Case Study on Suzuki Samurai Course: Strategic Marketing (EMB620)

Prepared By ..... Submitted To Dr. Riad Mahmud North South University Submitted on 27th September 2009

Table of Contents Preface iii 1. What is Suzuki s marketing strategy in the U.S? 1 2. What are the three major positioning options (as per industry practice) accor ding to a vehicle s physical characteristics? What are the pros and cons of posit ioning the Samurai in each of these segments individually? 2 3. What are the pros and cons of the Un-positioning strategy? 5 4. What strategy would you recommend for the Suzuki Samurai in the U.S? 7

Preface As a part of a case study of Strategic Marketing (EMB-620) Course, this formal r epot has been prepared. The whole report covers on the case analysis of the posi tioning strategy of Suzuki s new entrant into the U.S. automobile market with the Suzuki Samurai brand. All the analysis & explanation have been written in this report on the basis of the provided case information.

1. What is Suzuki s marketing strategy in the U.S? To meet the dynamic market demand, Suzuki changes its policy many times. At firs t they entered in the US market as exporter of a single product (only motor cycl e) with vertical integration. In 1964 Suzuki began exporting motorcycles to the United States where it established a wholly owned subsidiary, U.S Suzuki Motor C ompany, Ltd., to serve as the exclusive importer and distributor of Suzuki motor cycles. Then it began to export multi products and out sources its one brand: In 1983, General Motors (GM) purchase 5% of Suzuki and helped the company a subcom pact car for the US market. The car, named Chevrolet Sprint, was the first entry into the continental US automobile market. GM's success with Sprint showed Suzu ki that a market existed for its cars in the continental of United States. Then Suzuki (The always something different car company) planned to introduce several unique vehicles into the US market over time. Suzuki had no guarantee that GM w ould be willing to market the vehicles. Therefore, Suzuki decided to establish i ts own presence in U.S automobiles industry.

SELECTIVE DISTRIBUTION: Suzuki s goal was to establish itself as a major car compa ny in U.S. To achieve this goal, Mazaa, Vice President of ASMC (American Suzuki Motor Corporation), adopted the step of Convincing prospective dealers to build separate showrooms for the Samurai. Then he designed a dealer agreement that required prospective Samurai dealers to build an exclusive sales facility for the Samurai. The facility had to include a showroom, sales offices, customer walking and accessory display area. Service and parts could share a facility with a dealer s other car lines, but a minimum of two service stalls need to be dedicated to Suzuki, which had to be operated by Suzuki-trained mechanics. Required dealership to display specific signs and outs ide the sales office and in the service stalls. A minimum of three sales people , two service technicians, one General manager and one general office clerk had to be dedicated to the Suzuki dealership. The bold points above are illustrati ng the fact that the company followed the selective distribution (close to exclu sive distribution). It allowed the company to achieve higher profitability, deal er loyalty, greater sales support and also higher degree of control over the ret ail market. PRICING POLICY FOR DEALERS: Price is the only marketing variable that generates revenue. Though it is close to exclusive distribution that is characterized by high margi n, high profit and low volume, Mazza adopted with an opposite view. The company aimed to gain market response for its high quality with low price advantage. Thu s their strategy was to sell high volume with low profit margin. Engage a strong dealership bigger than traditional based on the belief that quic k dealer profitability would be key to success as a dealer s sales opportunities gre w, so too would the financial commitment and overhead. Dealerships selected with trading areas that encompassed zip codes with high con centrations of households that fell into Suzuki s target market. Cost efficient product (almost half the traditional one) to attract & catch the customer quickly. Focus on early entry (Before Hyundai Motor Company of South Korea and Zavodi Crv ena Zastava (Yugo) of Yugoslavia,) Introduce several unique vehicles into the U.S (the always something different c ar company) Establishing its own presence in the U.S automobile industry for independence (c ollaboration with GM is not guaranteed to continue) NEW PRODUCT DESIGN: (SJ413) for customer attractiveness & product modification f or overcoming import barrier for big quantities. Chose to introduce the Samurai into California, the nation s largest automobile ma rket, and Florida and Georgia, where Japanese import sales were higher then the U.S. average PRODUCT DIFFERENTIATION: To grab different market segment by two different produ cts, a convertible and a hard-top. 2. What are the three major positioning options (as per industry practice) acco rding to a vehicle s physical characteristics? What are the pros and cons of posi tioning the Samurai in each of these segments individually? Before Suzuki could enlist dealers, it had to decide how to position the Samurai to consumers. The position it chose would help define the vehicle s target market which, in turn, would influence ASMC s preferred dealer locations. POSITIONING STRATEGY: Positioning is placing a brand in that particular part of the market where it will receive a favorable reception compared to competing pro ducts. From the point of view of Leonard Pearlstein, president and CEO of keye/ donna/ pearlstein advertising agency, positioning is," The unique way we want pr ospects to think about a product." Douglas Mazza, VP of ASMC wanted a fresh appr oach for his company's new product. So he gave the responsibility to that advert ising agency, which had no experience in developing campaign for automobiles. Af ter accepting the offer, Pearlstein and his associates scanned the industry prac tice for automobile advertising.

