Pricing for Industrial Products

Assignment – Group 8

Comparison of Pricing Strategy of Premium Automobile Products

[Pick the date]

Contents Executive Summary ........................................................................................................................ 2

Brief About The Organisation And The Chosen Products: ............................................................ 3

Value Creation: ............................................................................................................................... 8

Price Structure ............................................................................................................................... 18

Price and Value Communication .................................................................................................. 19

Pricing Policy ................................................................................................................................ 20

Price Level .................................................................................................................................... 21

INTERPRETATION..................................................................................................................... 22

CONCLUSION ............................................................................................................................. 23

Executive Summary In this report, we have compared 3 different cars which are sold in the super premium segment which are,

• Jaguar XJ L – V6 • Mercedes- Benz S class – S350 CDI • Audi A8 L – 50 TDI

All of these cars are compared for their pricing strategies w.r.t to the following factors 1. Price Level 2. Pricing Policy 3. Value Communication 4. Price Structure 5. Value Creation

A good pricing strategy involves five distinct but very different sets of choice that build upon one another. The choices are represented in the pyramid below, with those in lower levels providing the necessary support for those above. Although the principles that underlie choices at each level are the same, implementing those principles in any given market requires creative application to the specifics of each product and market.

This Strategic Pricing pyramid can be used as a framework to not only set a price for a product, but to have resources and a company capable of backing that price up.

Brief About The Organisation And The Chosen Products: As mentioned above, we have considered the premium segment of the automobile sector for our analysis. Few of the premium segment car manufacturers are Mercedes Benz, BMW, Audi, Jaguar Landrover, Porsche, Ferrari, etc. We would be analyzing the pricing structure using the strategic pricing pyramid of Audi, Jaguar Landrover and Mercedes Benz. The products selected are Audi A8, Jaguar XJ and Mercedes S-Class. Below is the description of each company and their relevant products. Jaguar Land Rover:

• Jaguar Land Rover Automotive PLC is a British multinational automotive

company headquartered in Whitley, Coventry, United Kingdom, and a subsidiary of Indian automaker Tata Motors.

• Its principal activity is the design, development, manufacture and sale of vehicles bearing the Jaguar and Land Rover (including Range Rover) marques.

• Both marques have long and complex histories prior to their merger going back to the 1940s, first coming together in 1968 as part of the ill-fated British Leyland conglomerate; and later existed independent of each other as subsidiaries of BMW (in the case of Land Rover), and Ford Motor Company (in the case of Jaguar); Ford later acquired Land Rover from BMW in 2000 following the break-up of the former Rover Group; which was effectively the remainder of British Leyland.

• Jaguar Land Rover has been a wholly owned subsidiary of Tata Motors since 2008, when the latter acquired it from Ford. It sold a total of 462,678 vehicles during 2014, comprising 381,108 Land Rover vehicles and 81,570 Jaguar vehicles.

• Jaguar Land Rover currently has six main facilities for R&D, manufacturing and vehicle assembly, of which five are in the UK and one in India. Jaguar Land Rover invested a total of £1,058 million in research and development in the year ended 31 March 2013.

• Jaguar Land Rover has three research and development facilities in the UK: o Gaydon – an engineering and development facility o Whitley – an engineering and development site and headquarters for Jaguar

Land Rover o Warwick Manufacturing Group, University of Warwick – advanced research and

development • Vehicle Assembly plants:

o Castle Bromwich Assembly, Birmingham, UK o Halewood Body & Assembly, Halewood, UK o Solihull plant, Solihull, UK o Pune, India

o Chery Jaguar Land Rover, Changsu, China • Current Major Models:

o Jaguar XE (compact executive car) o Jaguar XF (executive car) & (estate) o Jaguar XJ (luxury car) o Jaguar F-Type (sports car)

Model Selected: Jaguar XJ

• The Jaguar XJ (X351) is the latest version of the Jaguar XJ executive saloon from Jaguar Cars. Announced in 2009, and on sale from 2010, the new model features completely new styling combined with underpinnings based on the previous X350 version.

• The vehicle is produced at the Castle Bromwich Assembly plant in Birmingham, United Kingdom. In 2014, assembly from complete knockdown kits (CKD) of the XJ would commence in Jaguar Land Rover's facility in Pune, India.

Audi:

• Audi AG is a German automobile manufacturer that designs, engineers, produces, markets and distributes luxury automobiles. Audi oversees worldwide operations from its headquarters in Ingolstadt, Bavaria, Germany. Audi-branded vehicles are produced in nine production facilities worldwide.

