Automotive Market of the United States - Eco-Zen - Research Paper Example

New Product Paper of the of the Number New Product Paper Product and Automotive market of the United States is one of the largest automobile markets in the world. More than 13 manufacturers are available in the market. Various new and advance features of automobiles has been introduced by these manufacturers over the last few years but none of them has come up with a car which runs on water (“The Automotive Industry in the United States”). Fuel charges are increasing day by day and consumers are getting more aware about the benefits of eco-friendly products (“Nearly Half Of Adults Are More Inclined To Buy Eco-Friendly Products, And Four In Ten Would Pay More For Them”). This paper proposes to launch a new car, Eco-Zen, which will be running on water-fuelled technology. Market segmentation variable It has been observed that segmentation of market and targeting potential consumers are essential prior to the launch of a new product. It helps in making marketing mix for a particular product (Wedel, Kamakura and Böckenholt, “Marketing data, models and decisions”). There are generally four major market segmentation procedures such as: Geographical segmentation includes region, city size, metropolitan area, density, climate etc. Demographical segmentation includes family structure, age, gender, social class, marital status, occupation etc. Socioeconomic, which comprises of income, education and occupation of consumer. Psychographic, which includes personality, values and lifestyle of the consumer. To segment the market for Eco-Zen, geographical and socioeconomic factors will be followed. Among geographical factors metropolitan areas have been considered and among socioeconomic factor income is the most important variable for this product. Rationale behind chosen market segmentation According to the researchers, certain section of consumers prefers to purchase a premium product as it is closely related to the status symbol. It also satisfies their high self-esteem (Goyat 45-55). Manufacturers are launching this product to promote green-marketing concept and this car will completely eliminate toxic emissions that are currently rampant in the existing automobile industry. So, market segmentation of the car is being done on the basis of geographical factors and marketers need to find regions where consumers are ready to experiment with new innovation. In the introductory phase Eco-Zen will be accepted in metropolitan areas only because these areas are already equipped with required physical infrastructures such as broad roads and highways. To be more specific and accurate about right customer, the market must be further segmented into socioeconomic categories such as their income and affordability in particular. Income is the most important determinant to decide whether the customer is able to purchase the car or not. This is the main reason why the purchasing power of consumers is important variable here. The product is going to follow a premium pricing strategy, so consumers in the higher income group having the wherewithal to purchase are only going to be targeted. Target market Eco-Zen car is a premium product which is about to be launched in the American Market (Craft, “A factor analytic study of international segmentation performance measures”). The Primary target market of the product should be professionals, college students and people who are supporting the environment protection movements. Figure 1: Disposable income of US (Source: “United States Disposable Personal Income.”) The above graph has displayed an increase in the disposable personal income of the US consumers in the last few years. Increase in disposable income directly influences the buying behavior. Most of the consumers are ready to experiment with path-breaking and innovative products (“United States Disposable Personal Income.”). Eco-Zen shall be proven as a great success in the market as it eliminates the extra charges of fuel and provides a huge contribution to the green movement. Secondary target market should be the consumers who already have a car and ready to upgrade their product with new features. Marketers must target those consumers who are looking for exchanging used cars (Dibb, Sally, and Simkin 131). Product’s benefits to the target market Eco-Zen is build with the electrolytic carburetor technology. This technology will totally eliminate the usage of gas or fuel and it will give the similar features and speed of a fuelled car. Consumer can save a huge amount on gas pumps. Apart from saving thousands of dollars by eliminating fuels, one can also directly contribute to the environment. Water-fuelled cars will emit non-toxic water vapor and oxygen in the air which will provide a cleansing effect to the environment. Introductory price of the product Introductory price of the new product must be designed as per targeted market. Various competitors are already available in the market so manufacturers must enter the market with a high price structure. The introductory price would be $40,000. This price has been set by considering the production cost, desired profit and pricing pattern of the similar range of products. Product pricing Strategies