Marketing Plan for the 2010 Toyota Auris HSD Hybrid - Case Study Example

Marketing Plan for the 2010 Toyota Auris HSD Hybrid Table of Contents Introduction................................................................................................... 2 Corporate Objectives.................................................................................... 2 Market Overview........................................................................................... 3 General Conditions in the UK/European Market................................ 3 Competition........................................................................................ 4 Marketing Audit............................................................................................. 5 Toyota’s Marketing Mix...................................................................... 5 SWOT Analysis.................................................................................. 6 PEST Analysis.................................................................................... 7 Porter’s 5 Forces Analysis.................................................................. 8 Assumptions about the Market Environment................................................ 9 Marketing Objectives for the Toyota Auris HSD........................................ 9 Alternatives & Options.................................................................................. 10 Promotional Programme............................................................................... 10 Control, Measurement & Review.................................................................. 11 References................................................................................................... 13 Introduction The second half of 2010 will see the introduction of the Toyota Auris HSD, the second of Toyota’s extensive vehicle line-up to feature hybrid technology, following up on the success of the petrol-electric Prius. The Auris was originally introduced in 2007 as a replacement for the Corolla model, and is presently available in 3-door or 5-door hatchback configurations. Vehicle assembly is done in Toyota’s factory in Burnaston, Derbyshire, with engines coming from the manufacturing facility in Deeside, North Wales. (Toyota Manufacturing UK, 2009) The Auris will be the first Toyota model to feature the Hybrid Synergy Drive system, which the company will gradually introduce into its complete passenger-vehicle line-up in the coming years. (Pollard, 2009) Thus, the success of this new model is critical to Toyota’s future, particularly in the UK market, but around the world as well. This report will present a marketing plan for the new Toyota Auris HSD in the UK. An explanation of how the Auris fits into Toyota’s overall corporate objectives will be followed by a detailed analysis of the hybrid passenger vehicle market in the UK. To determine if the chosen marketing programme is effectively meeting Toyota’s objectives and maximising the opportunities presented by the UK market, a system for assessing the programme’s results will be included. Corporate Objectives There are three key factors which guide Toyota’s overall strategy and corporate objectives. First are the Japanese concepts of monozukuri and genchi genbutsu, which have been integral to Toyota’s corporate philosophy since its founding. Monozukuri best translates into English as “craftsmanship”, and is expressed in Toyota’s innovative, product-oriented marketing model. Genchi genbutsu means “at the place of engagement” or “on the front lines”. (Toyota Annual Report, 2009) In terms of marketing objectives, this means closely engaging with customers to assess their needs and desires, in other words, “putting themselves in the customers’ shoes”. This then becomes a modifier to the product orientation, so that innovation is directed to meet the demands of the customers. The second key factor is Toyota’s “Global Vision 2010”, an all-encompassing long-range strategic plan launched in 2002 and aimed at making Toyota the world’s number one automaker. A considerable portion of the plan was devoted to environmentally-friendly initiatives, both in manufacturing and operations processes, and in the vehicles Toyota produces. (Krishnan & Chaudhuri, 2006) The successful Prius model was the first step in introducing a new generation of ‘green’ vehicles, and the forthcoming Auris HSD will greatly expand that initiative. The third key factor is the global economic crisis of 2008-2009, which severely impacted Toyota’s sales and revenues. Toyota recorded only the second operating loss in its history for the fiscal year ending 31 March 2009, and saw a 21.9% decrease in its net revenues. (Toyota Annual Report, 2009) A comprehensive cost-reduction and revenue recovery plan was devised beginning in late 2008. Among the measures implemented was a shift to a greater focus on compact, fuel-efficient, and hybrid vehicle development, which in the judgment of Toyota’s senior management are the product types most in demand in the current economic climate, and the area with the most promising prospects for growth. This is of course also a reflection of the monozukuri and genchi genbutsu philosophy. The direction laid out for Toyota by Chairman Fujio Cho and President Akio Toyoda in their statements in the 2009 Annual Report also indicate a shift away from centralised strategy, with a more region-specific approach. (Toyota Annual Report, 2009: 1, 3) This means that the marketing effort to support the introduction of the Auris HSD in the European market will be simplified to some degree, since it will only need to take into account conditions specific to the European market and not on a global scale, at least initially. This, too, is a reflection of Toyota’s genchi genbutsu philosophy. Market Overview General Conditions in the