An effective auto show program for Mercedes-Benz USA
Author Caroline Henneman (1062956)
University Rijksuniversiteit Groningen
Faculty Management & Organization
First supervisor Mr. Drs. H.A. Ritsema Second supervisor Drs. M.E. Boon
Supervisor Mercedes-Benz L. Marchiona
Place Montvale, New Jersey, United States of America Groningen, The Netherlands
Date March 2004
Management Summary
This thesis researches the process of developing an effective auto show program for MBUSA.
Methods to measure and improve the effectiveness of trade shows will be described.
The research objective is:
Develop a new effective auto show program in such a way that it contributes more to MBUSA’s marketing objective regarding this program.
The research question is:
How can MBUSA make its auto show program more effective?
An auto show program is in this thesis defined as the actions which need to be taken to get an overview of the shows which MBUSA needs to attend to get the most return on their investment. With effectiveness is meant, return on investment. Return on investment can be defined in two ways. First MBUSA should attend those shows which will give them the most product and/or feature awareness.
Second, MBUSA should attend those shows which will lead to the most sales leads.
MBUSA has set criteria to measure the effectiveness of an auto show. A show has to meet these criteria before MBUSA will consider attending this show. These criteria are chosen because they appeared to be important for measuring the performance of a show in the past. The current auto show program is not effective because it doesn’t meet these effectiveness criteria. A new program based on the effectiveness criteria should be developed. The first step in developing an effective program is already done, MBUSA has set effectiveness criteria. The next step is to develop a method to compare the performance of shows. The point system is a method which can compare the performance of shows and combines certain criteria. To the criteria weights are assigned. Based on the criteria, and the information of region and market managers and data stored in the database, MBUSA has designed a new effective program.
In the literature we find methods to develop trade show programs and to measure their effectiveness, but they are all based on measuring effectiveness after the show has been attended. When comparing MBUSA’s program to the literature a few important differences can be seen:
• MBUSA does not define a target audience.
• MBUSA does not project actual costs before deciding to attend a show.
• MBUSA does not communicate effectively with the prospects
• MBUSA does not take evaluations of attendees into account.
Gopalakrishna and Lilien’s model is used in this research to measure the performance of trade shows.
This model is chosen for two reasons; the first one is because it measures effectiveness by using efficiency. Efficiency is used in this research as an important part of effectiveness. They measures effectiveness with three kinds of efficiency and tactical variables.
The second reason for choosing this model is because they collect information from attendees and information from other exhibiting firms. This leads to an objective view on the performance of a firm at a show and to a solid base when deciding what show to attend.
MBUSA’s auto show program wants to measure effectiveness before attending a show. This seems not to be possible, because there is no specific information on MBUSA’s performance at trade shows on forehand.
Because an auto show program is only effective when the shows MBUSA attends are effective for MBUSA, the revised auto show program can not lead to an effective auto show program. However, it could be used to do recommendations on what shows to attend.
When developing a model to do recommendations, a few adjustments must be made to the current design:
• Market share should be removed from the criteria on which auto shows should be evaluated.
• An efficiency/effectiveness balance should be developed before recommendations are made.
• The target audience should be defined.
The effectiveness of auto shows can only be measured after the company has attended the show. The steps that need to be taken to develop an effective auto show program are:
• Defining the target audience;
• Communicating with target audience;
• Measure effectiveness conform Gopalakrishna and Lilien’s model.
These steps require information from both attendees and other firms exhibiting.
This research concludes that effectiveness of shows can not be defined before attending the shows.
Too much information from different sources, attendees, other exhibiting firms, booth personnel, is required to evaluate the effectiveness. MBUSA’s model can therefore only be used as a model to do recommendations on what shows to attend. An effective auto show program can be developed, but has first to define the target audience, then methods to communicate with the target audience and as last measure the effectiveness of the shows according to Gopalakrishna and Lilien’s model, or another established measurement technique.
Table of contents
Preface
Management summary
Chapter 1 Introduction 7
1.1 DaimlerChrysler 7
1.2 Mercedes Car Group 9
1.3 Mercedes-Benz USA 10
1.4 Brand Event Marketing 12
Chapter 2 Research design 14
2.1 MBUSA’s auto show program: the problem field 14
2.2 Conceptual design 15
2.2.1 Research objective 15
2.2.2 Research question 15
2.2.3 Description of the conceptual model 15
2.2.4 Conceptual model 16
2.2.5 Sub questions 18
2.2.6 Restrictions 18
2.3 Research strategy 19
2.3.1 Type of research 19
2.3.2 A problem solving research 20
2.4 Data collection 20
2.4.1 Documentation 20
2.4.2 Interviews 21
Chapter 3 Analysis of MBUSA’s auto show program 22
3.1 Reasons to attend auto shows for MBUSA 22
3.2 A description of MBUSA’s current auto show program 23
3.3 Effectiveness for MBUSA 23
3.3.1 Show structure 24
3.3.2 Market structure 25
3.3.3 Competitor structure 26
3.4 The level of effectiveness of MBUSA’s current auto show program 26 3.5 Methods to analyze and calculate with the collected data 27 3.5.1 Method 1 The attendance/days standard 28
3.5.2 Method 2 The scale method 28
3.5.3 Method 3 The point system 30
3.6 Preferred method according to MBUSA 30
3.7 Assigning weights to the criteria 31
3.8 MBUSA’s revised effective auto show program design 32 Chapter 4 A theoretical framework of an effective auto show program 35
4.1 What is effectiveness? 35
4.2 What are trade shows? 36
4.3 The role of trade shows in the marketing mix 38
4.4 Effectiveness of trade shows 39
4.4.1 Setting objectives 40
4.4.2 Communicating to the target audience 42 4.4.3 Evaluating the performance of trade shows 43 Chapter 5 Evaluating MBUSA’s revised auto show program 48
5.1 A comparison between Cavanaugh’s model and MBUSA’s revised effective
program 48
5.2 Evaluating MBUSA’s communication to the target audience 50
5.3 Evaluating MBUSA’s effectiveness of exhibiting 51
5.3.1 Gathering information 51
5.3.2 Different criteria 52
5.3.3 Summary 54
Chapter 6 Recommendations, a re-design for MBUSA’s autoshow
program and conclusion 56
6.1 The reason for the re-design 56
6.2 Recommendations to make MBUSA’s revised program more effective 56
6.3 A concrete re-design 57
6.4 Conclusion 58
Reflection Literature
Appendices A - F
Chapter 1 Introduction
The research described in this thesis has been conducted in the Consumer Events and Sports Marketing department, which is a subdivision of the Brand Event Marketing department of Mercedes Benz USA, Montvale, New Jersey. To gain insight in the structure of the Mercedes-Benz organization, this chapter provides a global overview of the DaimlerChrysler Group in paragraph 1.1. An overview of the Mercedes Car Group has been given in paragraph 1.2, a comprehensive description of Mercedes Benz USA in paragraph 1.3 and an overview of the business unit Brand Event Marketing in paragraph 1.4
1.1 DaimlerChrysler
DaimlerChrysler is one of the world's leading automotive companies. It is a global transportation company with many subsidiaries. Some of the subsidiaries manufacture and distribute both passenger and commercial vehicles.1 DaimlerChrysler’s passenger car brands include Maybach, Mercedes-Benz, Smart, Dodge, Chrysler and Jeep. The commercial vehicle brands include Mercedes-Benz Commercial, Setra, Freightliner, Sterling and Western Star Trucks. Other DaimlerChrysler subsidiaries are involved in aerospace, microelectronics, engine design and manufacturing. It also has subsidiaries that serve as marketing companies worldwide.
