Volvo cuts back auto show glitz in marketing strategy shift
Volvo Car Group is shifting its focus from auto shows, where carmakers vie for influential eyeballs in an atmosphere of glamour and glitz, to market more directly to buyers instead.
Starting next year, Volvo Cars will take part in just one motor show per region: Geneva in Europe, Shanghai or Beijing in China and Detroit in the U.S., the Gothenburg, Sweden-based company said today. Still, the carmaker plans to increase its marketing budget by spending more on e-commerce, dealerships and an annual event to promote its models.
"We have been doing what is expected in the car industry so far, and we're going to do things that are unexpected," said Alain Visser, who heads marketing and sales. The carmaker needs to "stand out and challenge things," just as its products will, he said.
Volvo's decision to leave some key auto shows, including Frankfurt and Paris, contrasts with the desire of German competitors BMW, Audi and Daimler AG's Mercedes to show off. Champagne flowed in the VIP rooms at the last Paris event in October, guests nibbled on macaroons and even Volvo tempted passers-by with virtual-reality headsets and cooling cascades of mist. Interest in such shiny and sometimes extravagant affairs is especially high in emerging markets, where car ownership is soaring.
"When we go there, we try to be the best," said Luca de Meo, Audi's sales chief. "We see them as very important platforms," he said, especially in growth markets like China, where car shows are proliferating.
Audi, the world's second-largest luxury-car brand, attends all the major international shows including Paris, Geneva and Shanghai. At the last two industry events in Frankfurt, the Volkswagen AG unit constructed temporary free-standing exhibition halls to display its latest models and seek to one-up rivals. In 2011, that meant spending more than 10 million euros ($12 million) on an indoor test track.
"Let's be honest about it: We're still a relatively small player," said Volvo's Visser. "We have an 800,000 volume forecast by 2020, which means that our budgets compared to our some of our competitors are still going to be relatively small."
Volvo will probably sell about 465,000 vehicles in total this year, Visser said.
By comparison, Bayerische Motoren Werke AG is set to deliver more than 2 million autos this year, a record, after handing 1.9 million over to customers from January to November. Audi sold 1.59 million cars over the same period, also setting a record. Daimler delivered 1.49 million Mercedes-branded vehicles.
To build sales, Volvo plans to lure customers using a revamped website and digital commerce, aiming to gradually start selling online around the world.
"We know from research that more and more of our customers are ready to buy online," Visser says. "The reason why they are willing to buy is not to get a cheaper price, but to avoid the hassle around negotiating the deal."
Chinese billionaire Li Shufu's Zhejiang Geely Holding Group Co. bought Volvo from U.S. automaker Ford Motor Co. in 2010. The Swedish company is executing a complete renewal of its product range in the next five years while seeking to maintain its decades-long reputation for car safety. Its main promotional focus at the moment is next year's rollout of the XC90 sport- utility vehicle, Volvo's first model wholly designed under Geely ownership.
Volvo is pegging its brand's revival on the $66,000 XC90, which will replace a version built since 2002. The Swedish company, which introduced the three-point seat belt in the 1950s, also makes the S60 and S80 sedans.
The carmaker said last month that it's doubling U.S. marketing spending as part of an effort to reverse a decadelong sales decline. Chief Executive Officer Hakan Samuelsson has set a medium-term target to increase sales in the country 67 percent to 100,000 vehicles, helped by the new XC90 and the V60 Cross Country wagon.