Online automotive marketing course
Automotive Design & Marketing Management
We are already in the final stretch, our cars have finally left the factory and will be transported to a dealership. This is where all car design courses tend to end, and that is why there is a gap between reality and theory. We want to design cars because we are passionate about them, but let's not forget that brands make these cars to sell them and obtain an economic return.
Therefore, the key is as simple as designing cars that are easy to sell and profitable, for this you have to understand the keys to the automotive business. This part of the automotive marketing course is often missed by most professionals in the sector, with years of experience behind them. So knowing that part gives us a great advantage, especially if we are students or if we are starting in the industry.
That a designer understands the car business is the same advantage as if a singer (or his manager) understands the music business. The most successful singer is the one who sells the most records, not the one who wins a talent show for his voice. A musical TV Show can give the singer fame and the opportunity for a successful career.But there are many singers who don't achieve anything after winning a contest because they don't know how the business works.
Therefore, there is no use making passionate vehicles with a zero sales prediction. This is reality, whether we like it or not. That is why this part of the automotive marketing course is important.
We will see it in a summarized way in the next two posts. We aren't going to mention the basic marketing strategies that can be applied to the automotive industry, for this, there are hundreds of books and high quality sources. We will focus on revealing only the keys to the automobile business, from the point of view of the automotive engineer/designer.
In this post we will talk about the work carried out by the automotive marketing department or company once the car is on the market. This is directly linked to the first posts in which we talk about the marketing actions that are carried out to detect market needs and establish design criteria. The entire process of designing a car is a cycle, as soon as the car is on the road, the researchers evaluate it and work begins on the next vehicle. This cycle is usually skipped by most automotive courses.
In the next post we're going to delve into the operation of the automobile business from the point of view of distribution, that is, the dealerships. We'll see how car brands make money. Interesting right? Few design engineers know this concept, just as few dealership managers really know the process of designing a car, having both knowledge gives us unique value as professionals.
6 - MARKET EVALUATION
Marketing and market evaluation
Last week we saw that 50% of the final price of a car, without taxes, was given by manufacturing costs. Almost a quarter of the vehicle, 23.5% on average, comes from the cost of marketing a vehicle. Almost a quarter of the final car price (excluding taxes) is destined to pay for the premises, the commercials and the advertisements that we see on television and on the internet.
This percentage is important especially if you want to make your own cars. Since it's very common to find low volume car brands that set a price based solely on manufacturing costs and profit margin, without adding that 25% of costs derived from marketing the vehicle.
Therefore, they lack a commercial and marketing department. This leaves some small automakers with poor marketing and virtually non-existent customer service. In this way, they limit the growth of the brand, despite having a great product.
These costs include the distribution of the car, advertising and marketing expenses, training of sales representatives and the rest of the commercial support. In addition, we must not forget the technical service and the profits of the dealer itself, which are between 8% and 15%. The more luxurious the sector, the higher the percentage of profit, although the lower the volume of sales. In addition to this, it's estimated that the manufacturer's warranties impact 5% of the final price of the vehicle, before taxes. The automotive designer doesn't need to know the cost structure in detail. But at least to understand the business model of a car brand and understand the real extra cost of marketing a car.
Marketing from the designer's point of view
Marketing from the automotive designer's point of view
To be able to design and develop a vehicle for the future, you have to understand the trends and the car business model. We're going to see it from the point of view of the automotive designer. It's a very different point of view from the marketing concept held by a director of an automotive dealership.
There are two different visions regarding automotive marketing, both are usually very different.
Market assessment in the automotive sector
As we have seen, the design team doesn't finish working once the vehicle is on the market. The team will have to evaluate the response of the market to make modifications to the car and to start planning the next model. Remember that the car design process takes up to five years.
Once the vehicle has been launched on the market, a team of specialists carefully analyzes the criticism of the media, and the opinions of the users.
It's usual that, due to cost issues, this stage of market evaluation is advanced in phase. Pre-series prototypes are loaned to a group of selected journalists to get their impressions before starting the vehicle's manufacture.
