Carvana’s Market Positioning Through Innovation
Carvana is a well-known online used car dealer in the USA that applies non-standard development solutions. The company is famous for its multi-story car vending machines, which allowed it to stand out from its competitors (Pollak 6). The company’s marketing goals are to minimize the consequences of external negative aspects for the business. Thus, after the start of the COVID-19 pandemic, it was decided to focus on online trading, which increased profits (Estes and MacMillan 17). Moreover, marketing goals included informing customers about the company’s modern automated processes.
The car market is one of the most competitive, both in the US and around the world. It also applies to the used vehicles market, as many companies and private dealers are involved. Thus, Carvana occupies a specific niche in the market, gaining a solid position through non-standard solutions. Its position includes focusing on automated processes in car sales (Pollak 19).
Buying a vehicle is usually associated with a complicated procedure for filling out documents, guarantees, insurance policies, and other bureaucratic processes. However, Carvana’s approach breaks these stereotypes by allowing customers to purchase a car in 20 minutes. This position formulates a non-standard Company’s niche in the marketplace, which allows one to stand out among the rest and attract customers.
It is necessary to determine suitable marketing goals and strategies for the company’s stable development. In the case of Carvana, these include brand building and direct communication to improve services (Estes and MacMillan 5). As indicated, brand building is formulated by applying modern and convenient process development methods, such as automated car purchase points, which few companies offer today.
Direct communication to improve services involves utilizing various communication methods to obtain feedback. Clients can leave reviews about their experience interacting with the company on the site or share them directly with managers. Moreover, Carvana actively uses social networks to advertise its services, maintain trend positions, and explore customer requests.
The most successful companies have unique services that competitors can not offer, so they receive high sales. It could be cheaper in terms of price, a better product or service, faster delivery, or something that makes the product or service stand out from the rest of the company (Ferrel et al. 39). Carvana has built a large car vending machine. This five-story building can accommodate 20 cars, three boxes, and a customer consultation room (Tamaseb 98). The measure increases the speed of the purchase process and reduces the number of staff involved in the sale process.
Target Market Segmentation and Product Strategy
Defining a target market using segmentation variables is essential for improving a company’s sales performance. In the case of the selected company, segmentation variables include the customer’s age, income, and area for used car sales. Carvana identified men and women aged 21+ with low to moderate income as the most likely target audience (Tamaseb 66).
Used cars are a more affordable alternative for those who want to buy but cannot afford them due to their financial situation. The territorial aspect includes the location of car purchase points, namely the proximity to major cities (Hooley et al. 47). The overall product includes used but quality vehicles, which form differentiation.
Convenient services and the possibility of feedback strengthen the company’s position in the market. The life cycle is when the client searches for options to purchase used cars and picks up the goods from the automated sales center. The product line includes used vehicles ranging from the middle class to pre-premium vehicles. Finally, the product niche in the market lies in the possibility of purchasing named products and subscribing to discounts and bonuses.
Pricing Strategy and Distribution Channels
The company’s pricing strategy focuses on competitive pricing, not exceeding the allowable limit. Business costs include buying and repairing cars, salaries for mechanics, managers, and directors, renting premises, building automated systems, and transportation. In the current economic conditions of recession, the high cost of business can have a negative effect on the company’s profit. The prices for used cars have already dropped by 15.6%, which signals that the company needs to sell more affordable cars to generate profit (Oligna).
A significant part of the used car buyer audience comprises people with medium and low incomes. The company should reconsider its pricing policy and make prices even more affordable. Alternatively, the company can revise its buying policy and prioritize purchasing used budget cars to ensure the low price of final products.
Caravana applies an indirect distribution channel when the client cannot interact with the company’s management (Tamaseb 32). E-commerce facilitates B2B transactions where mutually beneficial deals are made with other companies and other financial flows, such as sales revenue and business costs. The company actively utilizes integrated marketing communications and social networks to distribute its services and offers. In addition, a customer feedback system has been developed, which can take advantage of several options. Carvana uses a variety of offers, including bonuses, discounts, subscriptions, and other public relations benefits for customers.
Therefore, a non-standard approach and a desire to stand out from the competition allowed the company to increase sales during the crisis due to the pandemic and strengthen its position in the market. Implementation of the marketing plan will allow the company to adapt better to changes in external conditions. Thus, implementing the marketing plan will focus on strengthening the position in the competitive market by improving communication with the target audience to inform them about the convenience of the company’s services and reviewing the pricing and purchase policies.
Works Cited
Ferrel, Michael, et al. Marketing Strategy. Cengage Learning, 2021.
Hooley, Graham, et al. Marketing Strategy and Competitive Positioning. Pearson Education Limited, 2020.
MacMillan, Andy, and Estes, Janelle. User Tested: How the World’s Top Companies Use Human Insight to Create Great Experiences. Wiley, 2022.
Oligna, Luc. “The Dramatic Fall of Carvana, The Amazon of Used Cars.” The Street, Web.
Pollak, Dale. Whole Truth: A Fresh Money-Making Method to Wholesale, the Most Misunderstood Side of Your Business. Vauto Press, 2022.
Tamaseb, Ali. Super Founders: What Data Reveals About Billion-Dollar Startups. PublicAffairs, 2021.