They found out that the industry practice was to position vehicles according to their physical characteristics. They also found out that most advertising was fe ature/ benefit or price oriented. Based on its physical characteristics, the maj or three positioning options for Samurai SJ413 were as follows: ? ? ? Position as a compact sport utility vehicle. Position as a compact pickup truck Position as a subcompact car.

The pros and cons of positioning the samurai in each of these segments individua lly are given below: COMPACT SPORT UTILITY VEHICLE: The most obvious position for the samurai is as a sport utility vehicle. It look ed like a "mini- jeep" and had 4-wheel drive capability. PROS: ? The features matched exactly with the attributes of compact sport utilit y vehicle. ? Designed to drive well off road.

? Positioning as a sport utility vehicle is consistent with the samurai's heritage. ? The Samurai was smaller and lighter than the other vehicles. ? Praising of foreign owners because of samurai's reliability. It had the ability to go anywhere where larger vehicles could not. ? ? Ease of repair. Smaller and lighter than the other vehicles.

? Its price and size made it distinct from all other sport utility vehicle s in the U.S. market. It was sold below the price of the other vehicles. Its $5, 995 suggested retail price was well below the other vehicles $10,000 to $13,000 p rice range. ? Thus the positioning of Samurai as sport utility vehicle solely concentr ated on the low price and its ability to squeeze through places where bigger veh icles could not go. It needed to be advertised as a Tough little cheap Jeep." CONS: ? There seemed to be a problem of whether the positioning could generate t he envisioned sales volume. ? The market for sport utility vehicle was relatively small. In 1984 it wa s less than 3% in the U.S market. The goal was to build as annual sales of 30,00 0 units within 2 years of its introduction. To achieve this it was required to e xceed the combined 1984 sales of all imported sport vehicles. COMPACT PICKUP TRUCK: The second option, positioning the Samurai is as a compact pickup truck. PROS: ? It would tap a market two and one-half times the size of that for compac t sport utility vehicles.

? It had the advantage that Japanese trucks sold well in the U.S accountin g for 54% of total 1984 compact pickup trucks. ? It had the high level of US consumer s acceptance. ? The Samurai could be used as a truck when purchased without back seat or when its back seat was folded up. ? The price was set at the retail price to keep it in comparison with Japa nese imported trucks. Thus the positioning strategy would only indicate uniformi ty with other truck prices but rather uphold a serious, practical, male-targeted tough truck. CONS: To penetrate as a new company, price is one of the factors to attract customers. But it did not have any price advantage over other similar cars. SUBCOMPACT CAR: The third option is to position the Samurai as a subcompact car. Samurai adverti sing copy should emphasize the vehicle s looks. The message to consumer would be Wh y buy a Toyota Tercel or a Nissan Sentra when, with the same amount of money, yo u can buy a much cuter vehicle, the Samurai? PROS: ? Positioning the Samurai as a subcompact car would open up the largest of the three possible markets. ? A trend had been developed that professional like lawyers, doctors drove it to their offices leaving their Mercedes at home. ? The Samurai boasted an average 28 miles per gallon in combined city and highway driving, was priced lower than many subcompact cars, and offered more ve rsatility. Those who were shopping for an economy car could consider it. Thus the positioning strat egy should give emphasis upon looks and style of the car. CONS: ? If it was positioned as a car then it might not meet the expectations of the consumers because the Samurai was built on a truck platform, its ride was s tiffer and less comfortable than the least-expensive subcompact cars 3. What are the pros and cons of the Un-positioning strategy? UNPOSITIONING STRATEGY: Un-positioning is just the opposite of positioning. It i s offering a single product to the entire market. Each person can define the product in his or her owns way and can rationalize th e purchase decision in his or he owns terms. Pearlstein Ad agency suggests that Samurai SJ 413 should be un-positioned in the market to cover all three possible segments; compact sport utility vehicle, compact pickup truck and subcompact ca r. ADVANTAGES OF UNPOSITIONING: Larger Target Customers: Due to un-positioning Suzuki Samurai American Suzuki Motor Corporation (ASMC) ge ts the opportunity to target the entire potential consumers segment. The Un-posi tioned Suzuki Samurai will appeal the users of pick up truck, subcompact cars an d sports utility vehicle. That ensures higher consumer acceptance by offering a car for various needs. Customer satisfaction: If each consumer is allowed to personally define the Samurai, this would lead to

