Marketing Strategy For The Chevy Volt Marketing Essay

Marketing Strategy For The Chevy Volt Marketing Essay In November of 1911, Louis Chevrolet, William Little and Edwin Campbell integrated the Chevrolet Motor Company. Chevrolet offers an assortment of motorized vehicles to the general public such as subcompact cars, sports cars, luxury cars, trucks, SUVs, and vans. Chevrolet made the cut and will continue to serve its customers for years to come, stated Nick Kalapos the Times leader in a documentary about Chevrolet being the leader in their community (15). Chevrolet continues to be on top with performance, price, fuel economy, and value leader for General Motors North America (13). Many people are becoming more aware of global warming and they are trying to find various ways to become more environmentally friendly. Record oil prices have pushed consumers toward fuel efficient vehicles and have prompted many governments to consider electric transportations as a way of traveling (5). Research shows that consumers want eco friendly cars. About 68 percent people say that they are willing to buy an eco friendly car within the next couple of years (1). Will Buss said that in reference to Newtons Third Law of Motion, consumers have reacted to gas prices, which have soared to record levels, by buying fewer gas-guzzling sport-utility vehicles and more of the fuel-efficient and hybrid-powered variety. As consumers become more aware of how harmful emissions are and how much oil prices continue to rise they will be more willing to buy and the need for electric cars and hybrids will take over the automotive marketplace (1). Chevrolet is searching for those who are willing go the extra mile to be early adopters for the new Volt that will hit the market in late 2010. The people who are going to be more interested in the Eco friendly cars are the Generation Y consumers, says James Schroer. As Generation Y grows up they are going to demand for their vehicles to become more environmental friendly. Gen Y consumers have grown-up up to be technology savvy and they are known to be more familiar with technology than any other generation (1). By developing high technology that could be appealing to the consumers it would entice drivers to plug in rather than filling up (5). Chevy Volt has soaring technology that will give buyers a smart phone application that will let the owners control key vehicle functions along with On star. I phones, blackberries and android phones will be available with the electric car. Remote access will also be possible from a cell phone web browser that will have applications for starting , locking and unlocking the doors, security system arming and disarming commands, and trunk popping. Also there are applications for honking the horn so people will be able to locate their cars easily. The Chevy volt has new technology innovations for the generation Y. As this generation matures and gains more power, their influence will spread across the country (4). There are also some cultural issues to deal with when it comes to electric cars. Some Issues about the electric car depends solely on the time the vehicle will come out, the cost of the Volt and most importantly the consumers (5). Americans want to do good things for the environment, as long as they do not have to compromise performance, convenience, or comfort which causes a major issue (1). Americans only want to do what is suitable and as long as it does not affect their everyday life. Many Americans have a large family which requires them to need a bigger vehicle like a SUV making a gas eating vehicle more suitable than a small electric car. Bigger issue that arises is the lack of batteries that are available. Many car manufactures have been slow to commit to their decisions about electric vehicles, because they are unsure about how many people will want to purchase the electric car. Without orders being placed battery manufactures cannot invest in the time and money that is necessary to produce the batteries at a timely fashion. Gassenheimer says that he has concern that the United States will trade their dependence on the Middle Eastern oil for a reliance on Asian batteries (5). Many experts say that Western companies have more experience in technology and Asians are the leaders in producing Lithium-iron batteries for electronics. A concern for the U.S is that they really dont know if they have the resources or capabilities to produce mass loads of Lithium-iron batteries and the same concern goes for Europe. So a major concern arises about where the Lithium-iron batteries are going to be made. This is a huge issue due to Asians being the only ones that are experienced in making loads of Lithium-iron batteries. An issue about shipments of the Lithium-iron batteries is that its on a strict International Regulation that would be placed on goods making these goods being labeled in the dangerous goods category. Tollefson stated, When the first generation of anything comes out, to a certain extent car manufactures are rolling the dice and this is the biggest roll of the dice anybody has ever made (5). With the rising gasoline prices and consumers growing preference for environmentally-friendly technologies, the hybrid car market has grown tremendously. Toyota, being a huge competitor to General Motors captured the largest percentage of the hybrid car market. Automobile companies such as DaimlerChrysler, Ford and General Motors (GM) have agreed to double their annual production of energy efficient vehicles by 2010. With all the environmental issues going on, nearly all automobile companies are scrambling to be the first and best new electric or hybrid on the market. Shane Donahue stated, Our competitors and others are pursuing similar technologies and other competing technologies, in some cases with more money available. There can be no assurance that they