UK/European Market: Energy-efficient, low-emissions small vehicles continue experience sales growth throughout the UK and Europe, although the automotive market on the whole has experienced a sales decline through 2009. Sales have been greatly helped by the scrappage scheme in the UK, which provided customers with a ₤2,000 incentive to trade their old vehicles, and a temporary reduction in the VAT from 17.5% to 15%. (Wearden, 2010) The VAT returned to its previous level at the beginning of 2010, however, and the scrappage scheme will end later this year, so the recovery of the auto market in 2010 is expected to be modest. Hybrid and full-electric vehicles are expected to become more attractive to consumers as the price of the technology decreases, and with the introduction of future government incentive plans set to take effect from 2011. (Gow, 2009, and Vaughan, 2009) In the interim, though, auto sales are likely to be a challenge. In the view of some analysts, “good, old-fashioned marketing” with a focus on product development, brand identity, and positioning with respect to consumer economic and environmental consciousness is the key to success for all automakers in the year ahead. (“Automobile heaven or hell?”, 2008) Competition: The Toyota Auris HSD will face worthy competition from a number of products from other manufacturers. These will have to be considered in any marketing effort for the Auris HSD. Toyota Prius: The success of the Prius has been legendary, with over 1 million units sold since the model’s introduction in 1997. (Vaughan, 2009) The Auris HSD offers Toyota’s customers another choice in hybrid models, but will initially face a disadvantage because of the widespread public recognition of the Prius brand. Ford Fusion: The Ford Fusion is a small SUV (although not of a size or emissions rating to be derided as a ‘Chelsea tractor’), with either diesel-electric or petrol-electric power, and available in three configurations ranging in price from ₤13,681 to ₤15,520. (Ford UK, 2009) Honda Insight: Originally introduced in 1999 in the US, sales of the Insight were disappointing, and Honda withdrew the model in 2006. The re-designed vehicle is intended to compete with the Prius, although the Insight is slightly smaller than the latter and has a slightly higher CO2 emissions output. (Jha, 2009) The new Insight is available in three styles ranging from ₤16,338 to ₤19,303 in price, all powered by a 1.3-liter petrol-electric hybrid. (Honda Motors UK, 2009) Honda Civic IMA: Like the Insight, the Civic IMA hybrid has also undergone an update, and is classed as a slightly-higher model in the ₤18,000 to ₤22,000 price range. (Honda Motors UK, 2009) It has a slightly-more powerful 1.4-liter powerplant, but also has a higher CO2 rating, 109 g/km, versus 101 g/km for the Insight and less 87 g/km for the Prius and Auris HSD. Peugeot 308: The Peugeot 308 hybrid, like the Auris HSD, is based on an existing non-hybrid model and was introduced in 2008. (Strong, 2007) The 308 is a 5-door hatchback, powered by a 1.6-liter turbodiesel+electric combination. Vauxhall Ampera/GM Volt: The GM Volt is a full-electric model (plug-in charging plus a gas generator system for on-the-road re-charging) that will be available in the US in late-2010 and will be introduced in Europe in 2011. (Chevrolet, 2010) In the UK, the model will be branded as the Vauxhall Ampera. (Vaughan, 2009) VW Touareg, Jetta, and Rabbit hybrids [planned]: In mid-2008 Volkswagen announced that it was developing hybrid variations of its Touareg, Jetta, and Rabbit models as well as a full-electric vehicle, with anticipated introduction of these in 2010. (Johnson, 2008) The present status of these projects is not known, but it can be expected that these or similar VW vehicles will reach the market in the near future. Marketing Audit Toyota’s Marketing Mix The traditional way of looking at the marketing mix is the “Four P’s”: Product, Price, Promotion, and Place. Toyota’s monozukuri philosophy certainly does fit well with the Product aspect of the Four P’s, but the concept of genchi genbuchi demands a closer engagement with the customer. This kind of relationship orientation is restricted by the traditional model. (Gronroos, 1997) Another consideration which is particularly applicable to the automotive industry is that competition exists between and is driven as much or more by customers than it is by manufacturers. Increasing consumer concern for the environment and economic conditions which put a premium on high value-to-price encourage consumers to compete with each other on more moral or ethical grounds than the simple displays of materialism that existed perhaps two or three decades ago. (Burns & Warren, 2008) Social superiority subtly symbolised by an automobile is still important to consumers, but rather than having the biggest or most expensive, the prize is now to have the most responsible and technically-developed. Therefore, a “Four C’s” approach to the product mix – Consumer, Cost, Convenience, and Communication – may be more appropriate for Toyota and the Auris HSD: Consumer Considerations: Attractive styling Comfort Reliability Safety Cost Considerations: Value for Cost – Most possible features for lowest possible price. Fuel Efficiency Low Cost of Ownership – Maintenance, upkeep, and regulatory costs. Convenience Considerations: Ease of Operation Versatility and Practicality Availability Communication Considerations: Consumers use Internet extensively. “Informed Consumers”: Internet and wide array of other communications available to consumers means that they are much more likely to do their own research and comparisons over different options before ever visiting a dealership. These considerations must all be effectively addressed in the marketing plan for the Auris HSD. SWOT Analysis Strengths Weaknesses Toyota has high