Is Porsche's Gamble Paying Off?

Moving from a focused marketing strategy to a differentiated approach is one of the trickiest strategic changes for brands to pull off but Porsche appears to be doing it admirably well. Originally known for producing sleek looking, high performance sports cars aimed at wealthy male drivers, the brand has been gradually expanding beyond these confines for the past ten years or so. Its sports utility vehicle, the Cayenne launched in 2004 has been an unprecedented success and this was followed by a four-seater, luxury sedan, the Panamera in 2009, targeting the executive market.

All the while, sales of its venerable two-seater, the 911, were suffering – increasingly being squeezed out of the sports car segment by brands like Maserati and Lamborghini. So in 2011, Porsche took its biggest gamble yet by trying the re-position the 911 in the United States as an everyday vehicle with its Engineered for Magic campaign. In it the brand presented somewhat conflicting claims by saying that it was a car designed with a singular purpose, yet it managed to achieve so much more – namely, be a school bus and a pick-up truck!!

Despite the apparent implausibility of these messages, the campaign appears to have worked. It set a new sales record of over 35,000 vehicles in the US, a twenty one per cent year-on-year increase. While the core of its sales growth came from the Cayenne, the 911 also showed gains. Globally, the picture is even better with the brand hitting record sales levels of over 129,000 units by the end of November 2012 helped in no small way by the huge popularity of the Cayenne in China. And it looks as though its transition from niche road car maker to mainstream luxury car brand is set to continue with a smaller version SUV and further diesel and hybrid variants planned.   

However, increasing sales (and overall profit levels) are coming at a price. Return on sales slipped to 18.7% in 2012 from 20% the previous year though the company appears to be willing to tolerate a fall to 15% as it expands its unit sales.