Ferrari Marketing Mix: The Prancing Horse’s 8Ps
It is known that in the luxury automotive world Ferrari has such a unique history that very few come close. This strong identity reflects as well on its business model and its marketing mix. So, let’s dive in and see what and how many are the characteristics that make Ferrari one of, if not the most powerful brand in the world.
ABOUT THE METHOD
Marketing Mix is defined as a set of controllable marketing factors that a firm blends to produce the response it wants in a target market (Kotler & Armstrong, 1989). This article adopts the Booms and Bitner’s 7Ps (1981) instead of the classic McCarthy’s 4Ps (considered too simplistic) through Rafiq and Ahmed (1995) Marketing Intelligence & Planning approach. The model defines the marketing mix as Product, Price, Place, Promotion, Participants, Physical Evidence, and Process. Their research elevates the analysis method from its initial specification for service-based businesses to a generic marketing mix model. Levitt (1972) also supports the approach by claiming the 7Ps framework is adopted because to some extent everybody sells intangibles, so everybody delivers services. Ferrari's business model reflects perfectly these claims as well as Rafiq & Ahmed's thesis. First as automotive is a sector that requires a high degree of service. Second, a luxury brand such as Ferrari, has a short distribution channel which is strictly under control and following specific guidelines ensuring that the service and its quality are on-brand. The immediate recognisability of its Ateliers is one example.
Finally, for the same reasons, Goldsmith’s 8th P (1999) is also applied to this article, as the factor outlining market segmentation and product Personalisation that is increasingly important today, especially in the luxury segment. And automotive is no exception.
PRODUCT
Ferrari has a strong and varied product line that has been expanding at an unprecedented level in the last few years. During the last decade alone four products for different market segments were added. First the 4-seater luxury shooting-brake FF substituted by the GTC4 Lusso in 2017. Then the hybrid SF90 Stradale that applies the electric component in a different way from what the LaFerrari used to do, but most of all is a proper production model, not a limited series, and is sold for less than half the price of the LaFerrari. A completely new line called Icona and aimed at celebrating the classic beauty of older Ferrari models reinterpreted in a modern way introduced the speedster Monza SP1 and SP2. Finally, the new, understated and elegant 2+ GT Roma competes with a different range of Grand Tourers from those against Portofino and GTC4 Lusso.
FERRARI LINEUP CUSTOMER PROPOSITION VALUE
*This chart does not include the track-only models like 488 GTE, 488 Challenge Evo, and FXX program ones**SF90 Stradale, Portofino M, 488 Pista, 812 Superfast all have a convertible version not represented here
All the models are high-performance, and with this range, Ferrari reaches a significant market coverage that extends its competition to every company in this segment. Additionally, new Limited Series, an SUV (Purosangue) that will likely substitute the GTC4 Lusso covering and possibly extending that market segment, and a new V6 powered line have been announced too.
The features are several and mainly found on the luxury-oriented models more than on the pure sporty ones. Options are plentiful on every single vehicle of the range in terms of specifications. Quality, of course, needs to be the best possible considered the market segment and to support this a 7-year warranty is included with every new car.
Along with its car range, Ferrari also sells luggage sets matching the cars’ specifications and an increasing number of lifestyle and apparel items in partnership with luxury brands.
Finally, the three most important features to include in this analysis: Design, Performance, and Brand, as shown in my more extensive Research and reported in my previous article McLaren and Ferrari: matching product diversification strategies?
Design is a matter of pride for Italian manufacturing and automotive which have historically been a distinctive feature, and still are. Beauty is another factor that cannot be overlooked in the slightest and always distinguishes Ferrari. The same goes for the performance, which is always at the top of its segment for every model, right beside its competitors. As for the brand, Ferrari has been declared by Brand Finance the strongest one in the world for two consecutive years, and it is confirmed by the survey among luxury and supercar owners I conducted for the research linked above.
