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Marketing 101 (long rant) (was ... Dream Lineup)
Excuse the long rant, and by all means sign off now if you please. Sometimes
I get the impression that everybody thinks the guys in the car business
haven't got a clue. Lucky we are here to help.
In a message dated 97-01-27 20:18:17 EST, somebody writes:
<< Here is my idea of what Audi should sell in the US market and never
mind what they say about not being able to sell Americans hatchbacks.
A3 - sell a 2 door hatchback version to combat the 318ti. Do not sell a
notchback, it'll hurt the A4.
S3 - highly tuned 20V 1.8. Best part is Bimmer has no M3t
A4 - Sedan, Coupe, Avant and Cabriolet. Available with 2.8l, 1.8T and TDI
S4 - All versions with twin turbo 30V 2.8 and quattro standard. 16" wheels
with optional 17"
RS4 - Porsche tuned S4 with very firm suspension. Porsche 17" rims, brake
calipers, shifter knob and handbrake lever all in brushed aluminum. Limited
edition and sold through Porsche and Audi Dealers. 6 Speed tranny or
A5 Minivan - 2.8l, 2.8 30V and TDI engine choices for short wheelbase A4
based van. Long wheel base based on A6 with all engine options.
S5 - 3.2 liter V8
RS5 - 4.0l V8 from top of line A8 with tiptronic transmission. Sell through
Porsche and Audi dealers.
A6 - 2.8, 2.8 30V, and TDI in Sedan and Avant form
S6 - same engines as S4, in both sedan and Avant
RS6 - 4.0l V8 from A8 top of line. Focus on firm ride and gearing, and not
on luxury. 6-speed manual or tiptronic. Sell through Porsche and Audi
A8 - current linup but focus on luxury.
TTS - 1.8T quattro for $28K and TT 1.8 fwd for $25K . Only sell the
This sounds like the "kid in a candy" store product line. (Although you
missed a big opportunity with coupes on the A6 basis. And what about an S8?
And the TDI V8? And only one powertrain on the TT?) But okay, lets give
the plan some consideration.
It's interesting to consider the problems an automobile manufacturer has to
deal with. Lets take a look at what this lineup would mean. By a fairly
conservative count, I find 116 different models here (a model = any unique
combination of platform, body style, engine, transmission, and
quattro/front-drive). That's several times BMW's current lineup, or
Mercedes-Benz. But lets say that this proposal was so wildly insightful that
it netted Audi the astonishing sales level of 100,000 cars - nearly a
four-fold increase from today.
That still leaves the average model with an annual volume of about 860 units.
Not much efficiency here. By definition, every car is a niche product. Even
if your big sellers were 10,000 cars a year (still peanuts), that only
compounds the problems with the small fry. Think of the demands on the
marketing budget, the parts supply infractructure, training (both retail and
technical), vehicle delivery logistics, the catalogs, .... Aren't we the
same guys who already complain about availability of cars, parts, intelligent
sales people, technicians with a clue ...
And if you are the poor schmuck dealer, which, and how many, of these beasts
will you carry in stock? ...and what color(s)? ...and what options? A guy
could get burried in floorplanning pretty quickly. And God forbid that you
got stuck with a few slow moving cars.
Consider the proliferation of choices. Take the 116 models and add in a
range of colors - say eight per model; now we have 928 variations. Suppose we
offer two upholstrey choices (leather, cloth, leatherette, alcantara...); now
we are at 1856. But we always need some choice in upholstery color, say three
for each trim; that gets us to 5568.
Now it gets interesting, because we should consider options. Unlke the
previous items, which were mutually exclusive, options can be combined in
various fashions. Simply having, say, eight options per model would multiply
the total by eight factorial. Lets see, thats... oops, the calculator over
ran its display. (reaches for calculator with scientific notation) So we
have 224,501,760 possible ways to build this dream lineup - lets just call it
a quarter billion to make it simple. This is the part where they take the
product planner out and shoot him.
And this is for an import company with a supply pipeline that takes 120 days,
minimum, to turn the inventory. Think you'd ever find the car you want in
stock? Not likely. Got any idea what it takes in marketing dollars to even
put a car on the map with customers? Got any idea what it takes to
federalize a single one of these combinations? I'd say we are looking at a
many billions in _incremental_ investment which will have to be repeated
every few years to keep this lineup fresh. And $100,000,000 a year in
advertising/marketing wouldn't even get the job started. And who wants to be
a dealer badly enough to pony up the money for a suitable facility? Propably
looking at $3-7 million for a building and land. And the pay back for the
dealer or the company? Try selling this proposition to your stock holders,
finance committee, investors, your banker, even your father. I'd like to see
your business plan.
As they say in the car biz, "It doesn't pencil."