The Home Product Placement is also carried out, which consists of leaving a series of pre-series vehicles to strategic clients so that they can test it for a few weeks. These strategic customers will give their impressions and help the marketing team define a better strategy with which to target their target customer. Similarly, they will collect information for design engineers. In this way they will be able to add possible improvements or certain accessories for the vehicle. At this advanced stage, it's practically impossible to change the overall design of the vehicle, but a minor change is possible.
After the launch of the vehicle, after about six months, the team obtains the market conclusions and finds possible improvements of the vehicle. In the same way, a team will be analyzing these conclusions to prepare the next vehicle of the brand, five years from now.
Usually a vehicle is launched in a single region of the world, for example Western Europe. Once the vehicle is in production, a team of engineers studies the design requirements of the vehicle to adapt it to the needs, tastes and regulations of the different countries of the world. The marketing study also takes into account the cultural tastes, preferences and acceptance of the vehicle in each region of the world.
Each manufacturer or supplier has its own methodology to evaluate the market and determine the product's success, in order to decide what changes to implement in the next model. Brands carry out all kinds of studies to identify the reception of the product, to be able to give a quick response to any rejection from the public.
For example, a two-seater sports car from a premium brand was launched on the market and was well received by a high-income female audience. The quality of the car was very good. Still, a percentage of the people who went to the dealership with the intention of buying the car got out of the vehicle immediately. After identifying this fact, the marketing team found that the problem was that the interior rear view mirror was too small. These types of actions can be easily detected by the salesperson, because he sees the vehicle and the potential buyer every day, but this detail is eluded by the engineers and the production plant.
There are so many technical aspects that they have to deal with (vibrations, resistance of materials, maneuverability ...) that it's a pity that a detail like this can ruin thousands of sales; when it has a really easy solution. The difficulty here lies in communication, in detecting something that is daily for salespeople.
We're going to name some of the most common marketing studies in automotive design, but there are many more. This will give us some ideas on what to consider once the car is on the market. In fact, manufacturers can commission many different marketing studies, depending on what they want to study and measure. No need to learn names. It's to have a general idea and, if at any time we have the need to study a car that is already in production, we can use this post as a guide.
There is little information on the internet about it, whether in Spanish, French or English, especially if it's focused on car design. The little information that is normally found is focused on the car distribution. That is why we have listed some studies so that it can serve as a guide, except for benchmarking, there are other studies that are very specific and difficult to access from outside the sector. That is why we have listed them in the automotive marketing course.
- Study of expectations: This study is always done. Consumers are surveyed to detect whether the needs that were intended to be satisfied have been met. For example, if a car was designed so that free sports enthusiasts could transport sports goods, specialists will study whether or not this design requirement is actually met. So the theory of this study is simple. It is enough to validate if the design requirements are met and if the customer is happy.
- Another common analysis is the USP Analysis (Unique Selling Propositions), which tries to find the competitive advantage of the model through a unique selling proposition.
- Study based on emotions: Buying a vehicle is one of the most thoughtful purchases we make in our lives, due to its high cost, it's not an impulsive purchase. In fact, the car is usually the second most expensive item we buy in our life, after a house. But here we have to differentiate. Deciding to buy a car is a mostly rational decision. But once the customer knows that he needs to buy a car, the choice of car has a high emotional component.
For example, if this emotional component didn't exist, people wouldn't buy classic cars. Buying a car combines a mixture of rational and emotional parts.
The emotional part is subject to a multitude of influences that can derive from status, social norms, fashions, peer pressure, family pressure, personal values, self-image, etc.
So the manufacturer will try to understand all these elements of influence to design the vehicle. Even the customer who wants "a car to get from point A to point B" is being emotional in seeking absolute practicality and refusing to pay more than is strictly necessary.
Here we must differentiate the need from the emotional aspect: The need leads the customer to consider buying a vehicle. The rational decision is the one that leads the client to study how much can be spent on a new car and how it will finance it. The emotional decision is what leads the customer to choose one model or another. So brands don't try to invest in awakening the need for a customer to buy a car, but in working on the emotional side of the customer to choose their brand rather than another, once the need arises. The car brand is not going to waste time convincing you why you need to buy a car. This is a very relevant factor when designing a marketing strategy.
