the same market.

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Step Two: To get an understanding of the target audiences buying process and at points in the process were advertising and other marketing communication can influence the brand decision, the decision-making model is going to be implemented in this part of the analysis. The model divides different steps in the process into four stages: need arousal, brand consideration, purchase, and usage. Furthermore, it looks at: who is involved and their roles in the decision making process, where that stage in the decision is likely to occur, when each stage occurs, and how that stage is likely to occur. The model is just a guide line, as the real world cannot be divided into small boxes. When the potential consumer starts to think about having a car a need arises. Looking into the different car models, their features and evaluating which car to buy, is part of brand consideration. Visiting the Seat dealer and get more detailed information, looking at the cars in the showroom and test-driving is part of the purchasing. Finally, implementing it in the customers daily life and driving it, is the usage stage. The Skoda example with John, gives an insight of, who could be involved and which role they play. But there are many other situations where the involved and their roles are different depending on target audience. The need for a new small car could appear at home, while visiting a friend (who already has a small car and love its benefits), when passing a car dealer, or even when seeing an advertising at the train station on the way home from work (thinking, how convenience it would be to have a car). Before making a decision of buying a small car, the potential consumer will need to be reminded of how convenience it is to drive a small car in the city. An example could be when moving to the city an ad would be placed in the welcome package, so the potential customer would notice that a small car for the city would be preferable. The “how” describe what is happening at each stage in the decision process. Again the example of including a Seat mii advert in a welcome packed is used. Example: a man (Carl) is moving to the city, he sees the advert and thinks about buying a small car (need occur), as it is a high involvement product Carl has a need for collecting information´s, to be sure he is making the right decision (brand consideration). These information’s could be collected from friends, car magazines, or event on car-test web pages. After having made a decision Carl goes to the seat dealer to buy the new car. Finally, he uses his new car for driving around the city, to work, to the theater or to visit friends. Step Three and four: Like the Skoda advert, the Seat mii advert is central positioned and brand oriented.

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MC53: Positioning & Creative Strategy Exam project spring 2012 CPR. Nr. 280880-3030
Convenient Transportation for the city

Seat mii

Small car Great for the city Environment friendly Easy to park

Brand awareness

Brand attitude

The category need in the Seat mii advert is very clear, as the car is in the center of the advert, parked in the city attracting the eyes with its bright yellow color and through dawn toning the areas around it. The city and green areas in the background illustrates further benefits. The link between the need for convenient transportation to the brand Seat mii is established through brand awareness by brand recall. In the advertising this is illustrated through the product and the brand symbols (car/logo). The product benefits (shown in the figure above), and the target audience emotions towards the product (attributes), provides the link between Seat mii and the benefit. Step five: As mentioned earlier the communication objectives are brand awareness and brand attitude. Like in the Skoda case, the brand awareness strategy is brand recall, which makes all media appropriated some with limitations (visual, processing time, and frequency). As the Seat mii is a high involvement and the advert transformational, the radio has to be excluded, because it can´t visualize the advertising, which is needed for brand recall. All other media´s can be used with some limitations in the frequency and time areas.

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MC53: Positioning & Creative Strategy Exam project spring 2012 CPR. Nr. 280880-3030

Part Three: Brand Advertising Strategy
VW Up advertising analysis The VW Up is a high involvement product and informational advert (app. 3). As mentioned before, the motivation is both positive and negative. The first thing that catches the eye are the big white letters saying “only the thinking is big”. Indirectly the message says “that the car is one of the small ones”. Furthermore, Volkswagen sends the message of being a strong and competent brand, with a lot of knowledge in producing cars (thinking is big). The colors are consistent with the VW logo (blue/white), which make it easy to recall the brand. The advert is loaded with a lot of information’s, which fits to a high involvement product. But it also requires a longer message processing time. This will have an affect on the media strategy. Step One: Rossiter and Percy´s divide the target audience in five buyer groups depending on their brand purchase behavior: brand loyals, favorable brand switchers, other brand switchers, other brand loyals, and new category users. The five buyer groups can further be divided into the groups: brand users and non-users of the brand. As VW Up´s through the print advert is working with advertising, the main interest will be on attracting new users or encouraging existing users to purchase more often. The characteristics of the target audience are already mentioned in the Skoda and Seat analysis. This gives the opportunity to concentrate on their purchase behavior. Being brand loyal means that a consumer always goes for the same brand. An example could be: The need for a second car has occurred for a little family of 4 persons. They have already a VW station wagon and do not hesitate to choose a VW as their second car as well. They stay loyal to the brand, as the brand has become one of them. These users have very high brand awareness and a positive brand attitude, which immunizes them against competitive messages. Favorable brand-switchers have also high awareness and a positive attitude towards VW. The problem with this group is that they do not keep buying the same brand. That’s way it is very important to maintain their brand awareness by advertising frequently. The finally group is the new category user. They just know the category but have not build any awareness or attitude towards a special brand. The VW marketing manager needs to make this group notice the brand, this is done through advertising and even promotion. This will be explained later in this section. Step Two: After describing the characteristics of the target audience and understanding their purchase behavior its time to look at the people involved in the purchasing process and which role they have. An example of the process is given in step two of the Skoda Citigo analysis. The most important role is the decider, as he chose what brand to buy. But he can be
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MC53: Positioning & Creative Strategy Exam project spring 2012 CPR. Nr. 280880-3030

