This research project provides a thorough context analysis and evaluation of Volvo Company marketing activities. Volvo, a Swedish multinational manufacturing company, has become one of the biggest manufacturers of cars, trucks, buses and other equipment worldwide. Since 2010, Volvo Cars has been under the ownership of the Zhejiang Geely Holding of China. It formed part of the Swedish Volvo Group until late 90s, when the company was bought by Ford Motor Company. In 2010, Volvo Cars was acquired by Geely Holding. The project provides PEST analysis and SWOT matrix as well as corporate and marketing strategies of Volvo AG. Competitors audit of Audi, Mercedes-Benz, BMW and Lexus demonstrates its strengths in the automotive industry and gives a clear understanding of the current Volvo position in the market. Customers’ characteristics and attitude towards Volvo show how people treat this brand. In 2007, Swedish energy company Vattenfall and the Volvo Car Corporation has launched an industrial joint venture partnership to introduce Plug-in Hybrids on the market. Volvo has introduced its new campaign in order to promote their ecological and economical car line Volvo DRIVe which include seven models. The research project further discusses and analyses the DRIVe campaign, based on Fill (2011) marketing communications planning framework.
1.1 External context
Volvo has established a set of general principles based on consistently conducting business. The company comply with the laws, regulations and taxation of each country in which it operates by demonstrating its commitment to responsible business practice in policies, decisions and other activities. The Volvo group also claimed that they do not participate in any corrupt practices and do not support money laundering as well as any payments, gifts from a third party that could affect their objectives in the business decisions. The Volvo’s code of conduct states that its products and services are presented and complied with applicable regulatory and legal requirements. The company also proposes that they respect and value all employees and the minimum employment age is the age of completion of compulsory school, but never less than 15 years.
Since 2001, the Volvo has an average annual growth rate of 7 per cent which has been succeeded via organic growth and acquisitions. The long-term financial strategy of Volvo ensures the best use of capital in providing shareholders with a satisfactory profit and offering creditors reliable security. Annually, Volvo discusses the investor’s view of the company with credit rating institutes in order to assess the future ability to repay existing loans. Volvo’s financial representatives maintain good credit evaluations as a base for financing of certain business operations via loans. It is believed that net sales should increase by at least 10% by handling upswings and downturns in each sector to achieve better profitability in a business cycle. In 2013, the company’s net profit was $425 million. Volvo Cars claimed that operating profit rose 17 per cent by the end of 2014.
There is no official data about the Volvo buyers’ profile, however, different sources claim that the average Volvo car buyer is under 35 years old, medium to high income, well-educated and family oriented personality. People between 20 to 35 years old are more likely to start thinking about safety, quality and reliability of their vehicle. For example, the main Volvo cars website shows its concerns about child safety and pregnant women and provide a special comfortable seats, convenient seat belts and extra airbags. Volvo also considers the economic, environmental and social impact of the products and services they offer to their customers, as well as the effect of everyday processes on society and planet. They intend to improve efficiency and minimize the harmful carbon dioxide impact from its own production and, meanwhile, provide significant savings to their clients.
Volvo has never been slow in going forward in technological perspective. In 2013, Volvo launched Sunsun connect infotainment system with built-in USB and auxiliary connectors, wireless connectivity through Bluetooth and broadband technology. The cars also has been equipped with Park&Pay parking solutions which allow drivers to search for the closest parking and pay for the space from the comfort of their Volvo car. The Glympse app gives an advantage to drivers to share their current location with others and counts the estimated time of arrival. Volvo takes environmental sustainability very serious and they believe they can meet the continuously increasing need for transportation, generate productivity for their customers, and at the same time to reduce emissions of greenhouse gases and other harmful substances. In 2009, Volvo introduced its first eco-friendly and fuel-sufficient technology DRIVe with only 120g/km of CO2 what makes Volvo models the most efficient cars in their respective classes. Volvo DRIVe scheme on S40 and V50 models cost £35 a year to tax in the UK and brings a great value and enjoyment to the driver. Also, Volvo was the first car who introduce a new technology of autonomous parking without the driver inside. The driver uses a mobile phone application to activate the Autonomous Parking and then leave the car. Volvo Company always has innovation at its core what makes it especially competitive in the automotive industry.
