Digital Segmentation in the Automobile Industry

Answer this quickly! What do the following Automobile brands have in common?

Porsche, Audi, Bentley, Lamborghini, Bugatti, Skoda, Seat, Scania, Man and Ducati

For those who don't know (and frankly, neither did I before I researched this post!) these are all automobile brands owned by Volkswagen! 

While that bit of information is startling enough, a closer look reveals another facet. Many of these brands compete against one another, especially in the Luxury segment. What this means is that consumers, irrespective of the brand preference, are actually putting their money into Volkswagen's pockets. In most cases, they don't even realize they are doing so. Call it underhand marketing or brand segregation at another level, it clearly works for Volkswagen.

This brings us to the topic of today's post. How exactly does segmentation work in the Automobile Industry? In previous posts we have already examined in detail why demographics are not the ideal way to segment. However, does the automobile industry have a specific type of segmentation that works? They answer may surprise you. For there are not one, but three non-demographic ways to segment for this industry vertical.

1. Value-based segmentation

Value means different things to different people. Hence, this method of segmentation can be further sub-divided into three distinct categories.

a) Those who buy cars for their economy (fuel or otherwise)

These people are looking for the cheapest car that will serve their needs. Brands aren't that important to them. They prefer to go with the brand or dealer who offers them the biggest savings or discounts. They are particularly concerned with fuel economy. After price, that is their chief concern.

b) Those who buy the best car they can afford

While a bit more brand conscious, these people are looking for the best car they can afford. They typically have a budget in mind and use a checklist to find a car that checks the most boxes. Build quality, durability, reliability, fuel efficiency, service availability, cost of parts are all factors they look at. Price is a primary concern but not the only one.

c) Those who buy the car that enhances their status

This category of people may not readily admit their desire, but status or the prestige value of the car is an important factor in their consideration. Their version of status may not realistically represent the luxury market - rather, it is an upgrade to the next level of car that they desire. Owners of hatchbacks moving to sedans and sedan owners upgrading to an SUV are examples that represent this category.

2. Aesthetics-based segmentation

Again a complicated segment simply because aesthetics (or the lack of it) differ greatly among individuals. For some buyers an expensive car is a showy automobile that has a lot of chrome and ornamentation while for others it is a much more subtle, bling-less appeal. The key to understanding this segment is identifying cues from other aspects of their life. What does status represent to them? How do they define class? How good or contemporary is their understanding of style? What trends in fashion and lifestyle appeal to them? The answers may not be readily available or forthcoming. So the best way is to use cross-category information to identify their sense of aesthetics.

3. Evolution-of-choice segmentation

This is an important segment in the automobile industry. These are people who bought a particular brand. The reason could be one of many - the discount was great, the deal was attractive, the version that year had great styling etc. Post this, they fall into a wide spectrum. On the one hand there are hardcore loyalists of a particular brand. They have only ever owned one make of car and will continue to do so. Possibly moving up the value chain with other brands across categories from the same manufacturer. On the other extreme of this spectrum are the brand flirts - those who buy whichever make of car catches their fancy at that particular point in time. They can be easily persuaded to buy another make. In between these two extremes lie the susceptible consumers. They have a particular brand preference to a greater or lesser degree. However they can be persuaded to consider another make - if the motivation or rationale is strong enough.

Depending on the kind of segmentation approach chosen, a digital strategy could be put together to identify the best approach. When catering to the Value buyers, product features that confirm their needs can be highlighted. When catering to the aesthetics seekers, content marketing with a lifestyle or fashion slant could prove effective. When playing to the evolution-of-choice consumers, influencers and endorsements from trusted category experts could swing things in one's favor. 

What is important however to start segmenting. If an automobile marketer chooses not to do so, they run the risk of using the wrong way to market to the wrong audience. And that is never a good way to build a brand in any sector!