Managing Research Report

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INTRODUCTION

This coursework entitled ³Marketing´ is about creating a marketing strategy for a new or

existing product.

The product I have chosen here for this assignment is the newAudi A6. Audi A6 is the latest

model of the company to hit the road of the UK in April 2004.

History

The badge of Audi which reflects the 'Four Rings¶ is the emblem of one of the oldest car

manufacturers of Germany. This Four Rings emblem tells about the merger which took place

in 1932 among the four car manufacturer. They were Audi, DKW, Horch and Wanderer and

can be said as the root of present day AUDI AG. The Audi Company current hold the

reputation of producing high quality and long lasting cars. Technologyis the Audi Slogan.

Their quality resulted with the net profit of ¼816 million in 2003, which was ¼5.4 million

more than as compared to 2002.

Audi UK is the most efficient and successful importer of Europe which has its increasing

sales ratio each year since 1999 as in 2003 the sales boomed to the figure of 70,107 and made

a 2.7% of market share. Audi UK is an independent company in UK since 10 years after it

separated from Volkswagen Group in 1993.About 131 Audi centres are proudly serving in

UK presently. The new Audi A6 Let¶s see What Company say about the newA6:

µThe creation of a class-leading executive saloon calls for a broad range of abilities. Supple

ride comfort, but with precise and clear feedback; power, but with fuel efficiency; an

exhilarating driving experience, but with luxurious accommodation for four. The new A6

triumphantly reconciles these apparent opposites through advancedtechnology and design.



From t f irst gl you know t t t A6 marks a signif i ant st forward for t class. A

bl nd of opposing qualiti s; but a compromise in none¶

The car made its f irst appearance at the 2004 Geneva Motor Show on the 2nd of March. It

has been announced that pr ices of this car will range from £24,175 to £42,775 which is only a

1% pr ice increase on the old model. The car has many new features both aesthetic and

functional such as leather seats and upholstery, V6 and V8 petrol units, si speed gear box

and improved dynamic suspension.

INFORMATION GAT ERING

To f ind out about the new Audi A6 I must gather information about it and also marketing

theory to enable me to come up with a suitable marketing strategy for the car. The ways that I

have gathered information about the new A6 are:

Product brochures ± I collected a product brochure and pr ice list from an Audi showroom.

These contain information about the car ; the var ious types, specif ication, possi ble colours,

extras, pr ices, etc.

Audi website ± the Audi UK website is www.audi.co.uk. This contains information about

Audi cars including the new A6. It contains a lot of the same information about the car, but

also tells you about the company in general and has regular ly updated information.

Audi annual report 2003 ± this has background information about the company and

f inancial, marketing and product information from the past year. I downloaded this from the

Audi website.

The sources of information I used to f ind out about more developing process are:

Text books ± the text books I used most is Intermediate Business byCarysfor th, R awlinson

and Neild and The Complete A-Z Business Studies Handbook by Lines, Marcouse andMar tin. These both contain information about all aspects of business theory including

marketing.

Websites ± there are numerous websites, such as www.bized.co.uk , that contain information

about business theory. I mainly used these for information not found in other sources as it is

more time consuming.



Handouts ± the three handouts given to me are Marketing, Marketing Mix and Marketing

Objectives, Strategy and tactics.

Notes ± class work notes provide background information about the topic of marketing. I

will also carry out pr imary research to f ind out more about what the consumer wants from the

A6.

Developing

Marketing ± identifying, antici pating and fulf illing the customer needs and wants in a

mutually benef icial process. It must be benef icial for both sides; it involves meeting the

organization¶s objectives as well as the customers¶. Identifying customer needs is done

through market research.

Antici pating customer needs is done through forecasting.

Fulf illing customer needs is done through the four P¶s:

Price ± selling at the psychologically r ight pr ice.

Production ± selling a range of products with appropr iate features

and branding.

Promotion ± may involve adver ts, sales promotion, PR , etc.

Place ± mak ing sure the product is sold in the correct outlets.

Market Research

Market research ± gather ing, recording, analysing and presenting information relevant to the

marketing process. It is par t of marketing planning at the gather ing information stage.

The purpose of market research is to:

* Identify oppor tunities and threats (such as changes in the market)

*Analyse alternative approaches (such as changing the pr ice)

* R eview progress (such as monitor ing changes in sales af ter a promotion)

Before a f irm star t their market research they will f irst identify a problem; in Audi¶s case

what people want from a car. As I have already said, they are a market or ientated f irm so will

take great notice of this. They then decide a method of gather ing data ± pr imary or secondary.



