Ford Motor Company
The Ford Motor Company is the fifth largest automaker in the world and one of the most successful in the United States with over 3 million shares. The company has, however, been experiencing sales challenges in some markets which make it an ideal first client for my advertising agency. The paper explores the company in detail by first assessing the industry it operates in before delving into the company’s operations. The paper then explores the proposed campaign for the 2016-2017 financial year and how the campaign will be assessed for effectiveness. This paper proposes that Ford has a differential advantage over rivals that it can use to boost profitability.
Industry Information
Size of the Market
The global automotive industry had been badly hit by the economic crisis of 2009 but it is undergoing a recovery in all markets. There are roughly 1.2 billion cars and light trucks in operation around the world, a number that has been growing by 50 million cars annually. In the US, the world’s second-largest market, production, and sales have been steadily increasing to 12 million units in 2015. Sales are expected to increase over the next two years before taking a downturn as a result of high auto loan interest rates, adverse economic cycles, and an upsurge of the used car market. China, the biggest market, has seen sales steadily increase over the years to peak at 17.4 million units in 2015. The nation offers more opportunity for growth, but the institution of new restrictions on ownership in large cities threatens to curtail sales.
In Europe, car sales have also improved since the financial downturn to 12.6 million units in 2015, a 9.3 percent proliferation year-on-year. Production in Europe, however, has failed to keep up with demand due to the threat of recession that has held European nations hostage. While the region does not offer high growth potential, it remains a renewal market since sales are still below the historic 18 million units of 2007 and at an ownership rate of 55%, there is still room for sales growth (Hirsch, Jullens and Singh). Japan, the world’s largest producer of cars, along with the U.S, China, and European nations make up 75% of total car sales, but this balance is threatened as a VAT hike threatens to reduce car sales in the long run. This leaves emerging markets with an ownership rate of below 10% as the last frontier for growth.
It is expected that in 2016 over 88 million units will be sold, but in the US, Japan, Europe, and South Korea profit growth will be stagnant. Even as the market is expected to exceed 100 million cars by 2020 and profits expected to rise by almost 50 percent, profits from the established market will be outpaced by growth in emerging markets by almost three times (Hermes). As a result, emerging markets will be able to account for approximately 66% of total automotive profits by 2020. The market is, however, threatened by changes in macroeconomic factors as well as the proliferation of novel mobility services such as e-hailing and carpooling that will see sales growth dip from the 4% experienced now to around 2% by 2030 (Gao, Kaas and Mohr).
Major Competitors and Product Mix
The automotive industry has evolved over the years and is now filled with hundreds of assemblers spread across the globe. In the early 1990s, first movers established market dominance and while their brands are still recognized to this day, but changing market trends have made this oligopolistic market highly dynamic with market leaders changing annually. The top companies have, however, managed to hold on to their positions despite their market shares being diluted. Toyota is the world’s largest producer with over 10.2 million cars produced annually followed by Volkswagen that produces about 9.9 million cars. General motors come in at 3rd with 9.5 million cars manufactured annually, and these three make up 32% of the market share. Other top manufacturers include Nissan, Hyundai, and Ford that account for another 20% of market share. Overall, U.S, European, and Japanese manufacturers have dominated the market but the emergence of new entrants from high growth nations has seen market shares as well as profit margins decline (LeBeau).
Competition in the automotive industry is based on numerous factors including product features and quality, fuel economy, and customer service. The current generation perceives cars as just another means of transportation and thus have no specific brand preference which coupled with the proliferation of data on automotive price, specifications, discounts, and quality fuels the competition (Lang, Collie and Zhai). There is also looming competition from traditionally unfamiliar sources including the proliferation of car sharing and e-hailing services such as Uber as well as the entry of hi-tech firms such as Google and Apple. Technological advances have led to these tech companies having an advantage in the production of cars hence their entrance into the market.
