Porsche: Guarding theOld While Bringing in theNew

Porsche (pronounced Porsh-uh) is a unique company. It has always been a niche brand that makes cars fora small and distinctive segment of automobilebuyers.In2009,Porschesoldonly27,717carsinthefivemodels it sells in the United States. Honda sold about 10 times that manyAccords alone.ButPorscheowners areasrareastheirvehicles.Forthatreason, top managers at Porsche spend a great deal of time thinking about customers. They want to know who their customers are, what they think, and how theyfeel. They want to know why they buy a Porsche rather then a Jaguar, a Ferrari, or a big Mercedes coupe. These are challenging questions to answer; even Porsche owners themselves don't knowexactly what motivatestheirbuying.ButgivenPorsche'slowvolumeandtheincreasingly fragmented auto market, it is imperative that management understands its customers and what gets their motorsrunning.

THE PROFILE OF A PORSCHE OWNER

Porsche was founded in 1931 by Ferdinand Porsche, the man credited for designing the original Volkswagen BeetleAdolf Hitler's "people's car" and one of the most successful car designs of all time. For most of its first two decades, the company built Volkswagen Beetles for German citizens and tanks and Beetles for the military. As Porsche AG began to sell cars under its own nameplate in the 1950s and 1960s, a few constants developed. The company sold very few models, creating an image of exclusivity. Those mode shadarounded,bubbleshape thathaditsrootsintheoriginal Beetle butevolvedinto somethingmorePorsche-likewiththeworldfamous356and 911models.Finally,Porsche'sautomobilesfeaturedair-cooledfour-andsix- cylinder"boxer "motors(cylindersinanopposed configuration)in therearof the car. This gave the cars a unique and often dangerous characteristica tendency for the rear end to swing out when cornering hard. That's one of the reasons that Porsche owners were drawn to them. They were challenging to drive, which kept most people away. Since its early days, Porsche has appealed to a very narrow segment of financially successful people. These are achievers who see themselves as entrepreneurial, even iftheyworkforacorporation.Theysetveryhighgoalsforthemselvesand

then work doggedly to meet them. And they expect no less from the clothes they wear, the restaurants they go to, or the cars they drive. These individuals see themselves not as a part of the regular world but as exceptionstoit.TheybuyPorsches becausethecarmirrorstheirs elf-image; itstandsforthethings ownersliketoseeinthemselvesandtheirlives.Most of us buy what Porsche executives call utility vehicles. That is, webuy cars primarilytogoto work, transportchildren, andrunerrands.Because weuse our cars to accomplish these daily tasks, webase buying decisions on features such as price, size, fuel economy, and other practical considerations. But Porsche is more than a utility car. Its owners see it as a car to be enjoyed, not just used. Most Porsche buyers are not moved by informationbutbyfeelings.APorscheislikeapieceofclothingsomething the owner "wears" and is seen in. They develop a personal relationship with their cars, one that has more to do with the way the car sounds, vibrates, andfeels, ratherthanthehowmanycupholder sithasorhowmuchcargoit can hold inthe trunk. They admire their Porsche because it is a competent performance machine without being flashy or phony. People buy Porsches because they enjoy driving. Ifall they needed wassomething to get them frompointAtopoint,theycouldfindsomethingmuchlessexpensive.And whilemanyPorscheowners arecarenthusiasts,someofthemarenot.One successful businesswoman and owner of a high-end Porsche said, "When I drive this car to the high school to pick up mydaughter, I end up withfive youngstersinthecar.IfIdrive anyothercar,Ican't evenfindher;shedoesn't want to comehome."

FROM NICHE TO NUMEROUS

For its first few decades, Porsche AGlived bythe philosophy of Ferry Porsche, Ferdinand's son. Ferry created the Porsche 356 because no one else made a car like he wanted. "Wedid no market research, we had no sales forecasts, no return-on-investment calculations. None of that. I very simply built mydream car and figured that there would be other people who sharethat dream."So,really, PorscheAGfromthebeginningwasverymuch likeitscustomers:anachieverthatset outtomaketheverybest.Butasthe years rolled on, Porsche management became concerned with a significant issue: Were there enough Porsche buyers to keep the company afloat? Granted, the company never had illusions of churning out the numbers ofa

Chevrolet or a Toyota. But to fund innovation, even a niche manufacturer hastogrowalittle.AndPorschebegantoworrythatthequirkynature ofthe people who buy Porsches might just run out on them. This led Porsche to extend its brand outside the box. Inthe early 1970s, Porsche introducedthe 914, a square-ish, mid-engine, two-seater that was much cheaper than the 911. This meant that a different class of people could afford a Porsche. Itwas no surprise that the 914 became Porsche's top selling model. Bythe late 1970s, Porsche replaced the 914 with a hatchback coupe that had something no other regular Porsche model had ever had: an engine in the front. At less than $20,000, more than $10,000 less than the 911, the 924 andlater944modelswereonceagainPorsche'spitchtoaffordability.Atone point, Porsche increased its sales goal by nearly 50 percent to 60,000 cars a year. Although these cars were in many respects sales successes, the Porsche faithful cried foul. They considered these entry-level models to be cheap and underperforming. Most loyalists never really accepted these models as "real" Porsches. Infact, they were not at all happy that they had tosharetheirbrandwithacustomer whodidn'tfitthePorsche ownerprofile. They were turned off by what they saw as a corporate strategy that had focused on mass over class marketing. This tarnished image was compounded by the fact that Nissan, Toyota, BMW,and other car manufacturers had ramped up high-end sports car offerings, creating some fierce competition. Infact, both the Datsun 280-ZX and the Toyota Supra were not only cheaper than Porsche's 944 but also faster. A struggling economy threw more sand in Porsche's tank. By1990, Porsche sales had plummeted, and the company flirted withbankruptcy.

