Market segmentation - Research Paper Example

Rationale Chevy Volt is an eco-friendly electric vehicle offered by General Motors in US market as part of its ‘go green’ initiative. The global carmanufacturer has spent over $750 million on research and development of Chevy Volt, which competes with Nissan Leaf. Taking above into account, it should be pinpointed that Volt costs nearly 41,000 after inclusion of taxes to a consumer, whereas the Nissan’s Leaf costs $32000 (after tax) on average (Weingarten, 2011). Nevertheless, the initial target market of Chevy Volt is upper – middle and elite consumers with stable purchasing power and with inclination to acquire premium quality branded electric automobiles.

The market could be segmented into three major groups – young adults (age 22 to 35), middle – aged (age 36 to 50) and senior citizens (51 years and above). Nevertheless, the business scope (in terms of sales volume) of Chevy Volt is relatively high for first two segments because these consumers are tilted towards new hybrid vehicles and eco-friendly products (Welch, 2010). It is justified to argue that GM has currently a small market because there are fewer customers in the market that could easily acquire a $40,000 car in bleak economic scenario (inflation, high gas / fuel prices and unemployment).

Indeed, GM sold only 647 vehicles in first 2 months of launch that confirms aforementioned argument (Jin, 2011). It should be emphasized that GM competes with Japanese makers like Toyota, Honda and Nissan that could easily produce and market a hybrid in range of $17,000 – 33,000. Therefore, GM has been planning to increase its production and sell 25,000 units a year. This would definitely enable GM to reduce Volt’s total market price by $8,000 – 12,000, thereby increasing its competitiveness and attracting a large pool of middle – middle customers.

In short, GM could then capture market of Honda and Toyota (if prices reduce below $30,000 level during 2011) because the difference between Volt’s price and substitute cars will reduce considerably (Mick, 2010). References Jin, Raggy “GM to cut Chevy Volt Prices for Second Generation” Mobile Magazine, February 4, 2011 [Online] Available at http://www.mobilemag.com/2011/02/04/gm-to-cut-chevy-volt-prices-for-second-generation/ Weingarten, Gene “Gene and the Machine: The shocking truth about the electric Volt” The Washington Post, January 30, 2011 [Online] Available at http://www.

washingtonpost.com/wp-dyn/content/article/2011/01/21/AR2011012105347.html Welch, David “Chevy Volt versus Nissan Leaf: Let the Race Begin” Business Week, December 23, 2010 [Online] Available at http://www.businessweek.com/autos/autobeat/archives/2010/12/chevy_volt_versus_nissan_leaf_let_the_race_begin.html Mick, Jason “Update: GM CEO: Chevy Volt should hit the market at close to $30K, Earn a Profit” Daily Tech, January 19, 2010 [Online] Available at http://www.dailytech.com/UPDATE+GM+CEO+Chevy+Volt+Should+Hit+the+Market+at+Close+to+30k+Earn+a+Profit/article17438.htm www.gm.com