Brand Segmentation and Positioning Analysis Report: Ferrari

Brand Segmentation and Positioning Analysis Report: Ferrari

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Brand Segmentation and Positioning Analysis Report: Ferrari

Introduction

Situated in Maranello, Italy, Ferrari is an Italian car manufacturing Company that is well-known for the production of world-class sports cars. The Company was founded in 1929 by Enzo Ferrari. During that period, the Company produced race cars and sponsored drivers before shifting to the manufacturing of street-authorized vehicles in 1947 (Bonetto, Rillorta, & Kirby, 2015, p.6). Over the years, Ferrari has been acknowledged for its continued participation in car races, particularly Formula one, where the Company has achieved great success.  Ferrari is among the world’s best luxury brands focused on sleek design and advanced engineering. Ferrari, according to Parasha (n.d), is a symbol of exclusivity, Italian engineering and design heritage, innovation, and state-of-art racing performance.

Today, the Company has created a brand that is associated with high performing super luxury motorway and raceway cars. Creating exotic and exquisite cars in a class that most motor fanatics call the “supercars”, Ferrari has built many power loaded vehicles that continue to surprise the motor sector in regards to performance and speed. To understand how well the Company has been able to achieve success in the motor industry, it is crucial to know how the brand segments and positions itself in the market.  As posited by Andaleeb (2016, p.180), segmentation plays a role in helping the brand understand the features fit for a specific group of consumers, as explained in this paper. When it comes to market targeting, Ferrari prefers selective targeting since not everyone should own their cars. In terms of brand positioning, Ferrari has positioned itself as a luxury brand that is associated with global racing events. The successful brand employs a value-based strategy to position itself in the market, an approach that gives its customers a sense of pride in possessing the masterwork.

Segmentation Analysis

Actions of the Brand through Marketing Communication

Ferrari, according to Andaleeb (2016, p.182), sets a good example when it comes to brand marketing.  A yearly survey carried out in 2013 by a recognized brand appraisal consultancy revealed that Ferrari was the most recognizable and popular brand globally (Zhang, 2019). It is important to note that the brand stood out among big brands like Coca-Cola, Apple, Google, Rolex, and Disney. This implies that it is worth more than Apple, Mercedes, Nike, and BMW, and its allure cannot be matched by any other brand. The story of Ferrari is unique, and an astounding global success and cannot be appraised in terms of market capitalization or sales and revenues. 

Ferrari, in the 1990s, found authentic transformational leadership in Luca Cordero di Montezemolo. At this time, Ferrari was beginning to lose the value of the brand, and its race cars were suffering the most. Unlike today where the Company is a famous luxury brand, the 1990s proved otherwise. One of the marketing strategies advocated by Montezemolo and one that is still used by the Company to reach the target audience is maintaining exclusivity and rarity of all company vehicles (Parasha n.d). Today, because of Montezemolo’s policy, the Company is capable of selling its cars with a high premium price tag while at the same time keeping its market demand undamaged.

Being an exclusive luxury brand, Ferrari tries to stun its target customers with its unique designs. The Company seeks to maintain its exclusivity by manufacturing vehicles in low volumes but with high pricing margins. In 2013, Ferrari announced its goal to reduce the volume of cars manufactured to maintain exclusivity.

Ferrari marketing mix analyzes the brand, which evaluates the 4Ps (Product, Price, Place, and Promotion) and explains the Company’s marketing strategy. The distribution, advertising, and pricing strategies used to communicate the brand are described in this part of the discussion. The product mix and strategy in the marketing strategy of Ferrari is as explained herein. As earlier stated, Ferrari’s main specialization is sports car manufacturing, although they also create road cars. The cars are expensive and record-high performance. The first car was built in 1940 and was known as the Ferrari 12 S. In the 1950s, the Company manufactured 44 models, in 1960s 45 models were produced, Ferrari came out with 16 models in the 1970s, 28 models in 1980s, 23 models in 1990s, 20 models in 2000s, and 9 models in 2010 (Ferrari, 2019). Currently, the Company has been creating exceptional cars that have captured the increasing demands of the contemporary consumer. The current models include GTC4Lusso, LaFerrari, 488 Spider, and LaFerrari Aperta, among others (Ferrari, 2019). Each model is unique, with the designs getting inspirations from sports prototypes such as or Scuderia Ferrari in Formula 1 and Gran Turismo. The Company also gives customers the freedom of personalization to offer each driver an exceptional experience. Ferrari has manufactured several models for GT Racing, which include 458 Italia GT, 458 Challenge EVO, and Ferrari FXX K (Ferrari, 2019). Other than cars, the Company also focuses on third party merchandising at their main stores.

