Question

COMPANY Case: Porsche: Guarding the Old While Bringing in the New

Porsche (pronounced Porsh-uh) is a unique company. It has always been a niche brand that makes cars for a small and distinctive segment of automobile buyers. In 2009, Porsche sold only 27,717 cars in the five models it sells in the United States. Honda sold about 10 times that many Accords alone. But Porsche owners are as rare as their vehicles. For that reason, top managers at Porsche spend a great deal of time thinking about customers. They want to know who their customers are, what they think, and how they feel. They want to know why they buy a Porsche rather then a Jaguar, a Ferrari, or a big Mercedes coupe. These are challenging questions to answer; even Porsche owners themselves don’t know exactly what motivates their buying. But given Porsche’s low volume and the increasingly fragmented auto market, it is imperative that management understands its customers and what gets their motors running.

Since its early days, Porsche has appealed to a very narrow segment of financially successful people. These are achievers who see themselves as entrepreneurial, even if they work for a corporation. They set very high goals for themselves and then work doggedly to meet them. And they expect no less from the clothes they wear, the restaurants they go to, or the cars they drive. These individuals see themselves not as a part of the regular world but as exceptions to it. They buy Porsches because the car mirrors their self-image; it stands for the things owners like to see in themselves and their lives.

Most of us buy what Porsche executives call utility vehicles. That is, we buy cars primarily to go to work, transport children, and run errands. Because we use our cars to accomplish these daily tasks, we base buying decisions on features such as price, size, fuel economy, and other practical considerations. But Porsche is more than a utility car. Its owners see it as a car to be enjoyed, not just used. Most Porsche buyers are not moved by information but by feelings. A Porsche is like a piece of clothing—something the owner “wears” and is seen in. They develop a personal relationship with their cars, one that has more to do with the way the car sounds, vibrates, and feels, rather than the how many cup holders it has or how much cargo it can hold in the trunk. They admire their Porsche because it is a competent performance machine without being flashy or phony.

People buy Porsches because they enjoy driving. If all they needed was something to get them from point A to point B, they could find something much less expensive. And while many Porsche owners are car enthusiasts, some of them are not. One successful businesswoman and owner of a high-end Porsche said, “When I drive this car to the high school to pick up my daughter, I end up with five youngsters in the car. If I drive any other car, I can’t even find her; she doesn’t want to come home.”

For its first few decades, Porsche AG lived by the philosophy of Ferry Porsche, Ferdinand’s son. Ferry created the Porsche 356 because no one else made a car like he wanted. But as the years rolled on, Porsche management became concerned with a significant issue: Were there enough Porsche buyers to keep the company afloat? Granted, the company never had illusions of churning out the numbers of a Chevrolet or a Toyota. But to fund innovation, even a niche manufacturer has to grow a little. And Porsche began to worry that the quirky nature of the people who buy Porsches might just run out on them.

This led Porsche to extend its brand outside the box. In the early 1970s, Porsche introduced the 914, a square-ish, mid-engine, two-seater that was much cheaper than the 911. This meant that a different class of people could afford a Porsche. It was no surprise that the 914 became Porsche’s top selling model. By the late 1970s, Porsche replaced the 914 with a hatchback coupe that had something no other regular Porsche model had ever had: an engine in the front. At less than $20,000, more than $10,000 less than the 911, the 924 and later 944 models were once again Porsche’s pitch to affordability. At one point, Porsche increased its sales goal by nearly 50 percent to 60,000 cars a year.

Although these cars were in many respects sales successes, the Porsche faithful cried foul. They considered these entry-level models to be cheap and underperforming. Most loyalists never really accepted these models as “real” Porsches. In fact, they were not at all happy that they had to share their brand with a customer who didn’t fit the Porsche owner profile. They were turned off by what they saw as a corporate strategy that had focused on mass over class marketing. This tarnished image was compounded by the fact that Nissan, Toyota, BMW, and other car manufacturers had ramped up high-end sports car offerings, creating some fierce competition. In fact, both the Datsun 280-ZX and the Toyota Supra were not only cheaper than Porsche’s 944 but also faster. A struggling economy threw more sand in Porsche’s tank. By 1990, Porsche sales had plummeted, and the company flirted with bankruptcy.

