Student name: Eric Joel Nhodza.

Student Id: @00438661.

Programme: MSc in Global Management.

Module title: MSc Marketing and Service

Management.

Course Leader: Dr Roy Damary.

Assignment Title: Case Study (Semester 2).

Word count: 3191 words.

Abstract

An analysis of the marketing mix strategy and its

contribution to market success in the United States

MERCEDES-BENZ. of America.
Mercedes-Benz and its marketing mix strategy in America

Introduction

Mercedes was founded in 1923 and was said to be the producer of the first gasoline powered

engine vehicle in the 1900s (Cosgrave, 2013). Mercedes was poised from the beginning to be

a power brand. A few years later in 1957, Mercedes entered the US market through a

distribution agreement with Studebaker- Packard Corporation (Mercedes Benz USA, 2015).

The automaker was such a success that by 1965, Mercedes-Benz USA was registered. Almost

fifty years later, the US is the largest market for Mercedes (Anon., 2014). The main factors

that would have contributed to such success would have included the marketing mix strategy

adopted by Mercedes in approaching the market amongst other things. Mercedes Benz USA

adopted interesting marketing strategies that continue to strengthen its market presence. This

report aims to analyse how the marketing mix strategy is aiding the consistent growth

experienced by Mercedes within the US market.

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Contents

1. Mercedes-Benz and its product categorisation .............................................................................. 4

1.1. What is a product ........................................................................................................................... 4

1.2. Product category for Mercedes Benz ........................................................................................... 4

2. The marketing mix strategy and its relevance to market success in America for Mercedes. .... 5

2.1. What is the marketing mix strategy? ........................................................................................... 5

2.2. Product ............................................................................................................................................ 5

2.3. Price................................................................................................................................................. 6

2.4. Place ................................................................................................................................................ 6

2.5. Promotion ....................................................................................................................................... 6

3. Market segmentation practised by Mercedes ................................................................................. 7

3.1. What is market segmentation? ..................................................................................................... 7

4. The relevance of the marketing mix to market success in America ............................................. 8

4.1. Product ............................................................................................................................................ 8

4.2. Price................................................................................................................................................. 9

4.3. Place .............................................................................................................................................. 12

4.4. Promotion ..................................................................................................................................... 13

5. Mercedes as a brand ....................................................................................................................... 16

5.1. What is a Brand? ......................................................................................................................... 16

5.2. Mercedes’ Brand equity .............................................................................................................. 17

5.3. Mercedes’ brand equity as sales success .................................................................................... 18

6. Conclusion ....................................................................................................................................... 18

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Figure 1- Mercedes Benz models offered in the US. ............................................................................. 8

Figure 2- US Market analysis. ................................................................................................................ 9

Figure 3- Analysis of Mercedes model offerings and their price ranges in America. .......................... 10

Figure 4- Mercedes 2012/2013 unit sales. ............................................................................................ 11

Figure 5- Mercedes 2013/2014 unit sales analysis. ............................................................................. 11

Figure 6- Mercedes-Benz dealership network in America. .................................................................. 12

Figure 7- Details of Mercedes-Benz’s' manufacturing plant in America. ............................................. 13

Figure 8- A typical Advert campaign by Mercedes in the US. ............................................................ 14

Figure 9- A typical Mercedes advert. ................................................................................................... 15

Figure 10- Celebrity advertising used by Mercedes USA. ..................................................................... 16

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 1. Mercedes-Benz and its product categorisation

1.1. What is a product

A product is any item that can be offered to a market for ownership, to satisfy a want or a

need (Kotler et al, 2005). It is evident from the definition, that Mercedes-Benz produces

products that fulfil individuals transportation needs by providing vehicles to those who prefer

private transport compared to public.

1.2. Product category for Mercedes Benz

A further analysis is required of which category Mercedes Benz cars fall into. This will aid in

further assessing the marketing strategy utilised by Mercedes and its relevance to the product

segment offered by Mercedes. There are two main categories of products:

Non-durable Products-These are products that are consumed quickly. Typical products

include those in the food and beverage industry.

Durable products-These are products with significant wear and tear capabilities and are

consumed over long period of time.

From these categories, sub-categories are derived that are concerned with:

Industrial products- These are products used to make other goods.

Consumer products- These are products purchased to satisfy a want or need

Consumer products can be further subdivided into four sub categories (Kaushik, 2011):

Convenience products- Low value, non-durable goods purchased with maximum ease and

minimum effort, for example, a packet of chips.

Shopping products- Goods with a high value that are purchased infrequently and only when

necessary, for example a fridge.

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Speciality Products- Goods with a high level of emotional attachment and involve

considerable planning, for example, jewellery or automobiles.

