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Advertising Wars: A Case Study Of BMW & Audi

By Aditi Bali

ABSTRACT:

This paper talks about the essence of marketing an organization. It highlights that good marketing increases the visibility of a company in the market. Superior marketing helps in tapping into a new consumer base and increases the market share of a company by multi-folds. However, in the process of doing so, companies tend to put down their competitors via several marketing strategies. The purpose of this paper is to understand if competitive marketing commonly known as ‘advertising wars’ are beneficial to either of the parties engaging in them. The information for this academic paper has been gathered through various publications, research papers, newspaper articles, and journals.

Keywords: Competitive marketing, Advertising wars


INTRODUCTION:

Marketing is an activity that involves the creation, communication, delivery, and exchange of offerings that have value for customers at a micro-level and for the society at the macro-level (American Marketing Association [AMA], 2017). It is referred to as projects carried out by a company to promote the purchase and sale of its products or services. It consists of advertising, selling, and delivering products to buyers ( consumers and firms). Promotions are aimed at a certain target audience and may involve the use of puns, unforgettable slogans, and advertisements by celebrities. It is one of the methods of creating and maintaining relations with its new and loyal consumer base respectively. Marketing a product provides a greater reach to a company.


Linking products to customers eventually leads to profitability of a firm. A basic rule of marketing is the 4Ps: Product, Price, Place, and Promotion. Neil Borden, coined the term ‘marketing mix’ and popularized the concept of 4Ps. The first P, refers to items that firms plan on offering to its customers. The purpose of launching a product is to fulfil an absence in the market, or overcome the excess demand of consumers for a product that is already available in the market. A complete understanding of the type of product being sold, its competitors, and whether it can be paired with a secondary product is of utmost importance. Price, the second P, implies the amount that the company will sell the product for. When deciding on a price, the unit cost price, distribution costs, advertising expenses, taxes to be paid, and the product price of its competitors are taken into consideration. Place refers to the distribution of the product. The availability of the product i.e. physical storefront, online, or through both distribution channels is considered as place. Promotion, the fourth P consists of activities such as advertising, selling, sales promotions, public relations, direct marketing, and sponsorship (Twin,2020).


Broadcasting a newly launched product is essential as it informs the consumers of its existence. To be in a position to place an order, the audience first needs to be aware of the product’s functions and its usage. Advertising is considered as the most effective way to educate the customers about the products of the firm and that too in a fun and interesting manner. Modern consumers value the experience of purchase over the pricing. The experience of a consumer consists of perception as well as the feedback of the buyer. Tackling those assumptions via advertisements, social media campaigns is what small and medium businesses resort to nowadays. Hence, marketing helps them in equalizing their product in the eyes of the customers(Sims, 2013). Firms that have been in the market for 50 years or more have been able to sustain themselves as they keep evolving with time and improving upon their marketing techniques. For any firm to be profitable, it needs to maximize its sales and that can only be possible till the time its presence is felt in the market. Marketing is more like food than medicine for firms, i.e. it’s a necessity (Archer, 2011).


User satisfaction is one of the binding factors for any purchaser. It keeps them loyal to a certain company’s product. Quality is a primary factor in terms of measuring consumer utility and keeping them engaged with the firm, however, that is only after the consumer has used the product. To capture the attention of consumers, various techniques such as gamification( an addition of gaming techniques to non-gaming activities) are being used in today’s time. The usage of gamification has shown a positive effect on the sales of the products of firms employing this technique. (Walter, 2018). Approach such as this help a firm in achieving its motive of profit maximization and capturing market share, and hence is of the key essence for any organization that succeeds (Gross, 2016).


LITERATURE REVIEW:

A marketing strategy is an inclusive course of action for the business. It helps the firm in reaching out to its potential consumers and converting them into loyal customers of the products or services produced by the organization. It consists of the company’s value proposition, the primary brand message, and data on the targeted demographic (Barone, 2020). An effective marketing strategy helps a firm in defining its vision, the mission, and business goals, and underline the steps the firm needs to take to achieve these goals (Perry, 2017). Marketing strategies are used by diverse companies to communicate with their buyers. It is also implemented to inform the customers about the product’s attributes, characteristics, and benefits (Erstad, 2018). One key marketing strategy that is widely adopted by an organization is to identify its competition in an industry. To survive in this cut- throat industry, a company must be aware of the strategies of its rival so it can counter-attack them (Rouse, 2009).