DaimlerChrysler is the result of a merger between Daimler-Benz and Chrysler Corporation on November 17, 1998. The reason for the merger was simple: Both companies wanted to keep growing on the increasingly competitive markets in Europe and North-America. At the same time they wanted to gain a larger market share at the growing markets in Asia, South-America (Latin America) and East-Europe. A merger seemed to be the best way to accomplish these goals.
Intensive research showed that Daimler-Benz and Chrysler Corporation were perfect partners for a merger.2 They completed each other perfectly on the automotive as well as on the geographical market. Chrysler had a strong established position in North America and Daimler-Benz had a strong position in the European market. Both companies were well known for their technical innovations, both had a passion for building high quality vehicles for passenger and commercial use, and both had a desire for high profits for shareholders and secure employment for the future.
The DaimlerChrysler group is headquartered in Stuttgart, Germany and in Auburn Hills, Michigan, United States of America (USA). The group has manufacturing facilities in 37 countries and its products are sold in more than 200 countries.
1 DaimlerChrysler Annual report, 2002, p. 5
2 DaimlerChrysler internal information: Information regarding the merger of Daimler-Benz and Chrysler, p. 12
Figure 1-1 Daimler Chrysler Organizational Chart3
DaimlerChrysler’s strategy is based on the four pillars of:4
• global presence through the development of the dynamic operations in all important automotive markets, to profit from regional growth and to attract new customers;
• strong brands, creating efficient and effective market pull at the same time as they promote customer loyalty;
• a broad product range, serving all customer needs, exploring and profiting from new market niches or segments and allowing savings through significant economies of scale; and finally
• leadership in technology, underpinning DaimlerChrysler’s position as the world automotive industry’s foremost innovator and providing the key to further product differentiation.
Its purpose is to be a global provider of automotive and transportation products and services.
According to its management, strong brands, pioneering technologies, innovative products and first class services have turned DaimlerChrysler into one of the most respected companies worldwide.
3 DaimlerChrysler Annual report 2002, p. 5
4 DaimlerChrysler Annual report 2002, p. 16
Chrysler Group
DaimlerChrysler group
Passenger Cars Commercial Vehicles
DaimlerChrysler Service
Participations Strategic partners
Mercedes Car Group Mercedes- Benz Smart Maybach
Chrysler Dodge Jeep
Mercedes-Benz Freightliner Sterling Trucks Setra Western Star Trucks
DC Bank MTU Aero
Engines EADS
Mitsubishi Motors Corporation FUSO Hyundai Motor
1.2 Mercedes Car Group
In the late 1800s, Gottlieb Daimler and Karl Benz lived and worked 60 miles apart in Germany. Yet these two men, who are most responsible for the perfection of the internal combustion engine and the start of the modern transportation era, never met. In fact, their companies were fierce rivals in the late 19th and early 20th centuries.5
In 1900, the year that Gottlieb Daimler died, an Austrian businessman, Emile Jellink, agreed to buy 36 Daimlers (at that time 25% of the 1900 production) in for exclusive franchises in Austro-Hungary, France, Belgium and the USA; a seat on the board; and the right to name the cars after his 10-year-old daughter, ‘Mercedes’.
It was not until the mid-1920s, long after Benz had ceased to take an active role in his company, that the two giants of the internal combustion engine industry merged their resources and began working together. In 1926, Daimler and Benz officially became Daimler-Benz AG with a new trademark, the three pointed star and the laurel wreath.
The Mercedes-Benz division is divided in two types of organizations: Market Performance Centers (MPCs) and Market Cost Centers (MCCs). A MPC is basically responsible for the sales of Mercedes- Benz cars. Mercedes-Benz USA is after Germany the biggest MPC and is responsible for about 20%
of the total Mercedes-Benz sales. A MCC is a production plant, technical- or research institute that is not generating revenue, but incurs costs. MCCs are necessary to produce, test and distribute the cars in order to be sold by MPCs.
The Smart division of Mercedes-Benz is responsible for producing, marketing and selling the Smart.
The Smart car is a result of the joint-venture between Mercedes-Benz and the Swiss watchmaker, Swatch. A Smart is a small, environmental-friendly car, which was invented to be used in metropolitan areas. Until now Smart cars are only sold in Europe, but in two years they will make their journey overseas, and will be sold in the United States too.
The Maybach division of Mercedes-Benz is responsible for producing, marketing and selling the Maybach. The Maybach is a luxury car, in the biggest sense of the word. Wilhelm Maybach, a gifted inventor and design engineer, gave the automobile the form which we know today. His son Karl continued to pursue his father’s vision and created luxury cars which opened up a new dimension in vehicle manufacturing. The period from 1920 to 1936 was the first great Maybach era. It was a time
5 Mercedes-Benz internal magazine, ‘The origin of the brand’, p. 12
that saw the emergence of a way of life dominated by style and sophistication. Nowadays there are just two models of the Maybach, the 57 and the 62. The price of the cars starts at approximately USD 290,000.