RETURN TO ITS ROOTS?

ButPorsche wasn'tgoingdownwithoutafight.Itquickly recognizedtheerror of its ways and halted production of the entry-level models. Itrebuilt its damaged image by revamping its higher-end model lines with more race- bredtechnology.Inanefforttoregainrapport withcustomers,Porsche once again targeted the high end of the market in both price and performance. Itset modest sales goals and decided that moderate growth with higher margins would be more profitable in the long term. Thus, the company set out to make one less Porsche than the public demanded. According to one executive,"We'renotlooking forvolume;we'researchingforexclusivity."

Porsche's efforts had the desired effect. Bythe late 1990s, the brand was once again favored by the same type of achiever who had so deeply loved the car for decades. The cars were once again exclusive. And the company was once again profitable. But by the early 2000s, Porsche management was again asking itself a familiar question: To have a sustainable future, could Porsche rely on only the Porsche faithful? According to then CEO Wendelin Wiedeking, "For Porsche to remain independent, it can't be dependent on the most fickle segment in the market. Wedon't want to become just a marketing department of some giant. Wehave to make sure we'reprofitableenough topayforfuturedevelopmentourselves."Soin2002, Porschedidtheunthinkable.Itbecame oneofthelastcarcompaniestojump into the insatiable sport utility vehicle (SUV) market. At roughly 5,000 pounds, the new Porsche Cayenne was heavier than anything that Porsche had ever made, with the exception of some prototype tanks it made during WWII. Once again, the new model featured an engine up front. And it was thefirst Porschetoeverbeequipped withseatbeltsforfive.Asnewsspread aboutthecar'sdevelopment,howlscouldbeheardfromPorsche'scustomer base. But this time, Porsche did not seem too concerned that the loyalists would be put off. Could itbe that the company had already forgotten what happened the last time it deviated from the mold? After driving one of the first Cayenne's off the assembly line, one journalist stated, "A day at the wheel of the 444 horsepower Cayenne Turbo leaves two overwhelming impressions. First, the Cayenne doesn't behave or feel like an SUV, and second, it drives like a Porsche." This was no entry-level car. Porsche had createdatwo-and-a-halftonbeastthatcouldaccelerateto60miles perhour in just over five seconds, corner like it wason rails, and hit 165 miles per hour,allwhilecoddlingfiveadultsinsumptuousleatherseatswithalmostno wind noise from the outside world. On top of that, it could keep up with a Land Rover when the pavement ended. Indeed, Porsche had created the Porsche of SUVs. Last year, Porsche upped the ante one more time. It unveiled another large vehicle. But this time, it was a low-slung, five-door luxury sedan. The Porsche faithful and the automotive press again gasped in disbelief. But by the time the Panamera hit the pavement, Porsche had proven once again that Porsche customers could have their cake and eat itto.ThePanameraisalmostasbigastheCayenne butcanmovefouradults down the road at speeds of up to 188 miles per hour and accelerate from a standstillto60milesperhourinfoursecondsflat.AlthoughsomePorsche

traditionalists would never be caught dead driving a front engine Porsche that has more than two doors, Porsche insists that two trends will sustain these new models. First, a category of Porsche buyers has moved into life stages that have them facing inescapable needs; they need to haul more peopleandstuff.Thisnotonlyappliestocertainregular Porschebuyers,but Porscheisagainseeing buyersenteritsdealershipsthatotherwisewouldn't have. Only this time, the price points of the new vehicles are drawing only the well heeled, allowing Porsche to maintain its exclusivity. These buyers also seem to fit the achiever profile of regular Porsche buyers. The second trend is the growth of emerging economies. Whereas the United States has long been the world's biggest consumer of Porsches, the company expects China to become its biggest customer before too long. Twenty years ago, the United States accounted for about 50 percent of Porsche's worldwide sales. Now, it accounts for only about 26 percent. In China, manypeople whocanaffordtobuyacarasexpensiveasaPorsche alsohireachauffeur. TheCayenneandthePanamera areperfectforthosewhowanttobedriven aroundinstylebutwhomayalsowanttomakeaquickgetaway ifnecessary. The most recent economic downturn has brought down the sales of just about every maker of premium automobiles. Whentimes are tough, buying acarlikeaPorschestheultimatedeferrablepurchase.Butasthisdownturn turns back up, Porsche isbetter poised than it has ever been to meet the needs of its customer base. Itis also inbetter shape than ever to maintain its brand image with the Porsche faithful and with others as well. Sure, understanding Porsche buyers is still a difficult task. But a former CEO of Porsche summed it up this way: "If you really want to understand ourcustomers, youhave to understand the phrase, 'If I were going to be a car, I'd be aPorsche.'"

Questions for Discussion

1. Analyze the buyer decision process of a traditional Porschecustomer.
2. ContrastthetraditionalPorschecustomerdecision processtothedecision process for a Cayenne or a Panameracustomer.
3. Whichconcepts from the chapter explain why Porsche sold so many lower-priced models in the 1970s and 1980s?
4. Explain how both positive and negative attitudes toward a brand like Porschedevelop.HowmightPorsche changeconsumerattitudes towardthe brand?
5. Whatrole does the Porsche brand play in the self-concept of itsbuyers?

Guidelines:

1. Write up Introduction of case

2. Write up summary of case

3. Try to conceptual answer of the questions that are given into case.

4. Write up Conclusion of case