Pricing Strategy Behind Rolls-Royce Motor Cars Limited

SBSF 2133 (2)

PRICING
STRATEGY

BEHIND ROLLS-ROYCE MOTOR CARS LIMITED
PREPARED BY: MUHAMMAD SUFI BIN KAMAL

CONTENTS 003 FOUNDING OF
ROLLS-ROYCE

004 ROLLS-ROYCE
BACKGROUND

INTRODUCTION 005 “HIGHER THE PRICE,
HISTORY 007 BETTER THE CAR”
BACKGROUND
PRICING STRATEGIES ROLL-ROYCE'S
SMART STRATEGY PRICING
COMPANY SUGGESTED STRATEGIES
SUMMARY CONTINUE TO BE
REFERENCE SUCCESSFUL

008 CAN ASTON MARTIN
BEATS THE
ROLLS-ROYCE?

009 ROLLS-ROYCE'S
PRODUCT-NEEDS
FRAMEWORK

INTRODUCTION

FOUNDING OF At the time of the Second World War, Rolls
ROLLS-ROYCE Royce had a flourishing aircraft engine
business, giving the world the Merlin, which a
By Sufi Kamal powered famous Spitfire. The popularity of
Photo courtesy of Rolls-Royce their well-known brand and identity was
strengthened after the war and "As the Rolls-
History Royce organization developed and spread
through their many markets. Every activity
Rolls Royce was founded in 1904 by undertaken in the name of Rolls-Royce
Charles Stuart Rolls and Henry Royce as a complies with a set of important values and
luxury vehicle and aircraft engine principles which enable them to continue to
manufacturer. Henry was the brain behind develop new standards of excellence. - (Rolls
the car manufacturing company, and Royce PLC Group, 2010)
Charles, including flying, wanted to try out
his hand to build aircraft engines. Since 1998, when Rolls Royce sold that part
of the company to BMW, it had not produced
luxury cars. Rolls Royce is now a market
leader focus for aircraft engine production,
and let the BMW focused on the luxury car
manufacturing.

After the first world war, luxury cars were 3
just that luxury that only a few people could
afford, mainly the aristocrats, that, along
with the bank's decision to remove the
overdrawn facility of Rolls Royce, they had to
focus on the aircraft manufacturer side of the
firm.

ROLLS-ROYCE BACKGROUND

Rolls and Royce shared a dream together to make the automotive future exceptional. An
engineer, Henry Royce was eager to be perfect and an innate working ethic later the pillar of
the philosophy of Rolls-Royce; "Take the best that exists and make it better." Charles Rolls, an
aristocrat, was a skilled driver who had experience selling imported foreign motor vehicles.
His business partner, Claude Johnson, became Managing Director of the Rolls and Royce
company and expanded the reputation of the new company.  

Over 116 years of history, the business they formed faced unprecedented obstacles and
difficulties. Although still in its infancy, Rolls-Royce endured Spanish Flu, the world's biggest
pandemic in the 20th century, in 1918. A decade later the Great Depression once again left the
world economy wasteful. Throughout the years since, Rolls‐Royce has faced the shocks of
domestic and foreign economic and political crises and embodied stability and constancy in
the tumultuous, unpredictable world.

The business has weathered the 2008 financial crisis in its recent history and has come out
more resilient and focused than ever on the other side. With creativity, determination, bravery
and resilience the company has always been faced with any challenge, and Covid-19 is
perhaps the biggest test ever met by Rolls-Royce, but it definitely isn't the only.

Royce clearly found inspiration and creative energy in the calmness, calmness and
loneliness of the office and factory. Famous, one day while walking on the nearby beach he
outlined with his walking stick the first concept for the R-series aero engine in the sand. The
Merlin will be forever celebrated for the later development of the design, as the engine
driving the famed Supermarine Spitfire.  

Royce's home studio was the birthplace of another perhaps less-developed engine, which

still plays an important role in the annals of aviation success. In 1919, his Eagle VIII was driven

by British Aventurers, Captain John Alcock, and Lieutenant Arthur Brown, on the first ever

transatlantic flight from St John's in Newfoundland to County Galway in Ireland. In the

spectacular Wraith Eagle VIII Collection Car, which was confined in 2019 to just 50 pieces,

Rolls-Royce Motor Cars commemorated the centenary of their amazing feat. 4

PRICING
STRATEGY

“HIGHER
THE PRICE,
BETTER
THE CAR”

Torsten Müller-Ötvös
CEO of Rolls-Royce Motor Cars

Rolls-Royce Motor Cars
reveals their pricing
tactics.