brand value. Auris HSD can benefit from the good reputation and success of the Prius. Auris HSD to be locally-produced, reducing costs and time to move finished vehicles to the UK market. Regional focus of Toyota’s operations & marketing activity increase efficiency of efforts to support the Auris HSD. Financial losses in 2009 put some restrictions on corporate activities, such as marketing investment, vehicle development. Auris HSD does create competition for the Prius, which could harm sales of both vehicles. Although the Auris HSD is based on an existing chassis & powertrain (from the standard Auris & Prius respectively), it may meet with some scepticism because it is a ‘new’ model. Opportunities Threats Potential customer base in owners of the standard-model Auris. Auris HSD presents another choice in hybrid vehicles; potential customer base in Prius customers. Future government-mandated emissions targets are creating a bigger market for hybrid automobiles. Large number of competitive models on the market or coming soon. Ending of government tax & other incentives might affect customers’ desire or ability to purchase a new vehicle. Other assumptions about the extent & degree of the economic recovery in 2010 and beyond may be incorrect. The main strengths of the Toyota Auris HSD are the association of Toyota’s formidable brand strength, and the success of the Prius in establishing Toyota’s reputation in hybrid vehicles. The continued popularity of the Prius presents an opportunity to draw consumer attention to the Auris HSD, since the latter represents an alternative product choice; this opportunity also applies to potential customers of the standard Auris model. And with respect to the UK market in particular, the manufacture of the Auris HSD in Derbyshire gives Toyota a distinct advantage over most of its competitors. The most important threat for the Auris HSD is the large number of competing hybrid, electric, and high fuel-efficiency automobile models currently available or coming soon. One of these competitors – the Prius – also represents an unavoidable weakness; it will be a challenge to manage both nameplates without one enjoying success at some expense to the other. PEST Analysis Political Economic Social Technological Mandates on emissions, environmental impact. Advocacy of domestic industries. Labour laws and industrial regulation. Mandates on vehicle safety. General economic conditions, pace and degree of economic recovery. Government incentives related to economic stimulus and environmental protection. Oil prices/fuel prices. Government vehicle-related taxes & regulatory fees. “Green Conscience” Consumers more informed about products. “Consumer Competition” (Burns & Warren, 2008) Demand for high quality, technical sophistication. Demand for convenience and comfort. Hybrid (petrol-electric or diesel-electric) engine developments. Full-electric vehicles. Higher-efficiency & alternative fuel internal combustion engines. Hydrogen fuel cell technology. The most significant political factors affecting the marketing of the Auris HSD are those relating to regulation of vehicles, particularly in emissions controls. This regulation also relates to most of the economic factors, as it is expressed in the form of road and vehicle taxes on the one hand, and incentives to buy more efficient vehicles on the other. The social factors are determined by customers who are able to use communications technology to learn more about vehicles and who are increasingly considering cars as reflections of social conscience as much as for their features and benefits. And of course the political, economic, and social factors are driving rapid technological developments in automobiles, from increasingly efficient and reliable hybrids like the Auris HSD, to full-electric vehicles, higher-efficiency internal combustion engines, and hydrogen fuel cell technology. Porter’s 5 Forces Analysis New entrants in the sense of this analysis mean new hybrid, electric, alternative fuel, or high-efficiency automobile models rather than new manufacturers; the number of new models planned for introduction in 2010 and beyond is clear evidence of an extreme threat. The threat of substitutions – alternative technology or means of transportation – is by comparison rather low. The bargaining power of buyers is extreme. Tay (2003: 25) points out that margin costs for automobiles have been steadily declining for a long period of time, and in recent years the decline has been accelerated by the transparency of information – largely driven by the Internet – available to customers. Therefore cost reductions in other areas must be passed on to the consumer, giving customers formidable bargaining power. On the other hand, the shrinking margins and critical need to reduce costs for automakers gives suppliers very low, if any, bargaining power. Assumptions about the Market Environment Assumptions about the market environment can be inferred from Toyota’s forecasts for 2010 and beyond. The automotive market is expected to be challenging over the short-term, for 2010 at least, and the overall number of vehicles sold will continue to decline. Not only will sales volume decline, there will be a shift in the sales mix, with hybrid vehicles increasing their share. (Toyota Annual Report, 2009: 5) In the UK market, customers will continue to be very price-conscious, having grown accustomed to the idea of various incentives such as the scrapping scheme to make cars more affordable. With the end of the scrapping programme and the temporary reduction in VAT, however, these incentives will no longer be available. Customers will be seeking value that translates into perceived lower prices for the vehicles they are considering. They will likely be willing to sacrifice some features in choosing a car to buy in exchange for savings on price, and