Audi A1

I. Introduction * The german car manufacturer Audi is launching the new Audi A1 model. This small city car completes the range of vehicles marketed by the company. * Although the brand has many strengths, premium city cars represent a new segment for it, in which the competition is already well-established. II. Analysis

1. Internal analysis 2.1. The Audi brand Strengths: * Part of the Volkswagen group: leading Europea car market * In 2010: 1.09 mil vehicles sold, +5% compared to 2009 * 2010 sales: 35.44 bil Euros, +18.8% compared to 2009 * 2010 net profit: 2.63 bil Euro, +95.2% compared to 2009 * Excellent brand image * Success on international markets: 79% of sales * High level of investment in R&D: Audi e-tron * Good penetration of the French car market: 6th largest market for the brand * 52,520 vehicles sold in 2010, +9.4% compared to 2009 * Leader in the premium segment * Audi is the French consumer’s favourite car brand Weakness: * In Germany, sales are relatively stable and even slightly in decline

* Decrease in global sales in 2009

2.2. The Audi product range Strength: * Abroad range of vehicles, from the A1 model to the A8 model: now complete with the Audi A1, which enables it to appeal to several customer segment * A wide choice of models woth limited CO2 emissions

* E-tron, electric cars Weakness: * High prices: from 16.400 Euros to overs 200,000 Euros * Mitigated success of the Audi A2: model considered too expensive and inconsistent with the brand’s style

2.3. The Audi A1 model Strength: * It is “a real Audi”: benefits from the Audi brand image * Sober, polished design * Attention to quality and detail * Multimedia and ergonomics inspired by the new Audi A8 * Several different engines and levels of features * Options to personalise the vehicle * Incentive to trade in used vehicle * NCAP classes the A1 among the safest vehicles in its category * Distinction at the 2010 Golden steering wheel awards * Good start in France: more than 10,000 vehicles sold between 9/2010 and 5/2011 Weakness: * High price: price is the most important factor for the French consumers when purchasing a new car (cf 2011 IFOP survey) *

2. External analysis 3.4. The car market Opportunity: * French consumers have a very positive opinion German cars: In second place behind French cars * German cars are considered to be: the most robust (60%); the most sporty (48%); and the most luxurious (61%) Threat:

* Global economic crisis effecting the car sector households’ budgets are limited * Decline in sales on the French market: 2.252.736 registrations, -2.2% in 2010 * Removal of the scrapping premium market back down to 2mil registrations * One in two French people buys a French car

* Increasing offers of transportation and emergence of new mobility services appearance of substitution products * Increasing awareness of the environmental dimension * Changes in consumer behaviour, in particular among young people: 2/3 want hybrid and electric cars

3.5. The city premium car segment Opportunity: * A segment currently experiencing strong growth, particularly in France * This trend was confirmed in the first half of 2011 Threat: * Competitive market: Direct competition (MINI, Citroen, DS3m Alfa Romeo Mito); broader competition (downward movers, upward movers, broader segment, alternative segment) * Increasing number of competing new models: the couple or roadster version of the MINI for example * Certain brands are already well-established: the MINI by BMW, around for about ten years now * Arrival of a French brand: Citroen with the DS3 has quickly taken the lead Summary

Audi is completing its range of premium vehicles with the launch of the new A1 model. Audi’s good financila performance and brand image should enable it to establish itself in the city car segment However, the competition is already well-established and new players could appear. Audi must formulate a strategy taking these factors into account and propose a marketing mix in line with the objectives fixed.

III. Marketing strategy 4.1. Objective * Quantitative objective (volume of sales): 12,000 to 14,500 registration per year, i.e 23% to 28% of the volume of Audi registration in France * Qualitative objective (image): establish Audi as a reowned brand for premium city cars 4.2. Segmentation

* Income * Age * Place of residence 4.3. Priority target * People with average to high income * Who are young: 35 to 45 years old * Who are city dwellers Core target: women: In order to broaden Audi’s traditional customer base; projected 50% female customers 4.4. Positioning The Audi A1 model is a compact car which offers the quality, design and driving experience of a large Audi 4.5. Source of volume * Potential customers (winning 80% new customers): direct competition (MINI, Citroen DS3, alfa Romeo Mito); upward movers (Fiat 500, Smart fortwo); the alternative segment (Citroen C3 Picasso, Kia Seoul); downward movers (BMW serie 1, Mercedes class A,…); the broader segment (VW polo, Renault Clio) * Audi customers (customer loyalty: 20% of customers): Audi customers (A3 internal downward movers); audi customers who purchase a second vehicles (for a spouse winning over female customers) 4.6. Key marketing mix element