Several companies conduct SWOT (strengths, weaknesses, opportunities, and threats) analysis. A company can evaluate its short comings and strong areas with respect to its major competitors using SWOT analysis (Suttle, 2014). Marketing strategy is the basic approach that a firm uses to achieve its goals of attaining a monopoly in the market segment. It involves studying the strategies of its competitors in detail and using that information to come up with your own game plan. Two strategic aspects that need to be taken care of by the marketers are the competitive conditions and ferocious environment while determining the marketing strategy. The marketer has to choose a potential market and identify its needs and patterns (Kamola, 2017)


There are various types of marketing strategies that help firms in gaining market share and maximizing their profits and sales. One such type of marketing is Cause marketing; it necessitates the combined efforts of a profit-maximizing firm and a non-profit organization leading to mutual benefit. It connects the products and services of a company to a social issue or an affair. (Coompson, 2014). Emotional marketing is a technique used by firms to attract consumers as the organization toys with their emotions. Sentimental advertisements produced by companies at the time of occasions such as Mother’s Day, Christmas, etc are a perfect example of the same (Lofgren, 2020). An additional type of promotional strategy is Transactional marketing. It is a type of marketing where suppliers encourage customers to shop using shopping coupons, and discounts. It escalates the probability of sales and persuades the target audience to buy marketed products (Rouse, 2009). At times ethnicity, race, culture, and traditions are also made a part of endorsing a product to attract consumers towards it. This form of marketing technique is called diversity marketing.


An interesting broadcasting approach used by firms in such a ruthless market setup is called competitive marketing. The motive behind such advertising is to gain consumers that belong to the rival firms and thereby maximize the sales of a particular organization. In today’s world, it is a necessity for firms to combat the marketing efforts of any businesses that provide similar products or services. It is of utmost importance for a firm to establish a competitive advantage. Otherwise, the other businesses will thrive while your business experiences downfall(Erstad, 2018). There are many producers in such a market setup and hence no firm has monopoly power and no ability to alter the market price. The goods produced by such firms are highly substitutional in nature. Therefore, a distinguishing factor for the same becomes the quality of materials used, how well is the placement of the brand, and loyalty of the customers. In the long run, the characteristics of a monopolistic firm are similar to that of a firm belonging to a perfectly competitive market (Coompson, 2014).


However, the difference between the two lies in the fact that monopolistic competition produces diverse products, and non-price competition is established on the principle of product differentiation. A firm making profits in the short run will only be able to break even in the long run because demand will decrease and the average total cost of the firm will increase. A firm belonging to the monopolistically competitive market will make zero profit in the long run. This is an illustration of the amount of influence that a firm has over the market because of brand loyalty and thus can manipulate its customers by raising its prices without losing all of its customers. This means that an individual firm's demand curve is a downward sloping one. The demand curve of a monopolistic firm is in contrast with a perfectly elastic demand schedule in perfect competition (Wiens, 2010) Michael Porter has described competitive strategies as "taking offensive or defensive actions to create a shielded position in an industry”. The research conducted by him concluded that there are three generic strategic approaches to outshine other firms in an industry: overall cost leadership, differentiation, and focus/determination of a company (Sharp,1991).


Differentiation can be achieved through diverse attributes such as low price, better quality, high quality customer service, reputation, awareness, and availability of the products. The real challenge in marketing is to identify the different characteristics which will benefit consumers (such that competitive advantage will be gained). The benefit must be one which the company is capable of delivering in due time and which will be difficult for a competitor to duplicate (i.e. it should be a sustainable advantage). It should ideally be such an advantage for which customers will pay a sufficient premium enough to cover any increased costs incurred in delivering this added benefit (Perry, 2017). Differentiation has been interpreted by marketing and strategic management messages as ‘one in a kind’, ensuring that the offered product is perceived by the customer, as unique in some aspect. The inadequacy of this definition is apparent, in that logically any new offering must be different in some way for customers to buy it (Lofgren, 2020)

