Ford Online – New Distribution Channels

Ford have become the first car manufacturer to sell their cars directly to the customer online: encompassing the ‘Place’ element of the ‘Marketing Mix’. Although one would expect this to have happened first in Japan – given their high-tech reputation and hugely successful car manufacturing industry – through Ford Online British customers can request a car, have it delivered to a wholly owned dealership and sign-and-drive away the car. It seems simple enough; almost anything can be purchased online now-a-days anyway. So why is it that Ford have altered their Marketing Mix when their competitors have focused on traditional channels of distribution?

There are unfortunately several reasons why none of the car firms, even the Japanese ones, have tried online selling, which may be an indication that it will not be successful. Albeit customers can still try before they buy, there will no longer be sales-people to try to up-sell the customer – extended warranties, limited edition paint and electronic gizmos have high-margins, yet, as luxuries, customers particularly during a recession will need convincing that they really do add value. Moreover, there is less customer interaction with the product. Yes, the chosen car may be perfectly fine during the test drive; but choosing the car to test becomes a whole lot harder when using their website, especially given high cost of the product. Speaking of ‘Price’, another element of the ‘Marketing Mix’, there are no price discounts online nor are there sales-people to haggle with, an important issue given cars are income elastic.

But, of course, Ford are not a bunch of idiots – they have interviewed their customers to come to this change in distribution – and the change could actually present a number of benefits. In addition to a straight forward PR competitive advantage, it is more cost-efficient to hold cars centrally – as there is more potential for less intermediaries and more JIT stock control –  and allows greater consumer customisation of the car. Likewise, by distributing to only 12 regional delivery centres, as well as promoting exclusivity, there is no simultaneous need to promote a ‘Channel Value Proposition’ to the various intermediaries, which means that sales-people will not be too aggressive, as they are monitored under quality-control programs. There is also a greater scope for online advertising, where already many consumers look online before visiting a dealership to select a car.

So will the new distribution channel work? Well, that depends on what their current marketing strategy wants to achieve. Ford knows that they are not going to revolutionise (again) the way people buy their cars nor gain huge volumes of sales that would boost their market share. But, as a more realistic aim,  Ford can boast innovation over competitors – a minor accomplishment, but psychologically it will benefit management knowing they are one step ahead of the competition, even if no one else wants to follow suit.

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