They will then gather the data and analyse it. The f indings will be used to try and make the

f inal product, in this case the A6, as prof itable as possi ble. They may also carry out fur ther

market research af ter this to f ind out how popular it is. Types of market research

There are two types of market research:

1. Primary ± research that is gathered f irst hand. It is expensive, but more likely to meet the

precise needs of the company. It is gathered by f ield research.

2. Secondary ± research which uses existing data. It is cheaper, but may be in the wrong

format and available to competitors so it does not give you an edge. It is gathered by desk

research.

My market research

For this project I have undergone my own market research which will allow me to evaluate

Audi¶s current marketing strategy and make suggestions. As I have already said in the

information gather ing section (page 4), I have collected product brochures and pr ice lists of

the Audi A6 and looked on the company website to gather information about the car. I also

downloaded a copy of the annual repor t 2003. This is secondary research as it is from a pre-

existing source. I have also carr ied out pr imary research in the form of a questionnaire. I

asked a sample of for ty people eleven questions. A sample is a small group which is thought

to represent the market as a whole. My sample of for ty obviously will not be an accurate

representation of the whole market at it is so small and all those questioned are from the same

area. However, it was the largest sample that I could practically do. The possi bilities to make

the results more reliable are to do a census which involves surveying everyone in the country,

but this would be very costly and unpractical even for a large f irm such as Audi. My

sampling method was convenience which means I simply questioned people who were

available for interviewing, including my family and fr iends. This is the easiest sampling

method which is why I chose it, but can be unreliable as a sample representing the whole

market is not likely to be found.

Af ter a SWOT analysis has been produced, the f irm can take one of two paths:

1. Matching ± this involves building on the f irm¶s strengths and tak ing advantages of

oppor tunities.



2. Conversion ± this involves creating strategies that turn the company¶s weaknesses into

strengths and threats into oppor tunities.

As well as producing a SWOT analysis a f irm will have to examine market conditions before

producing a marketing strategy. The main things which examined are:

* Market size ± the total size of the market the f irm is work ing in. it is measured in terms of

volume or value (volume x pr ice). The car market is currently a large one.

* Market share ± the percentage of sales one brand has compared to the total market. In

2003 Audi had 2.7% market share in the UK which seems small, but it must be taken into

account how many car companies there are and Audi¶s market share in Germany, the home

country of Audi, is three times this.

*Market growth ± the rate at which the size of the market is increasing. From 2002 to 2003,

Audi UK had increased sales of 6.9%, but only increased market share of 0.6% so the market

must be expanding and at quite a fast rate.

* Segmentation ± appealing to different sections of the market in different ways by changing

the marketing mix. For example, changing features of the product so it appeals to different

people more luxur ies for those better off, different size engines, etc.

The next stage is to set the marketing objectives consider ing the corporate objectives. This

provides targets for the depar tment. I have not been able to f ind out the marketing objectives

of Audi, but they are likely to be increase market share and revenue (both with quantitative

values). My marketing objectives for Audi would be these things and also to enhance the

brand reputation which I believe is a vital par t of Audi¶s success; it provides them with a

unique selling point and so is impor tant to differentiate the product from those of

competitors.

Af ter this, a marketing strategy is selected tak ing into account the marketing objectives,

f indings of the SWOT analysis and market conditions. This will then be implemented throughmarketing tactics/ the marketing mix. So to achieve the marketing objectives all aspect of the

marketing mix must be r ight ± the car must be sold at the r ight pr ice, in the r ight places,

promoted well appealing to the target audience and designed and produced well.

My SWOT analysis of the A6 shows that one of Audi¶s main strengths is the company¶s

reputation. This should be built on through producing a high quality car and using premium



pr icing. They also have a very large spending power as they are a large multinational

company who have been very prof itable in the past. This means that they can spend a lot on

promotion of the A6 to give it a competitive advantage. This would give them an advantage,

but all of their main competitors can boast equal or greater spending power mak ing it a

necessity to spend highly on promotion and mak ing the product as good as is possi ble by

adding additional luxury features. Audi also have strength in the success of their previous

cars, including the old A6. This enhances the company image and makes it easier to launch a

new product, like the A6, as people know it will be good quality. A high pr ice will have to

charged for the A6, but this is likely to be less impor tant as to the target audience this is not

the most impor tant factor. A high must be charged to cover production, transpor t and

promotional costs.

