Ford Ka

Decisions to be Made:

The primary decision Gilles Moynier must make is determining the target market for the Ford Ka. Effective targeting is highly dependent on meaningful segmentation, so selecting an appropriate segmentation methodology from the variety of alternatives is another important decision Moynier must make. Moynier’s decisions must align with Ford’s objectives and also unite all the major stakeholders behind the Ka. Once the Ka’s target is identified, Moynier can develop the product’s positioning, finalize its marketing strategy and begin planning tactics.

Relevant Facts & Issues:

Ka’s Non-Traditional Development: Due to the importance of the French small car market to their operations, Ford developed the Ka prior to researching consumer needs in order to quickly respond to the success of the Twingo, a stylish urban car developed by Renault. Twingo’s success enabled Renault to supplant PSA as the small car share leader in 1993. With a 36.6% share in 1995, Renault has significant leverage over Ford at 7.6%. To remain relevant in the French small car market, Ford accelerated their new product development process and developed the Ka using the chassis of another Ford model. This constrained the Ka’s interior space, but still enabled it to compete on styling, features, and handling. Ultimately, the Ka was developed with only a quarter of the normal budget and this provided a cost advantage relative to the Fiesta, its other small car offering. Success with the Ka could signal a new competency in terms of reacting to competitive offerings

Ka’s Value Proposition: Ka provides distinct advantages relative to its competition. Besides outstanding fuel economy, it offers better performance and features versus the Twingo (see Exhibit 2 for comparative details). Ford’s positioning research showed people were looking for more from their small cars and were willing to pay more as a result.

Ford’s Objectives: Ford desires to grow their current share to a third of Renault’s share. Utilizing 1995 figures, this represents a 4.6 point increase for Ford or 60%. This lofty target means Ka must drive significant volume while minimizing cannibalization to the existing Fiesta line. Effective segmentation becomes a critical consideration because Ka’s target market must supply enough customers to help Ford drive towards this share objective. Additionally, profitable growth is needed based on the fact that Ford’s worldwide net income declined by 49% from 1994 to 1995 despite a 2.8% increase in revenue over the same period.

French Small-Car Market: Due to its magnitude and growth rates, the French small car market is an extremely important market to Ford. Small cars in the B category account for 42.7% of the overall French car market in 1995 and 47.2% of Ford’s car sales in France. The market’s growth rate over indexes at 43.7% and has been fueled by several economic and environmental changes over the last two decades. Changes to France’s tax policies have encouraged small, efficient vehicles through fuel tax rates that constitute 85% of retail gas prices and road tax rates (Chevaux Fiscaux) that increase according to engine size, transmission and fuel type ratings. Additionally, improved environmental awareness has encouraged customers to choose small cars for their relative environmental benefits. Further, the decline in household size opened up a market that historically sought the necessary space and comfort of a larger car. Small cars become more appealing with the average family size now at 3. A final change relates to urban traffic congestion and parking availability because smaller cars are better able to maneuver in heavy traffic and fit into tighter parking spots.

Ford Brand Issues: Ford entered the French car market in 1907 and by 1995 was the largest non-French auto manufacturer. Ford’s stale image is linked to and limited by its current offerings; the Fiesta, launched in 1977, and “New” Fiesta, launched in 1989. By 1995, these models lacked the appeal to satisfy the evolved needs of the buyers within France’s small car market. Changing the small car consumer’s perception of the Ford brand will be critical to Ka’s success and will require a significant advertising investment by Ford.

Organizational Alignment / Segmentation Issues: Ka’s success can be facilitated with strong alignment between Ford’s major stakeholders (senior management, Ka brand team, dealer network and Ogilvy & Mather advertising firm). Unfortunately, there is no alignment with regards to selection of segmentation methodology because none of the traditional or alternative methods have identified a clear target for the Ka. Without agreement,