Those of us in marketing are faced with the challenge of trying to improve our marketing strategy with tactics that resonate with our target market. Porsche provides a very successful example of how they segment their target market effectively and achieve bottom-line results.
Porsche has taken on an incredibly challenging goal of retaining its heritage and attracting a younger and more female audience by segmenting their target audience and creating messages and products that resonate with each segment and ultimately repositions the brand without losing its core customers.
If you are anything like me, you grew up with pictures of the 911 and 944 in your room daydreaming of driving one of these mythical vehicles. No doubt this image included you wearing sunglasses with the top down feeling the wind in your hair and listening to your favorite tunes.
Porsche represents an ideal, a lifestyle that a lot of us aspire to become. So, how does Porsche make us feel this way and achieve the level of success in the automotive industry? One of the most significant reasons behind Porsche’s success is their approach to their target market that includes how the company performs market segmentation, market targeting, and positioning.
I think it’s important to give the background on Porsche to provide a thorough understanding of the subject matter. Porsche is a global market leader in the premium segment of the automotive industry currently the most profitable automotive brand in the world.
The company was founded in 1931 by Professor Ferdinand Porsche in Stuttgart, Germany building motors, designing vehicles, and consulting. Porsche designs, manufactures, and markets sports cars, crossover utility vehicles, and automobile parts worldwide. Porsche also offers services through its operating divisions and subsidiaries, including Porsche Design Group, Porsche Engineering, and Porsche Consulting.
On August 1, 2012, Volkswagen Ag purchased Porsche operating it as a subsidiary (brand) in its automotive division. It came as somewhat of a surprise that Volkswagen owns brands you may not directly associate with their brand. Volkswagen also owns:
Porsche performs target marketing concentrating on the consumers the organization has the strongest potential to satisfy. Porsche performs effective target marketing by:
Porsche markets to an elite and upscale target audience effectively using market segmentation, market targeting, and positioning continuing to build on its strong brand focused on products exclusively in the premium (luxury) automotive segment.
Philip Kotler provides a quote that summarizes Porsche’s approach and provides guidelines for target market segmentation in general:
“If markets are to be segmented and cultivated, they must meet certain requirements. Segments must be Measurable, Substantial, Accessible, Differentiable, and Actionable.” – Philip Kotler
The automotive industry has approximately 23 different segments according to J.D. Power and Associates. J.D. Power and Associates do not include segments for vehicles from brands, such as Maserati, Ferrari, Lamborghini, Bentley, Rolls-Royce, Fisker, McLaren, and others.
Most of these brands compete with Porsche in varying degrees along with more traditional luxury brands, such as BMW, Mercedes, Lexus, Audi, Infiniti, Land Rover plus others.
J.D. Power and Associates classifies Porsche, BMW, Mercedes, Lexus, Audi, Infiniti, Land Rover plus others as part of the premium segment.
The automotive industry segments consumers based on demographic data, geographic information, and a psychographic profile of consumer behaviors with marketing messages targeted to these groups.
The product lineup for Porsche includes:
The price of a Porsche ranges from approximately $50,000 to $845,000 with segmented price points based on the model selected.
The basis of market segmentation for Porsche involves dividing a market according to defined smaller easily defined group of consumers with the same wants and needs.
Porsche identifies segments to target using two variables including, descriptive elements and behavioral elements.
Descriptive elements include demographic, psychographic, and geographic.
Behavioral elements include individual responses to brands, usage, and benefits.
Porsche segments markets based on five critical elements required to evaluate a segment. These elements include ensuring a market segment is measurable, accessible, substantial, differentiable, and actionable.
Demographic segmentation is a form of market segmentation involving dividing a market on the basis of descriptive elements. Demographic data provides Porsche with a distinguishable way to measure variables of a market estimating the market size and the media to use to reach the market segment. Demographic segmentation is based primarily on income, age, gender, education, occupation, and social class.
The demographic of the Porsche owner, includes a college graduate, household income over $100,000, 85% male, and 15% female. The typical Porsche owner is 40 years old and up with Porsche targeting the 25-54 age demographic seeking a slightly younger audience with the “Engineered for magic, every day” campaign.
The age demographic rose from an average age of 48 in 2007 to an average age of 51 in 2012. Porsche’s targeted marketing efforts focus on reducing the average age of the Porsche owner and increasing the number of female owners.
Porsche provides an example of an automotive icon focusing on demographics using age and gender. The “Engineered for magic, every day” campaign, in part, targets women with an image of a mother in a Porsche 911 in front of a school with the text reading school bus.
Additionally, Porsche uses tennis star Maria Sharapova as a spokesperson to engage a younger female audience. The results in the last two years indicate a growth from 8% to 15% in female purchasing the Cayenne CUV and Panamera four-door sport sedan primarily.
Psychographic segmentation uses psychology to increase understanding of consumers’ wants and needs. Porsche uses a psychographic segmentation approach dividing the segment based on behavioral elements, such as psychology, lifestyle, personality traits, and values to gain deeper insight of the consumer. The same demographic can possess different behavioral elements.
Psychographic profiling provides Porsche with the ability to customize the messaging to target the specific psychographic profiles developed by Porsche.
Porsche has added another profile consisting of individuals enjoying a sporty vehicle for daily use by women and younger drivers with the latest marketing campaign, “Engineered for magic, every day”.
Porsche uses a traditional geographic segmentation approach grouping markets based on countries, continents, regions, states similar to other worldwide automotive brands. Porsche is a global brand with dealerships located on every continent in major cities.
