Case Analysis: Toyota: Driving the mainstream market to purchase hybrid electric vehicles

Situation Analysis:

By 2003, the auto industry was in a mature development stage, at the precipice of a major change. Toyota had launched its first hybrid car in 1997 and the global cumulative sales of Toyota hybrid vehicles sold around 1000000 units, a 90% share of world market. Toyota announced its plans to become the largest worldwide automaker, striving for 15 per cent of global sales, and was contemplating to by nearly half in the next decade. The company had committed that by 2012, all vehicles produced in the United States would have a hybrid-electric engine available. Because of this commitment, Toyota was positioned as leader of the hybrid-electric market, and its efforts to develop the target market would define the automotive industry over the next decade. The recession of 2001-2013 dramatically affected new car sales. As annual sales of new vehicle declined, the manufacturers were struggling to hold both their leadership and share position. Each manufacturer competed by trying to meet the needs of its current customers, while preparing for future of the industry. Strong environmental legislation and societal perception of environment demands were accelerating manufacturers to make their products environmentally cleaner and more fuel efficient. As the technology changed, there was a great opportunity for manufacturers to take the lead in providing consumers with vehicles that were environmentally friendly and provide performance, reliability and styling. Leading companies would provide consumers with vehicles that bridged the gap to the future by combining the qualities of todays cars with the te chnology of alternative fuels. In 2003; Toyota had taken the lead in this product category evolution.

Since 2001, hybrid electric vehicles had received the most significant marketing push from auto manufacturers. On March 20, 2003, scientists found another reason for manufacturers to focus on hybrid-electric technology. A Massachusetts Institute of Technology study found that, at the present state of fuel cell innovation, hybrid technology is better for the environment. These scientists forecasted that until at least 2020, HEVs will use less fuel and emit less carbon dioxide than fuel cell models over the vehicle lifetime. Toyotas strategic advantage was to be better able to determine the needs and desires of consumers before they actually express them. Toyota, perhaps because of its early failures in the U.S. marketplace, conducted research to recognize the regulatory, environmental and legislative market drivers that would eventually translate into future purchasing variables for consumers. Toyota used an effective product development process that was able to reduce the cycle time for developing new models, bringing new products to market almost 30 per cent faster than its competitors. This agility gave Toyota a competitive edge in a business environment driven by changes in market trends and government mandates.

Problem Definition
The Prius launch in June of 2000 had a fully integrated marketing plan with an emphasis on Internet and Web advertising. The initial strategy targeted early adopters by showcasing the intelligence of the new technology in a Web-based marketing campaign. Toyota, in order to create an initial buzz around the product, began an early dialogue with interested consumers. Starting two years before the Prius was available in the US, the campaign began by creating a dialogue with customers that resulted in 40,000 people expressing an interest in the Prius. These prospects were given early access to a private web site and were able to pre-order the Prius, which 1,800 did. The campaign then continued onto a more traditional form using broadcast and print advertising and continued to combine interactive, outdoor and lifestyle marketing. However, this early Prius did not stack up based

on either features or price compared to its competitors and the marketing campaign heavily emphasized the car's green aspects. Toyota had only succeeded in selling to an audience of innovators and a limited number of early adopters who were drawn to the technology and willing to take a risk. As a result these initial marketing efforts failed in their attempts to produce mass appeal and only 15,000 cars were sold in 2001 and approximately 20,000 were sold in 2002. Crossing the Chasm was going to require further innovation and a different marketing strategy.

Alternatives to be considered:
Toyota can dig deep into the customer need and make some small changes, as per the customer, may be by customising and launching models in more segments to meet and exceed their expectations. Toyota can brand itself as feature competitive with similar cars and by new marketing campaign that can shift from a focus on early adopters and environmental friendliness to the mass market and economic benefits.

Identification of best alternative:

Toyota can implement both the alternatives to meet the customer requirement in increasing their sales, and at the same time focus on new marketing campaign that can shift from a focus on early adopters and environmental friendliness to the mass market and economic benefits.

Implementation Plan:
To highlight that Toyota Prius creates high Customer value through these attributes: Saves time spent filling up with gas Saves on fuel cost Generates Peer to Peer Buzz -- as it is immediately recognizable Toyota's Reputation for excellent reliability Provides public (environmental) benefits without requiring a sacrifice Toyota can use penetration pricing strategy in order to build market share rather than skim pricing strategy of setting the price high initially and then dropping it as competitors entered. This may be effective in gaining and holding onto market share. Establish some cachet around the product and make the product distinct and highly recognizable so that people may buy it as a luxury good for the environmental status it conveys.

Group members: 1. Pratik Shankar(G13034) 2. Amir Shameem(G13062) 3. Mayank Verma(G13082)