16 Jun HOW WOULD YOU RESPOND TO THE THREAT POSED BY GREAT WALL MOTORS UTE MODEL?
Great Wall, great value
Spotlight and short case discussion: Students will work in pairs and lead a discussion on the topic.
The booming Australian market for light trucks and utilities recently became even more competitive, with the arrival of Chinese newcomer Great Wall Motors. Its entry levels ‘ute’ model, priced at $17990 in Australia, dramatically undercut the established, mainly Japanese brands (such as Toyota’s HiLux),by at least 20 per cent . Selling at this substantial price discount as a newcomer to the Australian market, Great Wall is relying on its value offer to attract mainly business customers as its most obvious target market segment (e.g, self-employed and small business tradesmen).
In fact the price is low that the most immediate price competitors of the Great Wall entry level ute model will be three year- old Japanese utes( which , in most cases, will have done three ‘hard’ years of use). T he attraction of a new vehicle for the price of a worn second-hand vehicle is compelling. The Great Wall offer clearly relies on low price to offset any lack of brand awaraness on perceived uncertainties surrounding the quality and durability and reliability of the unknown brand from a country previously unknown for quality motor vehicles. The pricing strategy is an example of ‘value in use ‘pricing. The retail price is based primary on the benefits perceived by the customer, rather than the seller’s cost. In business markets, the benefits are frequently long term (as will be the buyers’ costs) and will include service, guarantees, reliability, low depreciation and brand image. In practice, different customers will assign different values and thus ‘values in use’ is likely to vary by market segments- ranging from the ‘price- sensitive’ to ‘image conscious’ segments.
While self- employed ‘tradies’ and farmers may find the values offer difficult to resist, other larger, more corporate business buyers (e.g. local council, government departments and major construction companies) may be less likely to be swayed by initial price alone and may continue to purchase established ute offerings. Over time, of course, Great Wall will hope that their price offer will be compelling even large corporate bodies, especially after the brand develops a reputation for quality, reliability and value for money. For companies such as Toyota, a higher price for their ute models may be sustainable, at least in the shorter term. That brand image is important to some business buyers has long been recognised and goes some way towards explaining why, for example, IBM famously sustained a significant price premium over technically equivalent competitors’ products during the 1960.
Questions
1- In terms of the four broad pricing objectives outlined in the chapter, outlined which appear to be being pursued by Great Wall Motors in Australia market.
Profitability-Long-term prosperity- Market share-Positioning
2- Imagine you are the marketing manager for the Toyota HiLux model. How would you respond to the threat posed by Great Wall Motors ute model?
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