• Audi has been a majority owned (99.55%) subsidiary of Volkswagen Group since 1966, following a phased purchase of Audi AG's predecessor, Auto Union, from Daimler-Benz. Volkswagen relaunched the Audi brand with the 1965 introduction of the Audi F103 series.

• Audi is among the best-selling luxury automobiles in the world.

• Current model range: The following tables list Audi production vehicles that are sold as of 2014:

Audi cars

A1

Supermini • 3-door Hatchback • Sportback (5-door Hatchback)

A3

Compact Executive Car

• 3-door Hatchback • Saloon (Sedan) • Sportback (5-door Hatchback) • Cabriolet

A4

Compact Executive Car • Saloon (Sedan) • Avant (Estate/Wagon) • Allroad (Crossover Estate/Wagon)

A5

Compact Executive Car • Coupé • Sportback (5-door Hatchback) • Cabriolet (Convertible)

A6

Executive Car • Saloon (Sedan) • Avant (Estate/Wagon) • Allroad (Crossover Estate/Wagon)

A7

Executive Car • Sportback (5-door Hatchback)

A8

Full-size Luxury Car • Saloon (Sedan)

Model Selected: Audi A8

The Audi A8 is a four-door, full-size, luxury sedan car manufactured and marketed by the German automaker Audi since 1994. Succeeding the Audi V8, and now in its third generation, the A8 has been offered with both front and permanent all-wheel drive—and in short- and long-wheelbase variants. The first two generations employed the Volkswagen Group D platform, with the current

generation deriving from the MLB platform. After the original model's 1994 release, Audi released the second generation in late 2002, and the third and current iteration in late 2009.

Mercedes-Benz:

• Mercedes-Benz is a German automobile manufacturer, a multinational division

of the German manufacturer Daimler AG.

• The brand is known for luxury automobiles, buses, coaches, and trucks.

• The headquarters of Mercedes-Benz is in Stuttgart, Baden-Württemberg,

Germany.

• Mercedes-Benz has been associated with India for more than 50 years. Presently,

Mercedes-Benz India’s engagement in India covers several domains:

o Local production of Mercedes-Benz cars

o Making available imported Mercedes-Benz cars

o Commercial Vehicle operations

o Global sourcing of auto components

o Captive automotive technology research and development

• Mercedes Benz has its manufacturing and assembly units all over the world

including countries like Brazil, Germany, China, India, Algeria, etc.

• Current model range: Mercedes-Benz offers a full range of passenger, light

commercial and heavy commercial equipment. Vehicles are manufactured in

multiple countries worldwide. The Smart marque of city cars are also produced

by Daimler AG.

o A-Class – Hatchback

o B-Class – Multi Purpose Vehicle (MPV)

o C-Class – Saloon, Estate & Coupé

o CLA-Class – 4 Door Coupé

o CLS-Class – 4 Door Coupé and Estate

o E-Class – Saloon, Estate, Coupé and Cabriolet

o G-Class – Sports Utility Vehicle (SUV)

o GLA-Class – Compact Sports Utility Vehicle (SUV)/ Crossover

o GLC-Class – Sports Utility Vehicle (SUV)

o GLE-Class – Sports Utility Vehicle (SUV)

o GLS-Class – Large Sports Utility Vehicle (SUV)

o S-Class – Luxury Saloon, Coupé & Cabriolet

o SL-Class – Grand Tourer

o SLC-Class – Roadster

o V-Class – Multi Purpose Vehicle (MPV)/ Van

o AMG GT – Sports car/ Supercar

Model Selected: Mercedes-Benz S-Class

• The Mercedes-Benz S-Class, formerly known as Sonderklasse (German for

"special class"), is a series of flagship vehicles produced by the German

automaker Mercedes-Benz.

• The S-Class has served as the top model for Mercedes for over fifty years in its

various incarnations. The S-Class has debuted many of the company's latest

innovations, including drivetrain technologies, interior features, and safety

systems (such as the first seatbelt pretensions).

• The S-Class has ranked as the world's best-selling luxury sedan

Pricing Strategies

Value Creation: It’s often said that the value of something is whatever someone will pay for it. However,

people sometimes pay for things that soon disappoint them. They do not repeat the

purchase and discourage others from making the same mistake. Of greater importance to

innovators, most people are unwilling to pay more for things that are new to them.

The strategic approach is to show marketers how to create value cost-effectively and

convince people to pay for that value.