1.3 Mercedes-Benz USA
Mercedes-Benz USA (MBUSA), LLC, is a wholly-owned subsidiary of DaimlerChrysler North American Holding Corporation based in Auburn Hills. MBUSA is a MPC, and responsible for the sales, service and marketing of Mercedes-Benz products in the United States. In 2001, the company sold 206,638 vehicles, cars and light trucks in the USA, setting the highest sales volume ever in its history.6 MBUSA has been founded in 1965 with headquarters in Fort Lee, New Jersey and moved to its current headquarters in Montvale, New Jersey in 1972. Prior to the founding of MBUSA, Mercedes-Benz cars were sold in the United States from 1957 to 1964 by Mercedes-Benz Sales Inc., a subsidiary of the Studebaker-Packard Corporation.
Currently there are 310 Mercedes-Benz Centers in the United States, including one Mercedes-Benz Center owned by MBUSA, Mercedes-Benz Manhattan, which is located in New York City. A Mercedes-Benz Center functions as an authorized car dealer for a certain area. In addition to marketing passenger cars and light trucks to clients, MBUSA also sells parts, accessories and specialty items.
Mercedes-Benz USA consists of five business units:
• Marketing: responsible for communication, vehicle administration, and product management;
• Finance and Control: responsible for all financial planning, controlling, purchasing, and IT;
• Sales: responsible for the logistics and sales in the 6 regions defined by MBUSA; New York, San Francisco, Jacksonville, Washington, Los Angeles, Chicago;
• Customer Service: responsible for products, parts and services;
• Pre-owned and Fleet operation: responsible for the used cars program and responsible for car distribution.
6 http://www.mbusa.com/brand/aboutus/company
Fi gure 1-2 Organization structure Executive Management Level MBUSA
Mercedes-Benz USA’s Vision: To Be The Best Car Company in America.7
Mercedes- Benz USA’s Mission: Each of us will deliver excellence in all facets of our business, while creating an environment that inspires world class performance, achieves customer advocacy, ensures profitable growth, and strengthens the Mercedes-Benz brand.
Mercedes-Benz USA’s Strategic Objectives:
• Develop our people with benchmark human resource practices that recognize performance;
• Create a marketing presence which differentiates us and strengthens the desirability of the brand and its products;
• Establish an effective sales organization that results in an exclusive and profitable dealer network that delivers on targets and customer expectations;
• Provide services which are customer focused, timely and profitable;
• Develop transparent processes that are measured, monitored, and improved upon to ensure profitable growth;
• Create cross functional communication processes which generate the consistent flow of information.
7 DaimlerChrysler Annual report 2002, p. 4
VP Marketing Michelle Cervantez
VP Fin & Cltlg Norbert Litzkow
VP Sales Keith May
VP Cust Services Klaus Ulkann
VP Pre-owned &
Fleet operation Dave Schembri President & CEO
Paul Halata
Figure 1-3 How MBUSA wants to accomplish its vision ‘To be The Best Car Company in America’
The core competence of MBUSA is to market and sell the Mercedes-Benz cars throughout the USA.
The company offers a wide range of products: 33 car types are positioned in the luxury car market and five car types are positioned in the Sport Utility Vehicle (SUV) market.
As American cars mostly have larger engines, MBUSA offers a different range of cars than elsewhere in the world.
1.4 Brand Event Marketing
The Marketing Business Unit consists of five different divisions, each having their own departments.
Figure 1-4 Organizational structure of the Marketing Business Unit of MBUSA
The Brand Event Marketing department is part of the Marketing Communications division. It has its own mission and its own strategic objectives all deducted from the vision to be the best car company in America.
VP Marketing Michelle Cervantez
E-Business Marketing
Communications
Vehicle Logistics/
Distribution
Pre-owned Marketing &
Vehicle administration
Product Mgmt/
Passenger Car/Light Truck
Its mission is: Create memorable customer-focused brand experiences that cultivate excitement and desirability for Mercedes-Benz and its products. 8
Its strategic objectives are:
• Identify and know the target market and customers to fulfill their desires
• Lead the generation of cross-disciplined, synergistic one-to-one marketing programs for MBUSA
• Establish relevancy in the marketplace to further a strong brand identity
• Ensure the effectiveness and value of one-to-one programs from conception to completion
• Develop, energize and continually challenge the Brand event Marketing team to be the industry leader for innovative marketing programs
The Brand Event Marketing department is subdivided in four areas:
• Relationship Marketing
• Internet Marketing
• Lifestyle Marketing
• Consumer Events and Sports Marketing
The research described in this thesis is a project within the Consumer Event and Sport Marketing Department. This chapter describes the context in which this research has taken place. The next chapter describes the fundaments and the set-up of the rest of this research.
8 Internal Mercedes-Benz Marketing information
Chapter 2 Research design
This chapter gives an introduction to the problem field (paragraph 2.1) and an overview of the research design. The research design can be divided in two groups of activities.9 The first group concerns about the deliverables to the research, the conceptual design (paragraph 2.2). The research objective (paragraph 2.2.1), the research question (paragraph 2.2.2), a description of the conceptual model (paragraph 2.2.3), the conceptual model (paragraph 2.2.4), the sub questions (paragraph 2.2.5), and the restrictions (paragraph 2.2.6) are described in this paragraph 2.2. The second group of activities deals with the question how the conceptual design is achieved, and includes the type of research (paragraph 2.3) and describes the way to get the information needed (paragraph 2.4).
2.1 MBUSA’s auto show program: the problem field
MBUSA wants to review its current auto show program. There are 82 auto shows throughout the USA. MBUSA is currently attending 25 of these shows. These 25 shows are nationally supported. The remaining shows are regionally supported or they don’t have Mercedes-Benz (MB) participation at all.
MBUSA has currently categorized the shows in A, B, C, and D shows. A- shows are the largest shows; they usually get a lot of press attention, are located near a big city and have a high attendance rate. D- shows are the smallest shows; they usually will not get press attention and they are not located near a big city. All 25 shows MBUSA is supporting nationally are all A, B, and C shows.
The main reason MBUSA wants to review its current auto show program is because it is not effective.
In MBUSA’s opinion its auto show program could generate more product and feature awareness and could maximize the investments done in the program to achieve more sales leads (and so increase the sales), if only it attends the right shows with the right amount of money.