The automotive industry involves a range of products including vehicle assembly and manufacturing, manufacture of component parts, the provision of after-sales services, and the provision of ancillary services. In the production of vehicles, there are numerous types of cars classified depending on size and usage. There are economy cars which are low-cost fuel-efficient types ideal for city travel and these include micro cars and hatchbacks. Another type of vehicle is the family cars which are small to midsize. Other car classifications are saloons, luxury vehicles, sports cars, off-roaders, and commercial vehicles. Vehicles may also be categorized depending on the type of fuel they utilize and in this category we have petrol, diesel, hybrid, and electric cars. Besides vehicle manufacture and assembly, some companies specialize in manufacturing component parts such as tires and engines either for sale to assemblers or as spare parts.
Target Market
The market for automotive may be divided depending on geography, demography, or the needs of customers. Geographical segmentation may be either dependent on location on dependent on the physical attributes of the place. Vehicles may thus be made for the Asian Market, the European market, the American market, or the African market as customers in these geographical locations have differing tastes. Cars may also be made for specific conditions such as city cars, cars for rough terrain, or mountainous areas.
The automotive market is also segmented according to demographics with the classification differing. Some vehicles may thus be made for the middle-aged man or woman while others are for a younger or older generation. A vehicle may also be targeted at executives or it may be targeted at ordinary workers. Demographic segmentation is also dependent on the customer’s financial status with some vehicles being designed for the affluent in society while others are made for the middle class. Additionally, while some vehicles are considered to be masculine some are made for females.
The most widely used means of gauging a target audience is the use of psychological traits. In using psychological traits, automotive companies assess a customer’s needs and wants based on emotions and psychological attributes. Some vehicles may thus be made for environmentally-friendly customers who demand fuel efficiency and the use of renewable material. Other customers may dwell on the vehicle’s performance or its top speed while other customers will base their purchases on physical appeal. Some customers may also prefer vehicles built in a specific locality or using a certain type of production process. Other customers are also loyal to a certain manufacturer independent of which vehicle type they purchase from the company. As such, the target market for vehicles is as broad as the types of vehicles on the road.
Ford Motor Company
Sales
Ford is one of the top five automakers in global sales occupying roughly 6% of the total market share. The company’s total number of sales have been increasing and in 2015 the company reported a 0.2% increase on the 2014 figures to peak at 6.65 million vehicles, the highest number it has ever sold. 1.53 million of these sales were in Europe, 1.5 million in the Asia-Pacific, and 3 million in North America. The U.S. Market remains Ford’s largest accounting for 2.5 million vehicle sales in 2015 and a projected 2.7 million sales in 2016.
Sales in Europe are, however, slow and the company expects to lose $1.2 billion in the region in 2016 and $250 million in 2017. The Asia-pacific region, however, offers the greatest avenue for sales growth and 2016 profits from the region are anticipated at $700 million. There were, however, mixed results for sales by category. Retail sales which make up the largest chunk of the company’s business were down 6% while fleet sales were up 5%. The number of trucks sold has also been increasing as have sales for the new Lincoln brand which a 40% increase. The Lincoln brand has been widely received and was responsible for the $140.6 billion of revenues in 2015, a $4.8 billion increase from the 2014 figure (Rosevear). Overall, it is expected that sales will grow by 52% to over 9.5 million units of annual sales by 2020.
Product Mix
Ford offers a variety of products ranging from vehicles to automotive parts and components as well as financial services. Vehicles include small cars that range from fuel-efficient family vehicles such as the Fiesta to the high-performance cars such as the Mustang. While most of these sedans are covered, Ford also makes two types of coupes and convertibles. The company also manufactures crossovers and SUVs that can accommodate up to 8 passengers, with functionality being differentiated for the urban and off-road segments. The company also manufactures trucks and vans as well as buses and tractors. While most of these vehicles have diesel and petrol engines, the company has also invested in the production of hybrids as well as electric vehicles for the fuel-conscious owner.
