Winning in the race in local MPV market

Winning in the race in local MPV market

Agus W. Soehadi, Contributor, Jakarta

An interesting development in Indonesia's automotive market is
the boom in sales of Multi Purpose Vehicles (MPVs), which have
topped those of sedans, Indonesian Automotive Industry
Association data shows.

The growth rate of the MPV market is about 5 percent annually
and MPVs made up almost 50 percent of total car sales last year.
The high sales and the number of different vehicles available on
the market are other indicators more consumers are making MPVs
their first choice.

Recently Toyota and Daihatsu have joined forces to produce
comparatively smaller MPVs. The two Japanese car-makers -- the
first a giant in the auto industry -- have launched almost
identical vehicles bearing the brands Toyota Avanza and Daihatsu
Xenia for the Indonesian market. The price tag is about
US$11,760. Both vehicles exude a modern sporty feel and have a
utilitarian design -- they are a far cry from Toyota's popular
Kijang.

Budi Setyadharma, president director of Astra International,
said the plan is to sell a combined total of 50,000 of the brand-
new MPVs annually.

And consumers are keen. Many do not mind waiting several
months for delivery as the demand for the vehicles is much higher
than the supply. Given the positive market response, both
companies are planning an immediate increase in production.

Noted marketing guru Phillip Kotler has written extensively on
how consumers decide to buy -- or adopt -- any new product or
service. Let's apply Kotler's theory on consumer adoption to the
MPV success story.

Kotler says each consumer has a different stage of readiness
to adopt an innovation or a new product or service. The most
ready cluster of consumers Kotler calls the innovators. The
success of a product or service is based on convincing these
innovators to make a purchase. Generally speaking, they are the
smallest but most crucial target, making up about 2.5 percent of
the market.

Innovators are vital to any marketer because they soon turn
into kinds of ambassadors or indirect "sales representatives" for
the next layer of consumers, the early adaptors or "early
majority". Most companies' efforts in new product launches
normally start to pay off at this stage, long before their
products are bought by the last segment, the late majority or
"laggards".

Naturally, the faster the early adopters buy a product, the
sooner the company realizes profits. However, some products, even
the most innovative ones take quite some time to reach this
stage. Personal computers, for example, took almost 20 years to
reach their early majority consumers. For mobile phones it took
less than 10 years.

Basically, five variables influence the process of diffusion
or the spreading of any one product to consecutive consumer
clusters.

Relative advantage is the first variable. This indicates the
superiority of a product in comparison to existing products. The
second is compatibility, which, as the word clearly implies, is
how well the product meets the customer's expectations. Variable
number three is complexity. This refers to the ease at which the
customer can optimize the product's features.

Next is divisibility. This is the opportunity available for
intending buyers to try out products. The last variable,
communicability, refers to how simple it is for consumers to
convey their understanding of the product to other people.

The phrase multi-purpose vehicle and its abbreviation, MPV,
became widely known in the country in the 1990s almost at the
same time as Hyundai's introduction of the Trajet and KIA's
launch of the Carnival. Soon Honda followed with the Odyssey. One
of the MPVs unique selling propositions was that it embodied the
concept of a luxurious family car priced at more than Rp 200
million.

The long-established Kijang, manufactured by Toyota, and
Panther, produced by Isuzu, both well-entrenched in the
conventional family car category, were soon attacked by the
aggressive onslaught of the Korean brands. The latest contenders
are the Avanza and Xenia, both from established Japanese auto
producers. Because of manufacturers' consumer education programs,
MPVs are now no longer a middle-class vehicle or the second car.
For many Indonesians the MPV is now their first -- and probably
only -- car.

The fast adoption of consumers to MPVs is based on their
perceptions that MPVs have a number of advantages over sedans.
The larger passenger capacity with similar-to-sedan comfort is a
strong point.

Features that used to be the monopoly of sedans are now
incorporated into most MPVs. Thus, even the sensitive area --
owner prestige -- is now well taken care of. Owners of MPVs, with
an enhanced performance and look, do not suffer an inferiority
complex.

While MPV consumers may rejoice at the wide range of brands
available, MPV makers face tougher competition all the time.
Kijang, for example, used to be the only choice in the market.
Though quantity-wise it is still dominant, each of its models has
a strong rival. Honda Stream and Trajet G8, for example, are
fighting it out with Kijang Krista. Kijang LGX and SGX are facing
pressure from the Carens, Aerio and Matrix. The Kijang SX and LX
are feeling the heat from GM's Aveo and Hyundai's Getz. A small-
sized MPV, Karimun, used to enjoy a prominent place in the market
-- but not now.

With the entry of Avanza and Xenia, every MPV manufacturer has
no other option but to adjust their price. Some have slashed
prices by 10 percent and one or two companies have reduced them
even more.

For products like MPVs, which have a high level of consumer
acceptance and are at a mature marketing stage -- close to the
late majority level, it is only natural that competition is
fierce. And it's customer-oriented strategies that will win the
day. Customer satisfaction leads to brand loyalty and repeat
sales, which in turn leads to long-term profits. To attract late
majority consumers most companies are defending their market
share with customer-oriented marketing strategies. In the long
run, both sides end up as winners: the marketers and consumers.

-- The writer is Prasetya Mulya Business School's Marketing
faculty chairman.