1.2 Internal context
1.2.1 Organisation identity
The Volvo Company is based on the principle that every person has the ability and the willpower to improve business operational processes, and the desire to grow professionally. The corporate and brand strategy “Designed Around You” puts people at the core centre and is a foundation and a guide for the business, the products and the corporate culture. Its main concept is to provide the best possible safety for anyone who drives a Volvo or is around a Volvo. The company takes the position that the car is for everyday individuals, with a humorous tone than Volvo is not for well-off people. In fact, the design of Volvo vehicles is based on the drivers’ behaviour, driving satisfaction and maximum possible comfort. Safety is an existing philosophy of Volvo since 1927 and its employees work hard to stay at the forefront of the industry by taking an overall approach to safety.
Volvo also takes economic, social and environmental responsibility to manage risk, create industry opportunities and build trust amongst colleagues and customers. It is the most effective way to contribute to the development and wellbeing of society and eventually to achieve the Volvo’s vision – to become the world leader in sustainable transport solutions.
1.2.2 Culture, Value, Beliefs
Volvo is a global leader in sustainable transport solutions which employs around 110,000 employees, has production in 19 countries and sales in 190 markets. The company’s culture involves the lively and open dialogue between leaders, team members and other colleagues worldwide. They believe that the new Volvo Way, a fundamental policy guide for employees, helps to build energy, passion of work and respect towards the individuals in order to achieve common goals and have a strong motivation to grow further. Volvo also sponsoring two long-term cultural projects, Gothenburg Symphony Orchestra and The Gothenburg opera, as they believe that sponsorship provides useful opportunities to enhance their relationship with customers, employees, stakeholders and to strengthen the Volvo brand within the automotive industry. Three corporate values of quality, safety and environmental care, help Volvo to progress in terms of key benefits it brings to the customers. Volvo’s mission is to make people’s lives easier, safer and better. They believe that they are able create value for customers, pioneer products and services for the transport and infrastructure industries as well as work with energy, passion and respect for the individual. The launch of long-term sustainable strategy in 2012, will help Volvo to achieve these strategic objectives and take the position of the world leader in sustainable transport solutions by 2020.
1.2.3 Financial constraints
In 2012, Volvo cars sales fell by more than 10 per cent in China and the U.S., mainly due to the poor financial performance and weakness in these markets. Volvo sold approximately 40,000 vehicles in March, and 98,000 vehicles in 2013. In Europe, sales decreased 13 per cent including an 11 per cent drop in Sweden, comparing with the previous year. According to Volvo’s Financial Report 2012, the company’s structure is based on a combination of own cash flow, external borrowing and shareholder funding. Three new loan agreements (with China Development Bank, Swedish Export Credit Corporation and other European banks) signed in the period of from December 2012 to February 2013. However, Volvo Car Group reported an operating loss of 577 million, affected by a challenging market situation in the European regions.
1.2.4 Marketing Expertise
Since 1st January 2014 the Grey London, a global marketing agency, handles Volvo’s global creative account, worth of £18m in the United Kingdom and £30m in the United States. Creative agency launched its first global campaign “the Swell” for Volvo’s XC60 model which urged consumers to “seek feeling”. As safety is a major part of Volvo brand, an innovative safety concept called LifePaint has been developed by Grey London and aimed at cyclists to become noticeable on the road at night. Recently, 2000 light-reflective spray cans were given to six bike shops in London and Kent. If successful, the project will grow nationally and possibly internationally. LifePaint totally represents the Volvo’s vision that, “By 2020 no person will be killed, or seriously injured, by a new Volvo.”