But Porsche wasn’t going down without a fight. It quickly recognized the error of its ways and halted production of the entry-level models. It rebuilt its damaged image by revamping its higher-end model lines with more race-bred technology. In an effort to regain rapport with customers, Porsche once again targeted the high end of the market in both price and performance. It set modest sales goals and decided that moderate growth with higher margins would be more profitable in the long term. Thus, the company set out to make one less Porsche than the public demanded. According to one executive, “We’re not looking for volume; we’re searching for exclusivity.”

Porsche’s efforts had the desired effect. By the late 1990s, the brand was once again favored by the same type of achiever who had so deeply loved the car for decades. The cars were once again exclusive. And the company was once again profitable. But by the early 2000s, Porsche management was again asking itself a familiar question: To have a sustainable future, could Porsche rely on only the Porsche faithful? According to then CEO Wendelin Wiedeking, “For Porsche to remain independent, it can’t be dependent on the most fickle segment in the market. We don’t want to become just a marketing department of some giant. We have to make sure we’re profitable enough to pay for future development ourselves.”

So in 2002, Porsche did the unthinkable. It became one of the last car companies to jump into the insatiable sport utility vehicle (SUV) market. At roughly 5,000 pounds, the new Porsche Cayenne was heavier than anything that Porsche had ever made, with the exception of some prototype tanks it made during WWII. Once again, the new model featured an engine up front. And it was the first Porsche to ever be equipped with seatbelts for five. As news spread about the car’s development, howls could be heard from Porsche’s customer base.

But this time, Porsche did not seem too concerned that the loyalists would be put off. Could it be that the company had already forgotten what happened the last time it deviated from the mold? After driving one of the first Cayenne’s off the assembly line, one journalist stated, “A day at the wheel of the 444 horsepower Cayenne Turbo leaves two overwhelming impressions. First, the Cayenne doesn’t behave or feel like an SUV, and second, it drives like a Porsche.” This was no entry-level car. Porsche had created a two-and-a-half ton beast that could accelerate to 60 miles per hour in just over five seconds, corner like it was on rails, and hit 165 miles per hour, all while coddling five adults in sumptuous leather seats with almost no wind noise from the outside world. On top of that, it could keep up with a Land Rover when the pavement ended. Indeed, Porsche had created the Porsche of SUVs.

Last year, Porsche upped the ante one more time. It unveiled another large vehicle. But this time, it was a low-slung, five-door luxury sedan. The Porsche faithful and the automotive press again gasped in disbelief. But by the time the Panamera hit the pavement, Porsche had proven once again that Porsche customers could have their cake and eat it to. The Panamera is almost as big as the Cayenne but can move four adults down the road at speeds of up to 188 miles per hour and accelerate from a standstill to 60 miles per hour in four seconds flat.

Although some Porsche traditionalists would never be caught dead driving a front engine Porsche that has more than two doors, Porsche insists that two trends will sustain these new models. First, a category of Porsche buyers has moved into life stages that have them facing inescapable needs; they need to haul more people and stuff. This not only applies to certain regular Porsche buyers, but Porsche is again seeing buyers enter its dealerships that otherwise wouldn’t have. Only this time, the price points of the new vehicles are drawing only the well heeled, allowing Porsche to maintain its exclusivity. These buyers also seem to fit the achiever profile of regular Porsche buyers.

The second trend is the growth of emerging economies. Whereas the United States has long been the world’s biggest consumer of Porsches, the company expects China to become its biggest customer before too long. Twenty years ago, the United States accounted for about 50 percent of Porsche’s worldwide sales. Now, it accounts for only about 26 percent. In China, many people who can afford to buy a car as expensive as a Porsche also hire a chauffeur. The Cayenne and the Panamera are perfect for those who want to be driven around in style but who may also want to make a quick getaway if necessary.

