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FORD KA SEGMENTATION STRATEGY MEMO

TEAM 13 AFTAB MAO MUCKERMAN PAVIA ZHAO


Background

Ford (and the auto industry as a whole) traditionally segmented customers in the small car market first
on their income (purchasing power and financial means) and then more sub-categorized based on other
traditional demographic characteristics such as gender, family size, and location. More specifically, Ford
grouped consumers into the following four large buckets: 1) financially constrained, 2) average income
and family constrained, 3) average income/youthful expressive and high income, and 4) not family
constrained (root of all four is income)

Historically, consumers made their decisions to purchase cars based on affordability and meeting basic
needs. As such, the traditional segmentation method made sense because these customer demands
were easily understood. More specifically:

1) Consumers wanted to buy small, affordable cars that allowed them to get from Point A to Point
B and small car manufacturers were able to concentrate on price by lowering costs of production
through high volume sales
2) Consumers had not yet developed the need for accessories and add-ons to vehicles largely
because they did not exist. Due to little differentiation and the standardization of car models,
there existed little incentive for a customer to buy from one brand over another as all met the
consumers utility-based needs. As such, car manufacturers did not need to segment base on
differing customer demands.
3) Additionally, Fords entry into the European market (at that time) was to have a presence, but
was not a major priority. Because there was no differentiation and no desire on Fords part to
invest in R&D to capture only a fraction of the available market share, it made sense to adopt the
standard methods of the European market.

Recommendation for Ford KA

Ford should adopt a similar segmentation approach that has allowed competitor Renault to succeed with
the (recently launched) Twingo.

Instead of focusing on income, gender, or family size, Renault targets a narrow range of customers for
whom the Twingo provides the most value. Renaults focus on marketing characteristics of the Twingo
to a specific customer segment is a departure from the generally adopted and used traditional
demographic segmentation for the small car market in the EU. As a result of this different marketing
approach, Renault has gained an 8.9% market share after only 12 months of production and sales.

Ford faces the following obstacles with the Ka:

1) Ford does not have the advantage of national brand loyalty as other EU-based manufacturers do.
As such, Ford will not be to able to gain market share in volume and therefore enjoy economies
of scale by continuing to use a traditional demographic segmentation and marketing approach in
a dense market segment.
FORD KA SEGMENTATION STRATEGY MEMO
TEAM 13 AFTAB MAO MUCKERMAN PAVIA ZHAO
2) Ford built the Ka without having a particular customer need to fulfill and therefore, is
experiencing difficulty about how and and to whom to market the car.
3) Ford has also not been able to differentiate the Ka effectively in the EU market.
Given these obstacles, Ford should consider using market research to identify characteristics of the Ka
that relevant consumers find most appealing and then determine a customer group that attaches value
to those favorable characteristics. This would allow Ford to market the Ka to those identified customer
segments as a differentiated low-cost small car.

Attitudinal segmentation, unlike the traditional demographic method, does not fragment customers on
income and general utility needs, but rather according to life-styles and behavior. The approach has four
main segments with the associated defining attributes:
i. Freedom Lovers: Outgoing, social, and active
ii. Attention Seekers: innovators, opinion leaders, and flashy
iii. Sensible Classics: responsible, risk-adverse, and traditionalists
iv. No-nonsense Neutrals: brand wary, TV watchers, and unenthusiastic consumers
Using this approach, a stronger correlation can be made between the hypothesized customer segments
and the favorable Ka characteristics identified in market research.
Market research indicates that 45% of buyers interested in buying a small car identify the Ka as one of
their top 3 choices. These individuals stated that they find the Ka to be flashy, sophisticated, fun to drive,
and futuristic.

Evidence suggest that the Freedom Lovers and Attention Seekers groups would most value the Ka. This
conclusion is further supported by the large gap between users in these categories that find favorable
characteristics of the Ka and those that focus on the Kas negative attributes (Case Exhibit 13).

Remarks regarding other segmentation strategies

Gender segmentation would not be an optimistic customer segmentation approach due to conflicting
opinions that both men and women had in regards to the Ka. For example, men saw the Ka as a
feminine car and women were concerned that they might not be taken seriously driving a car that looks
frivolous. Ford would need to further sub-segment the genders, which would eventually require
multiple marketing campaigns. Additionally, this method does not seem to identify the customer
segment that would value the Ka as well as the attitudinal segmentation approach.

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