In the confront of luxury push-back from Chinas control and hyper competition for luxury car consumers, how is Ferrari tuning its China message?
2013 was not luxurys finest year in China. The control shamed in the least and completely brazen displays of wealth and corruption, and Chinese consumers are now backing off the luxury buying frenzy that shaped the decade following the countrys ascension to the Humankind Trade Establishment, proving to be increasingly selective as occasion passes.
So how does an iconic luxury car brand navigate such a climate?
Named the worlds for the most part powerful brand in the 2014 Brand Finance Global 500 report on brand valuation, Ferrari brings Chinese consumers into the family, favoring scarcity and exclusivity over chasing easily available sales, deliberately dropping the number of cars delivered to their global network by 5.4% to 6,922 cars in 2013. The tactic has paid off handsomely. Revenues rose by 5%, feat 2.3 billion ($3.2 billion) in 2013 and net profits rose 5.4%, exceeding 246 million ($341 million.
Edwin Fenech, Ferraris Better China President and CEO
Overseeing Ferraris current China odyssey is Edwin Fenech, Ferraris Better China President and CEO since 2010. Surrounded by three years, the French-Italian Fenech tripled Ferraris dealer network in China, introduced the Ferrari Pirelli Cup Challenge to Asiarunning races in Zhuhai and Shanghaiand launched a dragon-striped limited edition vehicle just for the China market.
Fenech shares with CKGSB Knowledge the thinking behind Ferraris branding strategy in China, the logistical challenges of delivering autos from factories in Italy to buyers in the worlds second-largest economy, the major global brands survival guide to destructive press, and how they go roughly speaking establishing and strengthening racing culture in a country that has traditionally shrugged at global events like Formula One. Along the way, he recounts take aways from his occasion overseeing the European, Middle Eastern and African (EMEA) region and dismisses the notion that China is anything take away than the for the most part important growth market for luxury cars.
Q. In January 2011, Ferrari CEO Amedeo Felisa said: For Ferrari, China represents the donate and the future. And then this year Marco Mattiacci, the Ferrari North America CEO, said that Mexico is the pristine China. How has Ferraris China match strategy evolved since 2011? How would you describe the consequence of China currently to Ferrari?
A.China now is the second-biggest economy in the humankind. China is the number one market for automotive in the humankind. And I think now we are just scratching the surface, particularly when we are talking luxury.
In terms of the market, I think we doubled our markets size in the continue three to four years. This is something youre not as anywhere else in the humankind. This is the market that has completely the potential to really grow. What were going to predict in automotive, particularly in luxury automotive, is there are a lot of Chinese travelling abroad, besides moving abroad. We are monitoring a cloudless trend that Chinese are buying Ferraris abroad.
Other than this does not mean we wish stop investing at this point in the country. This is the opposed of everything the added luxury manufacturers are doing. We are in the country where we very must to make known our DNA, our brand values, to educate relatives on the market, who we are, and why we are so local.
Q. Ferrari Chairman Luca di Montezemolo said this year: A Ferrari is not a luxury product. To believe Ferrari is to take a piece of art, a piece of technology. In light of the official reprimand of luxury at this point, how is Ferrari in China integrating that into its identity and strategy?
A.Really the anti-corruption didnt have in the least impression on us. In fact, since they make happen this anti-corruption crack down, weve grown. I be able to easily country it. I think no relatives under the control wish ever try to be seen with a Ferrari, its just too discernible. For the rest, we have to acknowledge one thing, its the young relatives who are buying. At this point its a chauffeur-driven market. Relatives who are a confident age and wealthy they wish go for a chauffeur, like with a sedan. You just have to peek at the results of Rolls-Royce Motor Cars at this point in China. They are amazing. They are selling added than us. Other than when you draw closer to the sports segments, its committed to a smaller number of relatives which are usually the young guys. The average age of our customers is the lowest in the humankind, by far. Other than this is normal because in the mature countries, youve had the occasion to establish your brand, and besides to be ingredient of history. Relatives now who are 60 years one-time in mature markets, theyve known Ferrari since they were born, they grew up in this culture of racing.
At this point, the first car we sold was roughly 20 years ago, other than the real implication of Ferrari in the country came added or take away 10 years ago. In these 10 years, every free competitor came at the same occasion. It has created a little bit of, I wouldnt say confusion, other than imagine a customer that 10 years ago never approached the sports segments, now completely of the sudden, he has a huge shopping list with everybody trying to pull him aside, saying, Ill give you the best,. This is one of the reasons we are doing a lot of branding. This branding serves in two ways: one, to educate the customers, other than the added side is to create loyalty. What we are as is that now, these young guys have evolved, they are evolving very fast. Whats interesting is that the added they age, the added they are loyal to the brand. From this point at this point we be able to be very proud. We are a company thats besides very intelligent to bake relatives loyal.