The most recent economic downturn has brought down the sales of just about every maker of premium automobiles. When times are tough, buying a car like a Porsche is the ultimate deferrable purchase. But as this downturn turns back up, Porsche is better poised than it has ever been to meet the needs of its customer base. It is also in better shape than ever to maintain its brand image with the Porsche faithful and with others as well. Sure, understanding Porsche buyers is still a difficult task. But a former CEO of Porsche summed it up this way: “If you really want to understand our customers, you have to understand the phrase, ‘If I were going to be a car, I’d be a Porsche.’

4 Questions – Answer all Total Marks: 25

1.   Critically analyze the relevant Porters generic strategies and the growth strategies Porsche is pursuing , justify your answer by referring to the case study (5 marks)

2. Marketing had evolved through five stages, out of this five which concept or concepts is Porsche following , justify your answer. Do you agree with this why or why not (5 marks)

3. You are asked to develop a Mission statement and four Marketing objectives for Porsche for the next ten years (2021- 2025) . Draft an ideal mission statement and outline your four marketing objectives (5 marks

4. Identify , explain and justify the main consumer behaviour characteristics that influences the Porche buyers.

Answer 1

Porsche Automobiles

Before we go into the brand, let us understand certain general human characteristics when it comes to high esteem or an elevated mental stature because of achievements. It could be called a stage where human sensory receptors are in a unique combination of satisfaction. The sensory receptors of human beings are senses of touch, sight, sound, smell and taste. If you understand this, we can summarize that any brand that is successful should impact at least 4 sensory receptors of human beings at the same time. Hence, the satisfaction level goes down when anything, be it a materialistic or intangible, cannot stimulate more than 2 sensory receptors.

Let us take the example of a cake. You have cakes available in supermarkets, grocery stores and also in exclusive stores. The three places serve the same item which is collectively called cake but the experience you derive from these three places are different. If you are celebrating the birthday of your friend, you would prefer to buy a cake from a supermarket of a well known brand. But if you are with your spouse or partner, you will definitely want to make that occasion auspicious by providing a different experience. In the previous decision, it was only the need to celebrate but later the term experience has crept in. You will definitely prefer to be in some cake shops like Baskin Robin (used only for an example) to add an experience along with the taste, the ambiencence, the comfort etc.

Leading car manufacturers of brands will do enough ground work to stimulate at least 4 of human sensory receptors in the most pleasing manner. For example, consider a space with a cozy memory foam cushion with a fur coat, ambient temperature (not too cold or hot) with soft music (preferably a lounge music) with a smell of musk or rose lingering in the air that too on a large facade facing seaside with a sip of your favourite coffee. Any normal human being would find this ambience one of the best experiences in their life and they have to pay for it. That does not mean that there are unsuccessful lounges if seaside ambience not present or a memory foam cushion is not there. The summary is that there was a blend of comfort in the ambience used in the example above.

You can see that Porsche had some unsuccessful models. We can just see the reason for that in the middle of this discussion. Anyone who walks in to buy a Porsche/any Premium Car car showroom(at the present point of time) will definitely have his financials well planned and the reason he visits the showroom is for the experience of his imagination. For blending the right sensory inputs, there will definitely be cost associated with it. Porsche at a point of time thought capturing the market demand for cars at all segments of buying slabs. This is where they went wrong. They, at that point of time, did not do a market positioning of the brand. They would never have faced failure if they had consistently developed premium brands and encouraged only premium customers for it.