Some companies fail to create value for customers. They sometimes make the mistake of

believing that more technology is better for the customer. The following chart illustrates

the flawed logic that leads many companies to produce good quality but poor value.

Engineering and manufacturing teams design and make what they consider a “better”

product, and in the process incur costs to add features. Finance then totals these costs to

determine “target” prices. Only at this stage does marketing enter the process to begin the

task of demonstrating enough value to justify the premium price. When these prices prove

too high, managers may try to offer flexibility in the markups, which cuts into margins.

Solving this problem requires a complete reversal of the process. The price is based on the

estimates of the value of features and services chosen to best serve the targeted market

segment. The job of financial management is to insist that costs are incurred only to make

products that can be priced profitably given their value to customers.

While speaking about the 3 cars in comparison which are sold in the luxury

segment, they all cater to the same segment of the customers and they create value by

giving features to the customers which are required by such customers. Along with the

basic features which are provided, some companies offer some Bundled features / Add-ons

which can be added to the basic variant based on individual consumer needs. Below shown

is the comparison of the cars under consideration.

JAGUAR:

Features

1. THROUGH THE LOOKING GLASS Double Moon roofs

2. STUNNING SIGNATURE STYLING

3. Meridian™ Sound Systems

4. Protective Bodyshell

5. REAR PARKING AID WITH VISUAL INDICATOR

6. POWER BOOT LID WITH

7. HEIGHT ADJUSTMENT

8. JAGUAR SEQUENTIAL SHIFT™

Engines:

Mercedes-Benz S Class: Features:

1. Carbon-fiber missiles with horse or bull badge

2. Ambience Lighting

3. Intelligent Drive

4. Burmester Surround Sound System

5. Twin Digital Displays creating Business Class Loungue

ENGINES: 1) Twin-turbo V8

2) Twin-turbo V12 3) Hybrid a 20-kilowatt electric motor and V6 engine,

XJ 2.0L Petrol* LWB

XJ 3.0L Diesel* Turbocharged

LWB

Audi A8 Features:

• Full LED headlights • MMI® navigation plus with voice control system1 • Audi advanced key — keyless start, stop and entry2 • Audi drive select • BOSE® Surround Sound System with 14 speakers, AudioPilot® noise-compensation

ENGINES:

3.0 TFSI® 4.0 TFSI® Sport

Length (mm) 5252 5246 5265

Width (mm) 1899 1899 1949

Height (mm) 1457 1494 1471

Seating Capacity (Person) 5 5 4

Displacement (cc) 2993 2987 2967

Fuel Type Diesel Diesel Diesel

Max Power (bhp@rpm) 271 @ 4000 255 @ 3600 247 @ 4000

Max Torque (Nm@rpm) 600 @ 2000 620 @ 1600 580 @ 1750

SPECIFICATION WITH THE DIFFERENCES HIGHLIGHTED IN GREY

Features

Mileage (ARAI) (kmpl) 12.9 - - 16.77

Alternate Fuel Not Applicable Not Applicable Not Applicable

Transmission Type Automatic Automatic Automatic

No of gears (Gears) 8 7 8

Drivetrain Rear Wheel Drive Rear Wheel Drive 4WD / AWD

Air Conditioner Automatic - Four Zone Automatic - Three Zone Automatic - Four Zone

Power Windows Front & Rear Front & Rear Front & Rear

Central Locking Remote Remote with Boot Opener Remote with Boot Opener

Anti-Lock Braking System Present(ABS) Present(ABS) Present(ABS)

Airbags 6 Airbags 8 Airbags 8 Airbags

Seat Upholstery Leather Leather Leather

SAFETY

Airbags 6 Airbags 8 Airbags 8 Airbags

Dual-Stage Airbags Y N Y

Middle rear three-point seatbelt Y N N

Middle Rear Head Rest N N N

Tyre Pressure Monitoring System (TPMS) Y Y Y

Child Seat Anchor Points Y Y Y

Seat Belt Warning Y Y Y

LOCKS & SECURITY

Engine immobilizer Y Y Y

Central Locking Remote Remote with Boot Opener Remote with Boot Opener

Speed Sensing Door Lock Y Y Y

Child Safety Lock Y Y Y

BRAKING & TRACTION

Anti-Lock Braking System (ABS) Y Y Y

Electronic Brake-force Distribution (EBD) Y Y Y

Brake Assist (BA) Y Y Y

Electronic Stability Program (ESP) Y Y Y

Four-Wheel-Drive N N Torque-On-Demand

Hill Hold Control Y Y Y

Traction Control System (TC/TCS) Y Y Y

Ride Height Adjustment N N Y

Hill Descent Control N N N

Limited Slip Differential (LSD) N N N

Differential Lock N N N

COMFORT & CONVENIENCE

Air Conditioner Automatic - Four Zone Automatic - Three Zone Automatic - Four Zone

