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In your opinion, how important is it to invest in customer loyalty for cars, a product most people buy only every couple of years?

Marketing Excellence

>> Audi

The year 1899 marked the establishment of August Horch & Cie, the first car manufacturing company founded by August Horch. As a pioneer in automotive engineering, Horch had previously worked with Carl Benz, inventor of modern automobiles with combustion engines. Horch left his company in 1909 because of differences with its co management and supervisory board.

He immediately set up a second car venture which he named “Audi”—the Latin translation of his German family name, Horch (“hark” or “listen” in English). From the very beginning, Audi established a tradition of sports victories. Thanks to Audi’s accomplishments in the Austrian Alpine Runs between 1911 and 1914, August Horch succeeded in making the brand internationally well-known within just a few years. In 1932, the company’s famous four-ring emblem was created when Audi merged with the previously independent companies Horch, Dampf-Kraft-Wagen, and Wanderer to form Auto Union. For many years, the name Audi was not in use. A new merger in 1969, between Auto Union and NSU Motorenwerke AG, established Audi NSU Auto Union AG. The company was renamed Audi in 1985 by Volkswagen, the holding company of Audi since the mid-1960s. A new advertising slogan was created for the company in 1971 and has been used as the company’s mission statement ever since. “Vorsprung durch Technik,” which roughly translated means “progress through technology,” remains the main catchphrase for Audi. In the 1970s and 1980s, the company was effectively putting this to practice with innovations like the quattro fourwheel drive, aluminum car bodies, direct-injection engines, and the first hybrid vehicles. Despite these achievements, Audi had problems and needed to reposition itself in an increasingly competitive environment. Customers in the United States complained about a mysterious acceleration in their cars, and the image of Audi was not sophisticated enough for a manufacturer of premium and luxury cars. So in a bold move, the company’s management decided on an extreme repositioning strategy. Audi was to be the most progressive of all premium car manufacturers. Sportiness was picked as the second differentiating factor. With a famous commercial, the brand transformation was put into practice in 1986. An Audi 100 quattro, a four-wheel drive, drove up a snow-covered ski jump, apparently all by itself. The commercial won a Gold Lion (Lion’ d’Or) at the international advertising festival in Cannes, and in 1997 was voted best German advertising of all times by a professional jury.

Questions

  1. In your opinion, how important is it to invest in customer loyalty for cars, a product most people buy only every couple of years?
  2. Try to estimate the lifetime value of an Audi customer.
  3. What measures should Audi take to build long-term loyalty relationships?

Sources: Frank Janssen, Heiner Müller-Elsner, “Mutiger Steilpass”, Stern, March 7, 2005; Debasish Roy, “Audi hands over Q5 to Yuvraj Singh; with some low-scale marketing moves,”

The Economic Times, April 17, 2011; Sergio Zyman, The End of Advertising as We Know it, (Hoboken, New Jersey: Wiley, 2003);

“Facebook bleibt für uns in erster Linie eine Dialog- und Kommunikationsplattform,” Absatzwirtschaft, December 2, 2013; “Audi will noch größere SUVs

bauen,” Automobil Produktion, October 17, 2014; Rebecca Eisert, “Carsharing: Audi testet in Stockholm,” Wirtschaftswoche, October 13, 2014; “Audi Case Study: Post-milennium success,”

MarketLine, December, 2011; Audi, www.audi.com; BMW, www.bmwgroup.com; Daimler, www. daimler.de; Statista, http://de.statista.com; Volkswagen, www.volkswagenag.com.

Audi also heavily invests in motor sports. Numerous races and world championships have been won with its cars. Besides its motor sports activities, Audi sponsors major teams like Germany’s number one soccer club FC Bayern Muenchen. Since 2002, Audi and the Bavarians have been strategic partners. Audi is also the sponsoring partner for other leading European soccer clubs like FC Barcelona and Chelsea FC. In India, Audi became famous overnight in 1985. India won the world championship in cricket, the sport the country is most passionate about, and Ravi Shastri of the Indian team was awarded an Audi 100 for his winning performance— an event that is fondly remembered in the country even today.

The success of Audi’s marketing over the past two decades becomes clear if you compare the company’s sales figures to the turnover of their major competitive brands, BMW and Mercedes-Benz. In 2000, Audi sold approximately 653,000 cars, BMW 822,000, and Mercedes-Benz 1.053 million. Based on sales figures from 2013, BMW is leading the market with a narrow margin of 1.66 million cars as compared to Audi’s 1.58 million and Mercedes-Benz’s 1.46 million cars. In China, the most important automotive market in the world with 15.9 million cars sold (USA: 15.6 million) in 2013, Audi leads the market among the German competitors with 492,000 cars sold as compared to BMW’s 360,000 and Mercedes-Benz’s 228,000. Overall, 84 percent of Audi’s sales are realized outside of Germany today.

What else has Audi done over the past years besides a bold move in repositioning, and the creation of a convincing advertising and sponsorship concept? Audi offers a variety of innovative products that meet the customer’s increasing demand for SUVs and luxury cars on the one hand, and alternative driving systems and compact cars on the other. Audi’s SUVs are branded in its “Q” series. The company is rounding up its product range with a new Q7 in 2015, a Q1 in 2016, and a Q8 in 2017. With other Audi products like the Audi A3 e-tron, customers can combine the advantages of hybrids with traditional drive systems. The company’s image of being a superior sports car manufacturer is being enhanced with models like the R8, a car based on Audi’s race car prototype for the Le Mans 24-hours race. Its compact and middleclass cars A1, A3, and A4 mark the other side of the product portfolio. They also profit from the company’s innovativeness through light-weight construction and plug-in hybrid technology. According to a 2014 consumer survey, Audi is considered to be Germany’s most innovative car manufacturer. To further involve its customers emotionally, while at the same time acknowledging the increasing importance of the Internet as a communication and distribution channel, Audi has introduced digital showrooms. In these “Audi Cities,” consumers can experience the virtual world of Audi in 3D. London, Beijing, and Berlin were the starting places for the concept. Moscow and other locations will follow. An innovative idea for carsharing has recently been presented by Audi’s Chief of Sales and Marketing, Luca de Meo. Stockholm serves as a test market for a concept where up to five persons share a car for one or two years. Through an app, participants can make advance reservations and locate their car.

Despite its global success, there are challenges remaining for Audi. The average selling price of an Audi is still lower than an average BMW or Mercedes- Benz. New entrants in the growing market for environmentally sustainable cars like Tesla as well as its German key competitors will test Audi’s innovativeness even further.


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