influenced, by the VW dealer, friends, family and even by his own emotions. This makes the creation of a successful advert very difficult. Step Three and four: Compared to the competitors Skoda and Seat, VW uses a different positioning strategy. They are positioned differentially with a product benefit oriented strategy. The focus is on the benefits that differentiate VW Up from the others (c e+). In the advert this is illustrated through the five stars result from a safety test, highlighted price, and mentioning of the world car of the year 2012 award. These characteristics help building positive attitudes toward VW Up.
Convenient Transportation

VW Up

Small safe car The best Low price

Brand awareness

Brand attitude

Step five: As mentioned earlier the communication objectives are brand awareness and brand attitude. The brand awareness strategy is brand recall, as it is important for the car industry to be remembered by name. It is not enough to be remembered as the little white car with the funny looking logo. Furthermore, occurs the need for a VW Up not spontaneously at the VW dealer, as it is a high involvement product. Depending on which user group VW is going to target, different media´s are preferable. VW Up´s advert is informational and require time for the target audience to process the message. Television and radio have a too short processing time and can be excluded. When targeting the new category users the best media would be newspaper and the internet, as they have no limitations and can be used for high involvement informational adverts with focus on brand recall.

Potential new advertising for VW Up If the focus only were on price and features of the cars, than the VW Up wouldn´t differentiate itself from its main competitors and would need to be repositioned (see figure in app. 4). Through the analysis process it can be concluded that this is not the case. There are other elements that need to be considered before comparing brands with each other. Both Skoda and Seat are following a centrally position strategy. This means that they do not use any differentiation advantage to develop a stronger positioning. They just deliver the main benefits of the subcompact car category (being a small car). However, VW is a strong brand with a strong image, being the main brand of the Volkswagen group. Their differentiation positioning strategy separates VW from its competitors, as being a brand with unique benefits
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(mentioned in step 3-4 in the advertising analysis), which justifies the higher price. VW Up´s main benefits, being the world car of the year 2012 and having top marks in safety test are very effective in reaching their target audience. VW has a strong position in the subcompact car category, and as argued do not need to change their positioning strategy and be repositioned. All three chosen products are just entering the market. By being a new product in a product category, the first step is to create brand awareness and brand attitude. This requires consistency through the whole marketing strategy. New changes at this point wouldn´t be to prefer. Promotions are likely to be more effective for recognition brand awareness than recall brand awareness. In this case brand recognition is not one of the communication objectives, which make promotion less useful. However, promotions have the advantage to make the target audience aware of the brands existents and to induce them to try it. This is especially important for a product in the introduction phase of the product life cycle, as it is the case with VW Up. Tradeshows and fairs are already used by VW Up, as they have been participated in the Frankfurter Motor Show and the New York International Auto show. One advantage of using advertising and promotion together is according to Moran´s “Racket” effect (Percy & Elliott, 2009) the increase of general growth rate for VW Up. Furthermore, it helps to reinforce the positive brand attitude of regular users, which makes the VW Up brand more resistant to competitive brands´ promotions.

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Reference
AOL Autos, 2010, 24.04.2012, 07:05: http://autos.aol.com/article/volkswagen-caradvertising/

Autoblog, 21.04.12, 20.55: http://www.autoblog.com/2012/04/05/volkswagen-up-named2012-world-car-of-the-year/

Consumer Guide Automotive, The Consumer Guide to 2012 Subcompact Cars. 22.04.2012, 06.17: http://consumerguideauto.howstuffworks.com/2012-subcompact-cars-buyingguide.htm

Drive (2011), 22.04.12, 15.46: Cars of 2012: Small cars. http://news.drive.com.au/drive/motor-news/cars-of-2012-small-cars-20111223-1p7tt.html

HDP Presentation 2012, 23.04.2012, 21.05: Volkswagen Group: Excellence has many names. http://www.volkswagenag.com/content/vwcorp/info_center/de/talks_and_presentations/2012/ 03/London_Roadshow.bin.html/binarystorageitem/file/London_Presentation.pdf Larry Percy and Richard Elliott, 2009: ‘Strategic Advertising Management’ 3rd edition, Oxford University Press. Press Association reporters, 2012 – Thu, Apr 5, 2012 17:05 BST: Citigo prices to undercut Mii and Up. 23.04.2012, 23:19: http://uk.cars.yahoo.com/news/citigo-prices-undercut-mii160500242.html

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Appendix
Appendix 1 – Skoda Citigo print ad

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Appendix 2 – Seat mii print ad

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Appendix 3 – VW Up print ad

Appendix 4 – Hypothesized Mapping
High

VW

Price
Seat Skoda

Low Few Features Many

Hypothesized Mapping of Subcompact car market in terms of price and number of features

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