Unsought products- A product of which customers are unaware of or unwilling to purchase,

for example, funeral plans and life insurance.

It is evident from the definitions above that Mercedes-Benz specialises in Durable, Speciality

consumer goods.

2. The marketing mix strategy and its relevance to market

success in America for Mercedes.

2.1. What is the marketing mix strategy?

The marketing mix strategy can be defined as a theoretical framework designed to help

businesses plan and put into action effective launch and sell strategies for their products (DK

publishing, 2014). It is also a list of important elements and forces that make up marketing

programs for a company (Borden, 1984). The marketing mix is made up of four distinct

elements (DK publishing, 2014):

2.2. Product

When a product is being designed, an evaluation of customer needs and an understanding of

how the product will be used by the target market is conducted (DK publishing, 2014). The

final product is considered to be a good, service, idea, person, or place, regarded as so

necessary, that it is worthy of monetary exchange by individuals or organisations

(Brassington and Pettitt, 2012). A product can be further divided into three segments:

Core product- This is the problem solving product customers buy.

Actual product- The features and design that are incorporated in the core product.

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Augmented product- This is the services and benefits associated with the core and actual

products.

2.3. Price

Once the product exists, there is need to place value on it. This is the amount placed on a

product or service that reflects what a person is willing to give for access or ownership of

such a product (Brassington and Pettitt, 2012).

2.4. Place

Place mainly involves considering distribution channels. Distribution channels can be

described as the route selected to move a product to market through different intermediaries

(Brassington and Pettitt, 2012). This involves considering distribution channels for a product

and how it will be similar or differ from competitors strategies (DK publishing, 2014).

2.5. Promotion

The means by which an organisation attempts to communicate with its intended customers

(Brassington and pettitt, 2012).

This indicates that the marketing mix strategy is crucial for the successful launch of a product

in any given market. And the marketing mix is a major determinant of consumption levels

within a given market. It is also evident from the above definitions that the marketing mix

strategy is needed for the successful maintenance of markets and for the implementation of

relevant growth strategies within a given market. This necessity is applicable to Mercedes-

Benz and its need to succeed in a foreign market such as the USA. The marketing mix

strategy adopted by Mercedes will be key in its long-term US market success.

6
 3. Market segmentation practised by Mercedes

3.1. What is market segmentation?

This involves a proactive process of identifying potential target consumers of a company’s

products (Wind, 1978). And there are six different methods of segmenting a consumer market

(Brassington and Pettit, 2012):

Geographic segmentation- This involves, market identification based on location. For

example, region size or area setting.

Demographic segmentation- Involves, market identification based on statistical data

regarding individuals and groups within a specific country. For example age, gender and

income.

Geodemographic segmentation- Market identification based on demographic and financial

data.

Psychographic segmentation-Market identification based on lifestyle analysis. For example,

daily routine.

Behaviour segmentation- Market identification based on the habits of consumers in a given

area. For example, clothing brand preference.

Multivariable segmentation- Market identification based on a combination of all the above.

It would be important for Mercedes to utilise segmenting, as it ensures the correct products

are sold in the right markets. And Data are suggestive Mercedes has adopted geodemographic

segmentation.

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 4. The relevance of the marketing mix to market success in America

4.1. Product

Mercedes has a specific range of vehicles offered in America (Mercedes Benz USA, 2015)

and of the models offered, most are among vehicles preferred by the affluent in America

(malekafzali, 2012). Mercedes Benz, despite having a 2.1% market share in America (Statista

Inc, 2015), is ranked amongst the top three vehicle brands in America (Mraz, 2014). This

trend is indicative of the brand equity that Mercedes possesses. The luxurious appeal that

Mercedes holds title to in America has propelled its success. This may be due to the models

offered in America as shown in the table below:

Mercedes models Mercedes models US ranking in its

currently in offered in America category
production
A CLASS
B CLASS Electric only -
C CLASS Sedan and coupe 2
CLA CLASS Sedan 11
CLS CLASS Sedan and coupe 2
E CLASS Sedan, Coupe,
wagon, hybrid and 3
cabriolet
G CLASS SUV 16
GL CLASS SUV 2
GLA CLASS Light SUV 5
GLE CLASS
GLK CLASS SUV 12
ML CLASS SUV 8
R CLASS
S CLASS Sedan and coupe 1
SL CLASS Roadster -
SLK CLASS Roadster -
SLS CLASS
V CLASS
AMG-GT Roadster -
MERC MAYBACH

Figure 1- Mercedes Benz models offered in US from (Mercedes Benz USA, 2015) and their
US rankings from (US News and World report, 2015).

