Essay #3

Porsche research Proposal

The Main Issue or Problem

Porsche is a car brand under the Volkswagen Group with its headquarters in Wolfsburg Germany (Volkswagen 2020). The Porsche 992 is one of the most iconic makes of the Porsche brand, attracting speed and power enthusiasts all over the world. Consequently, many Porsche 992 social groups have emerged in many parts of the world to celebrate the sports car. Some of the groups exist as online communities where members exchange diverse information on the Porsche 992. Porsche 992 Enthusiasts (2020) is a Facebook group dedicated to the car model of the same name. The membership of Porsche 992 Enthusiasts consists of persons who own the car model and those who intend to own the model in future. The members share stories about their Porsche 992s and advise one another on improvements they can make on the cars. The discussions hover around the problems and challenges they are having with their cars or ownership of the cars. Members come from all over the world including the Americas, Europe, Africa and Asia.

The main issue that the members complain of is the high costs that Porsche and its dealerships charge for service, repairs and parts. The members, majority repeat buyers and loyal customers of the Porsche 992 complain that despite paying a premium price for the car, Porsche and its dealerships make ownership of the car very expensive because of their high charges. They are displeased that garages that have no affiliation to Porsche do as good a job or better but they charge significantly less. They therefore feel that Porsche is punishing them for being loyal customers. They find the business approach counterproductive to Porsche.

The issue is relevant for research because it investigates why a company would deal with its loyal customers worse than other garages do. If the owners of the Porsche stop buying it, the model will lose its reputation and lead to losses to the company. The loss to the company would lead to loss of jobs and raise unemployment in society. The issue is however complex because Porsche is a premium brand and price is one element of luxury goods. Reducing the cost of service, repair and spare parts would lower the brand equity of the Porsche 992. The project aims to explore the long-term effects of high costs of service, repair and spare parts for the Porsche 992. I will interview 50 members of the Porsche 992 Enthusiasts group on Facebook to determine their likely action if Porsche does not lower its charges.

Research Questions and Thesis

Research Question: What is the impact of high aftersales maintenance costs (service, repairs and spare parts) on the brand loyalty of Porsche 992 owners?

THESIS: High maintenance costs reduce the loyalty of Porsche 992 owners because they have alternatives that cost less and they want the high purchase cost to offset the maintenance costs.

Why the Issue is Compelling to Me

My interest in the Porsche pricing of service, repairs and spare parts arises first from my deep passion for cars in general. Since childhood, I have read much about cars and even studied the functioning of a car in school. Performance cars such as the Porsche 992 became my specific interest in adulthood. As a speed freak, I am always exploring the fastest road legal car that I can afford. The Porsche 992 is one such car. The Porsche 992 is a high performance car that connects well to its target market while providing practicality because of its agile and robust suspension (Volkswagen 2020). Besides the speed and performance capability, I find the Porsche 992 one of the most beautiful sports cars. At a personal level therefore, I identify with the members of Porsche 992 Enthusiasts with regard to the problem of high cost of service, repairs and spares. I intend to own a Porsche 992 in a few years’ time and I would like to be able to maintain it easily.

The academic value of the study would be immense. The Porsche brand in general is a premium brand that is reachable to a small but significant population. The pricing of the Porsche 992 makes it a luxury vehicle because it gives it exclusivity and appeal as a status symbol. The initial purchase price is therefore understandably high. Besides, the performance and durability of the car justify its purchase price that makes it a coveted item. Nevertheless, Porsche owners are protesting the high cost of service, repairs and spare parts. It will be interesting to know if the high cost of aftersales service affects customer loyalty as it is the first time such a study will be carried out.

