Mercedes-Benz is a formidable automobile manufacturer that is based in Stuggart, Germany. Initial origins identify the brand emerging in 1886 as a result of Karl Benz, and subsequently, becoming more well-known in the mid 1920's. The brand encompasses luxury vehicles that includes sedans, buses, trucks as well as coaches (Legate, 2005; Adler, 2006; Wirth, n.d.; Long, 2015; Mercedes-Benz, 2016). Over the years, Mercedes-Benz has perfected the art of branding. This paper discusses the marketing and advertising related efforts that Mercedes-Benz continues to execute and implement, in order to maintain its reputation of being a leading luxury automobile company.
Literature Review
Branding
According to Mercedes-Benz (2015), it is a leader in the area of perfection in automotive craftsmanship and its success is primarily steeped in its proficient engineering and speed (p.1). This success has contributed significantly in terms of sales of the automobile around the world. Much of the reputation that the company has built is primarily based in its marketing, however. As such, it becomes necessary to examine the branding associated with Mercedes-Benz.
Tuominen (1999), Berry (2000), Wood (2000), Pullig (2008) and Karadeniz (2010), all write that brand equity is traditionally concerned with a brand's value in the consumer marketplace. It is the underlying element or rather dynamic that keeps a brand in the mind of the consumer. Brand equity is how companies build their reputation and loyalty among customers. Both Keller (2001) and Baalbaki (2012) argue that brand equity is based in a company's assets whereby the value can be added and/or subtracted - and it is this that translates to a characterization by the customer. In other words, it is how the company comes to understand and know the brand that it is considering patronizing. Farjam & Hongyi (2015) highlight that brand equity "is significant in assisting customers to process information" (p.14). Companies and organizations understand that customers are bombarded with numerous amounts of information, and as such, utilize their specialties and aspects to help them distinguish the data they are receiving. Brand equity, then, is a framing of a certain context within the mind of the customer. It is a thorough and extensive model by which companies can use to both improve and reinforce their reputation.
Farjam & Hongyi (2015) consider several models associated with brand equity including: the financial based model, which looks at enhancing the brand through its financial value; the customer perspective, which is heavily grounded in the psychology of the consumer and how the marketing affects their behavior; and the employee perspective, which is when a brand is driven by the employees, its environment and culture (p.15-16). It can be argued that some companies incorporate each of the models into constructing their brand equity, but for the purposes of this discussion, it appears as though Mercedes-Benz uses the customer perspective.
Mercedes-Benz Branding Strategy
According to Keller (1993) and Lassar, Mittal and Sharma (1995), consumer based brand equity focuses intently on ensuring that the value of a brand or a company is unique and advantageous to consumers. Additionally, Farjam & Hongyi (2015) assess that customer brand equity provides companies with numerous marketing options, and to effectively obtain a favorability in the eyes of consumers.
For Mercedes, the brand is built on luxury. Luxury is typically defined as grandeur or opulence in terms of comfort. Each of the sedans, buses, trucks, etc. are created with an extravagance in mind. As Mercedes-Benz (2016) states, there is a need for the build of the car to offer performance, sophistication and trailblazing technology. Furthermore, the company prides itself on being well-known with the motto - the best or nothing - as the groundwork for everything it has done since its considerable marketplace reputation was built in 1926 (p.1). However, even though Mercedes-Benz is well-known for its luxury, it has been challenged over the years by two of its largest rivals, Audi and BMW. Also, it has had its share of internal challenges as well, including expenditures. Yet, despite of these challenges, the company boasts that in 2015, it "achieved the highest annual sales volume in its history with 343,088 units for the brand, representing a 3.8% increase over 2014 sales" (p.1). This would suggest that even though it has faced expenditure challenges in terms of its fleet creation and construction, this has not hurt its sales by any means. It can be reasoned then that the brand equity of Mercedes-Benz is rather solid. Presently, the company operates on a five item image - innovation, performance, safety, environment, and design. The brand wants customers to live and breathe the cars that it drives.