HIGH-PREMIUM CUSTOMER-PRICE SEGMENTATION

PRICING Rolls-Royce plans sale of its car only in
STRATEGY 
developed and first world countries. Rolls-Royce
(PRESTIGE PRICING)
mainly markets its cars in counties where the
The legendary name Rolls Royce has an
unparalleled brand identity. It has targeted rich live. Rolls-Royce 's clients are almost all
wealthy and high-quality people for its luxury
vehicles. The company has put in place a high- autonomous, traders, descendants to great
premium pricing policy for its cars, as all its
products are part of the luxurious industry. wealth or royalty. Rolls-Royce vehicles are highly

The company is proud of the brand name expensive and not for those with 'general sales.'
Rolls-Royce and maintains the high-sales
portfolio. As custom car production, hand- Rolls-Royce targets the very high income group
crafted cars cost more than other vehicles
made by machinery. But Rolls-Royce's prices and can afford a expensive car such as Ghost.
largely depend on its brand image and royal
and lucrative customer status. It only targets Rolls Royce, as the Los Angeles Times recently
consumers who can afford such a vehicle.
reported, is a typical client of Rolls-Royce who

contains three to five houses, a large range of

luxury vehicles, and a net balance of about 30

million US dollars.To attract and retain these

clients, Rolls Royce employs a range of

innovative marketing strategies. (The LA Times

article notes that Rolls Royce does not

participate in co-branding activities, but the

recent agreement with the vodka of Gray Goose

does not suggest otherwise). Customers are

invited to exclusive dinners where they have

contacts and deals. Customers also receive gifts

in the mail such as a personalized CEO letter or

a book on the company. 5

SKIMMING 6

STRATEGY

OBJECTIVE

Rolls-Royce will remain at a high level until some more
advanced, advanced or luxurious good has been introduced to
improve the quality of their cars. After their initial release, their
luxury goods higher, because the company knows steeper rates
would not decrease consumer appetite for the new Rolls-Royce,
so they benefit from the higher short-term profit margins.

PROS OF PRICE SKIMMING IN

ROLLS-ROYCE

Higher Return on Rolls-Royce
01 Investment

It Helps Build and Preserve the Image of
02 Rolls-Royce

It helps Segments the Market Focus on
03 Premium Customer Base

Please note that many of these versions of Rolls-Royce only
contain special features or tapering options. Rolls Royce cars are
premium-priced and represent very wealthy and affluent
customers only. Pricing in its marketing mix is kept high because
it provides the highest quality of products, facilities and finishes
and also offers flexibility according to customer requirements.
Rolls Royce offers cars starting at an RM2000,000 -
RM6,000,000 base price. Customizations, additional add-ons,
interiors can increase the price of the cars according to the
customer's preferences. This clearly shows that the brand is not
disturbed by a competitor 's price and is simply focused on
offering the highest quality and premium price.

This choice of skimming strategy requires a clear communication of the basis
of differentiation and how this distinction explains the new price. Exclusiveness is
the key to luxury.

I do not recommend Rolls-Royce trying to use penetration strategy. If Rolls-
Royce follows the price penetration approach, they need to set a lower price than
competitors. Based on discounted prices, perhaps the company will gain the
market share. However, Rolls-Royce needs to be aware of the potential
retaliation by rivals in the form of an unnecessary price war and it will eliminate
luxurious features in their brand.

WORLDWIDE SALES VOLUME OF ROLLS-ROYCE

07/10

FROM 2011 TO 2019 ROLLS-ROYCE Cars Delivers Historic 25% More In 2019.

Top ultra-luxury car company is having its best ever sales year in its 116 years of operation.

,6,000

Rolls-Royce Motor Cars declared its best 4,000
year 2018 has seen the highest annual sales
of the luxury marque in its 115-year history 2,000
with some 4,107 cars delivered to customers
in over 50 countries. The Phantom was a 0
major growth model, followed by the models 2011 2012 2013 2014 2015 2016 2017 2018 2019
Wraith and Dawn. Rolls-Royce's bespoke
department at Goodwood, UK, also enjoyed
high demands for more tailored and
customized motor vehicles.

The Rolls-Royce Motor Car company never had a higher overall revenue figure until 2018, which is a huge 25%
increase over its previous best year of global sales in 2019. The 25% percentage figure will sound massively
impressive for any car brand, but here is just a mere 1,100 extra cars sold with Rolls Royce. With sales rates in
Ringgit 's millions, the very popular and niche car maker has an additional 1,100 cars produced. Any of the extra
sales credit will go to Australia, China and, shockingly in Malaysia. Indeed, when driving in the 'right' neighborhoods
it's not hard to spot a Rolls Royce in Kuala Lumpur today and Malaysian buyers pay a huge tax compared to
Australia and China. A total of 5,152 cars were delivered to customers in more than 50 countries around the world,
up 25% on the previous record set in 2018. With these remarkable results, Rolls-Royce continues to make a
positive contribution to BMW Group's overall success.