The f inal par t of the process is reviewing the marketing plan af ter it has been implemented.

This is something to be done at a later date af ter the product has been on sale for a suitable

length of time. It can be done through fur ther market research into customers¶ opinions of the

car and how well it has sold. To proper ly evaluate the marketing plan, there must have been

clear targets with time restr ictions. This shows the impor tance of having set good objectives.

The information from this is then used to set new corporate objectives and the company¶s

position must also be reassessed.

The value of having a good marketing plan, created through the method shown above, is:

* Ensures continual evaluation of objectives and strategies

* Ensures eff icient use of resources

*Establishes cr iter ia for success; this hel ps motivate and makes it easier to monitor progress.

* Improves decision mak ing.

* Involves people in discussion so hel ps improve their commitment.

* Involves analysis so makes organisation better prepared for change.

* Coordinates activities.

* Avoids wasteful or conf licting activities.



*Involves rational decision mak ing based on quantif iable data.

The marketing plan will affect other functions within the business. One example is the

marketing plan determines what is produced, how it is produced and when it is produced

which affects the production depar tment. It determines the number and sk ills of employees

required which affects human resource management. Also, it determines the design of the

product, the cost to make the product (through choice of mater ial, production methods, etc)

and the pr ice of the product which affect the f inance depar tment.

DEVELOPING A MARK ETING STRATEGY

There are many different marketing strategies that may be adopted by the company and of ten

many are used at the same time for different products. For example the marketing strategy of

the new A6 will be different for that of the A3 which is a cheaper car and is already well

established in its market. The marketing strategy greatly depends on what type of product it is

for. This can be assessed using the Ansoff¶s Matr ix.

Ansoff¶s Matrix ± this it can be used to analyse marketing strategies

1. Market penetration ± attempt to gain a greater market share of an existing market.

Involves changing marketing mix.

2. New product development ± developing a new product for an existing market.

3. Market development ± launching an existing product into a new market.

4. Diversif ication ± enter ing a new market (one which that f irm is not yet in) with a new

product. This is can be very r isky.

The Audi A6 falls into the category of new product development as it is a new product that

has been developed, but is in a market where Audi already compete. The new product

development process begins with idea generation both internally from research and

development and externally from investors, competitors or consumers. They then analyse the

ideas to assess their feasi bility and develop them through prototypes. These are then tested

for safety and quality. In the case of cars there are vigorous safety checks as the car must

meet cer tain requirements. There is then test marketing in selected outlets before the launch



nationally. Another inf luence on the marketing strategy employed is the type of market the

product is competing in. There are two main types of market:

1. Niche market ± a small market in which major producers are not concerned.

2. Mass market ± market with a large volume or value of sales.

The main advantages of a niche market are it f its with limited resources, avoids competition

with major f irms, returns are relatively high and f its with a unique selling point (USP). The

advantages of mass marketing are higher returns, can exploit a brand name, economies of

scale and less vulnerable to changes in market. The car market is clear ly a mass market as the

value of sales is high. However, there is a wide range of quality and pr ice available and Audi

is in the upper range so this market is a highly differentiated mass market. The main

competitors to the A6 in this market are BMW and Mercedes, who also produce high value

cars.

As Audi are competing in a mass market, it is vital for them to undergo extensive promotion.

This will attempt to give the A6 a competitive advantage over its r ivals as consumers become

aware of the advantages the A6 offers. They should promote using the brand name as it is

currently has a good reputation and so will hel p improve sales. If the brand name is enhanced

through the A6, it will hel p Audi in the future.

There are also a number of business models and diagrams that can be used to hel p determinethe marketing strategy chosen by the company. Two such models are the Product life cycle

model and the Boston Matr ix.

Boston Matrix

The Boston Matr ix is a method of product por tfolio analysis. This is used to examine the

existing position of the organisations products in their markets to enable better decision

mak ing on aspects including marketing strategy. The value of it is that it examines all the

f irm¶s products together, provides an overview and hel ps with marketing planning. TheBoston Matr ix shows what percentage of the market each product has and the rate at which

the market is growing. The car market is a fast growing one and the A6 is a new product, so

would currently be considered a question mark. However, it is likely that it would soon

become a star if it sells well. The Boston Matr ix shows us that the A6 will need investment

(much will already have been spent on design and production) in promotion and other areas.



In general, af ter a f irm have evaluated a product in the Boston Matr ix they can do one of four

things:

1. Hold ± attempt to maintain the existing market position (with strong cash cows).

2. Build ± invest to develop position in market (with question marks). Involves sacr if ice of

shor t term prof it.