Q. How is that loyalty achieved?
A.Its like Ferraristi youre ingredient of a family. Thats whats interesting. We have no customers. We have relatives who be in this world their dream which is to believe a Ferrari and theyre ingredient of the family. In China we are selling 500 cars. We have 500 pristine customers or repeat customers that draw closer to us every year. We ought to realize everybody by brand.
When they institute to befall loyal, its true loyalty, because they really participate in every free affair. They institute on racing, they believe every free model, its amazing.
This market is in constant evolution. Its normal in this country that we have added first occasion buyers than in in the least added country in the humankind.
What is interesting to us is that the second and third tier cities are the ones that are growing faster than the rest of China, and we are taking help of that. When I came at this point in 2010, we had 10 dealers. From 2011-2013 we grew to 30 dealers. Then we tripled the distribution in only two years. Obviously, by toward the inside pristine cities, this brought us pristine customers. Now I be able to alert you that we are approaching first occasion customers. Other than we besides have a very big chunk of our customers that are repeat, loyal customers. Draw closer added than one occasion to our events and you wish predict many familiar faces. We are like a family, we are together, we drink together, we go to watch Formula One together and things like this. Its very important.
Q. How would you describe the effect of Formula One in Shanghai on the Ferrari brand in China?
A.First of completely, racing is not that all the rage in China. Obviously for us from a commercial point of view, from a media point of view, its something thats very important. Other than we have to confront the fact that racing is not a big interest. We cannot contrast with basketball, with Yao Ming and thats really the point because there are really no Chinese drivers in racing. And thats possibly one of the reasons for the be deficient in of interest, other than this does not mean we are not doing anything.
From our side we have the duty to promote racing, and I think we are the best ones to do it because its really ingredient of our DNA. We started by introducing the Pirelli Challenge four years ago. The Challenge means huge investment. Why? Because normally how the challenge is structured is you create teams which are usually managed by our dealers, which is whats happening in Europe and US. At this point, no, because you dont really have in the least racing culture. Racing is a grave thing. You cannot disaster throughout with racing because it be able to be very dangerous. To organize the best tune-up with the highest level of quality and safety, we decided to manage everything by ourselves, the logistics, the cars and rental of the route, the technicians, we fly 50 relatives from Italy for every free race completely over Asia. This has a huge cost.
We are working on scouting the then Chinese pilot, and we really would like to be the first one to be really difficult, to be the first to have a Chinese pilot on behalf of us in unlike series and one period at Formula One.
Q. Is this the first occasion youve had to really develop the racing culture to this extent in a pristine market, or have you been through this formerly?
A.No, because similar in the Middle East F1 is very all the rage. You be able to predict there are by now races in Abu Dhabi, in Bahrain and this is very favorably followed locally. At this point, we institute from nick. Other than through media, we are promoting what F1 is, what our racing is.
Q. How would you describe your media strategy and general marketing ecosystem?
A.First of completely just to realize when we say media, we never pay for advertising, this is completely roughly speaking creating rumor. We are targeting the national media other than besides working with the for the most part important local media.
For instance, I travel a lot and for the most part of the occasion we have interviews with local media. I think there is a strange appreciation of Ferrari, affection of Ferrari and passion for Ferrari. There are more or less journalists who are crazy roughly speaking Ferrari. Its strange, every occasion when they draw closer to predict me, they dressing only Ferrari gear.
Other than above completely is the pristine media. Pristine media is the one that really gives you the highest coverage by far. I dont realize how it is in the added countries other than for us, for Ferrari, the management of pristine media is very important, we have a committed team because its so important.
Q. Along with added global brands, Ferrari had more or less unfortunate press exposure prior in 2013. Can you outline a quick-thinking survival guide for large brands on how to deal with destructive press in China?
A.First of completely, clearly realize the framework. Second you besides have to be very quick-thinking in reacting, otherwise things be able to really take a dimension that be able to be very not easy to manage. Be very quick-thinking in releasing your statement, there be able to be unlike kinds of statements, other than very extravaganza your voice, alert your point of view. In China its very important because Chinese pay attention to what the brand is saying. Afterward, you be able to be old, other than at least you have your statement, and from your statement you be able to effort on it. Other than its very important, the framework and being quick-thinking. I think the wait and predict approach, it doesnt effort at this point, it goes from worse to the pits, you have to nurture your point. Besides, have only one voice, not a bunch of unlike relatives talking.
Q. Distribution is a challenge for in the least manufacturer in China. How does Ferrari handle with post-sale services and the logistics of shipment and relief agreed the cars are manufactured in Italy?