A second reason for reviewing the current program is the fact that MBUSA’s product group has quadrupled in offerings since the last review. Momentarily Mercedes-Benz has nine models and more than 38 different types of cars. A third reason is that the competitors have changed over the past couple of years. For every model are different competitors, such as Lexus, Jaguar, Cadillac, BMW and Infinity. In appendix A provides an overview of all the competitors by class. A fourth reason for the review is the amount of dealerships. Since the last review MBUSA has gone from more than 420 dealerships to 320. The number of dealerships is important for the review, since not the home office but the dealerships are present at the auto shows.
Pursuant to the reasons mentioned above, MBUSA wants to develop a new auto show program which provides more insight about the individual markets and the performance of MBUSA at the auto shows in these markets.
9 Verschuren en Doorewaard (2000), p. 16-17
2.2 Conceptual design
The conceptual design consists of the research objective (paragraph 2.2.1), the research question (paragraph 2.2.2), the description of the conceptual model (paragraph 2.2.3), the conceptual model (paragraph 2.2.4), the sub questions (paragraph 2.2.5) and the restrictions (paragraph 2.2.6).
2.2.1 Research objective
The research objective of this research is defined as follows:
Develop an effective auto show program in such a way that it contributes more to MBUSA’s marketing objective regarding this program.
MBUSA its marketing objective regarding the auto show program means, invest only in those auto shows that achieve the highest return on investment; those that are the most effective.
2.2.2 Research question
The research question encloses the knowledge which is required to meet the above research objective.
How can MBUSA make its auto show program more effective?
The research question can be defined more specific. With ‘how’ reference is made to the process that have to be followed in order to achieve the desired result and to the result itself, an effective auto show program.
With ‘an auto show program’ is meant the actions which need to be taken to get an overview of the shows MBUSA needs to attend to get the most return on its investment.
With ‘effective’ is meant the largest return on investment. MBUSA has a certain budget, approximately USD 12 million, to spend on auto shows each year. To get the most return on this money, MBUSA wants to know what shows it should attend and with what amount of money. Return on investment in this research can be defined in two ways. First, MBUSA should attend those shows that will give it the most product and/or feature awareness and second, MBUSA should attend those shows that lead to the most sales leads.
2.2.3 Description of the conceptual model
As mentioned above, the reason for this research is MBUSA’s dissatisfaction about the current auto show program. Therefore the current program is the input for the research. MBUSA wants its auto show program to contain certain criteria so the effectiveness of the auto show program can be measured. When it appears that the current program doesn’t contain these criteria, the research question as mentioned has been defined. To give an answer to the question certain actions need to be
taken. First, the methods to collect data are described in paragraph 2.4. Data can be collected from internal sources, such as interviews with employees and intranet, and from external sources such as internet, existing literature and interviews with people from outside the company. Data is needed to find out which actions MBUSA has to take to develop an effective auto show program and data is needed to find literature about developing an effective trade show. This thesis describes the actions MBUSA has to take to develop an effective auto show program and the actions that need to be taken according to the literature. In chapter 3 MBUSA’s current program and the criteria to examine if an auto show is effective or not are described. Also three different calculation methods are described.
These methods have been developed to create a standard on which the performance of the different shows can be compared. One of these methods is chosen and based on this method a design for an effective auto show for MBUSA is made. In chapter 4 existing theories about the effectiveness of trade shows, and the actions which need to be taken to measure the effectiveness of a trade show, are described. First, according to the literature, objectives have to be set, then a plan to communicate with the target audience has to be developed and finally the effectiveness of the show should be evaluated on the criteria. Chapter 5 will evaluate MBUSA’s design and compare it with the literature. In chapter 6 recommendations on MBUSA’s auto show program will be done and a re-design will be made. This chapter ends with conclusions about the research.
2.2.4 Conceptual model
According to De Leeuw (1996)10 a conceptual model is a visual reflection of a system of concepts in which the essential aspects of conclusions and recommendations show their connection. The conceptual model in this research reflects the steps described above and also reflects a planning of this research.
10 Leeuw, de (1996), p. 56
Figure 2-1 The conceptual model
Data needed for the criteria above (show structure, market structure, competitor structure)
External data:
interviews, internet, literature
How can MBUSA make its auto show program more effective?
Internal data:
interviews, existing documents
Communication to the target audience
Actions needed to get an effective auto show program/trade show according to theory:
Setting objectives
An effective auto show program based on the actions taken by MBUSA
Evaluation of MBUSA’s auto show program
MBUSA’s current auto show program
An effective auto show program
An effective auto show program based on the actions described in the theory
Method to calculate with the collected data
MBUSA’s criteria for an effective auto show program:
*market structure: -market share -volume opp.lost
-market penetration
*show structure -# days -# attendance -# square footage
*competitor structure: -# square footage -# sales
-show schedules
Recommendations for improving effectiveness and a redesign
Evaluation of the effectiveness of exhibiting Æ criteria:
-attention-getting techniques -points
-pre- show promotion -# booth personnel -competition -efficiency measures -booth personnel training
2.2.5 Sub questions
The sub questions are related to the conceptual model described above. They are required to give a structured answer to the research question.
1. What are the most important features of MBUSA’s current auto show program?
2. What are, according to MBUSA, relevant criteria for developing an effective auto show program?
3. What is the level of effectiveness of MBUSA’s current auto show program?
4. What are, according to the literature, relevant criteria for developing an effective auto show program?
5. What are the most important features of the re-designed auto show program for MBUSA and what does the re-design look like?
2.2.6 Restrictions
This research is limited by a certain amount of restrictions. These restrictions are:
Product:
• The auto show program to be constructed should be a program that can be reviewed annually in future years.
• The review should show MBUSA which shows are interesting to support nationally. The research does not concern regional supported shows.
• The research will be documented in an English written report.
Process:
• The timeline for the practical research is from February 11, 2003 until July 31, 2003.
• The research and research methods should be both theoretically responsible and practically useful.
• The research will be done on a nominal level. This means the criteria that have to be set and the steps which need to be taken to improve the effectiveness of the auto show program will only be mentioned. No calculations will take place (except for the examples of MBUSA’s methods).
2.3 Research strategy
This paragraph will specify how this research can be typified in terms of De Leeuw (1996).11 The type of research influences the research process.
2.3.1 Type of research
De Leeuw (1996) makes a distinction between scientific research and practice-oriented research within the field of Business Administration. The scientific research approach intends to contribute to the field of Business Administration by increasing the general knowledge on this field. The practice oriented research approach tends to contribute to the Business Administration field by trying to give useable solutions for specific management problems.