PRICE
The price positioning is always at the very top of the market with rates varying, in the UK, between £164,000 and £376,000 for the production models before options that can bring that price up by well over £50,000 as discussed in the in-depth on Tailor-made services. The highly limited series like the Icona Monza SP1 and SP2 sell easily for over £1 million.
*In order the cheapest Ferrari Portofino, the most expensive production car SF90 Stradale, and the Icona Monza SP1
Perceived value is clearly a crucial component of this market for collectors, investors, and the brands themselves. Ferrari, in fact, leads the market by maintaining a strict production number control to avoid overproduction that would dilute the brand and the pre-owned market value.
Avoiding depreciation is paramount for these brands to maintain their appeal (Aston Martin's de-stocking effort is emblematic in this respect) and the cars' resell value. The whole niche is worth millions.
Payments are usually received 30 to 60 days after the new car delivery, but limited series and special editions are handled differently. Invitations to get a purchase slot are sent only to the highly valued clients which usually happen to pay in advance for the most sought-after limited edition models.
PLACE
Ferrari sells through a network of 166 authorized dealers. They are carefully located either in areas with a higher density of high-net-worth individuals or in ‘cluster areas’ where other luxury automotive dealerships are located. London’s H.R. Owen in Mayfair is a prime example.
LONDON MAYFAIR LUXURY DEALERSHIPS AREA
Along with the dealership network, special access and services are granted to Ferrari clients at the Headquarter in Maranello too.
PROMOTION
Ferrari has a unique mix of promotion channels and a high level of diversification. This is arguably the aspect that distinguishes it the most from any other brand in the market segment.
First comes motorsport and above all, Formula 1. Ferrari was born as a motorsport manufacturer which only later expanded into luxury road cars. So, while owning a Formula 1 team translates into important developments and new technologies that can be trickled down to the automotive business, it is most of all an outstanding marketing channel. Especially if it is the most winning team in the sport’s history, in these years in which Formula 1 popularity increases and E-sports are booming attracting countless new enthusiasts.
Ferrari organises a range of events targeted to enrich the experience of clients who enter the brand and improve the loyalty of the existing ones. It offers a wide range of exclusive activities from gala presentations and driving experiences, to driving courses to proper racing championships and track days.
Among the motorsport-related events there are the single-marque championship Ferrari Challenge, the Corso Pilota offering owners professional driving lessons divided by increasing level of skills, and finally, the Corse Clienti project divided into the XX and the F1 Clienti programmes. The XX is organised throughout a series of track days in the most iconic racetracks in the world for which Ferrari sells extreme and highly limited track versions of its most iconic models. It then ships the cars (which are not directly held by the clients) to the designed location and provides engineers, mechanics, and physiotherapists to manage everything from the setup to the drivers’ well-being.
*Ferrari 488 GTE, Ferrari FXX-K Evo, Formula 1 2019 SF90
The F1 Clienti allows Ferrari's clients to directly buy previous seasons' Formula 1 cars from the Scuderia and drive them in proper track days organised by the company. Along with the track activities Ferrari also arranges gala dinners and cocktail parties for all the participants.
Moving into digital marketing, Ferrari applies also a really comprehensive strategy across all the major platforms available, and some more experimental solutions such as the ‘We Race’ digital comic.
Finally, Museums (in Modena and Maranello) and Amusement Parks (in Abu Dhabi and Spain) serve as brand promotion that similarly to digital marketing, not only strengthen the company’s image but also involve the audience of enthusiasts that do not necessarily have access to the luxury market segment.
PARTICIPANTS
The services offered by the brand are numerous and direct contact with the customer happens in various ways. It begins before the purchase. Specialised employees guide the clients through the countless options to specify their own car, giving advice on the best combinations. The customer is then kept in the loop with successive communications on the car assembly work. These and other activities as a whole, define the customer journey in a very unique way.
After-sales expert members of the dealership network take care of car servicing and in some cases of organising exclusive events as mentioned above. Direct contact with owners is maintained through other initiatives too, like Ferrari Classiche, the specialised program to preserve the beauty and integrity of classic models.