Rear AC Separate Zone Separate Zone Separate Zone

12V Power Outlets N 2 1

Steering Adjustment Tilt & Telescopic Electric Tilt & Telescopic Tilt & Telescopic

Keyless Start/ Button Start Y Y Y

Headlight off and lgnition Key Off Reminder Y Y Y

Cruise Control Y Y Y

Parking Sensors Front & Rear Front & Rear Front & Rear

Parking Assist Reverse Camera with Guidance

Reverse Camera with Guidance

Reverse Camera with Guidance

Anti-glare Mirrors Electronic - All Electronic - All Electronic - All

Vanity Mirrors on Sun Visors Driver & Co-Driver Driver & Co-Driver Driver & Co-Driver

Heater Y Y Y

Cabin-Boot Access Y Y Y

SEATS & UPHOLSTERY

Seat Upholstery Leather Leather Leather

Leather-wrapped Steering Wheel Y Y Y

Leather-wrapped Gear Knob Y N Y

Driver Seat Adjustment Electrically Adjustable with Memory Function

Electrically Adjustable with Memory Function

Electrically Adjustable with Memory Function

Head-rests Front & Rear Front & Rear Front & Rear

Front Passenger Seat Electrically Adjustable with Electrically Adjustable Electrically Adjustable

Adjustment Memory Function with Memory Function with Memory Function

Lumbar Support Driver Only Driver & Co-Driver Driver & Co-Driver

Adjustable Lumbar Support Electric - 4 way Electric - 4 way Electric - 4 way

Driver Armrest Y Y Y

Rear Passenger Seats Bench Bench Bench

Rear Passenger Adjustable seats Electrically Adjustable N N

3rd Row Seats N N N

3rd Row Seat Adjustment N N N

Ventilated Seats All All All

Ventilated Seat Type Heated and cooled Heated and cooled Heated and cooled

Interior Colours -- -- Customizable

Rear Armrest Y With Audio controls & Cup holder Y

Folding Rear Seat -- N Partial

Split Rear Seat N N Y

Split Third Row Seat N N N

Front Seat Pockets Y Y Y

Adjustable Head-rests Front & Rear Front & Rear Front & Rear

DOORS, WINDOWS, MIRRORS & WIPERS

One Touch -Down All All All

One Touch - Up All All All

Power Windows Front & Rear Front & Rear Front & Rear

Outside Rear View Mirrors (ORVMs) -- Body Coloured Body Coloured

Adjustable ORVM Electrically Adjustable & Retractable Electrically Adjustable Electrically Adjustable &

Retractable

Turn Indicators on ORVM Y Y Y

Rear Defogger Y Y Y

Rear Wiper N N Y

Exterior Door Handles Body Coloured Body Coloured Body Coloured

Interior Door Handles Chrome Chrome Chrome

Rain-sensing Wipers Y Y Y

Door Pockets N Front & Rear Front & Rear

Door Blinds Rear - electric Rear - electric Rear - electric

Boot-lid Opener Internal with Remote Internal with Remote Internal with Remote

EXTERIOR

Sunroof / Moonroof Electrically Adjustable Panoramic Sunroof Electrically Adjustable

Roof rails N N N

Roof Mounted Antenna Y Y Y

Body-Coloured Bumpers Y Y Y

Chrome Finish Exhaust pipe Y Y Y

Body Kit N N N

Rub - Strips N N N

LIGHTING

Cornering Headlights -- Active N

Headlamps Projector with Xenon LED LED

Automatic Head Lamps Y Y Y

Follow me home headlamps Y Y Y

Daytime Running Lights Y Y Y

Fog Lamps Front Front & Rear Front

Tail Lamps LED LED LED

Cabin Lamps Front and Rear Front and Rear Front and Rear

Headlight Height Adjuster Y Y Y

Glove Box Lamp Y Y Y

Lights on Vanity Mirrors Driver & Co-Driver Driver & Co-Driver Driver & Co-Driver