CCOVID-19 PANDEMIC HIT ROLLS-ROYCE

This pandemic is affecting a wide range of sectors, including the automobile industry, with major factories either
shut down in compliance with orders provided by local governments or operate at manufacturing sites with limited
personnel to keep their workers safe. Manufacturing plants around the world were shut down, showroom
footprints dropped sharply and the sales of vehicles hit tremendously. Rolls-Royce Aerospace announced that it
had reduced 9,000 workers of its world-wide 52,000 employees and was engaged in a major reorganization
caused by the global COVID-19 pandemic. In addition to the 9,000 job cuts, the company has decreased its spend
throughout the company to create annual savings of more than £ 1.3 billion ( US$ 1.59 billion), which will reduce
the employment savings of £700 millions. 

On the part of car price, I do not see any modification as the Rolls-Royce need to preserve their luxurious and
unique features in their brand. They cannot simply reduce the price as to grow the market share because the
nature of the pricing strategy promotes the high-premium pricing in their products. Rolls-Royce only intends to
add new features to their product, and not in the least intends to reduce the price of their product during this
pandemic. Felix Kilbertus, Rolls-Royce Head of External Design adds that the interior of a car needs to be secure
and allow its customers to do more, such as arrange business meetings. Within this pandemic security, safety and
connectivity are one. Now with the pandemic, physical and mental health must be taken into account in the
requirements for a healthy interior.

7

PAGE 20 FEATURE GEARS

CAN ASTON MARTIN
BEATS THE ROLLS-
ROYCE?

Aston Martin shares as VS
the luxury car
manufacturer issued
another profit alert and
claimed 2019 had been
a “very disappointing”
year. - By Callum Keown, Jan. 7, 2020
The main reason why they were failed because they

In its peak Christmas season, the British car put a high price on a medium premium car. not like
manufacturer announced that sales fell 7 percent Rolls-Royce. Aston Martin lagonda need to follow
compared to the previous year, to 5,809 automobiles. Rolls-Royce pricing strategy, by segment it into the
Over the past year, the company, most famous for its right customer. Aston Martin not focus into one
association with the James Bond film franchise, has segment, they do the premium, electric, modern and
several segment of car. Aston Martin need to have
issued a number of profit warnings amid a global their own unique features to attract the customer just
auto slowdown and economic uncertainty in the U.K
like the handmade creature of Rolls-Royce.
and Europe. The business, which also blamed higher Aston Martin also need to can make Rolls-Royce as
sales costs and lower margins, said it expects full-
year profits of £130-140 million, well below than a reference product so that it can be comparable to
FactSet 's forecast of £ 200 million and Aston Martin the product. pricing strategies used by aston martin
's profit of £247 million in 2018. and need to change according to the specifications
and convenience provided.
Aston Martin in the mid-70s was a company in bad
shape. It had been sold to new owners and merged Rolls-Royce could not be
with Lagonda. Since the release of the Aston Martin
lagonda, they have had financial problems and mimic but Aston Martin

received bad acceptance from the customer. The could be improved.
article stated in the CarBuzz article that Aston Martin 8
Lagonda as Expensive Failures.

SUMMARY

To sum up, Rolls-Royce Motor Cars Limited is a highly talented company with
unique and luxurious features that have been a crucial success over the years with
many of its products. It is tough to build a luxury brand and people can look at it.
Investments in communications, products, innovations, services and quality are
necessary. Rolls-Royce works rigorously to recover its former image and to
achieve consistent success. Holding these components at a high quality and
always being exclusive is not an easy job. Rolls-Royce cars are thoroughly tested
so that their quality is still at the highest level and without defects. Thus, they
overcome several challenges that make them one of the world's most luxurious
brands.

ROLLS-ROYCE'S PRODUCT-NEEDS FRAMEWORK

9

REFERENCE

Lloyd, I. (1978). Rolls-Royce: the growth of a firm. Springer.

Skool, MBA. (2020). Rolls Royce Marketing Mix (4Ps) Strategy. Retrieved
from https://www.mbaskool.com/marketing-mix/products/17132-rolls-
royce.html

Public.(2020),Rolls-Royce Motor Cars Reflects On Unique 116-Year History.
Retrieved from http://www.publicnow.com/view/rolls-royce-history

Pugh, P. (2015).  The Magic of a Name: The Rolls-Royce Story, Part 3: A
Family of Engines. Icon Books Ltd

Smith, D. J. (2013). Power-by-the-hour: the role of technology in reshaping
business strategy at Rolls-Royce.  Technology analysis & strategic
management, 25(8), 987-1007.

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