The automobile industry is one of the most gruesome industries in the economy and contributes a major portion to an economy’s gross domestic product. The auto manufacturing industry is considered to be highly capital and labour-intensive (Nielson, 2016). There is always cut-throat competition among the firms and hence are very competitive in nature and try to outdo one another. All the firms cater to the same needs but have been able to distinguish themselves from one another due to the quality of products and services offered and marketing strategies (Whitney, 2020). In a competitive market, there are four major strategies adopted by firms. The first one is cost leadership which refers to a firm selling products and services at a cheap price which makes it extremely difficult for small businesses to cope up with (Caulton, 2017). Businesses that can produce their products at a cheap rate and sell them at a discount while being able to generate profits are usually the ones that follow this strategy as they can drive their competitors out of the market by consistently offering the lowest prices.


The second strategy adopted by firms is known as the cost focus strategy which is highly similar to cost leadership strategy however the major difference being that in a cost focus strategy the business targets a specific segment of the market and offers that market the lowest prices available (Webber, 2015). Another technique that firms resort to for differentiating their products from their competitors is the differentiation strategy. This focuses on identifying a characteristic that makes the company’s products/ services extraordinary. Similar to the cost focus strategy, the differentiation focus strategy targets a very specific segment of a market, but it offers them something unique that competitors are not able to offer(Stewart, 2020)


METHODOLOGY:


The theme of competitive marketing was explored using a case study that follows the journey of the advertising war between BMW and Audi. The billboard war between the two giants of the automobile industry took place in the year 2013 in Los Angeles. So far, the paper has reviewed extant literature on the size and perverse incentives of employing competitive advertising as a method of marketing. It has also provided a quick look at the different marketing strategies employed by firms belonging to different aspects of the market. The idea here is to view the case as an example of two things, both of which are related to competitive advertising. Firstly, the pros and cons of competitive marketing and secondly the response of consumers to such a type of advertising.


This paper makes use of a case-based method to develop its thesis. To understand the impacts of this advertising war, a variety of secondary sources such as journal articles, research papers, newspaper articles, and information on the websites of BMW and Audi were made use of. The paper thus analyses how competitive marketing helps a business increase its visibility and captures the attention of consumers. Behavioural aspects of attention-seeking through various marketing techniques are also highlighted in this case study. This study highlights the need for firms selling similar yet differentiated products to invest in branding their product well as they are easily substitutional in nature. The paper brings in light, the level to which content in terms of advertisements is consumed by the buyers. It highlights how advertisements are a method of converting potential consumers into real-time consumers and hence stating the power of marketing. Thus, by choosing this particular case study, the paper hoped to unravel the uncertainty that abounds in this domain, regardless of the superiority and potential of this aspect.


CASE STUDY:


The world of advertising has been altered immensely in the last few recent decades. Strategies, techniques, and use of the media involved in marketing are evolving and becoming intricate as each day passes. These advertisements are featured everywhere: public transports to the walls of buildings to the washrooms. In this manner, firms can increase their visibility in the eyes of consumers and an extensive amount of information travels into the consumer’s mind. Hence it becomes extremely difficult for advertising agents to come up with a truly memorable advertisement(American Marketing Association [AMA], 2017). As the need to grab the consumer’s attention is increasing, the majority of the world’s largest commercial enterprises find it hard to keep themselves relevant and hence they resort to competitive advertising. Competitive advertising can be described as the use of any form of paid promotion, which helps in differentiating one company’s products and services to that of its competitors. It is considered to be more efficient than regular advertising. It is due to the reduction in prices of goods and services during this time which is beneficial for consumers. The recall value of the brands involved increases multi-folds (Erstad, 2018). This technique can however also mislead people if it consists of outdated or incomplete information.