* Product policy: develop an attratice product taking into accoune constraints with regard to the environment and the competition * Communication policy: entry into a new market (the premium city car segment) must be supported by a communication campaign in order to ensure awareness and popularity of the new product

IV. Marketing mix 5.7. Product Objectives: * Broaden the currnet range with a model corresponding to the expectations of young city-dwellers, in particular women * Offer a car in keeping with the style of the audi brand Actions: * Style codes of the audi brand: sober, polished sedign, ergonomy; * Same standards as large audi saloons: high quality attention to detail: multimedia installation,… * Broaden the choice of engines and levels of features

* Optional features to personalize the vehicle: styling package, panoramic sunroof * Pay particular attention to the visual aspects of the cars: choice of atractive colors; adapt the design to fashion trends Justifications:

* The new model must benefit not only from the positive Audi brand image but also from the brand’s selling points in terms of quality, attention to detail, service,… * Personalisation of the vehicles offers added value (sole model) * Young city dwellers and women in particular, pay particular attention to the visual aspects of cars.

5.8. Price Objectives: * Offer prices that reflect the Audi brand image * Set high margins in order to meet the brand’s objectives in term of profitability * Take the competitive environment and the target population’s budgetaty constrains into account. Actions:

* Set high prices, slightly higher than the competition (from 16,400 Euros) * Offer attrative terms for trading in a used cehicles * Offer attractive financing solutions: from 199 Euros per month with purchase Justifications: * High yet accessible prices reflect the Audi brand image and make it possible to obtain higher margins * The possibility to trade in a used vehicle constitutes an important factor when buying a new car * Financing a solutions can encourage the target to reach a decision more quichkly and/ or opt for the premium segment (upselling)

5.9. Distribution Objectives: * Enable new customers to discover the Audi quality of service * Motivate the net work to promote and sell the new model (sales support) * CRM (customer relationship management) by differentiation Actions:

* Maintain an exclusive distribution policy: the A1 distributed solely by Audi dealers compliance with Audi requirements * Employ sensory marketing concepts in showrooms: design, color, music, scents, stmosphere… to complement the new model (city car) * Train the sales force in selling the merits of the product and in negotiation techniques * Offer test drives of the new product

* Encourage the trading in of a used cehicle on attractive terms * Build an appropriate CRM: regular follow up prospects (reminders, sending promotional offers…); regular follow up of customers (satisfaction surveys, maintenance, sales of accessories, vehicle renewals…) Justifications:

* Exclusive distribution ensure compliance with audi’s qualitative standards * Training enables sales representatives to sell the product’s technical and commercial merits effectively * Attractive terms for trading in a used vehicle facilitated the purchase (financial contribution) * The aim of the CRM is to win over and retain customers

5.10. Communication Objectives: * Publicise the expansion of the Audi product range * Ensure the popularity of the new city car * Present the winning features of the new model Actions: * A large scale cross media plan: short film posted on the internet and shown in cinemas (starring Justin timerlake – an international star); shown in several episodes (car chases to escape from mysterious baddies) * A large scale cross media plan: TV, poster, press campaign: using the main idea of “Audi A1. The new big Audi); a red car against a red background in order to highlight the product; in media designed for the target (magazines, feminine press) * A roadshow in around thirty towns in France, offering test drives * Presentation for journalists

* A special A1 mini website * Presence on the main social nerworks: FB,… * Various competitions: a prize draw, an A1 personalisation competition and a quiz based on the short film Justifications: * The short film shown on the internet and in cinemas appeals to younger customers and has significant impact. The internet can create and maintain a buzz thanks to the rival posting of content by usersL films continue to exist on the web after the end of the official campaign * The TV, poster, press campaign makes it possible to showcase the new model for the target

* Maintaining relations with journalists encourages the publication of articles in the press * A special A1 mini website enables the user to visualise or personalise the car and request a test drive * The aim of a presense on social networks is to reach a younger target * Competitions make it possible to build up a database in order to ramain in contact with the target

V. Conclusion * The new Audi A1 model has several attributes with which to seduce the target customer. The ausi brand image contributes to the success of the model. * However, due to the economic crisis and strong competition within the premium city car segment, it is difficult to predict the evolution of future sales of the Audi A1.