Besides auto car manufacturing, the company also engages in the production of component parts of all types. These parts are sold separately either through third-party auto part stores or on the company’s website. The firm also recognizes that not all customers can afford to pay the full amount on their purchases and thus has financial services accessible through authorized dealerships or the Ford Motor Credit Company. Besides Ford Vehicles, the company also owns a small part of Mazda and Aston Martin brand of vehicles.
Target Market
Ford defines its target customers through psychological traits which transcend country-specific attributes hence appealing to customers in multiple markets. One of this target group of customers are the environmentally conscious people. This group of customers seeks environmentally friendly vehicles that do not sacrifice on performance, hence Ford’s introduction of EcoBoost turbocharged engines as well as well as intensive research into electric cars. The company has also set a specific focus on Generation Y, customers born after 1993. This group of customers is keener about the economy, aesthetics, and value for money and they also have extensive access to information on which to make informed decisions, hence the reason for the production of small cost-effective brands such as the Fiesta. Ford is also targeting the over 80 million millennials entering their baby-rearing years with an increase in SUV production as it is expected that when these millennials become married, their interest in SUVs is proliferated (Anthon).
The company is also targeting customers attracted to visual appeal as these make up a large part of the market. 30% of people state that they would avoid a vehicle due to a bad exterior while 17% would do so due to a vehicle’s bad interior hence Ford’s introduction of better materials and designs as well as the addition of features for all vehicles across the board. Another target group of customers is those who demand innovative technologies such as socially connected vehicles with infotainment screens. Ford is hoping to satisfy this market by introducing over 12 novel performance vehicles to the market through 2020. All in all, Ford looks to serve a global market hence its introduction of a diverse product line.
Differential Advantage
With competition rife in the automotive industry, customers tend to last as long as the next warranty which is why companies struggle to find a competitive advantage. Ford has engaged in numerous campaigns to ensure that it is the number one choice for customers, particularly through its customer focus. Ford excels at customer service especially with regards to complaints and queries. Ford has a dedicated team of customer service officers that work 24/7. The company has also inculcated the culture of integrity and customer focus to all its staff meaning that employees are well-handled all the time. The company is also a one-stop shop for all a customer’s motoring needs as in every Ford location one can be sure of accessing the car they want, parts, as well as financing if in need. Ford’s financing plan which is used in 40% of all Ford purchases has especially been widely acclaimed by both dealers and customers.
Another differential advantage of Ford is its high-quality products that come at a low cost. Ford has managed to keep costs low while maintaining productivity high leading to its vehicles being lower in cost than its competitors. The company has done so without minimizing on quality leading to its vehicles being respected for performance and cost-effectiveness. The Ford F-Series pickup, for example, remains the most respected commercial truck to date and the company’s hybrid designs have maintained a high reputation for performance and efficiency despite recent innovations by competitors. The company also benefits from the fact that it has suffered lesser recalls than its competitors hence proof of quality. Additionally, Ford has a differential advantage in the US where it is considered a thoroughly ‘American’ brand hence capable of understanding and satisfying the needs of Americans.
Opportunities and Risks
An area of opportunity for Ford is in the production of more efficient hybrid and electric vehicles. The enactment of numerous environmental laws has threatened many automakers with massive recalls as a result of flouting environmental regulations. This coupled with the evolution of customer tastes to more ‘green’ cars has led to the upsurge in demand for hybrids and electric cars. Ford is already producing these cars hence it has the expertise and the capacity to mass-produce these cars and become a leading pioneer. Ford could also engage in the production of driverless cars expected to account for 10% of all vehicles produced by 2020.
Ford could also benefit from tapping into the Chinese and Asian-Pacific market where car ownership is low. Since Ford produces globally acceptable vehicles, it will not have as big a problem penetrating this market as some of its American and European counterparts do. The U.S. market where Ford sells most of its vehicles is also undergoing an improvement that has seen disposable incomes increase, hence intensified advertising in this market will see sales rise.
