Driving Forces in the New Car Market Marketing Management Memo
The Key issue:
PRODUCT DIFFERENTIATION: The case shows 2 extremes of product differentiation. Subaru with is ‘All Wheel Drive’ niche’ market, and Toyota with is similarities to its direct competitors.
Why is this concern?
Image 1: How Points of Differentiation affect Marketing Strategies and Planning
(If you can’t see the image above email email@example.com and request a copy)
When talking about product differentiation Walker* states:
“In the auto industry, this can be achieved by having an effective manufacturing system that allows upgraded vehicles to be produced at a little extra cost.....The success of best-cost provider strategy depends on a strong focus on low cost combined with the ability to differentiate.” Walker (2009, p61)
Without this contrast in products – the customer will get confused and rely on simple principals e.g. Price, Colour or Brand name (with no associated values). Or the customer will simply fall back to what they have known to work for them in the past, eliminating any marketing done to promote new products.
So how does this fit with the cases of Toyota and Subaru?
In the case it states “Kevin studies this table...” (Walker*, 2009, p349), meaning Kevin had already skipped over any marketing to do with the product and was only comparing RACV rating and score for the car (against price).
With Subaru, everything is facing the other extreme – they have sectioned out their own niche’ market with their sponsorship of motorsport, and specialisation in “AWD” system. Their products are completely different from similar vehicles.
Where is the problem then?
Kevin compares the Fiesta as a direct comparison to the Yaris – which means the products have no points of difference between them. This means that Toyota’s segmentation strategy has failed. They are relying on the fact that their competitors are not as good as them, constantly defending their territory of mediocrity.
Subaru – they have done an excellent strategy of becoming leaders in AWD systems (niche’ market). Their true direct competitors sit above them (Audi, VW...) with indirect competitors sitting above their price (Toyota, Nissan...). However Subaru now have the problem of how do they market outside the box they have so well created? Is their Niche’ now holding them back from attempting a Growth-Market strategy (Hybrids etc)? As developing new technologies outside what they know will take large budgets (on a very high risk).
So how is this solved? – Segmentation Strategies
Toyota need to stop intimidating the market in some segments (case: small car segment), and put some specialist strategies in place to emphasise product differentiation with its competitors – e.g. mp3 or fuel economy etc.
Perhaps Toyota take some of its R&D from other divisions (Robotics, Hybrid....) and operate a Prospector (Walker*, 2009) Business Unit. To provide new product advancements across all divisions using a broad product-market domain.
By making an alliance with another manufacturer, they can have a joint product platform to target a market that neither currently has access too. (Note this currently has happened with Toyota and Holden)
Subaru needs to have a small division that does projects completely different from all other designs in Subaru.
This needs to be done without sacrificing their motorsport sponsorships – which seem to give a good image of the company. The products in this division have potential to become new ‘star’ ranges into the mix, or prototype ‘dogs’. However if this is not performed the company will find growth slow and difficult.
Walker, O, Gountas, J, Mavondo, F, Mullins, J. (2009). Marketing Strategy: A Decision-Focused Approach
N.S.W. Australia: McGraw-Hill
Pride, W, Ferrell, O, Elliott, G, Rundle-Theile, S, Waller, D, Paladino, A,. (2008). Marketing : Core Concepts & Applications
Qld, Australia : Wiley