1.2.5 SWOT matrix
SWOT analytical framework identifies strengths and weaknesses (internal factors), opportunities and threats (external factors) of Volvo Company. The following graph demonstrates the organisation’s position today and where it could be in the future.
1.3 Business context
1.3.1 Corporate strategy
All Volvo work is based on a sustainability perspective which contributes to long-term success. Long-term plans define the direction in a 5 to 15 years and the plans are aligned and reviewed regularly. The company has economic, environmental and social responsibility for the operations, products and services in the area where the Volvo Group has the potential to influence. (Appendix 1) The most recent strategy for 2015 aims at profitability improvement and organic growth. It includes logistics optimization, reducing product cost, improving white-collar efficiency and pushing sales. This will help Volvo to strengthen its relations with business partners and achieve the wanted position by 2020.
1.3.2 Marketing Strategy
In 2014, Volvo has announced its new global marketing strategy the ‘Volvo Way to Market’, which focuses on four areas: marketing tools, digital leadership, dealership and services. Also, Volvo has agreed to concentrate on three international motor shows in the U.S, Europe and Asia, where the company presents new products and innovations to the press and potential customers. Advertising spend is not at the same level of its main competitors, but Volvo plans to increase its investment into their brand message. The company focuses on sponsoring the Volvo Ocean Race, rather than other activities, as it is purely related to Volvo. The marketing strategy also includes digital commerce and industry-leading configurator/website which gives customers a simple and functional experience online. The ‘Volvo Personal Service’ concept provides a personal technician who take every customer through introduction and car ownership. In order to achieve these goals, Volvo has increased its marketing budget.
1.3.3 Brand Analysis
The Volvo brand, Latin for “I roll”, has become one of the most recognizable and famous worldwide, and identifies the company’s products with a reliable symbol of origin and a promise of performance. Volvo brand promises the better design, higher quality and improved productivity within the commercial vehicle industry. According to Volvo Club, the Volvo brand name is simple, smart and easy to pronounce in each country and with a much smaller probability of spelling mistakes. The logo is an ancient symbol for iron and the astrological symbol for Mars which, in turn, symbolizes the male gender and creates associations with steel, safety, quality and strength. The Swedish founders of the company, Assar Gabrielsson and Gustaf Larson, chose that symbol as they wanted a strong and powerful image for their vehicles. The Volvo already exists for 88 years and its logo has always been slightly changing since 1927, however, the symbol still remains the same. (Appendix 2) Volvo’s portfolio has a wide range of industry-leading brands such as Volvo Penta, Sunwin, Renault Trucks, Nova, Prevost and other. The Volvo’s human-centric brand strategy strapline “Designed around you” illustrates the future direction of the company’s brand development. Volvo has been sincere not only towards its brand but also to its customers.
1.3.4 Competitor Analysis
In 2014, Volvo cars’ sales grew 10.6 per cent comparing with its main competitors in the premium segment: Audi sales rose 4.2%, BMW sales increased 5.1% and Mercedes 5.3% (Volvo Car Group, 2015) Despite strong competition in the automotive industry, Volvo still focuses on the car safety technologies as well as quality and reliability what makes Volvo Cars even more noticeable in the global market and increase sales volume. (Appendix 2.1)
See “Sources. Competitors Audit” in Bibliography
1.4.1 Segmentation characteristics
In marketing, market ‘potential’ can often be segmented by using various demarcation criteria: demographics, socio-geographics, psychographics and so on. (Dahlen, et al., 2010) Volvo develops cars for their target market of customers whose major concern is personal and/or family safety, for example, newlyweds, young parents with kids, single parent with children or middle-aged people. Volvo divided its market into new and used cars based on their customers’ income and social class. New cars are suitable for high-income personalities (more than £ 50,000 per annum) and these customers are the business people who rely on safe, reliable transportation solutions every day. Slightly used Volvo cars may be eligible for younger people with middle income, known as working class. Volvo customer segmentation age fluctuates between 20 to 35 years. Besides, Volvo offers the following models all aimed at different market segments in terms of age, gender, income and lifestyles: Volvo S40, Volvo S60, Volvo S80, Volvo V40, Volvo V70, Volvo XC70, Volvo XC90 and Volvo C70 convertible. Many personalized extras (leather interior, body colour, sound system) are offered on the website and can be added according to customers’ preferences.
