Archive

Back to overview

Why one price doesn’t fit all markets

Getting the price right for their models in each market is vital for car manufacturers to achieve that all-important market share with target audiences. But it’s a challenging part of any global sales strategy. Here we look at how Volvo met that challenge when launching the new premium S60 model – and a new brand image – in the US, Germany and China.

The launch of the S60 in 2009 was crucial for the Swedish car manufacturer’s image transformation. The brand wanted to move away from its rationally oriented brand to an emotional one to reach new consumers in the younger premium segment. It said farewell to the boxy Volvo image, and hello to an elegant, stylish look and feel.

Price was a key part of achieving market targets. It was a balancing act of appealing to the target consumer and pricing the car so drivers not only desired it, but so they could actually afford it. With three such different markets under consideration, the approach in each had to be different, and Volvo and GfK worked together to test and agree those tactics.

Three markets, three different price points

In the US the S60 was positioned as comfortable and spacious, elegant and sporty. Although on the expensive side, the functional benefits – including fuel economy – combined with design left it to consumers to judge the price as appropriate. During research a 5% S60 share was predicted for the originally planned price. Volvo increased the launch price, still achieving the target share due to unexpectedly high growth in the premium segment prior to launch.

In Germany, safety and function combined with a modern design were valued by consumers. In research the tested price suggested the model would achieve a 9% share of all new registrations within the tested segment. Volvo took the strategic decision to raise the launch price, ultimately achieving a 5% share. Consumers considered the price to be borderline, but affordable, for the quality.

In China, price brings with it social status. European manufacturers like Volvo are more expensive than local brands, and that adds to their appeal. Volvo is considered as a brand on a par with BMW, Audi and Mercedes, and although it is expensive, it is cheaper than the other three. Here Volvo wanted to achieve 2% of new registrations in the first year. To do so it chose to go to market at a slightly lower price level than originally planned for the S60 to achieve those targets. The approach worked, ultimately exceeding expectations and delivering a 5% market share.

Get close to the target market to get prices right

In GfK’s car clinics, acceptance surveys carried out 24 to six months before market launch saw the new model receive extraordinary praise from high numbers of the target market in US, Germany and China. An unexpectedly high number of drivers also considered the tested prices to be entirely appropriate. And this played out in the final analysis: the pricing strategy was a success in all three markets.

For more about our offerings, visit our Automotive pages or contact Marko Anders, Senior Product Director, Market Opportunities and Innovation | Automotive, GfK Germany

AUTOTALK newsletter
Discover latest industry insights, market data and how Auto and Consumer trends will affect your business. Sign-up for AutoTalk.

Back to overview

Write a comment

*required field

Leave a Reply

Your email address will not be published. Required fields are marked *

Name*
E-mail*
Your comment*