For this reason, the company is noted by Nechita, Virlanuta & Oprit-Maftei (2013), as having an exceptional ability to be highlight competitive in the eyes of consumers, and approach every prospective customer with a strategic process (p.346). So in relation to the customer perspective brand equity framework, the company comprehensively understands its relationship to the consumer, and why its reputation must be driven by it. Still, even with its strengths, there are some weaknesses associated with Mercedes-Benz, as well as opportunities and threats.
SWOT
In examination of its strengths, it can be noted that the company’s brand is noteworthy for its smooth, polished image. The Mercedes-Benz vehicle is unmatched in terms of appearance, and the symbol for the brand is known by just about everyone who comes in contact with it. DeMuro (2015) finds that one of the key aspects related to Mercedes-Benz lies in the opulent appearance that it provides each individual that drives it. Due to the cost of the vehicle, those who drive Mercedes, even if they lease the car, are considered to thoroughly enjoy splendor and have a significant amount of money in the bank. While this may not necessarily be the case, it is a perception thing (p.1). This is something that has played heavily into the strengths of the Mercedes-Benz regardless of the class of car or truck that is purchased by consumers. Another notable strength is the reliability.
Phenix (2014) identifies that Mercedes-Benz tends to be regarded as very reliable in terms of mileage for a luxury vehicle. Regardless of class, consumers that purchase and subsequently, drive the vehicle come to know that, they will be afforded a breathtaking technology in terms of reliability (p.1). This is an important strength, because consumers when purchasing cars tend to want to know that they will not have to return it immediately, and that they can get at least 2 years or more out of it before having to look for another vehicle. Regarding the weaknesses related to Mercedes-Benz, they have often been cited as reasons why consumers opt not to purchase them even though they are reputable and noted as lavish.
According to Bhasin (2016), the prime issue with MB vehicles is the servicing and maintenance costs. Consumers frequently state that they are on the high side. Moreover, other competitors such as Audi and BMW tend to have cheaper cars that are stressed as just as luxurious (p.1). As such, these weaknesses have hurt the brand in terms of sales. As Mercedes-Benz (2016) states, the sales for 2015 were up from a dismal 2014 (p.1), which would suggest that many consumers were choosing to purchase from its rivals. Despite the weaknesses, there are some opportunities for the brand.
The opportunities for Mercedes-Benz include: expanding into newer markets and developing electric cars. Kokemuller (2016) observes that newer markets tend to afford companies, even those such as Mercedes, with a considerable opportunity to perfect their foreign presence. In addition to this, there is a kind of synergy that often results when companies expand to newer, untapped markets. This is because of the fact that their strengths are 'strengthened' via customers purchasing them and the amount of resources that are used can produce a more proficient system of business. It also behooves companies to diversify (p.1). To this end, Mercedes-Benz can employ its cars into markets that it does not sell its cars in, or where there are issues/problems related to its sales. Much of the sales that Mercedes-Benz (2016) writes about for 2015 were connected to North America – which arguably suggests that other countries could benefit from the company’s touch. It is also recommended that the company should consider electric cars.
NRGEVgo (2016) explains that the electric car is an innovative behemoth in terms of promoting environmental awareness and offering performance when examined against regular cars. It appears as though electric vehicles offer an element of sophistication that traditional vehicles just do not offer. This is also identified in in the cost and savings related to it. "The overall cost of EV ownership is actually lower than gasoline-powered cars. Consider fuel costs: say you drive 15,000 miles a year and average 25 miles per gallon, with gasoline at $3.50 a gallon. That comes out to $2,100 a year in fuel costs to operate your vehicle" (p.1). Thus, by creating more electric vehicles, the company stands to gain a considerable amount of customers.
Presently, Mercedes-Benz (2016) reveals that it offers a model, the B-Class, which is a groundbreaking alternative to the conventional class of MB. Moreover, the company describes that it offers the same type of comfort and style that consumers are used to (p.1). The main threat associated with Mercedes-Benz is Tesla and its innovativeness. Tesla has changed the face of the automotive industry in terms of offering customers, premier electric vehicles that highlight and stress the reasons as to why there is a gravitation toward the purchasing of these vehicles due to cost and savings. It befits Mercedes-Benz to undertake the construction and creation of more electric vehicles in order to compete with the likes of Tesla. This is because it can be asserted that many consumers that choose to purchase Mercedes-Benz are looking for the same regal, premium luxury that Tesla cars also provide.