Let us understand what makes Porsche different from other premium brand cars. (This can be the answer to 2nd question)

1. The design. Take any Porsche car from a coupe to the latest suv Porsche Cayenne (turbo/Macaan) or even to the Panamera. You cannot see any sharp edges. Every edge both exterior and interior has an eye soothing curve with no sharp cuts. Human beings' sensory perception is more attracted to smooth curves. The brand unfortunately does not bring out any macho looking cars with sharp features.
2. The comfort: once you close the drivers door, even for the 911 or Cayenne, the feeling is just the same. The Whiz of the powertrain under your legs is a different feeling altogether. The accessibility of different switches for A/C, music system are well ergonomically placed for an easy operation unlike other brands.
3. Drivers Car. Porsche is always a driver's car unlike other premium brands. It gives the driver the absolute comfort of driving. One thing you should understand is that Porsche even though they have come out with a SUV, still maintained the size not to become too large to increase the head room or leg space. In short the maneuvering through the streets, or on the highway is no strain unlike other SUVs of the other premium brands. After your busy office hours, you would always cherish to be behind the wheels of you Cayenne, listen to the smooth Lounge Music that comes through the exotic Music System and the comfortness of the leather seats
4. Ergonomics: The car is having the minimal wind cross section. From the 911 till the Cayenne and the Panamera, ergonomics is never compromised and that is the reason their success story still continues unlike when they tried to invest in entry brands.
5. The Brand Name: “Porsche”. The combination of syllables for the brand also had paid a major role. We always associate our perception with our ability to express. Let us say there is a person with the name Tom and another person with the name Tiger. We will always frame a person in our minds by the name we hear. The first person we perceive will be a normal average person competent to survive in the world decently. The latter would be considered as someone close to an energetic character excelling in all areas of work. If the appearance makes sense then the naming would work else, it can also create failures. Porsche as the name goes becomes a major word of communication. The car easily gets associated with the word and does not need a second thought. There will not be any person who will ask the question as to what is a Porsche?
6. A true sports car for the streets: Everyone is crazy about speeds and what a car can attain. Humans always feel proud when they tame a wild beast rather than a home cat. (just an example to make the concept clear). In the middle east, rulers have lions and tigers as their pets, where the common man cannot think more than a household dog or cat. The respect will always go for the ruling family when you see a car with a Leopard at the back seat (Owners Pride and Neighbour’s envy concept). Similarly anyone driving a Porsche which goes from a zero to 100 in approximately 6-8 seconds will feel driving a sports car at the same time through the busy streets

Though there are other features unique to the car, these are the most after characteristics of a typical Porsche vehicle. By reading the above aspects, driving a Porsche is an experience rather than a brand. The makers of the brand take care of every minute detailing of the manufacturing process, design, automation and customization whose sum total accounts for the overall experience. There are rich business men, who carry their 911 wherever they go around the world to drive. It becomes a part of their lives. A purchase decision to buy a Porsche vehicle is never impulsive but a result of a culmination of a driven desire to excel. It becomes their symbol of excellence in all places they visit and carries a brand value along with it.

Marketing Objectives.

1. Acquiring more prospects from the existing market. Porsche made its entry to a country like India in 2004 and still their success story continues.. Strategies channels to attract more prospects as the number of industrialists in india and around the world grow day by day. Gone are those days when an entrepreneur wishes to be chauffeur driven. In olden days, business is usually inherited and the new generation studies from their fathers where they see them often being driven by a chauffeur. Young business bloods always think differently and wish to drive themselves to office.
2. Retaining existing customers: as options grow in the market, this would be a major step that they should strategize. Mind shifts always happen if the customer satisfaction index goes down. Satisfaction index is directly associated with customer satisfaction in using the product. Market followers will always follow and try to mimic what market leaders do. If Porche does not take this seriously, they will lose to competition. For example, Lamborghini the sports car manufacture is now out wit their suv called the URUS, Rolls Royce with Cullinan etc
3. Increasing the customer advocacy: It's like a customer ambassador program wherein satisfied customers introduce the brand to other prospects. A customer would always tend to believe an existing customer in comparison with a well dressed sales person standing in front of them. It's the normal characteristic of a customer to believe a layman or an existing user than the sales person in front of them
4. Build Industry Authority. AS Porsche is the only brand with a sports background, it is necessary to build an industry authority for their car brands as no other premium brands have such a sports legacy. They should be authoritative to innovate their cars segment and others should be in a position to follow them

For attaining all these objectives above, it is necessary to have a well developed KPIs in place.