Ford, however, faces many risks to its business. Intensified competition from Asian and European markets has seen Ford’s market share decrease in its primary market, the US. These manufacturers have increased their product offerings hence Ford is facing competition in all market segments. The involvement of hi-tech firms such as Google and Apple in the production of self-driving cars also presents a problem to Ford as these companies have significant resources to mass-produce cost-effectively. The recent Volkswagen emissions scandal could also spell doom for diesel engine manufacturing which would greatly affect the sales of Ford’s Diesel trucks including the popular F-Series. A move from diesel engine production would also necessitate huge capital outlays for Ford which has had a run of poor financial results. The other significant threat to Ford is the current trend in oil prices. If prices remain low, the sale of hybrid vehicles will reduce as customers will not be focused on efficiency.
Types of Campaigns in the Past
Ford has engaged in numerous advertising campaigns over the years including ‘Built Ford Tough’ a campaign for trucks that has lasted over 8 years. The ad campaign was launched to showcase Ford trucks navigating various obstacles in real life. Over the years, the campaign has evolved from simple videos to an in-depth showcase snapshot of Ford’s powerful technology and innovative engineering. The campaign was originally meant for the US market but it has been launched globally.
In 2015, the company launched the ‘By Design’ slogan to highlight its cars. The ad campaign is built for cars and features video ads for the Focus, Mustang, and Fusion. The ads focus on the subjective qualities of driving a Ford car such as style, sound, and driving fun (Schultz). The company has intensified its ad campaigns in the wake of stiff competition and in 2016 it launched ‘unlearn’, an ad campaign targeted at UK customers urging them to dismiss the stereotypes they have heard about the brand. The Ford logo has been redesigned in the ad and now features a colorful script in place of the traditional blue oval.
Proposals for Campaigns 2016-2017
Objectives
Ford has been losing its market share especially in the retail division with locations across Europe expected to declare losses over the next two years. The South American market has also been doing poorly and in the US the company has been losing its market share despite a growth in sales. One of the objectives of the marketing campaign is thus to reclaim profitability in these markets while also recouping lost market share or increasing it. The company hopes to increase sales by 52% through 2020 or make at least 9.5 million units by the same date. The company also hopes to attain worldwide acceptability for all its brands.
The ad campaigns seek to reach all viewers under the target market group. It aims to elucidate people on the benefits of Ford products including quality, efficiency, and user friendliness. The ad campaign hopes to show how Ford can be utilized by individuals across the world in order to eliminate stereotypes. Additionally, the ad campaign wishes to showcase Ford as not just an automaker but also a service provider.
Advertising Plan
The theme of the advertising campaign is ‘A Global Village’ where the Ford is shown as a vehicle that is meant for use in all locations of the globe and for numerous purposes. Ford is thus the vehicle that unites and meets the globe’s transportation needs. Since the campaign will run across different platforms and locations, the budget will be split across these media.
For the social media campaign. The budget will cover costs such as website design and hosting as well as payments for the team that will create content. It also includes purchase costs for various items including computers, mobile devices, and video cameras for shooting videos. Additionally, the budget will also include payments for experts, models, and other influencers that will be used in the campaigns. Lastly, the budget will cover payments for advertising on third-party social media sites including the social accounts of numerous influencers. It is estimated that social media advertising will cost the company $1 billion annually.
Besides the social media campaign, there will also be a digital media campaign through the use of television ads. The costs for this campaign include paying television stations to air the ads as well as payments to creative staff and models. The television ads are expected to cost Ford another $1 billion in sales. Another key component of the ad campaign is through promotional events including a worldwide chance for lucky customers to win various items including Ford vehicles, fully paid-up holidays and household items. This campaign is expected to cost the company about $500 million. The last element of the campaign is offering sponsorships for events across the world as well as outdoor advertising, and the campaign is expected to cost $1.5 billion. Overall, the entire campaign by Ford is expected to cost $4 billion which is in line with the company’s annual advertising budget that averages at about $4.2 billion.
