irishcar.com - An overview of Fiat's new sales strategy

A relaunch of the Multipla and the introduction of a passenger version of the Doblo van (left) are among a schedule of Fiat Auto Ireland events which the company hopes will provide a new motoring talking point in Ireland every month of this year.

“A new or strongly marketed older product will be highlighted each time,” says CEO Paulo Gagliardo (below), adding that in the coming year the company has no plans to increase market share from its current 9%, but to ‘change the mix’ of product sales.

“We have in recent years been somewhat dependent on the A/B segments, but we are now going to instigate an ‘attack’ strategy in developing other segments. It is a strategy which will NOT be based on discount prices.”

While the main emphasis will be on making the new Stilo a success in the C segment, Fiat Auto Ireland’s change of course will include a determined ‘mission to protect the residuals’ in the value of its cars.

It’s an important sea-change, because the final results of the sales for 2001 have shown that the small car segment suffered most, with a drop of 40% against an overall market downturn of 29%.

And Fiat’s - very successful - pricing policy of the last few years, where its Open Book system insisted on an inflexible but highly competitive sticker price for Seicentos and Puntos that rolled in the punters, did have a downside in that residuals weren’t always perceived as good if an owner wanted to change brands.

The cost of change effectively included the original price difference against the other marque, the natural depreciation, and the addition of the ‘on the road’ extras such as delivery charge with the other marque. Immediate result: a perception of poor trade-in value.

That Open Book system provided an average 15% buying price differential between the Fiat products and competitors, obviously to the Fiat buyer’s advantage at the new car end. Under a new Open Book Plus rationale, the observed price differential is just 3%, but the company claims this increases to 16% when the value of standard ‘extra’ equipment is assessed, between Stilo and Golf, for instance.

“We will still be competitive in sticker price, though not now strongly undercutting our competitors at any price point,” says Gagliardo. “But we will be providing much more technology, more safety, and a set of variants where at each step the value added is clearly seen to be better than that offered by a competitor.”

Providing a ‘rich content’ from the very entry level puts it up to the established and new competitors in the segment - mainly Astra, Focus and Golf as the former, and new Corolla as the latter - to fight for retention of their share in a market which is tightening. And where a number of the B cars such as Ibiza and Polo are growing up and targeting the lower end of the C segment.

‘Rich’ in the least expensive Stilo includes aircon, ABS and trimmings, traction control, and a number of other electronic and comfort goodies, most of which would be optional in competitors.

And though it is a truism that the cost of extras ordered at the time of purchase of a new car is never recouped at the time of subsequent sale, if they’ve not been paid extra for they will certainly help hold up a residual value against a less well equipped competitor of the same age.

But is it a ‘loss-leader’ cost? Gagliardo says ‘no’, citing economies of scale when buying such ‘extra’ components in bulk and installing them as a basic part of the car.

Maybe he’s being disingenuous. But if we examined the overall added value content in ‘ordinary’ cars over the past 10 years, such as highly sophisticated engines and running gear, disc brakes, ABS, airbags, and more comprehensive entertainment systems, we’d likely find that the added value in financial terms is much more than the real-terms extra cost of today’s cars.

A more specific example: in the US, where probably 90% of cars are automatic, there’s not the same extra cost for an autobox as we have to bear here. Economy of scale is a real working thing.

The Open Book Plus system is also being put in place for the smaller bread-and-butter Seicento and Punto Fiats which have kept the marque on a rising tide of unit sales here for the past five years. In future, instead of a heavy discount, more content will be offered at a closer price to the competition.

“We have a strength that’s not known by the public, because Fiat has built a reputation in Ireland based on lower prices,” says Gagliardo. “Now we want to gain the kind of credibility we deserve, and through that make a difference in the marketplace.”

You can’t do that overnight. Particularly because Fiat for many years has not had a customer base in the medium car segment that was ‘proud to own’ its Fiats. It needs a critical mass of ‘proud’ Stilo owners before enough others will be converted from their favourite brands to make the new Italian car a best-seller.

And the others won’t be standing still in the meantime. But while they’re catching up, don’t expect your Fiat dealer to sell you a new car cheap. He just wants you to drive away with more for the money.