3. Harvest ± aims for shor t term prof it to get the most out of the product (possi ble with cash

cows).

4. Divest ± get r id of the product (with dogs).

It is likely that and advisable for Audi to build for the A6. This will hel p increase market

share and result in long term prof it and targets being met. This will involve major shor t term

investment so reduce shor t term prof it. One way to develop market position would be through

heavy promotion. Mak ing the consumer aware of the product and persuading them to buy it.

They must also set a pr ice which is competitive and r ight for the product¶s market.

MARK ETING MIX FOR THE AUDI A6

P rice - The factors that inf luence the pr ice of a product are:

* Costs ± the f irm will want to cover costs to make a prof it. The costs for mak ing and testing

a car such as the A6 are very high; therefore the pr ice is likely to be high.

*Price elasticity of demand ± how sensitive the product is to change in pr ice. If it is

sensitive then lower ing the pr ice will result in an increase in turnover. It is probable that

products of a highly reputable company, such as Audi, will be pr ice inelastic as the market

they appeal to pr ice is not the most impor tant factor. This means pr ice should be quite high.

* Competition ± are there any similar products currently available? There are no new direct

competitors to the new A6, but there are existing competitors. This means they should try and

set the pr ice similar to or lower than those.

* Stage of product life cycle ± it is likely a product in the growth phase will have a higher

pr ice than one in the decline phase. The A6 is a new product so the pr ice can be high as it has

cutting edge design features.



* Government ± government adds tax to products mak ing them more expensive which must

be considered. VAT is charged on cars.

* Other external factors ± PESTE (political, economic, social, technological and

environmental factors).

* Rest of marketing mix ± the pr ice must compliment other elements of the mix.

The pr icing method chosen will also be affected by the pr ice elasticity of demand of the

product. This measures the responsiveness of demand for a product to change in pr ice. (Both

measured as percentage of total.) It is calculated using the formula:

Pr ice elasticity = % change in demand / % change in pr ice

If percentage change in demand is greater that percentage change in pr ice then the product is

pr ice elastic. R aising the pr ice will result in a loss of revenue. If the percentage change in

demand is less than the percentage change in pr ice then the product is pr ice inelastic. R aising

the pr ice will result in a gain of revenue .The A6 will be pr ice inelastic because it is a highly

differentiated product. This means that people will be willing to pay more for the benef its it

provides ± reputable brand name, added luxury feature, good performance, etc. Also, they are

regular ly purchased as company cars so if someone else (i.e. the company) is paying for it

pr ice will not be so impor tant. Selling pr ice inelastic is generally considered a good thing by

a f irm as it allows them to increase the pr ice and gain revenue. If a product is pr ice elasticlower ing the pr ice should result in an increase in revenue, but this is a r isk as it relies on

demand increasing. If this does not happen as a result of external factors, the f irm could lose

a lot of money. As a result of being pr ice inelastic, Audi have increased pr ices by 1% on

average from the old A6 which should result in increased revenue. Also, this pr ice increase is

only small so people will not feel like they are being overcharged, so it is psychologically the

r ight pr ice. Audi will charge a high pr ice which seems a good idea. High pr ice is usually

associated with:

* Heavy branding ± Audi is a reputable brand.

* Few competitors ± no new cars in the A6¶s class.

* Unique selling point ± brand reputation, no new competitors, quality design features such

as the latest in-car technology and new engines.



* High unit cost ± building prototypes, testing and production are all expensive.

* Limited distribution ± only sold in Audi showrooms and on website.

The A6 should aim for product differentiation. This means Audi should try to distinguish the

car from its competitors in the eyes of the consumer. This will be an attempt to get customers

from the competition. It will be done by adding features to the car which add value.

Something which adds value will increase the pr ice of the product by more than it costs to

produce. Examples of this are alloy wheels, C player, sixth gear. If a feature costs more to

produce than it adds to the value of the product it should be removed. Audi have added

features to the A6 to improve its performance enjoyment to dr ive. It uses a new engine design

which is renounced for its responsiveness and high speed cruising ability. There are

numerous safety features on the A6 including anti-lock brakes, traction control system and

automatic tyre pressure monitor ing. These features appeal to people¶s emotion of fear so

gives the car another selling point.