The Four Ads
One of the digital media campaigns will be a runoff 15-second video clips featuring people from different backgrounds driving a Ford car to various significant sites including historical sites as well as the Seven Wonders of the World. The video clips will then be broadcasted on social media platforms including YouTube, the Ford Company Website, and Instagram. These videos will run for a period of two weeks each after which they will be replaced by another video from a different location. On platforms like Instagram and Snapchat, however, these videos will be run back-to-back on numerous occasions. The videos are expected to be shown worldwide signifying a ‘global’ village.
The second ad will be a television campaign in the Asia-Pacific that will involve various influencers including musicians, actors, and sports personalities. The ads will also be short running around 20 seconds in order to allow them to be run back to back. They will feature the sports personality enjoying driving the Ford and also trippy visuals that show the car’s capabilities. These television ads will be focused on the car’s performance capabilities as well as additional services offered by Ford including social integration and the use of interactive technology to enhance the driving experience. These ads will run for a period of one month on major television stations in the Asia-Pacific region.
The third ad involves four world-acclaimed media personalities. These personalities will be captured in different situations together while in the same Ford. Each situation will feature a different theme and message on the tag lines. These posters and billboards will run for a period of three months each but there will be multiple posters of different themes running concurrently. Besides being plastered on posters and billboards worldwide, the photos will also be used in the branding of Ford merchandise and locations including warehouses and select company vehicles.
The last advertisement is geared to a specific range of vehicles; driverless cars. The ad will be a 3-minute short documentary about a young professional suffering from a disability that renders him or her unable to drive. It will showcase these person’s day-to-day struggles that end when they acquire a driverless Ford. The ad then highlights other details about the car before ending with a catchy caption. This ad will be run internationally on various platforms including social media, the company website, and on television for a period of one year.
The success of the campaign will be evaluated on the grounds of penetration as well as profitability derived in the period. Social media ads, for example, will be assessed on the basis of total views or clicks depending on the platform. Digital media campaigns including tv ads as well as billboards will be assessed on the grounds of market reception either by doing a poll or acquiring bits of media information from newspaper reviews. The total ad success is, however, dependent on how much profit the company makes in the time when the campaign runs and this will be the chief basis of evaluation.
In conclusion, the Ford Motor Company operates in the automotive market segment where the top five players dominate fifty percent of the market. These automakers produce various types of cars targeted at different customers but in recent years the convergence of customer tastes has led to intensified competition that has eroded the profits of some companies. Ford is such company that has seen a decline in sales in various segments and markets despite an overall upsurge in profitability. Ford aims at increasing sales by 52% through 2020 and while it has many opportunities for growth, there are numerous risks it has to grapple with. To ensure increased profitability in the short-run, the company will run a campaign dubbed ‘a global village’ seeking to connect Ford and its customers across the world.
Works Cited
Anthon, Carl. FORD EYES TWO DEMOGRAPHICS AMIDST GLOBAL SUV GROWTH. 11 February 2016. Web. 03 November 2016.
Gao, Paul, et al. Disruptive trends that will transform the auto industry. Strategy Paper. New York: Mckinsey, 2016. Web.
Hermes, Euler. The global automotive market. Special Report. Paris: Euler Hermes Group, 2014. Document.
Hirsch, Evan, et al. 2016 Auto Industry Trends. Strategy Paper. New York: pwc, 2016. Document.
Lang, Nikolaus, Brian Collie and Bob Zhai. The Shifting Competitive Balance in the Automotive-Supply Industry. 24 June 2015. Web. 03 November 2016.
LeBeau, Phil. Big 3 dominance slipping as competition heats up. 18 December 2014. Web. 03 November 2016.
Rosevear, John. Ford Motor Company’s U.S. Sales Are Slipping as General Motors Gains. 2 November 2016. Web. 3 November 2016.
Schultz, E.J. Ford Puts Cars Under New Masterbrand Campaign. 01 October 2015. Web. 03 November 2016.