- Benchmarking: At this point in the process, as well as at previous points throughout the development of the vehicle, different technical benchmarking is carried out. What is Benchmarking? In short, it's about comparing your product with that of the competition. It can be as broad as factors you want to compare. You can make dynamic comparisons, or establish different factors (exterior design, cabin ...) and compare the different models of the competition to see the strengths and weaknesses of our vehicle. You can compare a specific aspect, from details such as the cup holder to more complex aspects such as engine performance.
- New Car Buyer Studies (NCBS): It's used to obtain a deep understanding of the behavior of customers towards the car brand after buying a new vehicle: Does the vehicle adapt to his lifestyle and his driving style? Have we built customer loyalty after their purchase? Is the customer satisfied with the specs of the vehicle? Did it exceed the customer's expectations?
The impact that the customer's experience with other brands has had in deciding on a car brand is also studied. . Experts consider key aspects such as the conversion funnel, rejection drivers, considerations and reasons for purchase.
It's advisable to build customer loyalty to promote the after-sales business. It must be borne in mind that people's requirements and family conditions vary over time, so when they buy another car their needs will be totally different. If the buyer is loyal to the brand, when looking for a new car, the purchase consideration will be higher compared to competing car brands.
This study can be complemented with other data obtained from various studies aimed at establishing purchase priorities, investigating vehicle selection criteria or tracking customer loyalty (Customer Retention Analytics). Traditional satisfaction surveys are also an important complement to obtain relevant information.
- Quality Feedback System (QFS): These are quality surveys aimed at buyers to detect design defects, or those derived from the manufacturing process. The client will not really know the purpose of the study.
- Study of the equipment and characteristics of the vehicle: The specialists study item by item which ones, to find out which ones the customer appreciates the most and which ones are essential: alloy wheels, cruise control, touch screen, etc.
Let's imagine that we have designed a dashboard made with vegan materials that is very expensive to produce. As manufacturers, we will be interested to know if this is a reason to buy it, to include it in other cars. Or if, on the contrary, the customer doesn't appreciate it. In the latter case, the extra cost wouldn't be justified and it wouldn't be added to future cars.
After this study, manufacturers check the characteristics most demanded by customers. Then they study how to include those features that weren't present in the car, with special emphasis on the three most demanded on the list.
This is really expensive to implement as it produces changes in the assembly chain itself. But if the brand doesn't do so, it will lose a significant market share, so the inclusion of each new feature is seriously analyzed.
Due to this fact, Automotive Product Planning is carried out in the first design phase.In this phase it's much easier to add a specification on a sheet of paper, than to change an entire production line and a logistics system in which millions of euros have been invested.
This also means that we have classic cars with amazing technologies that are forgotten and not applied again to the next models. As new equipment is included, others are also discarded if it hasn't been fully profitable. This is one of the negative aspects that large manufacturers have regarding excessive rationality in design decisions.
- Voice of Customer (VoC): After-sales is becoming more and more important in the business. But the success of the business is not left solely to the dealer network. In addition, this is necessary to have a forecast of the original spare parts that will have to be manufactured, or request from the supplier. The higher the production volume, the greater the ability to negotiate and scale prices to reduce the unit cost. Among others, the Voice of Customer (VoC) strategy is used both for sales and after sales. It's a process designed to understand customer expectations and preferences in order to better anticipate and serve their needs.
In short, a multitude of different strategies are developed to detect the market penetration, and its positioning in it. There are many more strategies and studies, but we didn't want to make an endless list either. However, the information is so scarce that it's interesting to have this part of the automotive marketing course as a guide.
There are companies that develop their own methodologies and studies to offer them to brands, so there is a wide range of possibilities. After all, they are tools that offer us diverse information about the client and the product. All this information without a specific purpose doesn't make any sense. So each market study will be done depending on the specific needs of the brand. For example, for a manufacturer it may be crucial to carry out a market study on the different combinations of the vehicle because it intends to be part of his strategy, so he will commission a study for this purpose.
Of course, from this section of the automotive marketing course, there are two things that can never be lacking: Knowing the target customer, and knowing whether or not the customer's expectations were exceeded once the car was sold.