1.4.2 Levels of involvement
The purchase of a new car is often considered as a high involvement decision because the level of risk and responsibility are high. Volvo prices vary between £20,000 and £46,000 depending on the model, engine type, accessories and other options selected. The safety of the car has become one of the most important factors for customers, and people are willing to spend more and more in order to be absolutely confident that they are safe on the road.
When referring to Volvo, the customers are always connecting the word “satefy” in their minds what, in turn, helped the company to develop a reputation and take a strong position. For example, the Volvo V40 has been named as the safest car by scoring five stars in the Euro NCAP crash test. (Knapman, 2012) Also, Volvo was the first car who invented a pedestrian airbag in the front bumper. (Appendix 7) The company has positioned themselves as the most innovative and the safest car in the market.
1.4.4 Media Usage
Volvo has released many TV commercials of different models, and puts emotional appeal ahead of functional ability. The most recent ad of Volvo XC90 demonstrates its safety for all road users and how luxury fits with technology. Volvo also publishes its ads in magazines, journals and newspapers. Volvo uses social media (Twitter, Facebook, LinkedIn, Instagram and others) and media services in order to increase customer satisfaction and sell more cars. During the Volvo Ocean Race 2008-2009, the company reached 221,768 registered players from 180 countries for online game and 1.168 billion radio listeners from nearly 1,500 broadcasts. (Media Volvo, 2009) In 2014, Volvo has double its marketing spent over the next five years.
The environmental strategy for Volvo is all under the umbrella name of DRIVe. DRIVe is simply the word ‘drive’ which means leading the way, taking a leadership and that is what Volvo doing. DRIVe is about confidence in the environmental credentials of Volvo products and its customers’ expression of their responsible purchase. This environmental program has been built on three pillars: motion (it is all about power trains and engines), inside (it is about cockpit, the purity of the air in the cabin) and lifecycle (means having the least impact on the environment). Volvo produces several different models with engines that run on bioethanol and emits less than 120 grams of CO2 per kilometer. For example, Volvo S60 with 99g/km of CO2, Volvo V40 with 88g/km or Volvo V60 with 99g/km. (Volvo cars.com) Volvo has decided to focus on energy efficiency, carbon dioxide reduction, materials used and other alternatives. Everything Volvo does is designed around people, so every innovation they make is designed to simplify and improve people’s lives.
- Marketing communication objectives
The DRIVe campaign corporate objective is to continually minimize the environmental impact of Volvo cars in production, in use, in recycling and to reach zero impact on the environment. Apart from bioethanol, Volvo continues to innovate its cars that can be driven on electricity alone, for example, the most recent Volvo V60 Plug-in Hybrid. Volvo has an objective to change the culture of cars, from a manly car culture into a more intelligent and responsible car culture.
- Marketing communication strategy
Volvo, together with the European Commission, agreed that advertising cars should not be focused at all on power, tork and high speeds, but on fuel consumption. The following DRIP tactical approach describes and analyses the marketing communication planning of Volvo for DRIVe campaign.
By launching the DRIVe campaign, Volvo differentiates from other automotive brands and enables people to choose this brand over another. Volvo, famous for its innovative technology, also wants to take the position of environmentally friendly cars. The main distinguishing feature of the DRIVe engine range is that they are all four-cylinder engines, what makes it exclusively economically attractive to the potential customers.
