Business Strategy Case Study: Relaunch of Fiat 500

On 4th July 2007, Fiat Auto the Flagship division of Fabbrica Italiana Automobili Torino (FIAT) re-launched its heritage brand the Fiat 500. It was exactly 50yrs after the launch of Fiat 500 on 4th July 1957, which not only helped Fiat in post World War-II recovery but also provided mass motorization to Italians. Luca De Meo, CEO, Fiat Auto, on the re-launch occasion stated that “This is the car that gave ordinary Italians four wheels for the first time; that transformed a country and a company.” In its 18yrs of career between 1957 and 1975, 3,893,294 Fiat 500s were built & sold, which provided millions of Italians and Europeans individual mobility.

Post 1970 with beginning of free trade in Europe, Fiat’s market share eroded continuously. Foreign companies such as Volkswagen, Renault, Ford, Peugeot, Honda and Toyota became prominent players in the Italian car market threatening survival of Fiat. The prime reason for declination of Fiat was the lack of innovation and deterioration of quality of vehicles. Between 1995 and 2001 Fiat spent $4.5billion on R&D in comparison to Volkswagen’s $20 billion and Renault’s $9 billion. The Fiat became synonymous with “Fix It Again Tony”, “Fehler In Allen Teilen” (defect in every part) and “Fur Italien Ausreichende Technik” (sufficient technology for Italy). Fiat’s market share in Italy fell down drastically from 52% in 1990 to below 28% in 2003.

In 2004 Sergio Marchionne got appointed as the CEO of Fiat Group and directed the massive restructuring of the ailing business. The re-launch of Fiat 500 was one of the important strategic tools in rejuvenating Fiat. On the re-launch occasion Sergio commented that “I want Fiat to become the Apple of automobiles. And the 500 will be our iPod.”

Business Strategy Case Study: Relaunch of Fiat 500

Fiat 500 – Marketing  Strategy

Fiat tried to develop customer intimacy well before the launch of 500. It started a pre-launch online campaign “500 wants you”. In this campaign, enthusiasts were welcomed to join the competition of designing accessories for 500 and winning free accessories with the purchase of new 500. Over 3,000,000 enthusiasts participated and submitted their idea to the project. Fiat’s approach for designing of the new 500 was distinct and was very appealing to Fiat fans. Additionally, Fiat tried to reconnect with Italians through starting new fan clubs and blogs on the internet.

Fiat organised a grand rally for old 500s on 6th, 7th & 8th of July 2007 in Garlenda, Italy just one day after the official launch of new 500. 1400 models including vintage models of 500 from all over the world participated in the rally, which helped in awakening Italian’s sentiment for 500. On this occasion Dante Giacosa 500 Multimedia Museum was also inaugurated, which features special models, designs, books, magazines, photographs and videos of 500 that provided Italy mass motorisation. Further on this occasion a new 500 was brought to the rally location through the air by a helicopter. All these events got extensive media coverage and helped Fiat in its above the line communications.

More than a year before the launch of 500, Fiat started advertising 500 with an aim to connect 500 with customer’s sentiment. In Italy Fiat advertised 500 by patriotic slogans such as “If you’re Italian, you have to buy a Fiat” & “The new Fiat belongs to all of us”. In Italy Fiat offered extras such as side stripe in colors of Italian flag. In France the slogan used was “The new Fiat is your history too.”  Through the campaigns, rallies and advertisements Fiat tried grabbing attention of Italians, excite interest in enthusiasts and create desire for 500.

Fiat made re-launch of 500 a national event in Italy and organized it on the bank of PoRiver in Turin. In the event, pictures of famous people with old 500 and Italian history with old 500 were projected on huge screens. 7000 people from 63 countries including ministers, entrepreneurs, business peoples, sports stars, and over thousand journalists attended the event. The whole event cost $16.4 million to the company. This event along with the XXIV Fiat 500 Rally formed a strong above the line communication tool for Fiat, as all these events were aired live on Italian mass media.

The sales phenomenon of 500 in Italy and France was very much appreciating for Fiat. The demand for 500 in first two days of launch exceeded its two quarters production. It received 57,000 dealer orders, where as it was planning to sell 50,000 to 60,000 units that year. Many customers were ready to pay a premium price to get the car that year.

Fiat 500 – Product Strategy

Fiat adapted a product development strategy. Fiat leveraged the brand heritage of 500 in Italy (Europe) by re-launching it. Fiat adapted a market led paradigm and followed a relationship approach for success of 500. In the heart of 500’s strategy was to keep the audience engaged from the very beginning and knowing them.

The prime vehicle of the whole strategy was to take advantage of 500’s heritage significance in Italian consumers. The success of re-launch of BMW Mini and Volkswagen Beetle proved the market for retro models. So Fiat also adapted the same strategy of re-launching its heritage 500. “The 500 has always been in the hearts of Italians, and I think therefore that it will be a great success,” said Silvia Depaoli, president of the Fiat 500 Club Italia. Fiat diligently tried to attract customer’s sentiment for 500 through advertising campaigns, car rallies & blogs. Further in the designing process of 500, Fiat included enthusiasts to participate and contribute to 500’s design.

The unparalleled differentiator in Fiat 500 strategy was the huge range of options for customization. It was unprecedented in small car segment. Practically a customer could customize 500 in 549,936 ways.  Some of the customization options were;

  • 12 colours including six vintage colours with tri-coat. Pink colour to attract women customers.
  • 15 types of upholstery including luxurious Cordura and Frau Leather.
  • Seven types of interior trims.
  • Full range of engines (1.2 8v Fire, 1.4 16v Fire and 1.3 16v Multijet).
  • 9 types wheel rims.
  • 19 types of stickers.
  • Hand-stitched leather steering wheel covers.
  • Electric fragrance diffuser with three types of fragrances.
  • Coloured key case matching car’s colour and many more.

Attractive finance options were also made available for 500. Further 500 was satisfying the emission norms of Euro 5, which was supposed to be implemented 2yrs later of the launch. The extended after sales services also formed a great differentiator in Fiat’s strategy. Additionally, the new Fiat 500 was designed by Frank Stephenson, the designer of new Mini and Beetle. All these differentiators helped Fiat positioning 500 in the target customer segment.

Fiat mainly focused on Italian and European customer for 500. It chose to focus on small car segment as demand for small fuel efficient cars was going up in European market because of rising fuel prices. For promotion of 500, Fiat chose to focus equally on online and offline media. As Fiat was targeting young-at-heart professionals and city-car drivers, and these customers spend time on the web. The online campaigning formed an effective and efficient bellow the line and soft communication tool for Fiat for targeting a broad customer segment. Initially, Fiat targeted for a sale of 120,000 units per annum with a breakeven point of 85,000 units. And further as 500 was in the heart of Italians, Fiat choose to launch 500 initially in Italy then to roll out to whole Europe.

In Europe Fiat is known for in-expensive cars. However, for 500, Fiat charged a premium price by banking on 500’s heritage value. At a conference in Prague, Fiat CEO, Luca De Meo remarked “I am not a fan of introducing [more] low-cost cars in Europe, we did it for years, and we went almost bankrupt.” Further to achieve an economy of scale Fiat decided to share the platform with Ford and use components from Fiat Panda.

With the launching of 500 and restructuring, Fiat’s operating profit improved drastically. Further delighted with the success of 500, Fiat planned to launch 500 convertible and sport edition of 500.

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