In this research Business Administration knowledge will be used to develop a new effective auto show program for MBUSA. Because of that this research can be classified as a practice oriented research program.
Figure 2-2 Practice oriented research (de Leeuw 1996) Practice oriented research MBUSA
According to Van Strien (1986)12 a practice oriented research approach is a regulative cycle. The researcher can intervene the cycle every moment, in order to make the research more effective. First the researcher looks at the reality and observes the problems. Then he will try to find the adequate tools for the problem in the knowledge base. To solve the problem, he will apply these tools in reality.
When translating this process to MBUSA, the adequate tools for problem solving will be found in sources such as, information provided by auto show organizers, magazines, literature, interviews and experiments. These tools will be applied to design the new to develop auto show program.
11 Leeuw, de (1996), p. 72-74
12 Leeuw, de (1996), p. 72
Researcher Knowledge
base
Reality
Researcher
Auto show program
Knowledge Base:
-effectiveness -trade shows
2.3.2 A problem solving research
Practice oriented research can be subdivided in problem solving research and policy supportive research. The policy supporting research provides knowledge to solve a part of the complete knowledge need in a specific situation. The problem solving research solves the complete problem of a specific situation. This research is problem solving, since MBUSA considers the current auto show program as not effective and wants to develop a complete new auto show program which is more effective; generates more product and/or feature awareness and generates more sales leads.
A differentiation to both problem solving research and policy supportive research is design-oriented research. Design oriented research is a process of testing and modifying. The new developed design will be modified and tested, until it has the desired behavior. Translated to MBUSA, the new developed auto show program should be modified and tested until it has the desired result:
effectiveness. The testing and modifying of the research is not described in this research.
2.4 Data collection
To answer the sub questions as well as the research question, data will have to be collect. The different data collection methods used for this research are the gathering of information from already existing internal and external documents, and from written or oral (semi- structured) interviews.13
2.4.1 Documentation
Making use of existing documentation is one of the most practical sources for research. In this research existing documentation has been used extensively in both the analysis and design phase. A distinction can be made between external and internal data. A complete list of the documentation used in this research can be found in the literature list.
External data used:
• Literature on marketing, efficiency, effectiveness, trade shows and automotive industry;
• Internet;
• Media such as magazines, news papers and business reviews.
Internal data used:
• DaimlerChrysler Annual report 2002;
• DaimlerChrylser information books;
• The MBUSA and the DaimlerChrysler intranet.
13 Baarda en de Goede (2001), p. 227
2.4.2 Interviews
To collect information about auto shows throughout the whole USA, auto show organizers have been interviewed. A structured questionnaire with ten questions has been sent out to them (Appendix B). To check the collected data per region, a questionnaire has been sent to the region managers and the market managers (Appendix C). This questionnaire contains open questions, to give the region managers the opportunity to speak freely about the show in their region and provide all the information they have.
To get general information about auto shows, and about MBUSA’s current auto show program, the auto show specialist, the region managers and the supervisor are interviewed. These are open (oral) interviews. The oral interviews with the auto show specialist, the region managers and the supervisor are held during the analysis and the design phase.
The following table shows which data collection method has been used for answering the sub questions.
Sub Question: Data collection method:
What are the most important features of MBUSA’s current auto show program?
Open and structured interviews with auto show specialist and department manager
What are, according to MBUSA, relevant criteria for developing an effective auto show program?
Open interviews with auto show specialist, auto show organizers and region managers. Internal documentation (internal knowledge gained by experience) and external documentation.
What is the level of effectiveness of MBUSA’s current auto show program?
Open and structured interviews with the auto show specialist and the department manager
What are, according to the literature, relevant criteria for developing an effective auto show program?
External documentation: literature about effectiveness and trade shows
What are the most important features of the re-designed auto show program for MBUSA and what does the re-design look like?
Open interviews
Table 2-3 Data collection method per sub question
Chapter 3 Analysis of MBUSA’s auto show program
This chapter analyzes MBUSA’s current auto show program and describes the actions that MBUSA has taken to revise the program to make it more effective. The analysis consists of the reasons for MBUSA to attend auto shows to reflect the importance for MBUSA to attend shows (paragraph 3.1), a description of MBUSA’s current auto show program (paragraph 3.2), effectiveness according to MBUSA (paragraph 3.3), and the analysis of the level of effectiveness of the current program (paragraph 3.4). The actions that MBUSA has taken to develop a more effective auto show program are; developing methods to calculate with the collected data, described in paragraph 3.5, choosing a preferred calculation method (paragraph 3.6) and assigning weight to the criteria described in paragraph 3.7. In paragraph 3.8 MBUSA’s effective auto show program design is described. The actions MBUSA has taken regarding the development of a new effective auto show program have been evaluated in chapter 5.
3.1 Reasons to attend auto shows for MBUSA
According to MBUSA, auto shows are important for several reasons. One of its main motives to attend auto shows is to make consumers aware of its products and the features these products have, increase the number of sales leads and finally boost its sales. Before a consumer decides to buy a product and convert himself into a Mercedes-Benz driver, he has to be aware of the existence of the product.
Blackwell, Miniard and Engel (2001)14, state that one of the most fundamental aspect of consumer knowledge involves whether or not consumers are aware of the product’s and/or feature’s existence.
Before a product can enter the consideration set, it must gain entrance into the awareness set, which comprises those products known to the consumers. Until consumers learn about a product or feature its existence, it is impossible to convert them into customers. A fundamental step when introducing a new product/feature is to inform consumers about its existence. By attending auto shows MBUSA tries to make the public aware of its products and the product its features. Attending auto shows is also an opportunity to send out a special message to the public. For example, during the 2001 auto show season MBUSA exhibited the message ‘value’. MBUSA wanted to make the public aware that not all the cars it sells are over USD 50,000. The focus was on potential customers who can afford a Mercedes-Benz but are not yet aware of that fact. Another example is the 2002 show. Its focus was
‘how to attract a younger public’. The average age of a Mercedes-Benz owner is 53.15 The traditional image of Mercedes-Benz can be described as, reliable, safe, luxurious, and prestigious. Mercedes- Benz wants to get rid of this stigma. Its goal is to attract a new younger segment: people between 25 and 40 years old with an active lifestyle. To attract these people, Mercedes-Benz needs a new, younger and sportive image. Besides promoting this message on the auto shows, Mercedes-Benz is also trying to change its image by organizing special events for these new potential customers, such as the C-spot
14 Blackwell a.o. (2001), p. 260
15 Automotive Magazine January 2003
event.16 Other reasons to attend shows are press attention and the presence of competitors. Since auto shows are such an import instrument to make customers aware of products; MBUSA wants to make sure it is attending the right shows with the right amount of support.