Also, as it should be in 2020, Ferrari clients have access to the MyFerrari app which is a further exclusive connection with the brand to enrich the ownership experience. The app includes a configurator, information about the owner’s cars, Ferrari specialised events and presentations as well as direct contacts with dealerships and assistance.
At all times, dealerships employees receive training according to the company’s standard and are committed to promoting and marketing Ferrari in a manner intended to preserve the brand integrity and to ensure the highest level of client satisfaction.
PHYSICAL EVIDENCE
Ferrari’s presence has a strong and recognizable corporate identity. As of now, the dealership network is not owned by the firm but managed through licensing and franchising agreements with clear guidelines in terms of employees’ appearance standards, facilities, layout, and interior design finishes.
The three photos below are from dealerships in different cities but clearly present a very coherent and uniform image.
*Dealerships Ferrari Salt Lake City, H.R. Owen Ferrari London, Ferrari of Miami
Dealerships are also equipped with lounge rooms for clients to physically spend time during the purchase process and experience some relaxing time in a refined environment. Every facility is maintained to the highest standard in order to reflect the brand identity.
PROCESS
The process description partially overlaps with that of the Participants outlining how the customer is guided through the purchasing journey and followed after it.
Overall, the production process alone can take between 30 and 45 days as the cars production rate is relatively low and, as said, the overall production number is strictly controlled. The main reason though is that the manufacturing process is mainly carried out by hand by expert artisans and engineers. This part of the process itself adds significant value to the finished product.
This is also the reason why, in the pandemic period, potential supply chain disruption, discussed here How Covid-19 will affect the luxury automotive industry, could become even riskier for low-volume luxury manufacturers. Also, with the lockdown periods during 2020, different measures have been put in place for clients and prospects to get in touch with the brand. Video content is an important component for instance with pre-owned cars as often customers cannot be shown the car in person.
PERSONALISATION
Last but not least, the defining feature of luxury spending in many different industries, personalisation. Introduced already in the 50s and expanded throughout the years, it reached the pinnacle in 2011 with the introduction of the Tailor-Made Program.
The personalisation service is now divided into three levels, ‘Personalisation Program’, ‘Special Equipment’ and the mentioned ‘Tailor-Made’ which offer an increasing level of detail and variety of choices, along with higher care by Ferrari designers. Additionally, Tailor-made also offers three distinct collection guidelines named Scuderia, Classica, and Inedita that take inspiration respectively from the racing heritage of the brand, from the more classic GT combinations, and from new and innovative solutions.
Last but not least, the defining feature of luxury spending in many different industries, personalisation. Introduced already in the 50s and expanded throughout the years, it reached the pinnacle in 2011 with the introduction of the Tailor-Made Program.
The personalisation service is now divided into three levels, ‘Personalisation Program’, ‘Special Equipment’ and the mentioned ‘Tailor-Made’ which offer an increasing level of detail and variety of choices, along with higher care by Ferrari designers. Additionally, Tailor-made also offers three distinct collection guidelines named Scuderia, Classica, and Inedita that take inspiration respectively from the racing heritage of the brand, from the more classic GT combinations, and from new and innovative solutions.
This allows clients to create virtually endless bespoke combinations of materials, colours, and finishes. Specifications include also interior functional components such as sound systems and sports exhausts as well as the aforementioned accessories like luggage sets.
*Tailor-made Ferrari Portofino
Overall, when it comes to the marketing mix and diversification strategy, Ferrari represents probably the most impressive example within the luxury segment. So much could be added that twice the length of this already long article would most likely not be enough. In the meantime then, if you are interested in going more in-depth contact me via social or email at riccardo.delbello@rccdbcars.com to request a copy of my Ferrari Brand Market Potential Analysis.
Sources:
Goldsmith R., 1999, The Personalised Marketplace: Beyond the 4Ps, Marketing Intelligence and Planning, available Here
Rafiq M. & Ahmed P., 1995, Using the 7Ps as a generic marketing mix an exploratory survey of UK and European marketing academics, Marketing Intelligence and Planning, available Here
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