In the United States dealerships are located in major cities with the manufacturer dividing the market into four regions (north, south, southwest, northwest).
Porsche varies the product mix offered by dealerships within each region. As an example, the dealers in the warmer south and southwest regions offer a higher percentage of convertibles in the product mix versus the north and northwest regions in the United States with marketing following suit.
In 2003, Porsche launched the Cayenne creating the first sport utility vehicle with luxury and high performance. Porsche’s introduction of the Cayenne created a new market segment in an attempt to expand the brand. The introduction of the Cayenne has resulted in a vehicle that accounts for half of Porsche’s profits.
In 2009, Porsche launched the 2010 Panamera a four-door sport coupe based on the market research department identifying a need for a sporty four-door that drives like a sport car. The Panamera is the first of its kind creating a new segment of the four-door luxury sport car.
Porsche’s effort to move outside of the sport car niche with the Cayenne and Panamera product launches have stimulated demand resulting in increased sales for the brand. The Panamera and Cayenne have proved to be effective brand extensions appealing to a wider audience by offering unique product offerings.
Market targeting involves Porsche evaluating the viability of each market segment and deciding which segment or segments to pursue (target). Porsche uses a hybrid market targeting strategy focused on a large share of the premium sport car and sport CUV segment using a finely tuned marketing mix based on marketing messages tailored to Porsche’s psychographic segmentation.
Porsche with the “Engineered for magic, every day” campaign uses a niche concentrated marketing approach tailored to change position slightly. Porsche is trying to change the perception that a Porsche is an everyday vehicle appealing to a larger audience to increase sales. Porsche targets consumers at differing performance and price levels in the premium sport car and CUV market segment.
Porsche offers products of the highest quality for a premium price with various price points for the products in the Porsche lineup. The Porsche brand is a lifestyle brand because of its legendary status and attributes associated with their products.
Porsche achieves the ultimate goal of locating a brand in the consumers’ mind differentiating it in terms of attributes or benefits, quality, price, and use or user to maximize the brand. Porsche positions itself as a high priced, high quality, exclusive sport car.
Porsche focuses on the premium (luxury) segment with sport cars (five segments) and crossover utility vehicles (two segments) providing the consumer with a frame of reference for the company. Porsche offers a distinct product in each vehicle segment. The Boxster, 911, Cayman, and 918 Spyder provide the vehicles traditionally associated with Porsche.
The attributes the Porsche brand evokes primarily consists of exciting, sporty, beautifully designed, performance, and German engineering. Other attributes commonly associated with Porsche, include quality, powerful, highly sophisticated, style, purity, very exclusive, exotic, racing heritage, and elegant.
The benefits associated with Porsche, include excitement, performance, achievement, success, status, and high income.
The Porsche product lineup offers products that are more fun to drive and faster than any competitor in the segment providing the latest technology with a historic culture making the brand impossible to imitate.
Porsche’s legendary association with racing and numerous appearances in television, movies, and books gives Porsche a unique position in the automotive industry and automotive history. Porsche with 70% of all vehicles built by the company still in operation provides indisputable evidence of their unique position.
Porsche has points of parity with the American performance vehicles, such as the Chevrolet Corvette and the Dodge Viper. A segment of Porsche products also have point-of-parity with Cadillac, when comparing United States luxury vehicles.
Porsche’s German design, performance, and engineering along with its racing heritage provide a point-of-difference on performance compared to the competition. The tagline used by Porsche in the past “There is no substitute” sums up the iconic brand immortalized in the movie Risky Business starring Tom Cruise.
In an effort to reposition the Porsche brand to expand into different, but similar markets the company has introduced the “Engineered for magic, every day” campaign. The campaign primarily uses the 911 to reposition the brand for everyday use.
The essence of peak performance designed to excite your everyday driving and lifestyle provides an appropriate positioning statement considering the repositioning of the brand. The slogan captures the essence of the Porsche brand remaining consistent with its heritage and conveys the revised position of the company.
The results have seen Porsche 911 sales increase year over year since the campaign started. Porsche continues to be the most profitable automobile manufacturer, with a 17% profit margin in 2016. The Cayenne, Macan, and Panamera provide Porsche with the ability to extend the brand with vehicles better suited for everyday use.
Porsche’s innovative strategy to expand consists of introducing a combination of non-sports models and sports vehicles. Porsche has expanded the product lineup with vehicles such as an SUV, sedan, while launching new sports cars directly aligned with its heritage.
Porsche provides an intelligent and effective balance of market expansion for the brand while remaining true to its Porsche heritage especially critical for the loyal Porsche consumer.
The introduction of the Macan crossover utility vehicle with the 918 Spyder supercar provides evidence of this strategy. The Macan has had a significant impact on the bottom-line with 19% growth in 2016 resulting in 95,642 vehicles sold globally.
Porsche has continued its record-breaking success story in 2016 with another successful year with a 6% sales increase for a total of 237,778 vehicles sold worldwide.
The target market segment strategy of Porsche provides an example of an iconic brand and its ability to reinvent itself creating new markets extending the Porsche brand in a meaningful manner while remaining true to its heritage.
The Porsche strategy of targeting female consumers to optimize the demographic profile by expanding the product lineup and repositioning the brand as an everyday vehicle has resulted in great success. The repositioning of the brand has started to change perceptions of Porsche as a weekend vehicle resulting in additional sales.
Porsche with its many awards for quality, style, and engineering also have sophisticated marketing complementing the superior products making it easy to understand why it’s the most profitable automotive brand in the world.