3.2 A description of MBUSA’s current auto show program
MBUSA’s current auto show program is not based on clearly defined criteria. There is an annual budget of USD 12 million for the auto show program. This money has to be divided between the different shows MBUSA wants to attend each year. MBUSA decides what shows to attend with what amount of money solely based on experience from previous years, intuition and common knowledge about the shows. In appendix D a list of the shows can be found that MBUSA attended in model year (MY) 2002/2003.
3.3 Effectiveness for MBUSA
MBUSA wants its auto show program to be effective. To MBUSA effectiveness means:
‘Generate the largest return on investment possible. Attend those shows which will give the most product and/or feature awareness and attend those shows which will lead to the most sales leads.’
MBUSA makes the definition of effectiveness mentioned above operational by defining different criteria. MBUSA has to take these criteria into account when deciding whether to attend an auto show or not and with what amount of money. The criteria are linked to three important aspects of a show;
show structure, market structure and competitor structure. To get information about the show structure criteria and the competitor structure, a questionnaire has been sent out to the organizers of all the auto shows in the USA. The questionnaire can be found in appendix B. The choice for MBUSA to take only the criteria below into account is mainly based on the experience of the auto show specialist.
Since the auto show specialist has years of experience working with auto shows, she is of the view that these criteria give MBUSA the most information on the importance of an auto show. It is however unclear if these criteria are the right ones to examine the effectiveness of an auto show. Chapter 5 evaluates the criteria on basis of the literature.
• Show structure: -number of days;
-attendance number;
-number of square footage.
16 The C-spot event is an event that was organized by MBUSA in cooperation with other brands which are popular by generation X (People between the 25-35 years old). It was a range of 8 events, held throughout the summer of 2003, and organized to attract generation X in order to re-young MB’s image.
• Market structure: -market share;
-volume opportunity lost;
-market penetration.
• Competitor structure: -number of square footage competitors at show;
-market share competitors;
-show calendar competitors.
To design the new effective auto show program, a certain weight will be assigned to each criterion.
MBUSA has to develop a method to calculate with the collected data about the different shows before it can compare the data with the weight assigned to each criterion. Only then decisions can be made about what shows to attend and with what amount of money.
3.3.1 Show structure
Show structure, the first criterion, is important when reviewing the effectiveness of an auto show program. Show structure means the characteristics of the show: the duration, the attendance number, the total show size in square feet, the show dates etc. The following criteria are the most important for MBUSA when comparing the different shows.
• number of days;
• attendance number;
• total show square footage and MB square feet.
Number of days means the total duration of the show in days. A large show such as the NY auto show usually has a duration of seven days or more. When a show takes place many days, more people are able to visit the show. Therefore, number of days is an important criterion to MBUSA. The attendance number means the total attendance during the show days. Large shows usually have a higher attendance number than small shows. A higher attendance number means a lot of people are visiting the show. This criterion is important because it could lead to more people becoming aware of MBUSA’s products and features and could lead to more sales leads than when the attendance number is smaller. The total show square feet means, the size of the total show measured in square feet. MB square feet means the amount of space Mercedes has at a show. It is important to know how many sqft the total show is, because it determines MB’s space size at a show. A large space size is important to MB, because people derive status of the size of the space. Another thing is that more space size leads to a bigger space to demonstrate the products and show features. These four criteria are the most important to MBUSA because the size and importance of the total show can be derived from them. As can be seen in the appendix B, more questions have been asked about the criteria than mentioned above. This is because general information about shows is needed for MBUSA when it decides to
attend the auto show. All the information about a show will be collected and put into a database.
3.3.2 Market structure
The market structure is another important aspect for determining the effectiveness, because it gives MBUSA information about the market in which the show takes place. This information, gathered by the market research group, helps MBUSA to decide where to invest with what amount of money. The following criteria are the most important for MBUSA:
• market share;
• volume opportunity lost;
• market penetration;
Market share means MBUSA’s percentage of market share based on the luxury import segment. The luxury import segment is the segment that consists of imported cars (cars manufactured outside the USA) and are luxurious (costs over USD 30,000). It is an important criterion for MBUSA because with this information MBUSA can see precisely in which market it is performing best. It is likely that MBUSA will invest more in shows where its market share is low, if the show itself is worth investing in, to promote its products more.
Volume opportunity lost is a measure that the market research group of MBUSA has invented. This criterion is important to MBUSA, because it gives insight in the number of vehicles that MBUSA should be selling based on the BDI and CDI indexes.
BDI means Brand Development Index and refers to brand performance in that market.
CDI means Category Development Index and refers to category performance in that market.
A negative volume opportunity lost number means MBUSA is performing better than based on BDI and CDI indexes. A positive number means MBUSA should sell more cars in that market. Shows located in markets were MBUSA has a positive volume opportunity lost are interesting to attend.
Those are markets with potential for MBUSA.
Market penetration means MBUSA’s percentage market share based on the total industry. This is different from market share, because market share is only based on the import segment. Most of the European vehicles sold in the USA are manufactured in Europe. In market penetration the American vehicles are also taken into account. By taking market share as well as market penetration into account when developing an auto show program, a more detailed insight in the market, regarding the potential sales for imported cars, will be acquired.
3.3.3 Competitor structure
Detailed information about MBUSA's competitors is required when developing an effective auto show program. MBUSA wants to enlarge its market share in the markets in which it performs less than the competition. Therefore it needs to know in what markets it performs less, so it can consider attending the shows located in these regions. The criteria which should be taken into account are:
• number of square footage competitors at show;
• market share competitors;
• show calendar competitors;
A list of MBUSA’s main competitors spread out by model can be found in Appendix A. Since Lexus and BMW are MBUSA’s main competitors in general, only these two will be taken into account for this research.