Place/distribution

The channel of distr i bution descr i bes how the title of ownershi p passes from manufacturer to

consumer. A f irm is likely to set distr i bution targets such as number of areas and outlets the

product is sold in and number or value of sales in each region. The f irst two will be the same

for the A6 as they are for every other Audi car. Audi are a well established company in all of

their markets so expansion into new markets or number of outlets in existing areas will not be

required. The number or value of sales will be determined by supply (must be equal to

demand), other aspects of the marketing mix and external factors (e.g. income).

Audi must use both above and below the line promotion to promote the A6. In my opinion

the most suitable ways to the A6 are on television, in magazines, in national newspapers and

on bill boards. I have chosen television as it has a very large potential audience and uses both

images and sound so will be more memorable. Audi are a very large company so can afford

the high costs associated with it. The most suitable time would be the evening as this is when

most people are watching. The main benef it of magazines is the adver t will be seen by the

target audience. It is also cheaper so can be done more of ten. More information can be put in

adver ts as people can spend longer reading them. Newspapers have the same advantages.

They still appeal to the target audience as different newspapers appeal to different socio-

economic groups. Broadsheets such as the Times and the Financial Times would be most



suitable. Bill boards are cheap and show the aesthetics of the car. They will be eye catching to

people, par ticular ly if they use br ight colours. They are not the best way to communicate

information about the A6, but will make potential customers aware of it and will get the car

in their minds.

As you would expect from a company with a large marketing budget and they also promote

through product brochures and on their website. The A6 may also get promoted at special car

shows such as the Geneva Motor show where it was unveiled to the public. They also ensure

they appeal to the target audience and must assess the effectiveness of their promotion.

SUMMARY OF MARK ETING STRATEGY

The following table shows the choices I have made for the marketing mix for the new Audi

A6:

Decisions for the marketing mix

R eason for decision Should be customer or ientated. The product should appeal to the wants

and needs of the consumer so they do not chose competitors product over the A6. Pr imary

market research will be done in the form of a questionnaire. This is feasi ble method of market

research for me, an individual, to carry out and I can make it relevant for the task. This can

then be analysed to hel p devise the marketing mix.

The price of the A6 should be set high (the company chose £24,175 to £42,775).

This is because it is pr ice inelastic, is a high quality product and has a reputable brand. It has

been der ived using a combination of competitor based pr icing (similar pr ice to BMW and

Mercedes similar cars), demand based pr icing (what they have found people were willing to

pay for the old A6) and psychological pr icing (this pr ice is neither too much nor too little).

Premium pr icing is used due to the reputable brand name, par ticular ly in the current good

economic climate (higher income, A6 is income elastic). The product should aim for

differentiation through the brand name Audi and features, including new engines and the

latest in-car technology, which add value. Audi have always aimed for product differentiation

rather than cost management so this should be continued. It can be done through a reputable

brand name and a high quality product with many additional features. Differentiation is likely

to lead to increased market share and so increased turnover and prof it. Distr i bution of the



product should be limited to exclusive Audi dealershi ps and website. Exclusive distr i bution

is associated with high quality, high pr iced speciality goods such as the A6. This maintains

this image. The website will provide an extra market for sales and targets for this should be

set. Audi should use zero level distr i bution. Zero level distr i bution cuts out the middle man so

reduces costs and hel ps exclusive distr i bution.

The A6 should be adver tised frequently and in a wide range of places, mostly television,

bill boards, magazines and radio. The f irm has great f inancial resources at their disposal so

can afford a large adver tising budget (found from last years spending in annual repor t).

Adver tising in this way will ensure people, par ticular ly the target audience, here about and

know the benef its of the product.

Other forms of promotion, including personal selling, are to be done less. The A6 is a

consumer good so adver tising to the f inal consumer is most impor tant. Personal selling is not

as impor tant as this is used to sell products to retailers. However, Audi do need to use

personal selling in their showrooms to persuade perspective customers. All elements of the

marketing strategy and marketing mix compliment each other so they work together

effectively to achieve the marketing objectives.

BIBLIOGRAPHY

Audi product brochures entitled A6 with subsections: The new A6 saloon, A6 details, A6:

Saloon and Avant and A6 and S6 quattro Saloon and Avant pr ice list.

Audi website ± www.audi.com

Audi annual repor t 2003

Business studies websites including www.bized.co.uk

Lines, Marcouse, Mar tin, A-Z Business Studies handbook third edition, 1994

Carysfor th, R awlinson, Neild, Intermediate Business, 1995

Nike website ± www.nike.com

BMW website ± www.bmw.com



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