Porter’s Five Forces
In order to effectively delve further into the Mercedes-Benz brand, it becomes essential to analyze it through the use of Porter's Five Forces. It can be argued that the threats of new entry are low for the luxury car industry. Luxury cars are considered an enormous initial investment, which stresses that many brands like Ford and GM will stay away from entering into this arena. Moreover, there are strict regulations related to the luxury car industry that many companies simply will stay away from also. Certain countries have very strict standards when it comes to car construction, as well as the selling of certain vehicles. As far as the bargaining power of buyers, this is a high area for the luxury industry. Consumers have a relatively medium-sized array to choose from when they are looking to purchase a car. Mercedes-Benz is not the only luxury vehicle, so a substitute may do if the customer is looking for a less costly car. However, the brand is well-known for having loyal customers and these individuals tend to purchase them because they like the brand.
Regarding the bargaining power of suppliers, this can be said to be rather moderate. This is because there is a limited amount of supplier within the industry that can provide Mercedes-Benz with not only adequate materials, but those of exclusive quality (Taylor, 2013). The threats of substitutes include economic conditions, such as the aforementioned problems related to consumers opting to purchase less costly cars and technology progressing to a degree where the sales associated with Mercedes-Benz start to drop unless they choose to create more models of electric vehicles. With respect to the rivalry among competitors, this is reasonably high because BMW, Audi and the like are also well-known to consumers. This creates a lot of competition for Mercedes-Benz, because there are often instances where the rivals' cars are cheaper. For this reason, the hold that Mercedes-Benz has on the marketplace in terms of luxury car purchases could be shaken to a certain degree.
Additional Challenges for Mercedes-Benz
It appears as though Mercedes-Benz has tried to step into newer markets recently. Tschampa (2012) observes that the company has found it very difficult to appeal to certain markets. This has been mostly due to the fact that the brand tends to be overlooked for companies that sell something similar for less money. Younger buyers and prospective customers in markets that Mercedes has not tapped, or has only just began to tap into, are not overly eager to purchase any of the sedans, trucks, etc. because of cost - and this has led other brands like BMW and Audi to gain a significant advantage (p.1).
Another interesting attribute about the Mercedes-Benz is that some consumers tend to find it very similar to other brands like BMW and Audi in terms of performance and overall sleekness. Of course, consumer preference is relative in terms of each of the brands being equal, but the perception is arguably that each of them are very similar in handling, speed and overall luxury. This is something that Mercedes-Benz is frequently challenged with due to consumers asking why they should purchase an S-Class sedan, when they can go and purchase an Audi A4 or A6. Kobran (2013) explains that brand positioning plays a key role in tackling a challenge such as this one. One key aspect relates to the fact that consumers need to extensively understand how brands are different from one another (p.1). Given this, Mercedes-Benz needs to sharpen its marketing so that consumers do not continue purchasing alternatives or rather substitute vehicles that are dramatically, in some instances, cheaper.
Recommendations
In addition to mitigating the mentioned challenges, there are several recommendations that Mercedes-Benz should adopt. These include: improving its brand advantage; developing a unique series; and market extension. Regarding brand advantage, the company should increase the comfort of its cars. Comfort is encompassed within ride quality and consumers rarely sacrifice this aspect for something else, as both the driver and passengers have to be comfortable. It can be stated that Mercedes-Benz needs to evaluate the comfort level associated with its fleet. While Mercedes-Benz (2016) stresses that comfort is one of the most appealing attributes (p.1), this does not mean that they should be taking prospective consumers’ definitions of comfort lightly. Additionally, it might be productive for Mercedes-Benz to create a new series that is dramatically different from the competition. This would require an intense research and development, so the consumer does not feel as though they have any other option than to purchase a Mercedes-Benz vehicle. The market expansion recommendation is a substantial one as well, as the company stands to benefit from this considering new customers will purchase its vehicles. There is reason to believe that the company is known, even in markets it is not currently in, so expanding should not be an issue, especially in Asian countries.
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