The space size of the competitors is important because a lot of people visiting auto shows derive status from the size of the space. One of the main reasons for MBUSA to attend shows is, as said above, to make the public aware of its product and features. When visiting auto shows, people often have their first face to face contact with a certain brand, so it is important for MBUSA to make a good impression.
When MBUSA has insight in the market share of BMW and Lexus, it knows where to invest if it wants to keep up with the competition. In terms of auto show program this means, investing in shows that are situated in those markets where MBUSA’s market share is lower than the market share of BMW and Lexus.
The show calendar of the competitors and the grade of importance the shows have (national or regional supported show) for the competition is a useful thing to know. For instance if BMW categorizes the Cleveland Auto Show as a regional show, MBUSA can take advantage of this.
Cleveland is a national show for MBUSA, which means that there is more money available to invest in the show. This way MBUSA is able to attract more attention by having more space size, more cars and by having more people at the booth who can serve potential customers. The other way around is possible too; when BMW categorize a show as national and MBUSA as regional. MBUSA does not want to give BMW a step ahead so it will change its regional show to a national one. In the next chapter these criteria has been applied to the current auto show program.
3.4 The level of effectiveness of MBUSA’s current auto show program
The current auto show program has not been based on the criteria mentioned above. Currently, investments in auto shows have been based on general facts, like total show size and press attention, or
based on the intuition of the auto show specialist. This means that when a show takes place in a big city and is generally known as a large show, like Los Angeles or Chicago, more money is invested than when a show takes place in a smaller city. But the show in the smaller city could be of more importance for MBUSA, because of the potential market share in that area or because of the space size for MBUSA. Two other examples: a show like the Detroit Auto Show has the attention of the press, but a show held in the Mid West during the winter season, could generate more attention just by the amount of people visiting the show. Attending a show in an area where sales are low, promoting the products and features and trying to make the people aware of the products, could lead to more awareness of the product, which could lead to more sales leads and finally generate more sales than when money is invested in a show located in a market where the sales are already high and the market is more or less saturated. The previous examples show that doing investments based on unclear criteria or intuition does not seem reliable. Looking at the current program and the criteria MBUSA formulated for an effective auto show program, it can be conclude that the current program is not effective because it does not take the defined effectiveness criteria into account.
3.5 Methods to analyze and calculate with the collected data
Since MBUSA’s current auto show program has no clear defined criteria and does not have the desired level of effectiveness, the new program has to be developed from scratch. A questionnaire has been sent out to all the auto show organizers to collect all the information per show needed to develop a new effective program. All the collected information has been stored in a database. For the collected data about the criteria mentioned in paragraph 3.2, a calculation method will have to be developed.
This method should measure the performance of the shows and assign a certain weight to the criteria, so decisions can be made on what shows to attend.
MBUSA’s effectiveness criteria:
• number of show days;
• number of total square footage and MB square footage;
• number of attendance;
• market share;
• volume opportunity Lost (consists of BDI/CDI);
• market penetration;
• number of square footage BMW & Lexus;
• market share BMW & Lexus;
• BMW & Lexus show schedules.
Since the BMW and Lexus show schedules are qualitative data, they will not be included in the calculation methods. However, they will be taken into account when designing an auto show program.
MBUSA has developed three methods to calculate with the collected data. Each method is different to find out which criteria have to be combined for developing the most effective calculation method to evaluate the shows. The result of each method is a standard that can be used to compare the shows performance. Note: the methods have been developed by MBUSA and will be evaluated on relevantly and accurateness in chapter 5.
3.5.1 Method 1 The attendance/days standard
The first calculation method is based on the criteria attendance number and number of show days.
The attendance number is important to know, since it gives information about how many people are visiting the show. The number of show days is important as well; the attendance rate will be higher when the duration of a show is 10 days than when the duration is 5 days. In this method the attendance number will be divided by the number of days to create a standard: the number of people visiting the show per day. With this standard the different shows can be compared to find out what show has the most visitors per day.
In table 3-1 are a few examples.
Show Name Attendance # of days Result=attendance/days New York Int. Auto show 1,300,000 10 130,000
San Diego Int. Auto show 763,515 5 152,703 New England Int. Auto show 566,107 9 62,901
Denver Auto show 200,000 5 40,000
Tulsa Int. Auto show 99,500 4 24,875
Table 3-1 Calculation method 1
Looking at the table it can be seen that the San Diego Int. Auto show only has five show days, but the second highest number of people attending per day. According to this method, MBUSA should invest more in the San Diego International Auto Show than in the New England Auto Show, which has a duration of nine days, because of the number of visitors a day. When attendance is an important criterion, this method can be used.
3.5.2 Method 2 The scale method
Another calculation method is to give a weight to each criterion on a scale from 1-10. When a criterion has a 10 it is the most important criterion to MBUSA, when a criterion has a 1 it is the least important
criterion. The attendance and show square footage numbers will be divided by 10,000 to make smaller numbers, easier to calculate. The BDI and CDI numbers will be divided by 100.
An example of this method is presented in table 3-2.
Criteria Scale 1-10
Attendance 10
Total show square footage 9
Show days 9
BDI 2 CDI 2 Vol.opp.lost 2
Market penetration 2
Calculating with the above numbers will give the following result for the New York Int. Auto show:
New York Int. Auto show Multiply by
scale
Results
Attendance 1,300,000/10,000= 130 * 10 1300 Square footage 846,000/10,000= 84.6 * 9 761.4 Days 10 * 9 90 BDI 229/100= 2.29 * 2 4.58 CDI 141/100 = 1.41 * 2 2.82 Vol.opp.lost -12874 * 2 -25748 Market penetration 0.165 * 2 0.33
Total: + -23588.87
Table 3-2 Calculation method alternative 2
This method gives weight based on the importance of each criterion. Some criteria have the same weight because they have similar importance for MBUSA. The result is a large figure which is difficult to calculate with. It is also a negative number which points at the impact of, in this case, the volume opportunity lost number. This method can be useful for MBUSA because a lot of the criteria are taken into account in the calculation and each criterion has its own weight which is linked to the importance of that criterion for MBUSA. Therefore MBUSA can give important criteria a heavier
weight than less important criteria. The result of this method is a standard to which all the shows can be compared.