Rear Reading Lamp Y Both Sides Y

INSTRUMENTATION

Instrument Cluster Analog Analog Analog

Trip Meter Electronic 2 Trips Electronic 2 Trips Multi-Function Display

Average Fuel Consumption Y Y Y

Average Speed Y Y Y

Distance to Empty Y Y Y

Clock Digital Analog Digital

Low Fuel Level Warning Y Y Y

Door Ajar Warning Y Y Y

Adjustable Cluster Brightness Y Y Y

Gear Indicator Y Y Y

Shift Indicator Dynamic Dynamic Dynamic

Heads Up Display (HUD) N N N

Instantaneous Consumption Y Y Y

ENTERTAINMENT, INFORMATION & COMMUNICATION

Integrated (in-dash) Music System Y Y Y

Head Unit Size 2 Din 2 Din 2 Din

Display Touch-screen Display LCD Display LCD Display

Display Screen for Rear Passengers Y N N

GPS Navigation System N Y Y

Speakers 6+ 6+ 6+

Bluetooth Compatibility Phone & Audio Streaming Phone & Audio Streaming Phone & Audio Streaming

AM/FM Radio Y Y Y

iPod Compatibility -- Y Y

Internal Hard-drive -- Y Y

Steering mounted controls Y Y Y

Voice Command Y Y Y

MANUFACTURER WARRANTY

Warranty (Years) 3 2 2

Warranty (Kilometres) Unlimited Unlimited --

Price Structure

The most simple price structure is price per unit and is adequate for most commodity products and services. More complicated structures can be used to capture the best possible price from each segment, to make the sale at the lowest possible cost, or both.

In premium luxury car segment, the cars are sold on unit basis and all the companies price the car on the basis of Ex-Show room. That is these prices are the prices which the company authorized dealer should be getting after the deduction of all the implacable taxes governed by the law of the land. Though the on-road prices vary among different geographies, the ex-showroom prices are generally used for comparison with the competitor’s offerings.

Just like any other cars , these premium cars are also offered in various variants, but

the major differentiating factor being the engine offering rather than the differences in the exteriors and interior. To give a overview of the variants offered find the attached snapshots of the various offerings available in the market

Price and Value Communication

A successful pricing strategy must justify the prices charged in terms of the value of the

benefits provided. The content of value messages will vary based on the type of product

and the context of the purchase. The approach for frequently purchased search goods

such as laundry detergent or personal care items will tend to focus on very specific

points of differentiation to help customers make comparisons between alternatives. In

contrast, messaging for more complex experience goods such as services or vacations

will focus on assuring the customer that the offering will deliver on its value proposition

if purchased. Similarly, value messages must account for whether the benefits are

psychological or monetary in nature.

Price and value messages must be adapted for the customer’s purchase context. This

requires understanding the customer’s values as well as where the customer is in their

buying process. If customers are at the information search stage, the message should

emphasize the most differentiated and value creating features so that he or she weighs

these features heavily in the purchase decision. As the customer moves into the

fulfillment stage, the message shifts from value to price as marketers try to frame their

prices in the most favorable way possible.

In case of the premium luxury cars, the companies clearly know its customers

and advertise in the specific areas where affluent people flock. For example such cars

are put in displays at Airports.

In order to make the buy look attractive for the customers to buy such super

premium cars, the companies quote the EMI price on their advertisements rather than

quoting the complete price of the car. This attracts more customers and brings more

foot fall to the showrooms.

All these companies also come up with lucrative financing schemes like ZERO

interest options etc.

Some of the customers falling in this range, do not worry of the money which

they sped and may buy the entire car in a single payment. For such customers, the value

of the car is communicated through the various awards won by the car like calling it the

CAR of the YEAR etc.,

Pricing Policy

Pricing policy refers to rules or habits that determine how a

company varies its prices when faced with factors other than value and cost to serve

that threaten its ability to achieve its objectives. Good policies enable a company to

achieve its short-term objectives without causing customers, sales reps, and

competitors to adapt their behavior in ways that undermine the volume or profitability

of future sales. In other words, good policies enable prices to change along the demand

curve without changing expectations in ways that cause the curve to shift negatively for

future purchases. Price is the value that is put to a product or service and is the

result of a complex set of calculations, research and understanding and risk taking

ability.

A) Premium pricing

A premium pricing strategy involves setting the price of a product higher than similar

products. This strategy is sometimes also called skim pricing because it is an attempt to

“skim the cream” off the top of the market. It is used to maximize profit in areas where

customers are happy to pay more, where there are no substitutes for the product, where

there are barriers to entering the market or when the seller cannot save on costs by

producing at a high volume.