likely at a much lower level than previously; whereas a customer a few years ago might have considered a ₤2,000 savings worth it, perhaps as little as ₤500 might be the ‘magic number’ now. Marketing Objectives for the Toyota Auris HSD In light of the market and competitive environment, the marketing objectives for the Toyota Auris HSD can be described as follows: Market the Auris HSD as a Toyota first, and a hybrid second: A large part of the success of the Prius was that it was unique. It was a purpose-designed hybrid rather than a modification of an existing model, and it was introduced when there was little competition. Neither of these factors applies to the Auris HSD; it is based on existing Toyota designs – Auris chassis and Prius powertrain – and is facing much more competition from the outset than did its older sister. The Auris HSD should be presented as ‘the future arriving in the present’, as not the second example of a Toyota hybrid, but rather as the first example of what all Toyotas will be. The justification for this approach is that it will give the Auris HSD an advantage over its competition no matter how they respond. If Honda, for example, were to take the same approach with the new Insight and present it as a ‘Honda first and a hybrid second’, that invites a comparison between the Toyota marque and the Honda marque – in other words, a comparison between the world’s leading manufacturer of automobiles and a company which is not. Any other hybrid – from Honda or elsewhere – which primarily positions itself as a hybrid will have to contend with the Prius legacy, which is, naturally, Toyota’s legacy. Illustrate the long-term cost savings as well as the competitive purchase price of the Auris HSD: The Auris HSD will certainly be priced competitively, but it may not be possible to beat comparable competitive models in absolute price terms. The long-term economic benefits of owning an Auris HSD in terms of savings on fuel, taxes, and maintenance and repair costs should be clearly explained and highlighted in marketing communications. If the Auris HSD happens to be higher-priced than a competing model a customer is considering, highlighting the long-term savings effectively responds to that apparent disadvantage. In instances when the Auris HSD is priced lower, the long-term savings are simply added benefits. Alternatives & Options The marketing concepts described above are the best solution for the Auris HSD. They do assume, however, that the increase in the number of hybrid models and the continued attention to environmental and economic factors will decrease the “novelty” of hybrid vehicles. Hybrid power will become less important as it becomes more common, and customers will be seeking more of the features and benefits they have always expecting from their autos – safety, reliability, style, and comfort. It is possible that in the short-term, hybrid vehicles will still need to be marketed with significant focus on that particular feature of them. How consumers respond to the Auris HSD marketing effort will determine what, if any, changes in focus need to be made. If that becomes necessary, marketing communications can feature the relationship of the Auris HSD to the successful Prius, which will still confer a great advantage over the competition. Promotional Programme In addition to the standard promotional mix of television and print advertising, a strong Internet presence for the Auris HSD must be established. A UK-specific website similar to the all-Europe website that has already been established for the Auris HSD (available at: http://www.toyota-europe.com/innovation/design/concept_cars/auris_hsd/index.aspx) can be launched, and should be composed in such a way as to give the customers interactive opportunities, such as ‘building their own Auris HSD’ by choosing different colours and styles to view. Toyota Auris HSD homepage (screenshot) Other web utilities such as Twitter and Facebook can be used to connect the website to a larger audience. Customers in the UK are fortunate to have the facility building the Auris HSD close to home, and Toyota should take advantage of the favourable geography. Giving customers a chance to visit the factory and see first-hand how the Auris HSD is built is an effective way to reinforce Toyota’s commitment to quality and technical superiority. A program can be initiated – perhaps as a special incentive for Internet buyers in the UK – to permit customers to take delivery of their new Auris HSD from the Burnaston factory. With the factory’s Derbyshire location, Toyota has an opportunity for personal engagement with its British customers that most competitors cannot match. Control, Measurement & Review Utilising the Internet for the primary marketing activity will allow for measurement of the reach of and response to the material. Comparisons with the marketing activities of competitors can provide at least a general view of the effectiveness of Toyota’s marketing activity versus other methods. Customer surveys and feedback will also provide valuable information. Because the Auris HSD is not scheduled to be released for sale until September 2010, it will be most useful to review the effectiveness of the marketing effort at the end of the first quarter of 2011, which also corresponds to the end of Toyota’s fiscal year. Necessary adjustments can be prepared and made ready to present in time for the annual shareholder’s meeting, which typically takes place in June. References “2011 Volt”. (2010) General Motors - Chevrolet, [Internet] 2010. Available from: . “Automobile heaven or hell?” (2008) Strategic Direction, 24(9): 25-27. Available from Emerald: . Burns, D.J., and Warren, H.B. (2008) “Consumer Warfare: Implications for Marketing Strategy”. Journal of Business Strategy, 29(6):44-52. 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