The advertising strategies adopted by car producers are rather aggressive. The first instant of this appeared in Los Angeles in 2003 when a poster displaying a hungry cheetah (BMW Х5) chasing Mercedes ML coloured as zebra appeared. There was an intense wa between Audi and BMW in 2006 as well. It began with BMW releasing a signboard that stated “Congratulations to Audi for winning South African Car of the Year 2006, from the Winner of World Car of the Year 2006” (Gross, 2016). Audi came up with a fierce reply to this with another poster that said, “Congratulations to BMW for Winning World Car of the Year 2006. From the Winner of Six Consecutive Le Mans 24 Hour Races 2000–2006”.This fight was then renewed in 2009 in Los Angeles when Audi called out BMW while advertising its A4 with the words, “ Your move, BMW”. BMW counter attacked by posting an advertisement on a billboard adjacent to that of the Audi advertisement. While advertising its M3, it challenged Audi with the word “Checkmate”. Audi then stroked at BMW with a hoarding that promoted its exquisite R8 model that stated “Your pawn is no match for our king”. Nevertheless, BMW was determined to win the battle and hence, secured an air balloon featuring its F1 sports car stating “Game over” (Pyles, 2009).


After BMW put up the billboard of “Checkmate”, Audi decided to involve its consumers to help the brand come up with an appropriate war strategy. Audi hosted a contest on Facebook wherein it invited all its consumers to design Photoshop images with quotes for a prospective attack on BMW. One of those entries ended up going up on the billboard. It was an image of the Audi R8 supercar with the statement, “Time to check your luxury badge. It may have expired”. Several advertising experts believed that BMW won the billboard war just by displaying the words “ Game over” along with taking the high road by not bothering to respond to Audi’s second response (Erstad, 2018). Consumers would agree that BMW won the Ad Battle. However, Audi made use of this opportunity to interact with its customers that increased the awareness and the visibility of the brand. It treated its customers as its business partners rather than typical purchasers which was appreciated by many. People blogged and tweeted about this incident which proved beneficial for both the parties. The strategic move of involving its customers in this process proved that Audi was concerned about the opinions of the people and not just defeating BMW. (Rain, 2015)


The effectiveness of comparative advertising is difficult to estimate as it does not necessarily lead to an increase in sales all the time. It is a common thought to believe that transmitting negative information about rival firms would generate a greater impact and captivate the attention of the buyers. However, the unpleasant impression can be transferred directly to the brand itself (Gross, 2016). Not only does the brand put its reputation at stake but also becomes an easy target for the market for indulging in dirty politics. For the time being, the firm becomes the talk of the town and the brand is appreciated by the people for its witty remarks which in some manner helps the firm in conveying its message to its clientele base.


DISCUSSION:


Advertising wars are an excellent way of advertising a brand product while directly comparing it to the goods/services provided by its competitors. Differentiation of companies via advertising is not a contemporary concept. After the first ever advertisement in 1972, The Federal Trade Commission issued a statement that allowed advertisers to name their competitor’s brand instead of representing it as a no name brand. The television networks were asked to accept such commercials to increase the awareness of consumers related to rival firms and products offered by them. It is allowed in the European Union as long as it does not lead to mis-confusion or put down a competitor. Similar rules also apply in the United States.


According to the researches done in the past, studies have suggested that competitive marketing or in more generic terms, advertising wars can to an extent be validated in terms of increase in sales or maximization of profits for the companies that indulge in it. It also gives the company a boost in terms of its visibility in the market. Marketing nowadays has become very diverse and does not necessarily involve endorsements by superstars. With the youth being invested in social media, the social media presence of a company makes a lot of difference. Firms resort to puns, catchy slogans, eye-catching pictures to appeal to the public. Brands such as Burger King, Zomato, Swiggy etc have been able to encash the social media space perfectly with their witty advertisements. These firm have created a strong recall value factor for themselves.


There are several pros to competitive advertising such as it can make your brand look good. A way to approach comparative advertising is to grasp your competitor’s shortcomings to your benefit as long as your brand can communicate how you do it better. Advertising wars can boost awareness of your brand. It cannot be questioned that competitive advertising can engage viewers chiefly where the firm is a newly launched brand and it is making comparisons with an established brand. Advertising wars captivate the attention of the viewers and several times, those viewers get converted into users of products. During an advertising war, a company is not only putting the other brand down but also endorsing its products in the process.