greater similarity between the vehicle's promise and its delivery if Suzuki tol d customers what the Samurai was; by clearly defining the image of the vehicle. Higher Profitability: As un-positioning will target a larger customer segments, it will definitely inc rease sales and thus add larger profit to the company's income statement also. T hus this strategy is perfectly compatible with company's goal that is to establi sh ASMC as a major car company in the US. Threat to Competitors: Un-positioning will urpose of versatile competitor s sales six months. So, in offer a car with different purpose. It will also serve the p transportation. The broader appeal of the car can reduce its and thus can guarantee sales more than 6000 units in the first the mean time, competitors' sales might deteriorate.

DISADVANTAGES OF UNPOSITIONING: Losing of present Customers: Suzuki Samurai already had its brand appeal as a rugged utility vehicle in Canad a. The stylish looking little jeep along with its stylish looks made the car pop ular as the utility jeep to handle driving in rain, snow and off-road. The jeep is popular for going to fishing, camping and skiing. So, if other consumers star t to use it as subcompact car or pick up truck, it will lose its brand image. It might also happen that the present consumers might reject the jeep with diffe rent appeals. Thus losing customers will be a greater loss. Loosing Potential Market: The other possibility is if Samurai SJ 413 could try to be the niche in the "Tou gh-Little-Cheap Jeep" segment they might land up as a market leader in that part icular segment. So, the company needs to sacrifice the possibility of being numb er one in the niche market by accepting the "Un-positioning" strategy. Trouble for the Sales People: Due to un-positioning strategy sales people will suffer for explaining the vario us use of the car and it will be difficult for them to emphasize upon one partic ular need to the buyers. If two buyers with different perceptions contact one salesman at a time, the sal esman need to be expert enough to sell two cars for two different reasons at one single time. Increased Confusion: Confusion will arise among consumers if Suzuki avoid positioning. People usually use vehicles that they feel as the car for their own convenient. So, when they see that the car is also meant for different segment of people, obviously they w ill be confused. Thus sales might dropped out. The advertising agency wanted the car to be positioned as "antidote to traditional transportation" and thought an "alternative to small-car-boredom". Therefore, un-positioning could therefore attract buyers from all three-vehicle segments. But, in the long run the company needs to highlight a more specific ne ed to motivate the consumers to purchase Samurai SJ 413. 4. What strategy would you recommend for the Suzuki Samurai in the U.S?

RECOMMENDED STRATEGY: In recommending the strategies for Suzuki Samurai in USA, we are going to suggest some comments about some of the strategic issues. These are as follows: ? ? ? ? ? ? ? Market Targeting Positioning Relationship Distribution Pricing Promotion and Advertising

