Indian Institute of Management Tiruchirappalli

Ford Ka:
The Market Research Problem (A) & (B)

Write up Submitted to Prof. Hari Sreekumar Visiting Assistant Professor (Marketing)

Submitted By

Group (7), Section (A) Research for Marketing Decisions

Chetan Arora (1101007) Dr. Kishor Chindam (1101009) Shrikant Panchbhai (1101025) Pranay Nipane (1101027)

The demand for an urban, stylish car has been increasing in the European small car market because of the pioneering act of Renault Twingo providing customers a distinct original style, flashy colours, greater functionality and more interior space than the cars of similar size. In response to these changes in the European small car market and the success of the Renault Twingo, Ford decided to launch a new small car, the Ford Ka. However because of time constraints, they developed Ka already and now they are relying more on marketing campaign for the product.

Objective
Before Gilles Gilles can get to the specifics of the marketing strategy to launch the Ford Ka in the French Market, he needs to decide how to segment the market and who to target. The market research firm has conducted a series of studies among potential small car buyers and now the data has to be analysed and interpreted.

Problem Definition
Due to the importance of the French small car market to their operations, Ford developed the Ka prior to researching consumer needs in order to quickly respond to the success of the Twingo. Ford Ka must have a significant volume in sales while minimizing cannibalization to the existing Fiesta brand. Effective segmentation becomes a critical consideration because Kas target market must supply enough customers to help Ford achieve this share objective. Additionally, profitable growth is needed based on the fact that its worldwide net income declined by 49% from 1994 to 1995 despite a 2.8% increase in revenue over the same period.

French Small-Car Market

Due to its magnitude and growth rates, the French small car market is an extremely important market to Ford. Small cars in the B category accounted for 43.7% of the overall French car market in 1995 and 47.2% of Fords car sales in France. Changes to Frances tax policies have encouraged small, efficient vehicles through fuel tax rates that constitute 85% of retail gas prices and road tax rates that increase according to engine size, transmission and fuel type ratings. Additionally, improved environmental awareness has encouraged customers to choose small cars for their relative environmental benefits. Further, the decline in household size opened up a market that historically sought the necessary space and comfort of a larger car. Small cars become more appealing with the average family size now at 3. Moreover, manufacturers that had traditionally shown interest in large cars began to show an interest in the small car market. The small car market is becoming highly competitive with the introduction of new models and the upgrading of existing models.

Market Segmentation
The traditional methodology of segmenting the car market into size-tiers will not be evaluated, as product characteristics do not meet the definition of market segments.
1. Demographic Segmentation: Fords risk-averse senior management prefers to

segment the market using age, income and household size demographics that recommend a target of working singles, first-time buyers and multi-car households. It allows for the complete categorization of the market. However, there is a chance that this segmentation could miss entire groupings of likely Ka buyers since buyer needs does not always depend on physical characteristics. 2. Gender Segmentation: Gilles and his brand team prefer to segment the market by gender and target female consumers, primarily young women and housewives. This is due

to the fact that women prefer mostly small car, they drive 38% of all French cars and buy 30% of all cars in French car market. Additionally, the number of women in the workplace is growing. Moreover, the market research found that some men tended to view the Ka as a feminine car. A major problem with gender segmentation includes the non-consideration of potential male consumers by building an image around the Ka as a uniquely feminine automobile. 3. Attitudinal Segmentation: Goldfarb team thinks that a changing marketplace calls for new, fresh and ground breaking approaches, and segmenting the small car market by attitude could work nicely with this evolving market. The different segments include Freedom Lovers, Attention Seekers, Sensible Classics and No-nonsense Neutrals and target ones being the first two. By focusing on need states that can cut across demographic segments, this option provides the advantage of allowing Ford to cast a wider net when identifying targets. A major drawback arises in identifying and accessing individuals with the desired attitudes and besides it is expensive and risky. Besides, this option does not align with senior management or dealer segmentation preferences. 4. Purchase History Segmentation: Dealers in the Ford network did not think that a fancy, esoteric advertising campaign was necessary. Instead, they favoured segmentation based on purchase history thereby targeting current Twingo owners. A benefit of this approach is mass mailings could be effectively targeted to reach Twingo owners since consumer purchase history was readily available. However, because Twingo has been available for four years, it might not qualify as an immediate past purchase and also buyers needs may have evolved and they would now be looking to upgrade to a Class C or D car. Furthermore, this option unnecessarily limits the potential market to only those identified buyers whose needs may have been met by a competitors car.

Recommendations
The most important criterion Gilles should consider in defining the target market should be the ability of the associated segmentation methodology to identify distinct groupings of customers who have a preference for the Ford Ka. Besides, target market accessibility, likelihood of acceptance by senior management and alignment with Fords objectives are the additional factors which should be aimed at by the brand manager. Using these criteria, Gilles should select attitudinal segmentation and proceed to target Freedom Lovers and Attention Seekers now and Sensible Classics at a later date. Four distinct groupings can be used to clearly understand the preference for the Ka. By reviewing the gap between different rankings, the choice of which attitude groups to target now, target later and avoid altogether is clear. Besides, Ford can cast a wide net over 44% of the attitudinal market using the two target groupings and adding Sensible Classics later increases this total to 74%. High coverage rates on relevant targets are required if Ford is to build a small car customer base large enough to meet its share objectives and maintain relevance in the French small car market. Drawbacks to this recommendation include fuzzy linkage between attitude segments and actual physical targets, though complementary demographics by attitude segment are available. This drawback will make it difficult to evaluate post launch success. There will also be resistance as this option is not preferred by the Ka brand team, Ford senior management or the dealer network. Regardless, the choice is very much clear for the Ka as attitudes appear to be the strong influencer of customer purchase behavior especially when compared to demographics or purchase history.