3.5.3 Method 3 The point system
The third alternative is based on a point system. It takes three criteria into account. The established point system works as follows:
• Attendance was given 1 point for every 100,000 people;
• Total show square footage was given 1 point for every 100,000 square feet;
• Each show was given 1 point for each public day of the show;
• The formula for the calculation: Attendance points plus square feet points multiplied by the number of show days. See table 3-3 for an example of the New York International Auto show.
Criteria Number Points
Attendance 1,300,000 13
Total show sq.ft 846,000 8.46 Number of days 10 10 Total points 13 + 8.46 * 10 = 214.6
Table 3-3 Calculation method 3
The results of the point system are not too large in number so they are easy to calculate with. Using this method, the number of points can be taken as a standard. Shows can be compared at the number of points they have.
3.6 Preferred method according to MBUSA
One method had to be chosen to be the basis for MBUSA’s auto show program. The meaning of a calculation method is to develop a standard in which the most important criteria are combined, so MBUSA can judge what auto shows are interesting in terms of investing. MBUSA has evaluated the methods mentioned above.
The first method generates large results, which are difficult to calculate with. The attendance numbers are divided by the days, the result is the number of people who attend the show per day. This can be very useful when the examined subject is attendance. However, in this project it is not very useful because it tells us nothing about the show square footage, market in which the show takes place and competitors which are important variables when reviewing auto shows. Looking at the show square feet, conclusion can be made about the size of the show. Show size usually tells a lot about how many car manufacturers are attending the show, how many cars can be shown at the display etc. Customers
derive the amount of status a brand has from the size of the display. Therefore it is important for MBUSA to choose a calculation method which takes show square feet into account. Furthermore, the market is important for MBUSA. When MBUSA is performing well in a certain market, MBUSA can decide to spend less money in the show located in that market, based on the volume opportunity lost numbers. On the other hand, when MBUSA is performing terrible in a certain market, and the volume opportunity lost numbers confirm this, money can be invested in the show located in that market to try to support sales. Finally, MBUSA has to take the competition into account. MBUSA’s mission is to be the best car company in the US. Competitor information is important when trying to achieve this mission. MBUSA needs to know where it can still gain more market share so important is to know where, in what shows, MBUSA’s two main competitors, BMW and Lexus, are investing.
Concluding it can be said that method 1 is not sufficient for MBUSA since it does not take all the important criteria into account.
The second method is a method which can be used in different cases, because the designer determines the importance of the criteria and give them a heavier weight than the others. A disadvantage of this method is the complexity of the method. First a lot of the variables have to be divided to get smaller numbers, and then they have to be multiplied by the weight they got assigned. The result is a large number which is difficult to calculate with. This method is time consuming because of the complexity.
An advantage of this method is the accurateness by which the calculation is made and the possibility for the researcher to assign a weight to each criterion individually.
The third method is a point system based on the criteria MBUSA thinks are the most important to combine and to judge the shows on. The result is a point total for every show. The point system itself is a method which is easy to use, not time consuming, and gives results in small numbers which are easy to calculate with.
The best method to use for this research, according to MBUSA, is method the third method. The point system allows all shows to be ranked using the same, important for MBUSA, criteria. Since the point system only combines the criteria attendance, show square feet and number of show days, another, complementary method is developed, to give weight to the other important criteria.
3.7 Assigning weights to the criteria
Since the point system described above does not take all the criteria into account, a system should be developed for the criteria that are not combined in the calculation method. Different weights are assigned to the criteria that are not used in the point method. The performance of a show is based on both the point system and the criteria described below.
The national average market share is 10% for the luxury import segment. That is why MB takes 10%
as a criterion for market share for the new to develop effective auto show program. A show has to have a market share of at least 10% before it will be taken into consideration. Shows with a market share lower than 10% are too small to be a national supported show.
The criterion for volume opportunity lost is +500. This is done because at +500 a market still has a lot opportunity for MBUSA to grow and former studies showed that 500 is the minimum amount of opportunity to develop a brand. A show with a volume opportunity lost of below 500 will not be taken into consideration when deciding what shows attend national.
The criterion for MB square footage is 7000 sqft. Shows where MBUSA has less than 7,000 square feet are interesting since there is an opportunity for MBUSA to gain more space size. This number 7,000 is chosen based on former experience. With more space size MBUSA can exhibit more cars, show more features and this way better promote its brand.
The criterion for the point system is based on the maximal amount of shows MBUSA can attend in a year. For the upcoming year the maximal amount of shows is 30, based on the budget for this year. On the list of total points has Denver the 30th place with 25 points. The criterion for the point system is 25 points. Shows with more than 25 points will be taken into account to be supported nationally. Shows below the 25 points are not relevant for MBUSA.
3.8 MBUSA’s revised effective auto show program design
To create a final design for an effective auto show program for MBUSA two other factors, besides the criteria described above, have to be taken into account:
• regional input;
• the database with the collected data.
Regional input is used as a quantitative aspect of the design. The region managers and the market managers have had the opportunity to provide MBUSA with all the information they know (see appendix C). The regional input is important for the program since these people are out in the field, have visited the shows in their region and can provide comments, opinions and other information about the shows from real life experience. To collect and organize all the information, gained by auto show organizers, about the different shows, a comprehensive database has been developed. An example of a page of the database can be found in appendix E.
A visual representation of the final auto show program design for MBUSA will look as follows:
Figure 3-4 MBUSA’s final effective auto show program design
The shows that meet the demands on the criteria mentioned above should be placed on a separate list.
Then the comments of the market managers and the region managers should be taken into account. In the event a difference exists between a show MBUSA wants to attend and the recommendations of the region managers and the market managers (regional input), the show is reviewed again and other information about the show that has been collected in the database is used. This way the decision is not only based on qualitative data but also quantitative information. When there is a consonance what shows to attend, these shows will be national supported by MBUSA and are placed on the ‘shows to consider’ list (appendix F).
In this chapter MBUSA has taken the actions which it thinks are needed to develop an effective auto Criteria:
Volume opp.lost > + 500 Market Share > 10%
MBUSA sqft < 7000 sqft Total point > 25 points
Regional Input Database
MBUSA’s effective auto show program
show program. First it defined criteria for an effective auto show program. It has found out that the current program does not meet these criteria. Therefore a new program has been developed. The new effective program has been based on three aspects: the database, the input of region managers and a calculation method, which calculates with the collected data and the criteria to come to a standard by which the performance of the shows can be measured.
The next chapter describes the actions which are required to develop an effective trade show program according to the literature.