MARKET TARGETING: Suzuki wants its Samurai to sell extensively in the US market. So to target market it should follow extensive targeting strategy. The car should not be for any specific Suzuki's Marketing Strategy in the U.S. s egment but for all who needs a car. It will maximize the sales of the car and th us will increase revenue and profit. Moreover, it is likely to build customer aw areness and eagerness to buy a Samurai in every potential car buyer. There are l ess risk as the research showed that there is huge demand for the earlier model and the market was preferring the Japanese vehicle as they were ensured about th e quality of Japanese product and these vehicles were economical (Both mileage a nd price). POSITIONING: Three alternatives, including sport utility vehicle, compact pick-u p truck, and a subcompact car, are mentioned earlier to position Samurai among t he clients but research shows that customers perceive the car in different ways . To achieve higher market share and sales it will be unwise for Suzuki to impos e any perception on consumers mind. And that is why it should avoid positioning the Samurai as a specific type of vehicle so as not to exclude large groups of p otential buyers. From the research the agency found out that a young or young-at -heart person is a prospect for Samurai. Any sport utility buyer can be attracte d by just looking at the vehicle, it can be perceived as an alternative to dull automobiles for small-car buyers and small truck purchaser were buying them to u se as cars than import subcompact cars. Although there are disadvantages regarding un-positioning the car but the 80-20 rule is more applicable here. As the vehicle has every characteristic to attract every possible market segment, adoption from any of the segments would get the job done. CUSTOMER SERVICE STRATEGY: Customer Service strategy should also be planned amon g the organizations, dealers and customers. In the modern world of business it i s very hard for a single organization to run with the technology, financial cons traint, access to market etc alone. So, Suzuki should take measures to build str ategic alliance with potential companies in US. Relationship among dealers and c ustomers are also important. Customer satisfaction and after sales services are two major issues that can play effective role in positive attitude and perceptio n towards Samurai s success. BRANDING: As Samurai is a new product in the market it should build a strong bra nd image among the potential customers. The matter to consider is Suzuki, the ma ker of Samurai, is not new in the market and already it has a place in customers mind. The strategy that Suzuki should take is to make efficient use of that ide ntity to make the new brand stable and reliable. DISTRIBUTION: Suzuki can go for vertical integration system for distribution. Ve rtical Integration dominates the retailing sector. A primary feature of it is th e management of the distribution channel by one organization. The firm that is t he channel manager directs programming and coordination of channel activities an

d functions. Operating rules and guidelines indicate the functions of responsibi lities of each participant. Management assistance and services are supplied to t he participating organizations by the firm that is the channel leader. ASMC can also practice competitive channel strategy simultaneously to increase sales of S amurai. Addition intensive may be offered to sell certain numbers of Samurai to each dealer in this regard. PRICING: As Suzuki already fixes price of the Samurai, there is very low option to offer any pricing strategy for this car. But still price can be used in vario us ways in the marketing program positioning strategy. These are: Price may be u sed as a signal to buyer because the price of Samurai is visible to the buyer an d provides a basis of comparison between brands. It may be used to position the brand as a high-quality product at a less price. It may be used as an instrument of competition. In the US market all of the similar cars are selling at $8000 $13000 while Samurai is priced at $5995. So, undoubtedly it is a competitive factor. It may be used to improve financial performance of the company also. And productivity, expansion, investment etc. mo stly depends on financial performance. The low price of the Samurai can be used as penetration pricing strategy to capture greater share of the market. Penetrat ion pricing reflects a long-term perspective in which short-term profits are sac rificed in order to establish sustainable competitive advantage. At the same time Samurai can enjoy the advantages of one-price strategy also tha t includes administrative convenience, easier pricing process etc. PROMOTION AND ADVERTISING: The advertising and promotion budget of ASMC for the first six month is $2.5 million. Typically an automobile manufacturer spent 77% of its advertising dollars on television ads, 10% on print ads, and 3% on highwa y billboards. The print ads were to run in both general-interest magazines and e nthusiast magazines. To establish Samurai as a car of customers' perception, a c omprehensive/integrated promotion strategy is badly required. The objective of t his strategy for Samurai should be as follows: ? Creating or increasing buyer awareness of the car Influencing buyer atti tude toward the company Suzuki and the brand Samurai. ? Achieving increases in sales and market share for specific customer or p rospect target. ? Generating repeat purchase of the car. ? Encouraging trial of the car. ? Attracting new customers with existing Suzuki clients. ? Encouraging long term relationship. Suzuki should follow the integrated marketing communication to integrate the pro motion tools because, marketing communication programs are comprehensive. Advert ising, personal selling, publicity, direct marketing, sales promotion are all co nsidered in the planning of marketing communication. The messages delivered by a ll media are the same or supportive of a unified theme. Marketing communication programs are targeted. The public relation programs, advertising programs, and d ealer/distributor programs all have the same or related target markets. Marketin g communication programs coordinated execution of all the communication componen ts of the organization. Suzuki may also apply sales promotion activities to the following groups to achi eve its goal of selling designated number of Samurai. These are: ? Promotion to consumer targets: consumers may be offered free servicing f or certain time period, or some gifts with the purchase. ? Promotion to industrial/sports team target: Discounts may be given for b ig orders from such organizations. ? Promotion to channel members: Intensive or bonus may be announced to the channel members for selling certain number of vehicles.