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The Smart Car
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Smart Car Marketing Recommendations

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A presentation that analyzes the current marketing strategy for Smart USA and offers several recommendations. Created for a Marketing 300 project at the University of Michigan's Ross School of Business.

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Smart Car Marketing Recommendations

  1. 1. Leonard Agranat, Daniel Cady, Amanda Cohen, Nikhil Kulkarni, Chris Machielse, Linda Yeung
  2. 2. Agenda Origins Current Big Picture Areas for Improvement Revised Big Picture Recommendations Q&A 2
  3. 3. Volkswagen terminated Origins project 1993 Officially launched Assembly Plant opened in the U.S. Idea developed October 27, 1997 2008 by Nicholas 2010 sales were only Hayek, CEO of 5,927 units SMH No longer associated with SMH December, 2010 Late 1980’s January 1, 1999 March 4, 1994 January, 2009 Joined forces with Waiting list in US is 12 Mercedes-Benz October, 1998 months Smart car sales launched in 9 European Countries July 3, 1991 July 1, 2011 Penske Automotive Agreement reached Group rescinds all US with Volkswagen to distribution rights to develop new project Mercedes-Benz 3
  4. 4. Current Big Picture execute product service STP segment price business marketing source of objective objective volume target position place promotion 4
  5. 5. Current Big Picture execute product service STP segment price business marketing source of objective objective volume target position place promotion 5
  6. 6. Business Objective Fundamental • Smart Car USA Entity Core • Technology Competence • Engineering • Undefined Goal 6
  7. 7. Marketing Objective Acquisition – Small category: fuel-efficient subcompacts – Recent entry to market (2008) – Small customer base – Challenge: Overcome head and heart loyalty 7
  8. 8. Source of Volume Only have 0.1% market share Stimulate Demand for subcompacts – Main variable: small size and fuel efficiency – Dynamic variable: price and customizability “SmartCar is unique and has no real competition” Raising awareness for subcompact cars 8
  9. 9. Who is Smart talking to? Marketing Objective acquisition retention Pulling buyers Have current stimulate into the owners subcompact purchase more demand category. Smart Cars. Source of Volume Retain current steal Target buyers customers who of competing also own share vehicles. competing vehicles. 9
  10. 10. Current Big Picture execute product service STP segment price business marketing source of objective objective volume target position place promotion 10
  11. 11. Segment Source: Strategic Business Insights 11
  12. 12. How does Smart segment? Address high degree for self-expression Need to look “cool” – Regular compact cars are boring Sponsorship at young, urban events 12
  13. 13. Target Jenna Age 23 “Urban hipster” 13
  14. 14. Lives in the city 14
  15. 15. •Large cars hard to park •Public transportation is tedious 15
  16. 16. Cares about the environment 16
  17. 17. Fashion forward 17
  18. 18. Smart Car changes with her style 18
  19. 19. Positioning “unBig, unCar” Small cars are just as capable as big cars Deemphasize importance of having big car Small cars are fuel efficient 19
  20. 20. 5-Box Positioning Statement When I want to buy a car, I Bigger cars are Driving small want not necessarily cars are something big better smarter. and strong When I look to buy a car, I will When I look to buy a big car, buy a car, I will or SUV buy a Smart Car. 20
  21. 21. Current Picture Diagram execute product service STP segment price business marketing source of objective objective volume target position place promotion 21
  22. 22. Product Has not changed product line since 2008 – Pure coupe – Passion coupe – Passion cabriolet 22
  23. 23. Search Attributes Price Miles per gallon Appearance Safety 23
  24. 24. Price Base price $12,490 All models under $20,000 – Offer affordable car to young target market Competitive with other subcompact cars 2 year, 24,000 mile warranty 24
  25. 25. Miles per Gallon High fuel economy – 33 city and 44 highway mpg Highest mileage, gas-only vehicle in US Source: FuelEconomy.gov 25
  26. 26. Appearance Sleek look Small enough to fit in tight spaces Entirely customizable exterior – Color, design, pattern, change panels 26
  27. 27. Safety Highest possible crash test ratings – Frontal offset – Side-impact – Roof strength Source: Insurance Institute for Highway Safety 27
  28. 28. Experience Attributes Ride quality – Excels in turning radius and parking ease – Stiff suspension – Automatic transmission feels like manual – Rough riding experience 28
  29. 29. Promotion Buzz around US launch Few TV or print ads Active on social media Lowest brand awareness car in America Source: Young Intelligence 29
  30. 30. Promotion 30
  31. 31. Place Sold in Mercedes-Benz dealerships – Share the same showrooms Intimidates potential Smart Car buyers – Loss of sales due to this reason 31
  32. 32. The unSales Growth 32
  33. 33. Rick Perry, General Manager 34
  34. 34. Revised Big Picture execute product STP segment price business marketing source of objective objective volume target position place promotion 35
  35. 35. Revised Big Picture execute product STP segment price business marketing source of objective objective volume target position place promotion 36
  36. 36. unGoal: 1500 units/month 37
  37. 37. Revised Big Picture execute product STP segment price business marketing source of objective objective volume target position place promotion 38
