For some consumers, owning a Mercedes-Benz S-Class is about as likely as getting a date with one part of Brangelina – while a nice fantasy, it just isn’t going to happen. However, they might be lucky enough to pick up a lookalike at the local pub – or in the case of Mercedes, purchase a cheaper but still attractive set of wheels, such as the new B-Class.
It’s all part of the automaker’s strategy to reach out to Canadians who wouldn’t normally be able to afford such a high-roller car. And Mercedes isn’t the only one. Brands such as Procter & Gamble and IBM have found that aiming lower on the socio-economic scale can widen their customer base and augment sales, provided they don’t turn off their loyal core target.
It’s a strategy that could be risky, notes Bruce Philp, president of Toronto-based consultancy GWP Brand Engineering. ‘The moral of the story is ‘What did the brand stand for in the first place?” he says. ‘If it’s function, like consumer packaged goods, then there’s lots of latitude because it wasn’t defined by status.’
P&G is betting that’s the case: South of the border, it’s selling several ‘mid-tier’ versions of existing brands for a few bucks less. Charmin Basic and Bounty Basic both launched nationally in spring, and Pure & Simple, which is tagged ‘from the makers of Tide,’ is being tested in three markets.
Says Toronto-based spokesperson Joyce Law: ‘Based on research, we [found] that consumers were buying mid-tier brands – ours are premium products – and weren’t fully satisfied with them. So we set out to understand their needs and launched these products.’
Including the original brand names on packaging was a conscious decision, Law adds, since they already have established trust. And while she won’t say whether the new goods will debut in Canada anytime soon, citing competitive reasons, she points out that P&G is ‘always assessing opportunities for further growth.’
A cheaper version of Charmin toilet paper is one thing, but a cheaper Mercedes-Benz? For his part, Philp believes it’s a gamble: ‘What they’re doing is incredibly dangerous – in the short term they will get all kinds of customers, but in the long term, you’re really taking away from the original franchise a big reason that they drive that car. If you take away that statement, all that’s left is the machine.’
JoAnne Caza, director, corporate communications and PR for Toronto-based Mercedes-Benz Canada, begs to differ. In fact, she says the B-class, which has a starting price of $30,950, is geared at existing customers as much as younger people that will hopefully stick with the brand as they get older (read: wealthier), and empty-nesters who no longer need a family sedan.
‘The consumer that is driving an S-class very often has a second or third vehicle. In the past, they may have gone to a competitor, but now they have the option of buying a Mercedes. It is a strategy to be present in a segment we feel we can get some market share in.’
Along with research that indicates Canadians have more of
a propensity for compact cars than their American cousins,
the decision to introduce the B-Class, which isn’t being sold south of the border, was inspired by the successes of the Smart Car and
the C-Coupe. When it debuted two years ago, the original plan was to sell 400 of the tiny Smart Cars, but ‘we sold 4,000 in one year,’
says Caza. ‘When we first started doing the planning for it, we
thought it would [work] in Montreal, Vancouver and Toronto,
but 54% of them sold outside those markets. Victoria was one of
the strongest.’
Similarly, Mercedes sold 2,200 of the C-Coupe in the first year it came on the scene (2001), doubling its expectations. At that time, it had a price tag of just $34,950. (Since then it’s crept up to $37,000.)
The marketing strategy for the B-Class is to get Canadians
behind the wheel to experience it first hand, adds Caza. After showcasing the concept car at the Toronto Auto Show, the company acquired a database list of over 10,000 names and has been inviting prospects to test drive the vehicle, which is also being promoted through magazine, newspaper, radio and online advertising. B-Class is also making the rounds at retail locations where customers can try it out without the risk of being intimidated by sales people. ‘The idea is not to wait for customers to come in, but to bring the car to customers,’ says Caza. ‘The new consumer base is pretty much everyone.’
After all, there are more Howard Cunninghams out there than
Blake Carringtons.
LESS IS MORE – Low-end customers make up 20% of IBM’s business
Lower-priced products and services can equal higher profits, judging by IBM’s experience.
A little over two years ago, IBM Canada debuted IBM Express, a service geared at small and medium-size businesses. ‘We realized they were similar to larger customers when it came to business issues and challenges, but they were at a disadvantage when it came to critical mass of skills and affordability,’ says Ayman Antoun, VP for small- and medium-business at the Markham, Ont.-based firm. ‘That was the light bulb.’
Antoun says IBM Express was developed after focus group research revealed the target’s specific needs. ‘We got the feeling loud and clear that they don’t have the luxury to buy all their pieces separately and do integration on their own. They want someone to think through that for them. They also said it must be easy for them to deal with a [supplier].’
Enter IBM Express, which continues to add new products and services to its mix on a regular basis. For example, this fall, the group launched RFID packages for small manufacturers who are dealing with the Wal-Marts of the world and have been asked to get onboard with the technology.
According to Antoun, IBM communicates its Express offerings through DM, radio and e-mail ads by Ogilvy & Mather. The messages, he says, aren’t generic, but promote a certain set of solutions that would fit each recipient’s world.
‘There’s one common thing we learned early – what might be self-explanatory to us was not necessarily self-explanatory to the consumer. [They wondered]: ‘What am I buying? What is Express?’ So it’s clearly articulated [in marketing] that it’s a packaged offering.’
And just as clearly, results show that Express has been a worthwhile endeavour: According to Antoun, it now accounts for 20% of IBM’s total revenue worldwide. (That number is slightly higher in Canada.) And so far this year, IBM’s portfolio overall has been experiencing double-digit growth globally.
Just goes to show: The little guy does matter.