The pricing strategy also determines how the brand is communicated in the market. The company cars mainly target a consumer who is ready to pay a high amount owing to brand and quality. Each year, the Company prices its cars differently based on the engine type and the model. According to Kapferer, and Valette-Florence (2018, p.41), Ferrari prices start at about 170,000 US dollars. The current model, which is the Ferrari 458 GTB, currently costs 280,000 US dollars. The Company’s vintage cars are a significant investment given the fact that they are expensive to maintain. With time, the price of the cars appreciate. The pricing strategy of the Company is mainly offering premium-priced vehicles with the rate increasing with more personal customizations.  By concentrating on extraordinary car exclusivity and design, Ferrari sells its luxury vehicles with high-profit margins to end customers. Unlike other luxury car brands like Daimler and Porsche, Ferrari does not focus on sales figures but rather of its product’s exclusivity.

Ferrari is highly valued and recognized everywhere globally. From Japan to the U.S, from Switzerland, Germany, to France, to Australia, India, Russia, Argentina, Brazil, and New Zealand (Kapferer, Bastien, & Kogan Page, 2015, p.128). Following Ferrari’s distribution or place strategy, the Company has dealers across the world; Africa, the United States, Europe, Asia Pacific, and the Middle East. Today, Ferrari has about 52 dealerships globally and are opening to newer markets. Ferrari’s merchandise is sold at different stores globally and even online.

 Source (Parasha n.d). 

Ferrari invests in advertising and promoting the brand among its target markets. Since the advent of the brand, the Company has been involved in Formula One and this where it acquires maximum promotion. Ferrari promotional strategy is different from other car brands since it caters to a high premium niche market. As postulated by Blanding (2019), the Company has created immense brand awareness globally, owing to Formula One, even in areas where the brand does not exist. For example, In India, where the brand is not that famous, Ferrari has still been able to gain a considerable consumer base. Ferrari has an owners club where all owners share their experiences and stories. Other than this, their merchandising plays a significant role in promoting the brand. The Company has a huge collection of easily accessible perfumes, clothing, shoes for kids, men, and women, and watches. In 2007, the Company opened a branded theme park in Abu Dhabi and installed the fastest roller coaster globally known as Ferrari Rosa (Ferrari, 2019). To continue appealing to the digital consumers, the Company launched a mobile app recently known as SF All Access, where it updates new content about the brand directly to customers’ phones.

The brand is also famous in emerging markets. It is worth noting that Ferrari does not employ any traditional advertising channels. The Company takes pride in owning the most successful Formula One racing teams, which gives it a strong marketing power. To take advantage of this popularity, several famous brands like Microsoft, Puma, Movado, and Hublot among others pay royalties to the Company to use the brand name on particular products like luxury watches, video games, sportswear accessories, and toys.

Prominent Segment Targeted by the Brand

The insight of mass marketing and the assumption that all consumers have similar behaviors has pushed brands to understand the unique needs of different consumer groups, in order to increase their sales prospects. For example, a luxury sports car company like Ferrari cannot market its brand to the middle class mainly because it targets the wealthy.

Kapferer and Valette-Florence (2016, p.114) classify market segmentation into six interactive bases. These include geographic variables, behavioral style, psychographic profile, socio-economic and demographic variables, as well as benefits sought. Although Ferrari has a specific target segment, it precisely identifies its market segment. Below is a table showing how market segmentation is classified-:

When it comes to super cars and road cars, Ferrari targets and segments in the following ways as will be further discussed.

