The Ford Ka case introduces the fundamental problem of market segmentation and target selection. Ford’s problem does not fit the ‘textbook’ segmentation process since it developed the Ka before determining a target market for it. However, this is frequently the case, for example, when a firm copies a successful product idea (like Ford did) or wants to introduce an existing product in a new market to expand its geographical coverage. The case illustrates that even in this situation, market segmentation and target selection are fundamental to a product’s success.
The following questions should help you to analyze the case. 1. How did Ford (and car manufacturers in general) segment the overall car market? What was the typical small car marketing strategy in the past? Using production costs and price( income and age Small cars sold to younger, lower income buyers Large cars to older, wealthier buyers and families 1980s and 1990s environmental and demographic changes affected the French car market increased road congestion and problem with parking ( more people attracted towards smaller cars lower fuel consumption another factor attracting consumers to smaller cars.
Also average size of households declined to less than 3( increasing feasibility of small cars as a primary source of family transportation Rise in number of working women ( increasing women buyers In the past the product categorization was based on car size, engine output an price of a car 2. Why did Ford develop the Ka? Is the existing segmentation approach still applicable? In response to the changes in small car market ( where people wanted cars based on their needs and price was no longer the most important factor People wanted features similar to larger models ( improved safety
features (airbags), robustness, more space/functionality, power steering, great performance Ka was developed to compete with Renault Twingo—a basic-B category car with distinct, original style, flashy colors, greater functionality and more interior space than other cars of similar size Innovative styling, features and maneuverability as a basis for marketing Designed car that was out of the ordinary, for a market segment they had no presence in Targeting Urban, educated customer who is self-confident and rejects commonplace 3.
What segmentation approach do you recommend and who is your target buyer? Why? 4. What potential implementation problems do you expect with your recommended approach? How can you overcome them? Many companies often overlook essential issues such as market segmentation and target selection before manufacturing or creating their new product line. Ford, being one of the companies that fell prey to this mistake, manufactured their new car Ka before determining a target market for it. It is essential for Ford to now determine “an appropriate target market for the product (Ka).
” Ford developed Ka in response to the changing small car market in France, where people wanted cars based on their needs, and price was no longer the most important factor. Moreover, the development of Ka was a quick reaction by Ford to a successful offering of Twingo from rival manufacturer Renault, who developed Twingo to target a limited segment of “buyers looking for maneuverability and urban transport”. Within 12 months Twingo was able to capture 8. 9% of a market share, by offering unique, and stylish car to its urban-based buyer, and Ford wanted to gain some of this share through its new production of Ka.
Thus, in order to grow their current share, Ford decided to enter this market by designing Ka, which was designed to target urban, educated customer who is “self-confident and rejects commonplace”. To experience similar type of success as Renault did with Twingo, Ford must devise a successful segmentation strategy for Ka. In the past, the car market was segmented based on size-tiers and demographics (household income, age and lifestage), where small cars were mostly targeted towards younger generation, and/or lower income bracket people and large cars to wealthier, families and/or older buyers.
Unfortunately the traditional segmentation strategy for the small car market cannot be applied to this situation because of increased fragmentation due to changing French demographics and other environmental factors. Also, the product characteristics of Ka do not meet the definition of market segments. Therefore, to determine the target buyer, Ford can first segment the market using psychographic segmentation, which is primarily people’s life-style and behavior to help Ford gain a better understanding of what kind of people may be interested in cars like Ka.
Then based on people’s attitudes they can further segment the market based on demographics, which will provide Ford with the exact type of buyers to target. Based on exhibit 10, Ford should position Ka as a “sophisticated, futuristic” car, which is fun to drive in a congested traffic conditions of a big city. Ford should target customers who are self-confident, stylish looking for an affordable, yet small car. Moreover, with respect to psychographic segmentation, I believe Ford should target those buyers who may consider buying Renault Twingo or Opel Tigra and are not looking for a car that is just “practical or safe” to drive.
This is because Ka is similar to Twingo in terms of its offerings and aesthetics. In addition, demographically Ka should be targeted to 3 different segments within the target psychographic segmentation. The 3 demographic segments are as follows: 1. Single young, urban professionals who are looking for an affordable car that will reflect their personality 2. Middle-aged (31-35 yrs old) married couple with small family who want a car that is expressive yet within their budget 3.
Older adults with strong sense of style and want a small car but something that is unique and makes them feel young Major implementation problem that may arise from the recommended approach is the lack of data on people’s attitudes as it is not only hard to identify one’s attitude but it also changes frequently. To overcome this obstacle Ford needs to develop a creative survey questioning people about their reasoning behind their latest car purchase and what specifications they look for when selecting the car. This will provide interesting insights about customer perceptions and buying behavior.