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The table above is reflective of geodemographic market segmentation. The table above also shows

evidence of models offered in America being consistently ranked amongst the top vehicles in

America. And this is testament to how Mercedes focuses on product orientation in America. This has

resulted in a specific market segment preferring to own a Mercedes in the US market with a larger

percentage being men, of which most are married. A detailed analysis can be seen on the table below:

Figure 2- US Market analysis from (Mercedes-Benz USA, 2014).

As shown in the table above, the average income of a Mercedes model owner in America is $145,000.

This once again reflects how Mercedes is an acquired taste in America, with only a certain group

being able to afford to purchase car models. The data above reflects the luxurious nature of the core

and actual products offered in America, and is a confirmation of Mercedes’ successful product

strategy in America.

4.2. Price

When purchasing a model in America, there is a base price for a standard model (Mercedes Benz

USA, 2015), there are options then given for addition to the model selected. It is an option that is

known as building a car, thus resulting in price ranges as indicated in the table below. Mercedes is

9
considered a manufacturer of high quality products and this has resulted in a pricing level that holds a

premium, similar to other competing brands. This strategy has seen the German automaker beating

even American car manufacturers in some categories.

Mercedes Mercedes US Average price range

models currently models offered ranking in
in production in America its
category
A CLASS
B CLASS Electric only - $41,450- $54,498
C CLASS Sedan and 2 $36,491 - $61,420
coupe
CLA CLASS sedan 11 $31,158 - $48,496
CLS CLASS Sedan and 2 $63,839 - $105,031
coupe
E CLASS Sedan, Coupe, $48,506 - $99,846
wagon, hybrid 3
and cabriolet
G CLASS SUV 16 $116,036 - $137,736
GL CLASS SUV 2 $61,908 - $117,120
GLA CLASS Light SUV 5 $32,704 - $47,341
GLE CLASS
GLK CLASS SUV 12 $36,716 - $38,619
ML CLASS SUV 8 $46,333 - $95,843
R CLASS
S CLASS Sedan and 1 $90,678 - $224,255
coupe
SL CLASS Roadster - $80,342 - $204,690
SLK CLASS Roadster - $43,006 - $68,839
SLS CLASS
V CLASS
AMG-GT Roadster - $139,000-$181,644
MERC
MAYBACH

Figure 3-Analysis of Mercedes model offerings and their price ranges in America from (Mercedes Benz USA, 2015) and (US
News and World report, 2015).

This pricing strategy has not only made it competitive in the US market, but has helped in increasing

sales as shown in the figures below showing year on year growth between 2012 and 2014.

10
Figure 4-Mercedes 2012/2013 unit sales from (Daimler AG, 2014).

Figure 5- Mercedes 2013/2014 unit sales analysis from (Daimler AG, 2014).

The annual three year unit sales increase is indicative of market perception regarding base

models and extra’s pricing. It shows how customers in America, feel the value placed on

Mercedes-Benz models is fair. Which is indicative of a successful pricing model.

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4.3. Place

Mercedes-Benz has taken an aggressive approach in America by having a dealership in every

single state (Mercedes-Benz USA, 2015). This has resulted in an ease of distribution of

models in America.

Key

Dealership

Figure 6- Mercedes-Benz dealership network in America from (Mercedes Benz USA, 2015).

The aggressive tactic adopted by Mercedes has also made it a fierce competitor within the US

market and has ensured its ability to nudge off any competitors. Mercedes has further

enhanced its distribution channels by erecting a manufacturing plant in America. The details

of which are below. Although not all models are manufactured at the US plant, it has aided in

improving distribution channels and ease of access for customers who prefer those particular

models. It is interesting to note that not all models manufactured at the US plant are provided

in the US market. This further solidifies Mercedes’ product orientation.

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Figure 7- Details of Mercedes-Benz’s' manufacturing plant in America from (Daimler AG, 2014).

The placing strategy adopted by Mercedes has proved to be an effective one. And is one that

has aided its market presence in America. This is suggestive of how they are consistently

ranked as one of the best vehicles in America to the extent of even beating some American

brands.

4.4. Promotion

Mercedes is considered a premium brand. And as a result, the advertising strategies employed

are mainly above the line strategies. This means adverts are through mainstream media and at

times, via social media with the bulk of adverts being run in the actual Mercedes-Benz

website, when adverts are run through various forms of media, they are run in premium

media such as the magazine advert shown below:

13
Figure 8- A typical Advert campaign by Mercedes in the US from (Schmidt, 2012)

This ensures that Mercedes does not only maintain its brand integrity, but also ensures it

manages to communicate with its target market. As shown below, most Mercedes adverts are

usually informative. This not only re-affirms Mercedes’ product orientation, but also re-

confirms how Mercedes’ target market is mainly affluent individuals.