Demographic varables

• High Income
• Rich premium personalities, celebrities
• Mainly Men
• 25-49 and 50+

Geographic variables

• Worldwide

Psychographic

• Urban lifestyle
• Ferrari enthusiasts
• Loyal customer

Demographic segmentation as defined by Kapferer and Valette-Florence (2016, p116) is a type of market segmentation, which involves dividing the market based on descriptive aspects. Data offers Ferrari with a distinct manner to evaluate market variables by estimating the size as well as the channel to be used to reach that particular market segment. This type of segmentation is based on social class, gender, age, occupation, literacy levels, and income. The demographics of a Ferrari owner are those who earn high incomes and are found in the 25- 45-year-old age gap and 50+ age segments.  The average owners of a Ferrari are supposedly males in their mid-50’s. On rare occasions, an individual would buy a Ferrari because they need it as a transport vehicle; this is because most buyers buy them as their second or even the third car in their households. Not many young people own Ferraris since these cars are extremely overpriced. In addition, there is a biased group of male owning Ferrari sports cars, with most of them driving them on weekends or on race tracks. The fact that only the rich can afford a luxurious sport car makes sense given that the buyers of such brands are not saving up their last coin to afford it as they have accumulated more than enough wealth to accommodate their lifestyles.

Ferrari cars are targeted to consumers who appreciate the essence of a premium and a luxury brand. These customers associate with the brand persona. As stated by Smith and Stewart (2014, p.133), Ferrari customers are super-rich and famous world personalities interested in exclusive luxury sports cars.

Unlike the general motor industry, the luxury supercar sector is a unique segment that centers mainly on luxury, performance, and comfort of the brand, instead of elements like fuel efficiency and vehicle price. A report released by Bain Company revealed that the world’s luxury car segment in 2014 significantly grew to €351 billion compared to the year 2013 (Kapferer, & Valette-Florence, 2018, p. 46). The increased demand was a result of macroeconomic factors and the increased growth in the wealthy sector globally. For instance, about a decade ago, Ferrari sports cars were limited to developed economies like Europe and the United States. However, the geographic segmentation has grown to cover global markets given that the Company aims to capture the target customer base with high disposable income in developing markets. Ferrari is an excellent example of a luxury brand whose demand in emerging markets is evident from its sales statistics. Europe and the U.S in 2003 accounted for eighty-two percent of total sales, but this decreased by 27 percent in 2013 (Kapferer, & Valette-Florence, 2018, p. 48). This data mainly shows the heightening contribution of developing markets in Ferrari sales.

When it comes to psychographic segmentation, it is clear that the Ferrari market is concentrated to few market players who share certain features with other luxury goods like rarity, aesthetics, quality, uniqueness, as well as a high level of non-functional relations. Such factors result in considerable higher pricing. Ferrari’s market is affected by several factors such as urbanization, increased living standards in developing economies, the brand enthusiasts, a change in macro-economic conditions, and increasingly wealthy classes.

Positioning Analysis

 How the Positioning Strategy Has Been Implemented By the Brand for Each Segment

In a simple definition, brand positioning refers to a process of differentiating a product from its competitors. According to Keller (2013 p.105), an operational brand positioning is essential for organizations as it creates a unique perception of the services or products offered, thus finding the right market or consumers for the brand. When positioning their brands, companies focus on the target segment that they seek to serve as well as the differential benefits with which they will set themselves among competitors in the same segment. Ferrari, as a famous brand, is positioned in the luxurious segment of the automobile market with a unique advantage founded on its exclusivity and high performance. The Company is a status symbol brand which consists of extreme power, performance, and design (Bonetto, Rillorta, & Kirby, 2015).  The Company’s logo, as illustrated below, is a symbol of Italian luxury, design, quality, performance, and exclusivity across the world.

Acknowledged as one of the most desirable supercar brands internationally, Ferrari upholds high brand awareness levels, real customer insights, and high sales. The brand value has, over the past years, been reinforced by its exceptional performance on its unveiling IPO in 2015. Today, the brand trades over major luxury multinationals like Richemont. The stock performance of the brand also outperforms other automobiles like Porsche and BMW.

The Company operates in two major divisions, namely lifestyle products, and Ferrari Sports Cars. The Company stars in the Growth Market Share matrix since its cars are technologically advanced and lead in the luxury car market segment globally. In 2017, Ferrari was ranked eighth by the Forbes magazine among the most regarded companies worldwide. The Company in 2017 had market revenue of 3,435 million U.S dollars and market capitalization of 13, 589 million U.S dollars (Zhang, 2019). The Company sells its cars from over 170 dealers who operate through more than 190 sale points.