A.Since we are in a growing market, we are growing in terms of network, obviously finding the peoplethe mechanicsits all the time a challenge. Theres very fierce competition on that front. Other than for us and this is one of my burly requirements to our network and to those who are managing our network, I intend stability. When I was in Paris I was besides managing one of the chief dealerships we have in the humankind. And there we were as the customer draw closer in by themselves. Formerly, similar if you owned a Ferrari, usually it was the chauffeur who brought the car for repairs. Now relatives draw closer in because its ingredient of the experience of understanding, oral communication, creating the relationship. This is very important.
Q. And in terms of logistics?
Terror. used to have a lot of logistical problems.
The obstruction with Ferrari is that the cars are sports cars, they are not normal cars. They cannot go on normal trucks particularly when you load it. The for the most part conventional issues we had were scratches on the front bumpers or besides a new one that is really grating is when you nick the rims, which are very costly. We overcame in two ways: in the beginning when we had to confront it, other than can not solve it, we had to order a lot of bumpers and a lot of rims. Other than we can not sustain this for long. Then my sales team started to scout for best practices, talking with relatives in the same field, with added manufactures, and we came to identify one local group, other than similar with this group, obviously no one had the real tools to manage Ferrari, because we must very specific trucks. So we completed a deal with the company, according to the dimensions of cars per year, they wish bake the investment up front to have committed trucks just for us. Obviously its costly, other than its take away costly than to change the cushion every occasion.
The difference between then and now is night to period. Now we have much fewer problems. We have really improved the transportation issues.
Q. Do you envision a occasion when you wish manufacture the cars at this point in China?
A.First of completely, in order to build an additional works you must important additional dimensions and this is not our strategy. Our strategy is completely the opposed, because were a very exclusive brand we intend to limit our dimensions, similar if we have huge potential to sell added, we really intend to maintain the scarcity and the exclusivity. If you flood the market with too many pristine cars, the value drops. If you have scarcity, relatives intend to believe a Ferrari. If they dont intend to wait, they be able to easily have very good cars on the market, which are used cars. Like this, you maintain a very healthy circle of relatives buying first used cars, then selling back, which is a huge gain for the customer thats driving one of the best cars in the humankind without behind too much money. And this has been one of the successes of Ferrari.
For us its very key to be the owner of our pre-owned car market. We are working to create a process that involves our dealers buying back the cars from our customers to have a pool of pre-owned cars, to then be offered to the market from our dealers. This has additional benefits. First of completely you maintain the price of the car as you intend. If you control the market then you decide how much this car is importance. Second, you have in mind additional sphere to your dealers, and when its spring up through it be able to make happen a lot of money. The only concern we have at this point in China is the stocking price of the car. Prices are very high-priced. We have an average price of RMB 4 million. At this price level relatives intend to believe a pristine car. If you intend to reach the price for relatives that intend a used car, you have to trickle wholly a lot.
Q. Your partner, Poly Group Corp, is not exactly an auto maker, what does each one side make happen to the table that benefits the added? How do you negotiate that relationship?
A.First of completely we started to effort together when this market was not that big. When you come into for the first occasion into such an unknown market, it was like stepping on the moon. When you march on the moon, you intend to be very spring up prepared and to be really that you wish be doing well. In this ingredient of the discovery we wish to be covered by a very important group, which is a group thats a state-owned company, very influential, and that be able to give us the right direction. Because in China its not a normal market, because youre in a country thats governed by unlike rules than what you be able to realize, from the culture and from the political side and from the expectation of the customers. We intend to build in the respectable way, assuring the right direction. And definitely this is what Poly gets.
And we besides have inside knowledge of exactly where the control goes, the affect of the control be able to have a huge effect on every free sphere.
Q. Youve besides supervised the Middle East and Africa fork of Ferrari, meaning youve covered a important ingredient of the sphere for the company. Would you say there is a formula for integrating the Ferrari brand and yield into a local market? Or does each one place demand its possess special process?
A.With emerging countries you are toward the inside a market where relatives are discovering. To discover you have to bake them realize who you are, be donate where you must to be donate, which means distribution with the right tune-up. And confront the competition, which means you must to do branding behavior. You have to realize where you have to be donate and with whom, because partners are very important. Particularly when you are talking roughly speaking Ferrari, we are of a unlike mindset than others. You have to rationalize to a big cheese whos investing in your brand, if the guy be able to sell 100 cars Im going to give him 50, thats a mindset that be able to frustrate more or less relatives. You have to bargain the right one that understands what luxury sphere is.
Then above completely I think that you have to refrain from being too aggressive. We are a brand that has to be the same everywhere in the humankind. Its non-negotiable. Spring up refrain from toward the inside in this race of discounts. At this point in China we never sold impossible. At this point we have a long-term vision. The objective in the long term is to be the best brand in the country.
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