Volvo DRIVe campaign reminds people about the environment and what harmful impact their cars have every day. Eco driving is an easy way to reduce fuel consumption and greenhouse gases by 5 to 15 per cent. This campaign reinforces people that Volvo cars are not just only about safety features but also about responsibility to the environment.
Volvo demonstrates how essential it is to take care about the environment, resources and air. They make potential customers aware that ultra-low CO2 means better fuel economy and cheaper tax band. Volvo uses the Internet for creating buzz around new Volvo environmental philosophy, using websites, blogs, brochures and press releases in magazines and newspapers. Volvo DRIVe already grabbed customers’ attention by new emotional TV advertisement together with Swedish singer Robyn.
Volvo allows people to arrange a test drive in order to make audiences aware of a brand’s presence and finally persuade an individual to buy and consume a particular product. The new environmental program DRIVe attracts potential consumers and retailers to purchase and distribute eco-drive cars.
2.3 Communication mix
Each tool of the communication mix plays a different role and can perform various tasks. This reflects their different capabilities, attributes and key characteristics. The promotional communication aims at informing and persuading the customer to buy the product and informing him about the quality of the products. Volvo has effectively used advertising, public relations, direct marketing and sales promotion methods.
Advertising has the capacity to reach huge audiences with simple messages (Fill, 2011), whether it can be on an international, national, local or direct basis. Volvo eco-friendly models advertising create awareness, change perception, attitude and build brand values, influence behaviour, known as calls-to-action. Volvo’s DRIVe models are XC70, XC60, V70, C30, S40, V50 (appendix 8) and each of these cars have pretty much the same advertisements.
The TV commercials evoke a powerful range of feelings that have the potential to connect with the target audience. These commercials deliver the strongest message about the environment and show that these cars are perfect for driving in town and beyond the city. Volvo demonstrated the main innovative points in their adverts while having a cheerful background music and a strapline “Because Life is Better Lived Together” (Appendix 9). The main advert about Volvo DRIVe, which has been presented by Swedish singer Robyn, has a highly emotional appeal showing every aspect of life. Also, Volvo has launched a series of informational videos on YouTube describing the importance of smaller engines, low fuel consumption and CO2 emissions.
Volvo has decided to get into media relations via press releases on their websites, automotive magazines (Top Gear, Diesel Car Magazine, Auto Express) and online/offline articles in newspapers (Financial Times, Edmunds, Left Lane News, Telegraphs, Business Insider). PR has a wide range of other tools such as events management, public affairs, sponsorship and lobbying. For instance, the Volvo Eco Challenge provides grants of up to £1000 to sailing clubs in the UK since 2008. Environmental care has always been one of Volvo’s commitments for about thirty years and the Volvo Eco Challenge delivers real environmental avantages and encourage young people to become more environmentally aware. Besides, in 2015, Volvo has renew its partnership with The Worldwide Fund for Nature (WWF) in order to stop the degradation of planet’s natural environment and build a future in which people live in harmony with nature. Volvo Group also organised the Sustainability Forum for leaders and stakeholders, the private sector and civil society who are accelerating actions and decisions towards sustainable development.
Volvo’s main websites provides test drive option to everyone to try new eco-cars on the road. The nearest Volvo dealer contacts the customer within 24 hours to arrange a convenient time for test drive. This option allows potential buyers to try new product before making a purchase and trust Volvo brand. Volvo Cars also provide other online services such as brochure request and call back option that creates and sustains a personal and intermediary free communication with customers, potential customers and other stakeholders.