From here, the information collected is sent to two departments: the marketing team and the design center:
1st Communication and marketing team: This information is collected to develop the communication and promotion strategies, including social media. Information about emotional factors is also sent to them in order to better connect with the target user. In addition, they produce draft advertisements that will serve as a guide for the communication team at headquarters.
These initial ads are tested in different media and countries to verify their acceptance before any official launch. These offices will then develop their own publicity material and they will be distributed to the headquarters of each country, in their respective languages. Afterwards, each headquarters in each country will be free to use it or to create their own advertising creativity.
Even so, there are standards and guidelines that they have to comply with, such as typography, colors, words to avoid, etc.
From the beginning of the car development there is a forecast of sales necessary to dimension the production facilities of the vehicle and to determine the costs. But you also need to know what advertising levers will be used to help drive sales. That is to say, it's very easy to say that you are going to sell a million cars. But you will have to justify the data and say how you want to achieve that figure and what tools are going to be used to achieve it.
Social networks are becoming more and more important. Another really interesting type of promotion is the Product Placement of cars both in the cinema and in video games.
Above we see the Spanish supercar and the Croatian one in the Asphalt 8 video game
If you plan to create your own brand or work on the brand strategic, this is a largely forgotten aspect that can be used both to advertise the car and to obtain benefits. In the next post we will see the Product placement of automobiles as a source of income.
For example, the Dome Zero was a car that didn't achieve any sales. Was this a commercial failure? Not at all.
The design was so spectacular that, thanks to the image rights, Dome got enough funding to make the vehicle profitable. Thanks to the profits made, today they have become one of the most prestigious racing brands in Japan. Remember that not a single unit was sold.
All these strategies and sources of financing are forgotten pieces of the automotive business, many times we focus on the fact that to make a car profitable, it's necessary to sell as many more units as possible the better. Although, the product placement should be an addition, not the main strategy.
We saw in this automotive course that it can be profitable to even build a car at a financial loss when it comes to electric cars.
This opens up a range of possibilities when proposing a design. There are other vehicles that are designed to show the capabilities of the company. For example Rinspeed doesn't sell cars, although they're open to doing so, but it isn't their business model. Rinspeed invests about a million dollars on average in each model it develops, creating a single unit. Instead, it's a profitable business because it uses its cars as a showcase to sell its design services and the technologies they develop.
All this is part of the product strategy and the brand's reputation, just as, as we have seen, many brands are interested in having a sports car to offer to the public regardless of the units they actually sell.
2. Design center: To implement substantial improvements. It must be taken into account that a minor change implies a change of molds, even the supplier or changes in the production line. In the case of an accessory, it's feasible to make the change. Above all, you have to justify why this change wasn't made in the previous stages when the costs were lower.
Here also arises the possibility of designing special versions or accessories for the vehicle. It's one of the most beautiful parts of the design, since it allows large manufacturers to step outside the norm and create special vehicles, or even allow some approved tuners to make their modifications to manufacture it in limited series.
Also important is the information for the team that is in charge of designing the next model, which will come out in three or five years.
An important factor at this stage is perceived quality. It's about offering the customer exactly what he wants. This can be a problem; since a customer is not going to demand a certain torsional rigidity in the chassis but will ask that the car have a touch screen and a striking body color. Although there is a more demanding type of customer who will demand a certain cornering, which entails defining the torsional rigidity of the chassis; but it's not usual.
As a manufacturer, it's normal to take advantage of this fact and increase improvements in those elements that the customer can perceive, such as the sound that the door makes when closing, a dashboard with good finishes, the feel of the steering wheel, etc. All these data are taken in the market assessment.
Increasing quality is always positive, the problem comes in cost reductions, where it will be determined whether the added cost of a certain element will be perceived by the customer. If the client doesn't perceive it and it doesn't affect the safety or mechanical guarantee of the vehicle, brands will choose to eliminate it.
As a car designer, you must justify why it's essential to maintain a higher cost element if the client doesn't perceive it, to try to offer the public the best possible product. The key here is not to justify that a higher quality item is better than the other, but to justify that extra cost when the customer isn't able to perceive it.
So far we have seen the first part of marketing and distribution, where we will learn about the keys to how the car business works to apply it to design.
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