Accurate price of a product determines whether a company can generate maximum profit (Smith 85). Price skimming strategy is the most suitable pricing strategy to introduce this product. This strategy ensures that the product will gain a huge profit in the beginning of the product life cycle (PLC) (Levitt, “Exploit the Product Life Cycle”). The pricing pattern will vary according to the demand of consumers throughout the PLC. Objectives of these strategies High-end customers have an affinity to get attracted to latest versions of products. Superior quality and added features influences them to pay a premium value for the product (Kumar 205). By using price skimming strategy, the product can be successfully placed among the premium customers. Eco-Zen will require innovative promotional ideas to create a brand value. So, the introductory price should be higher to gain the desired profit margin. This product already has various competitor brands available in the market who are upgrading their products with eco-friendly technologies. So the demand will be decreased in a short interval of time and the price need to be designed accordingly. The higher price range with better features will help the product to create a brand value in the market and subsequently other products will follow the price structure. Price justification for the product To introduce a product with standout features which has high manufacturing cost organizations generally set a higher price. This will help them to enter into the market and balance the cost too. The pricing of this product is higher than the available hybrid cars but it is lower than the premium cars. So, it will be affordable to the targeted consumer section. Price charged at each stage of PLC Each and every product which has been released in the market has to go through the product life cycle (PLC). The life cycle of a product mainly have 4 stages that include development, growth, maturity, and decline (Kotler 45). In the development phase the product goes through expensive promotional activities and the demand of the product is also low because of lack of awareness among the customers. So the price needs to be designed to gain a good profit (Smith 85). In this period the price of Eco-Zen car should be set at $40,000. In the growth stage the product will be marketed very successfully by right amount of promotion and manufacturer can earn maximum profit (Levitt, “Exploit the Product Life Cycle”). When a product is in its growth phase, consumers are ready to pay a good price for right product. Few educational activities need to be organized to make people aware about their contribution to the environment. To increase the sales rate in low-profit locations, organization needs to introduce a discount of 2%-5% per piece. Maturity phase is more critical to set a price limit for any product. In this phase the market get introduced to various competitive products profit (Levitt, “Exploit the Product Life Cycle”). If consumer can find a substitute in lesser price they will tend to go for it. So in this phase various promotional offers are required to attract customers. The selling price should be set at a profitable mark but a generous 10%-20% discount can increase the sales of the product. Decline phase is the toughest phase to sale a product. If an organization wants to increase their sales ratio then they need to lower down the price as per the competitive product (Smith 85). In this case, the product price should be set at $28,000 to $30,000 as per the sales location and the market demand. The pricing strategy for Eco-Zen car is likely to be successful because it provides customers the true worth of their money. Before introducing Eco-Zen to the market manufacturers must review the pricing strategy a couple of time and few promotional campaigns need to be organized. Works Cited Craft, Stephen H. “A factor analytic study of international segmentation performance measures.” Journal of Euromarketing 13.4 (2004): 79-89. Print. Dibb, Sally, and Lyndon Simkin. “Judging the quality of customer segments: segmentation effectiveness.” Journal of Strategic Marketing 18.2 (2010): 113-131. Print. Goyat, Sulekha. “The basis of market segmentation: a critical review of literature.” European Journal of Business and Management 3.9 (2011): 45-55. Print. Kotler, Philip. Principles of Marketing. New Delhi: Pearson Education India, 2011. Print. Levitt, Theodore. “Exploit the Product Life Cycle.” Harvard Business Review. Harvard Business School Publishing, 2014. Web. 9 December. 2014. Smith, Tim. Pricing Strategy: Setting Price Levels, Managing Price Discounts and Establishing Price Structures. Connecticut: Cengage Learning, 2011. Print. Wedel, Michel, Wagner Kamakura. and Ulf Böckenholt. “Marketing data, models and decisions.” International Journal of Research in Marketing 17.2 (2000): 203-208. Print. “United States Disposable Personal Income.” Trading Economics. Trading Economics, 2014. Web. 12 December. 2014. “The Automotive Industry in the United States.” SelectUSA. SelectUSA, 2014. Web. 12 December. 2014. “Nearly Half Of Adults Are More Inclined To Buy Eco-Friendly Products, And Four In Ten Would Pay More For Them.” Ipsos. Ipsos in North America, 2014. Web. 12 December. 2014. Read More