Every new Volvo V60 Plug-in Diesel Hybrid comes with 3 years’ assistance cover, including free breakdown and recovery help and unique benefits such as Enhanced Journey Continuation Package for Business class. After 3 years, the car is still covered by Volvo Roadside Assistance by an authorized dealer every 12 months. Plug in Hybrid and any other eco-car comes with a 3 year warranty which also covers the first 60,000 miles and 12 years against rust perforation. The battery is covered for 8 years or 100,000 miles- whichever comes first. Volvo also offers V60 at 6.9% APR representative with £500 deposit contribution and 3 years complementary servicing when financed on Personal Contract Purchase with Volvo Car Credit. For example, Volvo V60 Plug-in Hybrid can be purchased with £10,458 deposit and 36 monthly payments of £699. However, such cars cannot be taken and driven until all payments are made. Recently, Volvo has announced its partnership with British Gas in order to provide benefits for new electric vehicle users. Customers who buy the new Plug in Hybrid model are eligible for a free car charging package from British Gas, which includes a charge point and free access to the Polar Charging network across the United Kingdom.
According to the analysis above, Volvo has a pulsing type of media schedule which have a consistently spread, steady pattern of regular but separated exposures. Volvo has advertised its eco-friendly cars in form of press releases, sponsorship and other announcements about the new products range. The schedule for new hybrid models has been introduced more slowly in order to spread a positive word of mouth. Volvo believes that rather than be seen a lot during specific periods, advertising of hybrids should be seen a little all of the time and should be near the period where customers are ready to purchase. Volvo excluded high repetition in advertising effectiveness as they did not want customers become bored, uninterested or irritated about the new product in advance. Volvo, as a recognizable brand, is likely to have immediate attention of customers and a quicker desired effect from the beginning.
According to AdAge (2014), Volvo is trying to increase sales volume from 470,000 to 800,000 cars in 2014 to 2019, and they increase marketing budgets in the same proportions. The quality of marketing has definitely improved in Volvo, for example, the company has included online services and improved their face to face or offline experience with customers. The DRIVe campaign and overall environmental program of Volvo, helped the company to allocate the right amount of resources into promotion of their vision and reach the specific level of profitability.
2.4 Control and evaluation
Every organisations review and evaluate the performance of their various activities, and Volvo is not an exception. In 2013, the company sold 7,739 V60 plug-in hybrids (Motavalli, 2014) but later the Volvo Cars reported a record sales in 2014 mainly in China and Western Europe. With 465,866 cars sold, Volvo still continues to expand in all markets in 2015. (Volvo car Group, 2015) Volvo’s highly competitive DRIVe cars with best in class performance and fuel economy are important factors behind the continued European success. In the Netherlands, positive sales driven by strong demand for the V60 Plug-in Hybrid and V40 were the base for increased market share to 5.5 per cent. The success of the promotional strategy shows that Volvo is operating well in achieving its objectives and planning to double its production by launching new XC90 T8 Plug-in Hybrid in China, U.S., Europe and other markets by 2016.
Due to the high cost of Volvo eco-friendly cars, many potential customers cannot financially afford such privilege and most of them either prefer other Volvo models or even another brand. However, if the price was lower, Volvo probably would not lost its customers and might increase sales volume. Despite this fact, the statistics show that prices tend to decrease after the newer model is released and demonstrated to the publics.
This research project critically analysed the internal, external, business and customer context of the Volvo Company and provided a broader discussion of DRIVe campaign. Volvo cars, known for its safety features and innovative technology, has demonstrated their concerns and ability to take care about environment. Several vehicle models with four-cylinder engines provide an outstanding performance and fuel-efficiency with lower level of harmful substances. In collaboration with the Grey London global creative agency, Volvo has double its marketing spend and, in turn, get a higher degree of brand awareness and interest amongst existing and potential customers as well as other stakeholders. Volvo’s objective is to change the car culture and become more intelligent and responsible towards people and environment. Further discussions was based on promotional tools such as advertising, sales promotion, direct marketing and public relations for DRIVe campaign. Volvo has definitely increased its profits and sales volume in the recent years worldwide. Today, Volvo continues to strengthen its competitive position in the automotive industry and the launch of sustainability strategy in 2012 will help the company to achieve its objectives and become the world leader by 2020.