Prince Mohammad Bin Fahd University Marketing Principles BUSI- 3313 Sec. 203 Name: Leena Al Mushcab ID# 201100096 Assignment #1 Topic: Case Study Submit to: Ms. Nadia Lucien 3/9/2015

1. Talk to five people varying in age about their vehicles or car and ask them what value means to them with regards to an automobile or car and how the manufacturer or dealer creates such value. Please write a brief report of what you learned about customer value? Write clear sentences and illustrate your points with examples.

“Those who expect to reap the blessings of freedom, must, like men, undergo the fatigues of supporting it." Thomas Paine was, of course, not talking about the freedom of automobile or even horse & carriage ownership. Nonetheless, there’s a point to be made: having a car can be a blessing and a burden.

First, we should understand the market place, market offerings, value and satisfaction, and exchanges and relations, and customer needs, wants, and demands.

A car is not an investment. It is a depreciating asset, meaning it loses value over time. On average, new cars and trucks lose more than 20% of their value in the first year (Motley Fool). On the flipside, that means that if you can find a well-maintained car that’s just one or two years old, you’ll get a huge discount on an almost-new model.

So, after talking to 5 different people from different ages and owning different cars, I came to a conclusion that someone who’s only 18 years old should take in consider that his budget might be low and he should consider to buy a used car as his first car, and someone who’s in his 30’s his budget is high. Supply and demand plays a big role in the value of a particular model in a particular year. Too much "car," just like too much of any single commodity, will depress the value of a car over its life cycle.

Put another way, you might think Mercedes wants to sell as many C-Classes as it possibly can. And if demand were always bullish, that would be true. But Mercedes, just like Honda and every other carmaker, has a vested interest in keeping residual values high because that enables Mercedes to have a "cheap" money supply: How much interest they're charged through their captive finance arm (a bank whose sole job is to finance car loans for a single carmaker) directly influences whether they can offer you that nifty 0.9 percent financing deal. High residual values also mean that the certified-pre-owned (CPO) program Benz dealers run can continue to be highly lucrative. A flood of C-Classes two years from now would depress that CPO market. Carmakers try carefully to match production to demand because otherwise they have to crank up incentives (cash-back offers) to generate sales, and that's just the type of thing that led to GM and Chrysler falling into crisis. Eventually the cheap money spigot shuts off and the debt must be repaid.

So carmakers are smarter than ever at predicting sales volumes and will restrict production if they see storm clouds ahead. Today the cost of used cars is at or near an all-time high because carmakers cut supply during the recession, and because people started holding on to old cars instead of getting new ones. Add in a variable like high gas prices and in the past five years we've seen crazy things happen, like the value of a used Prius topping that of a new one, and diesel VW Jettas commanding nearly new-Jetta pricing. All of it has to do with carmakers being very careful with supply.
References

"How Car Dealers Decide Residual Value." Popular Mechanics. N.p., 06 Feb. 2013. Web. 02 Sept. 2015.

http://www.popularmechanics.com/cars/how-to/a8711/how-they-decide-your-cars-residual-value/