The brand is linked to several motor shows, rallies, driving courses, and non-competitive and competitive races. The Company has two museums where it showcases its innovative technology and future-oriented brand capacities, one in Modena and another one in Maranello. The Company knows that the right way to position the brand is to make the stores “temples” to help in discerning consumers. Ferrari pays extra attention to the way they innovate and sell at the points of purchase.

The value that Ferrari holds is mainly attributed to its heritage. The success of the brand on Formula one -which it has been taking part in since 1932- has assisted in distinguishing their brand image between luxury brands and pin-up racing brands.  Ferrari is well-known for its continued success in Formula one racing facilitated by Scuderia Ferrari, which stands as the most successful team in the history of Formula One. Scuderia Ferrari has positioned itself as a Formula one premier team globally. The Company has managed to take advantage of its heritage to increase the sale of merchandise, while at the same time bolstering its luxury status in the market. This makes Ferrari a luxury product rather than just a car producer, thus setting itself apart from other competitors in the same market segment.

Ferrari believes that to continue maintaining the reputation of its brand, it should advocate beliefs instead of merely depending on the brand value. According to Romenti and Fumagalli, 2012, p.484), beliefs extend further and are more believable and specific. Unlike other mass brands, Ferrari does not focus on pleasing everyone, but only those consumers whose beliefs align with that of the Company. Ferrari rarely uses mass media for advertising, but invests highly in Formula one events. Ferrari focuses on activities linked to its belief to underline this tenet in customers’ minds, thus giving the right consumers a focused experience.

Ferrari observes the key luxury standards, which entail following its rich history and limiting production volumes. As explained by Zhang (2019), the production of cars had been stopped at 7000 units every year. However, it was not until October 2015, where the Company announced that it would increase the production to 9000 units by 2019. Although this was decided to meet the global demand, the Company carefully monitors this to guarantee that its decision has no impact on its exclusivity. By so doing, Ferrari monitors its market reach while evaluating its increased production to avoid being tempted to appeal masses, hence devaluing the brand. The aim of the Company when it comes to brand positioning is to meet the demands of the selected demographic, geographic, and psychographic segments.

Ferrari also maintains its focus on producing few sport car marques instead of shifting the market trends for cars such as SUVs. The respect and attention of the brand’s DNA have helped it maintain its reputation for manufacturing the best luxury sports automobiles, which are not weakened or tarnished by average models. To support this argument, Flavio Manzoni- Ferrari’s design director in 2015, spoke to one of the News Companies in Australia stating that Ferrari was not interested in joining the SUV growth (Blanding, 2019). Manzoni stated that Ferrari was not a follower and would not, in any way, consider joining the boom as the decision would affect its performance. By maintaining its heritage, Ferrari stays on track and evades the challenges thrown to them by short-term trends.

To position its brand, Ferrari also focuses on limited car editions. From time-to-time, the Company continues to introduce advanced versions of its most prominent vehicles as limited editions. As supported by Smith and Stewart (2015, p. 189), these editions have an excellent reputation of instilling curiosity among sport car fanatics. In 2013, for instance, Ferrari revealed its LaFerrari limited edition at the Geneva Motor Show. Reports from the Company officials showed that Ferrari received over twice its regular orders even before the version was launched. LaFerrari limited edition is one of the fasted street-legal cars ever produced by the Company. 

The ability of the Company to maintain a reputation among enthusiasts of high-performance cars gives it an average over its competitors. In 2014, the Company reported a 25.1 percent EBITDA (Earnings before interest, tax, depreciation, and amortization) margins, which was very high compared to other manufacturers in the same segment (Parasha n.d). The high EBITDA margin reflects Ferrari’s brand value. The positioning of the brand gives it a competitive advantage in that it can control its growth in developed and emerging markets. As mentioned, Ferrari employs its low production strategy to maintain its exclusivity, while bearing in mind the shifting customer dynamics, as well as geographic socioeconomic changes. 

Ferrari operates as a separate organization, an aspect that has enabled it to position its cars in the market strategically. In 1969, the Fiat group gained a fifty percent stake in the Company, a rate the extended in 90 percent (Parasha n.d). Fiat Chrysler Automobiles in 2014 made public its move to detach from Ferrari. Due to this spin-off, Ferrari was listed in the New York Stock Exchange (NYSE) and started its trading operations in October 2015, with a $52 Initial Public Offering (IP0) per share. 