B) Price-quality signaling Premium pricing can also be used to improve brand identity in a particular market. This

is called price-quality signaling, because the high price signals to consumers that the

product is high in quality. Some companies use this strategy to give their product an

aspirational image. For example, according to BetaNews, Apple now has 91 percent of

the market in computers costing $1,000 or more. This company has used premium

pricing to capture the market for high-end, high-quality computers.

C) Competition

Premium pricing is not generally used when there is direct

competition for a product. Competition tends to undercut prices and lead to poor sales.

For this reason, premium pricing is often a short-term strategy. The longer a company

can keep its competitive advantage, the longer it can charge a premium price. Many

products start out at premium prices, but the price is cut once competitors appear on

the market.

D) Brand awareness

Some brands can continue to charge a premium price because their entire brand image

is based around luxury. According to John Quelch, of Harvard Business School, it is very

challenging for companies to maintain a premium-priced brand while trading as a

public company. Luxury brands, such as Prada, often chose to remain private

businesses, so they can stay small and exclusive, and continue to use premium pricing.

Price Level

Price setting should be an iterative process. The first action is to

set appropriate pricing objectives, whether that means to use price to drive volume or

to maximize margins. The second action is to calculate price-volume trade-offs. A 10%

price cut for a product with a 20% contribution margin would have to result in a 100%

increase in sales to be profitable. The next activity is to estimate the likely customer

response by assessing the drivers of price sensitivity that are unrelated to value. The

marketer’s job is to understand how price sensitivity varies across segments to better

estimate the profit impact of a potential pricing move.

The advertisements to promote sales of such premium cars

always quote the Down-payment amounts or the EMI amounts. As these figures tend to

be lower, it order to lure the customers into buying such products, such clever

advertising are done.

These premium segment cars have carved out a price level for

themselves. A customer has a general perception that the cars sold under these brands

are priced always above 50 lacs. Though this creates a premium brand value, it neglets

the customers who are falling a nit short of such high premium brackets. So all of these

players are coming up with entry level variants to cater to the needs of the customers

starting from 25 lacs. Though these cars have not been launched in the markets, they

have been revealed by the companies.

• Jaguar XE

• Mercedes-Benz – CLA

• Audi A3

INTERPRETATION Value of the mobile depends on the following factors

1) Brand value

2) Specifications of the product

3) Competitor Price

4) Unique Proposition offered

The price of the product is determined by the value of the product. While pricing a

product the manufacturing firm should also look into the cost for manufacturing. The

Cost factors include

Cost of raw material

Cost of advertisement

Overhead costs

Profit Margin required

The automobile business is growing at a CAGR of 20 percent. So many players came

into market and pricing a product is vital in determining the success.

Jaguar XE V/s Mercedes-Benz – CLA V/s Audi A3

On the note of value creation, both the products are providing more or less same specifications. German auto makers BMW AG, Audi AG, and Mercedes-Benz are racing pell-mell against each other for the industry’s luxury-car sales crown, but the huge sums they are spending to get ahead are beginning to erode profits. In their quest for growth, the three German brands that dominate the global market for premium cars and sport-utility vehicles are spending tens of billions of euros to develop new technologies, build factories and churn out new models.

LEARNING

The relationship and interaction between the value creation & communication with

the price of the product was revealed. Strategies behind pricing a product were

understood.

The pyramid is therefore extremely helpful in comparing one product with other in

pricing aspects

CONCLUSION In addition to investing in new models, factories and dealerships to boost sales, the luxury-car makers also have been engaged in intense price competition, offering buyers steep discounts. Audi, which was just 70,000 cars behind BMW last year and is pushing hard to knock its rival from the throne this year, has offered discounts “comparable to volume brands”. The luxury-car makers are pursuing larger sales volumes by shifting into more affordable vehicles such as smaller compact cars. In the German luxury battle, brand is everything. Max Warburton, automotive analyst at Bernstein Research, said in a recent report that European car makers are spending more money on ads to sell their cars than on the steel to build them. It is seen that the gaps can illustrate the different quality of manufacturers and their brands. BMW has long enjoyed a better reputation than Mercedes. But Mercedes-Benz’s efforts to overhaul its brand and redesign its cars are paying off, giving it an opportunity to spend less to sell its cars. “We believe Mercedes [marketing and advertising] spending will probably trend downwards on a per unit basis,”.“We were the fastest-growing premium brand last year and intend to keep that momentum this year or to accelerate,” as per report. “The gap is closing.”