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Figure 9- A typical Mercedes advert from (Mercede-Benz, 2014)

The advertising style adopted by Mercedes reflects geodemographic market segmentation, as

continuous emphasis is placed on the product as shown in the above advert of the 2015 S-

Class where all that is shown is the vehicle and the background is mainly grey in colour. This

is done to place emphasis on the design aspect of the car and aims to convey a luxurious

appeal to the end consumer.

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Figure 10-Celebrity advertising used by Mercedes USA from (Ungureanu, 2015)

Mercedes advertising in the US has taken a slight shift as the company attempts to lure

younger customers to purchase its brand and one such approach is shown above. As the new

GLA class debuted in America, the famous talk show host Ellen DeGeneres gave some away

on her birthday, a move that was done in an effort to convey the “fresh, young” look that

Mercedes is aiming to portray with its new designs. The move was said to quite possibly

boost sales this year (Ungureanu, 2015).

5. Mercedes as a brand

5.1. What is a Brand?

A brand is any sign symbol, name or mark that is used to differentiate one product from

another (Kotler et al, 2005). It consists of five elements (Gunelius, 2009):

Brand promise-The guarantee associated with a brand and the feeling attached to the

guarantee.

Brand perceptions-How consumers view the brand.

Brand expectations- The experience anticipated by a consumer as per the brand promise.

16
Brand persona- The expectations consumers hold when considering interacting with a

brand.

Brand Elements- The identifying marks associated with a brand.

Mercedes has been said to be Europe’s most valuable brand (Cosgrave, 2013). This is

suggestive of the consumer’s response to its brand promise represented by its catch phrase:

“The best or noting”. And has resulted in high brand expectations as the brand persona

exudes luxury. This has resulted in a brand perception of high end products that can only be

afforded by a select few. The brand perception is based on this notion and has resulted in an

increase in the desirability of a Mercedes- Benz model, a predicament that may have

contributed to its continuous increase in sales units between 2012 and 2014 in America.

5.2. Mercedes’ Brand equity

As a brand grows, it accumulates or loses assets. These assets are commonly termed brand

equity (Aaker, 1991). Brand equity is the perception attached to a name and it consists of five

elements:

Brand loyalty: The susceptibility of consumption levels and rate to change in product pricing

and styling.

Brand awareness: The ability of potential consumers being able to associate a product with a

brand.

Perceived quality- The customer’s immediate assumption of the products quality.

Brand association- Memorable adverts or events linked to a brand.

Other assets- Patents and trademarks owned by a brand.

Mercedes is a strong brand, well known for its elegance. It has been highlighted that even a

toddler needs no introduction to the three pointed star (Bhasin, 2015). This suggests that

17
Mercedes has high brand equity which has not only aided its growth, but its current

positioning in the US market despite being a German vehicle.

5.3. Mercedes’ brand equity as sales success

Mercedes has experienced year on year growth in the US from 2011 to date, with year to date

sales increase, this is suggestive of continuous growth. There has even been an increase in the

models offered in the US in the same period. However, with year to date sales already

surpassing 2014 figures (UBM plc, 2015), it is a clear indication of customer satisfaction with

the new models. And suggestive of continuous growth in sales units. This may be due to the

strong brand equity Mercedes has.

6. Conclusion

Mercedes is a brand that has firmly positioned itself in the US market and with its new

designs, 2015 is positioned to be a year of growth for Mercedes. With year to date sales increase

of 6.7% compared to the same period in 2014 (UBM plc, 2015), the US market seems to continue to

grow for Mercedes. The hope of expanding its market base in America is not only possible in

2015, but for the foreseeable future. Mercedes has fully adopted the marketing mix in

America. And the product it offers, together with the price range, its vast distribution

channels and its rejuvenated promotional style in America, its mix is a guaranteed formula

for success in 2015 and beyond.

The brand awareness and brand loyalty that Mercedes has acquired over the past three years

is admirable and one that will most certainly contribute to Mercedes’ market growth in

America. The onslaught suffered by Mercedes from rival brands such as Audi and BMW has

a global hold with Mercedes coming third in 2014 (Boston, 2015), however due to the

renascence experienced by the Mercedes-Benz brand, 2014 US sales placed them in second

position behind BMW, ahead of Audi (Vijayenthiran, 2015). It is evident from the growth

18
trend experienced between 2011 and 2014 that Mercedes is likely to take the crown in the not

so distant future. With only 2.2% of the US market (Statista Inc, 2015), the US seems to

dominate other markets to remain the overall sales champion for Mercedes.

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