Brand Value & Demand Estimation

Our client, a major car manufacturer, wanted to evaluate the likely demand for a new car sold under a brand name not yet available in Australia. While this car was available in a number of overseas markets, the manufacturer wanted to ensure it was suited to Australian conditions with features that the local market wanted and at a price it was prepared to pay.

Furthermore, as the brand was largely unknown in Australia, the client wanted a consumer evaluation of the “value” of the car badge prior to launch: would it be seen as a “premium” brand compared to Toyota but less so than Mercedes-Benz? Or would it be perceived as just an “average” brand and therefore not able to sustain a premium-price positioning?

a&b developed a Choice Modelling solution to determine likely uptake of the same vehicle specifications shown to respondents with a range of scenarios: different brands, size of car, size of engine, trim level, fuel economy, warranty periods, prices, etc.

The research specifically addressed the following issues:

  • Determine market demand for the new car, both overall and by key segment. Would it appeal to new car buyers who already had a multitude of other options? If so, which segments would be most interested in buying it?
  • Establish the brand effect. How many cars could we sell if they were sold as a Toyota and how many if they were Mercedes-Benzes?
  • Ascertain the optimum revenue that would be obtained if the new car was launched with a Standard trim specification and in a V6 engine configuration compared to a Luxury trim specification and in a V8 engine configuration

 

What we found
(1) Drivers of Choice and the Brand Effect

  • The key determinant of market demand for new car buyers is the car manufacturer brand. Of course, drive-away prices and warranty periods are also important, but car size, engine size and trim level are much less important as drivers of choice.
  • There is a significant “brand effect” with luxury brands showing a much higher tolerance for price increases. Car buyers will trade-off a luxury brand against mid-level brand with a higher grade trim level combined with a better value proposition.

(2) Market Demand

  • Forecast demand at various price points takes into account all the trade-off interactions that car buyers make. a&b calibrated the demand model outputs (utilities) to take into account the market specifics of sales by segment, awareness levels, expected marketing spend, etc.
  • Our market model determined a specific price range that showed stable/inelastic demand at which to launch the new vehicle. Once the retail drive-away price was increased beyond this range, consumer demand/ revenue would decrease significantly and rapidly.
  • Our market model also predicted that more than half the overall demand would come from one of the consumer segments that expressed a strong preference for the car’s value proposition. This segment in turn had a key influence in determining the optimum price.

 

Strategic Implications
It was clear that new car buyers had definitive views on the brand and type of vehicle they wished to buy. However we were able to demonstrate to our client that there was a combination of features and prices that would make buyers re-consider their initial choice of vehicle and brand. We identified an opportunity that provided an acceptable business case to warrant full product launch.
The net result was that the car manufacturer launched the new brand at the top of the price range recommended by our model. Our client subsequently commended a&b for our accuracy in volume forecasts.

mv3
To learn how a&b can add value to your organisation’s marketing and business strategy, contact us:

[email protected]
+61 (2) 8227-5400