Marketing Consumer Behavior project

Executive summary

The Mercedes-Benz Smart Car launch is not the first of its kind, there has been other smart cars but with failure to the fact that manufacturers never realized the benefits of such a product. With Daimler’s Fortwo, the success story in major markets; Europe, Canada, and U.S are worth analyzing. The uniqueness of features, versions, timely environmental sensitization, soaring fuel costs are among factors that have contributed to the success. It has the best mileage efficiency compared to competitors, prices ranging from $11,590 to over $20,000 depending on version. The marketing participatory market promotions and media sensitization resulted in payment reservations long before availability in dealer stores. The segmentation was captured through the various models: from the basic version to the Fortwo Passion Cabriolet. Demographics would allow for expansion into a global market since all corners people share the same needs and concerns as those the product was designed to address.

Introduction: Product

The product of choice is the smart car; which was first introduced in the Canadian market in 2004 at a price less than $20,000 produced by Mercedes-Benz was a favorite among consumers who have the attitude of environmental friendliness. However, its success in the Canadian market was not only based on environmental concerns but also on their culture, “an appliance that gets them from one place to another” (Kurtz et al, 144)and the smart car does so. The size also met the expectations of urban Canadians who are usually alone in their cars. In the U.S., the smart car first touched the roads in 2008 timely with the soaring fuel prices made by Daimler’s Mercedes Car Group. In Canada customers were willing to wait for six months while in the U.S, 30,000 people had paid for reservation before the arrival of the smart cars (Pride, Ferrell, 456).

Some features of the car include the ability to burn only 4 liters of diesel for 100 kilometers. Being environmentally friendly, most parts are recyclable with no lead, chromium, mercury or cadmium all which has disposal complications. The bright colors of the cars seem well for the youthful and energetic while its simplistic model makes it a preference for the older segment (Kurtz et al, 144). The smart Fortwo Passion Cabriolet a convertible seater with leather seats was ordered at $ 16,000, and other features could be added on demand. The Smart Fortwo Coupe was $ 13, 590. The Smart Fortwo Pure Model known as the basic version two-seater was at $11,590 (Pride, Ferrell, 456).

Competitors to the smart car include the 2006 Toyota Prius which has the advantage of a powerful torque provided by an electric motor and an estimated 60 mpg (miles per gallon of fuel). Its retail price as suggested by manufacturer was $21, 725, is slightly above the smart car. The 2007 Toyota Yaris though less expensive at $17,000 has poorer mileage rating (34-39 mpg). The Honda 2007 Fit has mileage less than the Yaris but also costs less at $15,000. The 2006 Mini Cooper costing about $20,000 has poorer mileage ratings and weighs more. Most of these competitors are more concerned about the cost of buying the vehicle than the efficiency of operation. Smart Fortwo still has strength in terms of cost and being pocket and environment friendly in terms of saving fuel consumption. With the various varieties consumers can have a version that meets their expectations of a smart car while they have the privilege of demanding additional features be added such as metallic paint finish an alarm system etc. (Pride, Ferrell, 456) The Smart City-Coupe became a success because of “its fun, original look, great gas mileage, and safe design” (Warhol, 27) unlike other previous models like the Forfour.

Market segmentation

Many markets include consumers with different consumption trends, cultures and lifestyles. So it is necessary for the manufacture of the product to use a mixture of marketing strategy to capture customers of every need, taste and preference that the product can satisfy (Kurtz et al, 260). Segmentation is the grouping of market into homogeneous groups and applying a marketing strategy that will captivate each. The Fortwo overcame the failure of initial smart cars because of originality and differentiation (Diez, Zollter, 149). The segmentation of Fortwo seems to go beyond the perception that “a car finds its target group”. There are three parts; those who seek functionality as the older generation Canadians, those who seek something reasonable and the environmentally responsible automobile (Diez, Zollter, 157). There are those who purchased the Fortwo as a symbol of smart choices (labeled as intelligence) in being “ecologically and economically sensible”. It was considered as a group above average (Diez, Zollter, 162) may be in terms of income or social class. The segmentation was guided by three factors: sensitization of global environmental threats, introduction of CO2 /energy tax, and the rising cost of mobility as a result of dwindling fuel resources (Diez, Zollter, 156). But to add what the customer would like to import from technology, the brand offers variety that are almost luxurious.

The demographics which refer to composition of the market based on parts such as age, gender, movements such as environmentalism, countries etc. the smart car was designed first the basic model for those whose preference is simple as functional. Then there is the symbolic purchaser who wants to be associated with intelligence for making a sensible choice. The youthful who want something considered environmental friendly yet still flashy. Generally, the smart car was designed to capture a wide market segment that unlocks age, nationality, gender, conservation etc. with their needs, tastes and preferences. It is a global market segmented by age, sensitivity and culture. It is big because it captures conservationists (ecological and economical) and symbolic class/lifestyle.