Regardless, there are many cons to this as well. If a firm is unable to market its brand well, it will reflect poorly and the firm could end up losing its customers too. A brand can only make competitive advertising work in its favour when it is done appropriately and with the right amount of savageness and appreciation for the other brand. If competitive advertising is done smartly and efficiently, it helps the brand in the long run. The brand establishes a name for itself and with the mention of a particular item, the brand name pops up in everyone’s head. As long as advertising wars are conducted in respectable fashion, it is beneficial for all the parties involved.


SOLUTIONS AND RECOMMENDATIONS :


Battle of the billboard as some people call it proved to be beneficial for both the companies even though according to a few consumers, BMW’s final strike implied victory for the Germany based luxury car brand. The purpose of billboard advertising was to get as much attention of the consumers on the hoardings and their brand as possible. This dispute managed to create a tsunami of PR and social media attention which was very valuable for both sides. Two high end car brands, BMW and Audi share a respectable rivalry relationship with one another. While there have been no battles of the same magnitude as this one, nonetheless, these luxurious brands are often seen taking digs at each other on several social media platforms and mediums of advertising.


There is no concrete data to substantiate the increase in sales of two companies after this particular incident of marketing per se however, experts say that this act proved beneficial for both. In a world that is dominated by social media, an incident of this magnitude just had people talking about the two brands for days. Both the brands were appreciated for their sense of humour and use of puns. This incident took place in Los Angeles. However, if they wanted a greater reach in terms of different continents, the two companies could have had similar wars in other countries such as India, Australia, Germany to name a few. It was a series of billboard hoardings being put up for 2-3 days. The attention gained by this act does not validate the amount of money spent on the same. In the future, the companies could adopt these strategies but do it on a smaller scale in terms of the size of the hoardings. Turning this event into one hoarding and a one-day event could be a suitable strategy.


CONCLUSION:


In today’s competitive world, all firms are just invested in the process of increasing their profit margins while trying to stay relevant in the market. Firms have adopted various advertising strategies to achieve this goal. There is no clear cut formula for success in case a company adopts the method of an advertising war to endorse its products. However, the attention that a company can gather from this incident is unparalleled. This method is usually adopted by those companies that are already big giants in their market space, but wish to create a monopoly for the same. In the case of the Battle of Billboards of Audi and BMW, several hoardings were put up which involved large costs. Such a method of advertising is employed by companies at a very late stage in their career. Companies prefer to be established in the market before spending enormous amounts on advertising and just for attention-seeking. Advantages and disadvantages of competitive marketing have to be kept in mind before adopting this method. However, as long as companies engage in it with a sportsman spirit and have a sense of admiration and respect for their competitors, it is a win-win situation for both parties involved. The BMW and Audi billboard war is still spoken of even though it occurred a long time ago which proves that these strategies leave a long-lasting impact on consumers.


Therefore, a company needs to think very strategically before embracing the practice of competitive advertising. The Battle of Billboards cannot be stated as a failure or a success as it depends on the perspective of the companies involved in it. If the vision was to grab the attention of consumers, both companies were able to do so and hence this was a success. However, if the vision was to see an increase in sales of the cars of the respective companies, we cannot come up with a definitive conclusion as enough literature and data on the sales of the two companies after this marketing incident is not available.


FUTURE RESEARCH DIRECTIONS

To make research in this field of study more comprehensive, research gaps found in this academic paper could be looked into by future researchers. Changes in sales of the companies before and after indulging in an advertising war is an aspect that could be studied in detail in the near future. The impact on the reputation of the companies that indulged in the same could be analysed through conducting primary surveys. The behaviour of consumers in terms of their perspective towards advertising wars and if it attracts them to purchase goods or services from those firms could be another facet to research on. The comparison between the advertising wars of different companies belonging to different segments of the market such as automobiles, fast- moving consumer goods, etc could be studied in detail. It would assist the researchers in understanding how the impact of advertising varies for different segments and why is that so. Conducting interviews with officials of the companies involved in these advertising wars; understanding their whole perspective towards it and if this was a failure or a success according to them is another aspect that could be explored.


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