What I Already Know About the Issue and Advocacy Approaches

Veblen goods generally attract higher demand with increase in their prices. The market for Veblen goods prides itself in exclusivity that sets them apart from the common market or persons. Consequently, they try to purchase the most expensive goods within their reach. The actual satisfaction that consumers of Veblen goods obtain from their purchases varies sharply. According to Almeida (2015), about 50% of Veblen purchases are rated by the owners as unworthy. The owners show pride in the ownership in public but in private, they regret their purchases because of the poor performance or quality. The findings of Okulicz-Kozaryn, Nash and Tursi (2015) support the observation with the assertion that owners of premium cars were not happier than owners of frugal cars were. Furthermore, Patil (2015) in his study reported that owners of premium cars would like to spend little maintaining them because they have already paid a high cost to acquire them. The purpose of the study therefore is to determine the extent to which high maintenance costs of the Porsche 992 affect customer loyalty.

I plan to advocate for the Porsche 992 Enthusiasts members by raising the issue of the high cost of service, repairs and spare parts with Porsche and its dealers. For maximum effect, I will write a memorandum to the company and its dealers detailing the cost of service, repairs and spare parts from the company and its dealers. I will attach the receipts for the services for each member and attach receipts for the same services from other garages that have no affiliation to Porsche. The comparison should jolt Porsche to the possibility that its customers could easily drop their loyalty to its products unless it lowers the prices out of a feeling that the company is punishing them for their loyalty.

Target Audience

The target audience for this research proposal is the luxury automobile makers and the buyers (owners) of such automobiles. The typical luxury car manufacturer is a multinational corporation with more than twenty (20) years’ experience. With the exception of a few, most began operations manufacturing ordinary cars before they gained enough experience, knowledge and capital to venture into the luxury car market. A good number have been in existence for close to a century. The luxury car owners vary in age diversely depending on the type of car. The luxury sports cars typically sell to persons of average age 40. The buyers have advanced in their careers and the majority is in middle management to senior management. Some are successful business owners with disposable income they use to enjoy the most of their youthfulness. The majority 89.1% of the luxury sports car owners are male with only females representing a meagre 10.9% (Sharma 2015).

Most luxury car manufacturers are found in Europe and the US. The European market produces the most number of premium sports cars and brands. The most popular European brands include Porsche, Mercedes, BMW, Lamborghini, Ferrari, Bugatti, Maserati, and Koenigsegg among others. American sporst cars include Chevrolet (Camaro and Corvette), Cadillac, Dodge Viper, Tesla Model S, SSC Ultimate Aero, Hennessey Venom, Ford Mustang, and Saleen S7 among others. The drivers (owners) of the cars are found all over the world with the least in Africa.

The findings of the study will inform the car manufacturers the need to structure the cost of ownership of their cars to reduce maintenance costs. They will also be able to explore other ways of maintaining customer loyalty in the face of stiff competition. Failure to take action to reduce maintenance costs could lead to shifts in the luxury sports car market share with current leaders losing and new ones emerging. Reduction in maintenance costs would see increased loyalty to brands and retention of current market share.

Annotated Bibliography

Almeida, F. (2015). The psychology of early institutional economics: The instinctive approach of Thorstein Veblen’s conspicuous consumer theory. Economy, 16(2), 226-234. https://doi.org/10.1016/j.econ.2015.05.002

The article is an exploration of old institutional economics of consumption. The paper claims that many studies showed that psychological reasons were the main reasons wealthy people purchase Veblen goods. In addition, he proposes a new hypothesis that instinct is another reason that drives people to purchase Veblen goods even though cheaper goods would have served the same purpose. From the paper, human beings (consumers) have the natural instinct to purchase the most expensive goods when they can afford them. The instinctual drive ignores reason during such purchases. After the purchase however, many up to 50% of owners of expensive goods find that the goods were overrated and that they do not provide superior service equitable to the additional cost. While the paper provides a general view of the satisfaction that comes with Veblen goods, there is not reason for arguing that the argument does not apply to luxury sports car in general and the Porsche 992 in particular. The article will be useful in my argument that Porsche 992 Enthusiasts group members can easily switch loyalty because of continued expensive costs for service, repair and spare parts.