  38. 38. Revised Big Picture execute product STP segment price business marketing source of objective objective volume target position place promotion 39
  39. 39. Source of Volume Steal Share from other cars in category Clearly not the market leader 40
  40. 40. 41
  41. 41. Safety Size 42
  42. 42. Value Size 43
  43. 43. Revised Big Picture execute product STP segment price business marketing source of objective objective volume target position place promotion 44
  44. 44. Important Attributes Importance 5 4.44 4.5 4.11 3.95 4.02 4 3.85 3.56 3.46 3.5 Reported Importance 3 2.5 2 1.5 1 0.5 0 Size Fuel Economy Brand Name Exterior Styling Reliability Value Safety Attribute n=92 45
  45. 45. Most Important Attributes 1. Reliability 2. Value 3. Safety 46
  46. 46. Address Importance I don’t think fuel Smart is not only I can travel & do economy is very a great value, but more for my gas important. it can save you money with a fuel money on gas too. efficient Smart. I will buy a new When I look to car without buy a car, I will considering MPG. buy a Smart Car. 47
  47. 47. Perception Problems Perception 5 4.46 4.5 4 3.5 3 2.83 2.82 2.55 2.5 2.11 1.96 2 1.80 1.5 1 0.5 0 Size Fuel Economy Brand Name Exterior Styling Reliability Value Safety 48
  48. 48. Lowest Ranking Perceptions 1. Safety 2. Size 3. Styling 49
  49. 49. Address Perceptions Smart is a great Smart is a great Smart is both a value, but it is too value, and it great value and a dangerous. performs well in safe vehicle. crash tests. When I look to When I look to buy a car, I will buy a car, I will purchase a larger buy a Smart Car. vehicle. 50
  50. 50. Discrepancies Between Importance and Perceptions 5 4.46 4.44 4.5 4.11 3.95 4.02 4 3.85 3.56 3.46 3.5 3 2.83 2.82 2.55 2.5 Importance 2.11 Perception 1.96 2 1.80 1.5 1 0.5 0 Size Fuel Economy Brand Name Exterior Styling Reliability Value Safety 51
  51. 51. Revised Big Picture execute product STP segment price business marketing source of objective objective volume target position place promotion 52
  52. 52. Improve Warranty Coverage Increase beyond 2 year/24,000 mile Match Ford Fiesta – 3 year/36,000 mile bumper-to-bumper warranty – 5 year/60,000 mile powertrain warranty – 5 year/60,000 mile roadside assistance 53
  53. 53. Revised Big Picture execute product STP segment price business marketing source of objective objective volume target position place promotion 54
  54. 54. Place Make separate dealership for Smart Cars Different target markets hurt potential sales of Smart Cars 55
  55. 55. Price Ranges $200,000 $160,000 $150,000 Min $100,000 Max $38,000 $50,000 $19,000 $12,000 $0 Mercedes-Benz Smart Car 56
  56. 56. Cost of Implementation Add 26 dealerships in urban areas with Jennas – e.g. Southfield, MI instead of Bloomfield Hills Cost per new dealer = $816k – $265k annual salaries – $551k startup costs Total cost = $21,216,000 57
  57. 57. Revised Big Picture execute product STP segment price business marketing source of objective objective volume target position place promotion 58
  58. 58. Promotion Image promotion  need people to realize what Smart Car can offer for value. – Currently there are poor views of Smart Car. – More GRP’s – Promote on young, hip shows (Modern Family, America’s Next Top Model, etc.) Promote what matters to consumers – Safety, value Mercedes has allocated $25 million for media 59
  59. 59. 60
  60. 60. Example Ad Small is safe. The Smart Fortwo earns the highest possible ratings in roof strength, frontal offset, and side impact tests. 61
  61. 61. Cost of New Promotion Cost per 30 second spot: – Modern Family: $250k – America’s Next Top Model: $61k 1 exposure per episode – 24 episodes for Modern; 10 for Top Model per season Total Cost: $6,610,000 Total GRPs: 167 62
  62. 62. Key Takeaways Current Recommended Cost per 30 second spot: Business Objective – Goal -- 1500 units / month – Modern Family: $250k Source of Volume Stimulate Demand Steal Share – America’s Next Top Model: $61k Position Emphasize Smallness Emphasize Safety, Value 1 exposures per episode – Product 24 episodes for Modern;mi for Top Model per 2 year / 24,000 10 3 year / 36,000 mi Place season In Mercedes Showroom Standalone Dealership Total Cost: $6,610,000 Promotion Total GRPs: 167 on Social Media Focus More TV & Print ads 63
  63. 63. Questions? 64
  64. 64. Works Cited http://www.strategicbusinessinsights.com/vals/usframework .jpg http://www.iihs.org/ratings/ratingsbyseries.aspx?id=632 http://young-intelligence.com/2011/11/ad-review-smarts- uncar-campaign/ Interview with Rick Perry, General Manager of Mercedes- Benz of Bloomfield Hills Business Plan Handbook 65
  65. 65. SUPPLEMENTAL SLIDES 66
  66. 66. Supplemental Slides Competing Vehicles Launched Since 2008 Dealership Cost Calculations GRP Calculations unBig, unCar spot Crash test video 67
  67. 67. Must Keep Pace in Increasingly Competitive Segment Chevy Cruze Chevy Sonic Fiat 500 Ford Fiesta Kia Forte Kia Soul Nissan Cube Nissan Leaf Scion iQ 68
  68. 68. Dealership Costs Currently: 74 dealerships; add 26 Average unit sales for US car dealer: 653 – Smart Car goal: 180 (1500 units/mo. * 12 mo. / 100 dealerships) 27.5% of operation Dealership Startup Costs: $265k Average payroll: $2M/yr. * 27.5% = $551k Source: Business Plans Handbook 69
  69. 69. Dealership Costs Cost per new dealer = 551k + 265k = $816k Total Cost (26 new) = 816 * 26 = $21,216,000 70
  70. 70. GRP Calculation Viewers per episode Modern: 13.5 million Model: 4 million Episodes per season Modern: 24 Model: 10 18+ citizens of America: 217.8 million Source: TVbytheNumbers.com 71
  71. 71. GRP Calcuation GRPs = ∑ reachi × frequencyi 13.5������ 4������ GRPs = ∗ 24 + ∗ 10 = 167.125 217.8������ 217.8������ 72

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