Pricing

The Mercedes-Benz smart car is remarkably the lowest in price, the Fortwo basic at $11,590 (Pride, Ferrell, 456) and the Fortwo Coupe at $ 13, 590 is second best. The closest competitor is the Toyota Yaris at 15,000. The price conveys two pictures; one of a product easier to buy than others and less costly to maintain in terms of fuel and disposal (recyclable raw materials). The customer can ask for particular features to be added which would make it fashionable but at an additional cost. This is market strategy for segmentation those who prefer simplicity and those who need extensions are both captured. Pricing objectives include: “survival, profit maximization, target return on investment, achieving market goals” and sometimes maintain the same level of turnover (Pride, Hughes & Kapoor, 392). The pricing promotions was done way before the launch of the smart with customers giving orders in advance; probably successful as a result of media sensitization. In U.S. 30,000 people had paid for reservations before launch. When it comes to sensitization Daimler sent a number of smart cars in which about 50,000 members of the prospective buyers took part (Pride, Hughes & Kapoor, 394). Vehicles are available for cash at the prices stated above but they can also be leased for example the Smart Fortwo Pulse 71 BHP MHD Coupe would be leased at 156.68 pounds monthly for 2 years or 126.50 pounds for 3 years. http://www.cityvehicleleasing.co.uk/mercedes-leasing-offers/the%20smart%20range/ In the U.S. the car is leased with variation according to type; the 2012 Pure Coupe at $149 per month for 36 months, the 2012 Passion Coupe at $169 for 36 months with $1,463 at signing. http://www.smartusa.com/connect/

Distribution strategy

The Fortwo can be ordered from the internet; such as the website: http://www.cityvehicleleasing.co.uk/mercedes-leasing-offers/the%20smart%20range/ and others. It is also notable through the website: http://www.smartusa.com/connect/ that most versions of the smart car will be available through qualification and some through orders from the manufacturer. It is clear the distributors use both selective and intensive offers. The selective offer could be a strategy to sustain the fashionable brand versions profitability while intensively marketing the basic version. The orders are placed locally and the delivery made through the motor dealers. There are options for leasing, paying online or at the participating dealers.

Promotion strategy

Before the launch in the U.S., Daimler offered some smart cars to fifty cities to be used for sensitization of which about 50,000 people participated which can account for the success story of the launch. There are several websites such as the ones above that tell smart car shoppers of availability, benefits of smart cars, prices and versions. There is the participation through which various selective versions can be provided to qualifiers.

Customer satisfaction and commitment

The satisfaction of the user can be based on: consistency, eliminating waste speed delivery, compliance with policies and procedures, usability of product, delight of customers and doing it right the first time (Evans, Lindsay, 15). When it to the judgmental perspective, the Fortwo has is “absolute and universally recognizable” being less costly to purchase and maintain. It is a mark of uncompromising standards and high achievement (Evans, Lindsay, 15). On the user based-perspective where quality is defined as what the user wants; the smart car with the additional features at a charge is serving the right purpose, “smart car are fit for use and serve different needs for different groups of users” (Evans, Lindsay, 16). On value-based perspective whereby usefulness and satisfaction is compared to price, done by comparison, smart cars cost less for customers compared to competitors while giving the most efficient use of their fuel and disposable parts. Though there is a feeling of dissatisfaction with the leasing excludability but customers still stand a chance to get what they need. Customer commitment is captured through the personal health and environmental concerns as well as the participatory qualifications.

Customer complaints and survey

On consumer sample survey, smart cars had a boost in demand because of considerations such as: inherent beauty and fashion, sensitivity to environmental issues, efficient energy use, and restrained personal budgets (Plunkett). Consumers are willing to pay if they consider a product has ecological considerations, elimination of waste and personal health factors. Using focus groups the manufacturer was able to identify consumers’ attitude and likely behavior towards the product long before physical availability (Kotler, 35).

On consumer complaints which could be accountable for the delay of introduction of the Smart Car in America, is that the car was considered tiny and unsafe (that the crash test was done using a smart what if it collided with a bigger car?), and was expensive too. “After hearing this from several groups” (Kotler, 35), Mercedes halted plans to introduce it in the U.S. though the car was already a success in Europe and Canada. This use of focus groups may be altered the Daimler’s launch to first sensitize using media and participation of prospective buyers before availing the product through dealers. On payment offers there is cash payment and lease; those who want to use for a while can lease hand it back after the lease period.

SWOT analysis

The strengths of the product are that it is the lowest in price among product of similar features. It mileage efficiency exceeds those of competitors and the fact that it has been successful in three major markets (Europe, Canada and U.S) makes entry into other markets easier as the attitude of consumers is already shaped by the acceptance into the major world markets. The ability of different versions is a strength; serving different users for different preferences. Weaknesses emerge for the perceived cost which is relatively high compared to other vehicles and thus only those considerate for long time solution would venture into the purchase. Economies round the globe may not have income levels to support purchase or lease even though there is preference from consumers. Threats include; car brand such as Nissan are partnering with dealers to launch similar products. Opportunities are the intensifying global concern about the environment and that previous models like the ForFour and Smart Roadster failed (Warhol, 22) thus the threats of competition are lessened.

Works Cited

City vehicle leasing. Retrieved 18th November, 2011 from    http://www.cityvehicleleasing.co.uk/mercedes-leasing-offers/the%20smart%20range/

Diez & Zollter Jurgen. Smart: Small Car, Big Deal. Minneapolis: MBI Publishing (Motorbuch,         Verlag) 2008.

Evans & Lindsay William. Managing for Quality and Performance Excellence.Mason: South-         Western Cengage Learning, 2011.

Fuel-efficient fan favorite. Retrieved 18th November 2011, from      http://www.smartusa.com/connect/

Kotler Philip. Ten deadly sins: signs and solutions. Hoboken, New Jersey: John Wiley & Sons,       Inc., 2004.

Plunkett Jack. Plunkett’s Retail Industry Almanac 2009 (E-Book). Houston, Texas: Plunkett            Research, Ltd., 2008.

Pride & Ferrell O.C., Foundations of Marketing. Mason: South-Western Cengage Learning, 2011.

Pride, Hughes & Kapoor Jack. Business. Nartorp Boulevard, Mason: South-Western Cengage        Learning, 2010.

Kurtz, MacKenzie & Snow Kim. Contemporary Marketing. Toronto, Ontario: Nelson Education       Ltd, 2010.

Warhol Tom. Smart Car. New York: Marshall Cavendish Benchmark, 2011.