In brand positioning, one cannot ignore the differential advantages that the Company offers to its customers. For one, the performance of the brand is a selling aspect. Looking at all Ferrari models, from the 1962 Vintage 250GTO to the 2015 LaFerrari, the brand is mainly invested in the performance. The Company focuses on the production of vehicles with the capacity to reach a high speed with absolute power. The engineering, engine, design, as well as the transmission of all models, meet the desires of car enthusiasts. 

Another advantage that sets the brand from other car manufacturing companies is that Ferrari is “a car with a soul.” (Bonetto, Rillorta, & Kirby, 2015). First, its red color symbolizes passion. The cavorting horse logo signifies aggressiveness. The Company has its own identity that symbolizes boldness, power, strength, speed, and confidence. 

Ferrari prides itself on its heritage. As posited by Blanding (2019), the heritage itself is a marketing aspect or rather a selling point. The Company maintains its brand- through a focus on story-telling and anticipation that its “legend” is renown among its target customers. Only a few brands in the sports industry stir the kind of emotions Ferrari passes to its audiences. The horse logo itself is also a legend. One of the famous stories is that of a brave Italian pilot known as Francesco Baracca. In 1923, his parents gave him a squadron badge on his plane remains, which featured the family’s coat of arms that was the Ferrari Logo. In those days, racers used their national flags, and red was for Italians. Today, the connection still exists, and only a few corporations can associate with a color that invokes the heritage or the nobility of a brand. 

Ferrari is a legend that is built on years of sporting achievements and the unmatched car styles which inspire millions of enthusiasts. Ferrari supports the brand by organizing several initiatives for all fans and customers, both in Italy and across the world. To maintain its excellent brand position, the Company also focuses on sustainability initiatives. Ferrari places people at the heart of all its processes and motorsport involvement, beginning with its personnel and their families, then outspreading towards its consumers and the community at large. In 1990, Ferrari launched a program known as Formula Uomo, which has developed continuously and changed the face of the Company with the introduction of innovative technologies for quality of life and better safety. Ferrari is also committed to sustainability, as seen in its effort to avoid cars that are not environment-friendly. The Company has implemented the latest environmental principles in its newest sites and uses renewable sources and a trigeneration plant, which covers its general energy requirements. Other than the fruitful research and development goals of the Company, their dedication to create a conducive working environment, to focus on its people’s well-being, and that of the community allows the brand to manufacture cars with outstanding qualities for its consumers. 

Conclusion

From Ferrari’s discussion on segmentation and positioning analysis, it is clear that a luxury brand cannot satisfy all consumers but has to select a particular group of audience, who identify with the principles of the brand. This because people have different preferences and cannot be satisfied with one product. Companies in reaching the anticipated market adopt positioning, target marketing, and segmentation strategies. These strategies entail dividing the market into several segments and developing a product that appeals to these segments. Ferrari is an example of a brand that has adopted the strategies to target affluent personalities. Ferrari’s brand value and brand image speak for itself, as explained in the discussion. Ferrari often maintains its brand exclusivity and is not concerned about the market competition or the number of players in the luxury car manufacturing industry. The heritage of Ferrari is a factor that is next to being named as legendary. The success of the Company is measured through product and brand value rather than its revenues. The technology, innovation, and passion make the Company the leader in the automobile sector. From the discussion, it is evident that Ferrari’s name has been reinforced by its success in Formula One. Ferrari faces competition from luxury cars like the Porsche, BMW, and Lamborghini, but they are yet to surpass the quality of the Company cars. Unlike its competitors, Ferrari does not plan to enter the new market of electric vehicles, SUV, or saloon cars, which is a highly debated and speculated topic. Ferrari manufactures cars in fewer volumes and focuses its production on GT road cars and supercars to maintain its exclusiveness. The future of the Company lies in the expansion of its brand by penetrating developing markets and increasing its consumer base. This can be achieved by developing hybrid technologies and product adaptations without conceding the value ethics of the brand. 

References

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https://corporate.ferrari.com/en

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Zhang B. (2019). The incredible story of Ferrari 72-year journey from an up-start racing team to a $27 billion-dollar luxury brand (RACE). Business Insider. Retrieved from https://www.pulse.ng/bi/lifestyle/the-incredible-story-of-ferrari-72-year-journey-from-an-up-start-racing-team-to-a/jk51l15