Okulicz-Kozaryn, A., Nash, T., & Tursi, N.O. (2015). Luxury car owners are not happier than frugal car owners. International Review of Economics, 62, 121–141. https://doi.org/10.1007/s12232-015-0223-2

The paper is a critical analysis of the American Panel Study of Income Dynamics report of 2011. It investigated the existence of a relationship between high consumption and happiness. The researchers used the car as their article of consumption, dividing cars into luxury (expensive, costing more than US$35,000) and frugal (inexpensive) to determine whether people with expensive items were happier than those with less expensive ones were. The authors indicated that there was no difference in happiness levels between the two groups. Furthermore, it pointed out that expensive cars were not worth their price and that they performed just as well as the frugal cars did. It used the example of the Toyota Landcruiser and the Lexus LX 570 as one car where the Lexus had been marketed as more luxurious for psychological reasons. It suggested that buyers of expensive cars might consider reviewing their purchases to avoid disappointment. The article will be useful in arguing my point that Porsche needs to reduce its aftersales costs because owners of the Porsche 992 do not find much distinction in the car and the can change their loyalty to a less expensive car in future.

Patil, D.Y. (2015). Buying behaviour of luxury car owners in Western Maharashtra. International Journal of Management (IJM), 6(2), 50-60. https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.695.3998&rep=rep1&type=pdf

The research paper investigated whether the drivers of purchase behavior of luxury cars differed from that of other cars and other goods. The paper concluded that the economic status was the major driver for the purchase of luxury cars. The buyers’ of luxury cars main considerations were safety, latest technology, comfort and brand. While brand was a consideration, it was only one among the others. I will use the article to support my argument that Porsche needed to give the buyers and owners of the Porsche 992 a maintenance cost incentive to continue buying the model because other brands offered the other considerations for the purchase of luxury sports cars.

Kew, O. (2019 January 17). What’s the new Porsche 911’s deadliest rival? BBC TopGear. https://www.topgear.com/car-news/supercars/whats-new-porsche-911s-deadliest-rival#2

The article is a comparison of the Porsche 992 with other cars in its class. The comparisons were the Aston Martin Vantage, the Jaguar F-Type P380 Coupe, the BMW i8, the Mercedes-AMG GT, the Audi R8 V10, the Chevrolet Corvette C8 and a used McLaren 540C. BBC’s TopGear is the world’s most respected motoring program followed by millions of car enthusiasts worldwide. Its ranking of some of the cars in the comparison as better than the Porsche 992 at less the price is a major indictment on the latter. The article will help me argue that Porsche needs to lower its pricing for service, repairs and spare parts to retain the custom of the Porsche 992.

Sharma, H. (2015). A study of demographic characteristics influencing consumer behaviour regarding premium car brands. Pacific Business Review International, 8(4), 17-30. http://oaji.net/articles/2016/3050-1456462395.pdf

The paper explores the demographic characteristics of the premium brand car owners to identify any differences between specific brands. It found that 89.1% of the premium brand car owners were males and 10.9% female. The age distribution was 36.4% 45-55 age group, 25.5% 25-35, 13.6% above 55, 17.3% 35-45 and 7.3% below 25. The marital status of the owners was 74.5% married and 25.5% single. All owners were holders of degrees. The similarity of the demographics cut across all car brands. The article supports my argument that the buyers of the Porsche 992 were the same buyers of other brands of premium cars. Porsche therefore needs to consider lowering the aftersales costs of owning the Porsche 992 to retain customer loyalty.

Works Cited

Kew, O. (2019 January 17). What’s the new Porsche 911’s deadliest rival? BBC TopGear. https://www.topgear.com/car-news/supercars/whats-new-porsche-911s-deadliest-rival#2

Porsche 992 Enthusiasts. (2020). About this group. https://www.facebook.com/groups/porsche992/about

Volkswagen. (2020). Porsche. https://www.volkswagenag.com/en/brands-and-models/porsche.html

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