will not acquire similar or superior technologies sooner than we do. With that being said, it can be recognized that General Motors feels that their competitors are one step-ahead of them in the hybrid car market. The GM Chevy Volt will enter the market as a direct competitor to the Toyota Prius hybrid and the Honda Insight hybrid. The Toyota Prius is only a conventional hybrid, the Volt is essentially a plug-in car that has to affirm the companys ability to innovate and turn the company around. However, Nissan has announced that it will beat the Volt to market in fall 2010 with its Nissan Leaf, which boasts a 100 mile range on a charge. The Leafs target launch date will beat General Motors Volt plug-in hybrid, and while Japans Mitsubishi and Subaru both launched EVs for sale to fleets in Japan last month, the cars are smaller, lower-speed, city cars with far less range than the 100 miles-per-charge, claims Nissan for the Leaf. With the Chevy Volt and Nissan Leaf threatening to steal the green car market, Nissan is accelerating its plans for a plug-in version of the Prius (19) Ford has also announced that it will produce a battery-powered version of its Focus, called Focus EV, in late 2011. As well as many other companies are working on electric cars such as the BMW City, Dodge Circuit, Tesla Model S, and Chinas BYD E6. Although they are way more expensive, Tesla has actually sold a few of its cars, which gives it some advantage. Another eco friendly competitor of Chevrolet is Zenn. Their marketing slogan is Zero Emission and No Noise. The Zenn does not use gasoline but is all electrical The Zenn companys idea on eco friendly cars is about purity and original feeling. The Volt needs at least 8 hours for it to charge fully, but the Zenn can take as little as 4 hours to get a full charge. The price of owning a Zenn is half the cost of the 2010 Volt which has not even hit the market yet. The Zenn has been stated in Time magazine as small, inexpensive electric vehicles that can be charged to cover enough miles to handle the daily commute. (20) The Zenn is a Canada based company which has already launched the car in Canada and in the United States. Its sales are increasing with the concerns of a bad economy. A Zenn has significantly less parts than a regular vehicle that will have to be maintained on a regular basis. The owner will never have to worry about changing the oil, replace a filter or muffler and there i s absolutely no need for an emission test. Chevrolet has many routes to take its new innovations with its worldwide channels of production and distribution. GM has organized its brands into four channels: Chevrolet, Buick-Pontiac-GMC, Cadillac-Hummer-Saab and Saturn. Now it has changed the job responsibilities and titles of several of its channel leaders (3). A channels brand name depends on where the vehicles are being produced and sold in. Channels use different brand names to make their vehicles appear more localized. Many of the changes made to the cars are designed specifically to meet the customer needs of where their production is being made. GM took over bankrupt Daewoo Auto and technology to help regain Daewoo reputation at home. GM received a big achievement with Daewoo with their exports. Chevy Europe is a swiss-based firm that sells rebranded products of the GM Daewoo. Chevy Europe sold few United States domestic markets that were modified to suit the European regulations. Chevy Europe sold the Camaro, Beretta, Co rvette, Blazer and the Trailblazer. In 2005 Chevy Europe rebranded its ownership to the Ssangyong, however the Daewoo name retained its name in South Korea and Vietnam after 2005. The Suzuki badge is in the U.S and Canada, Pontiac Badge Canada, the Holden badge in Australia and New Zealand, and the Buick badge in China for some certain GM Daewoo models. Marketed in different distribution channels operated by the Netherlands-based Kroymans Corporation group are the Corvette and Cadillac. Kroymans Corporation going to sell German GM vehicles such as the Opel and they will also sell Netherlands and Belgium made brands. Kroymans is going to stay focused only on importing, distribution, marketing car and retail sales in the Netherlands. The reason for this is because the Chevy Brand represents value-driven cars in Europe. The Corvette name was made into different brand for Europe and Japan. With this World wide vast coverage GM will be capable of designing and marketing vehicles to diffe rent parts of the world. By having this wide coverage GM will be able to draw knowledge and cultural differences from engineers around the world (2). Market Approach The Chevrolet Volt is a hybrid electric automobile. The cars main source of power comes from lithium-ion batteries stored underneath its hood. The batteries can receive charge through one of two ways. They can store electrical energy from the small, gasoline powered engine, or can be charged by using 120-240V AC outlets. On a full battery charge, the Volt is capable of traveling over 40 miles (22). A study found that this distance satisfies nearly three quarters of Americans daily commutes. In addition, Chevrolet expects the batteries to last for up to ten years. The Chevrolet Volts main target market is middle class families that share similar opinions, interests, and hobbies. Segmenting the market and choosing this group is reflected within GMs marketing strategy. They will adapt a strategy that is tailored to attract consumers with related lifestyles and purchasing behaviors. With all the Green Marketing focus in todays world, many consumers are looking for vehicles that are environmentally friendly. Also, with the recent state of the economy, many consumers are seeking a car that provides good value and quality at a fair price. The Volt is a new kind of hybrid that runs primarily off of electricity which greatly reduces its fuel consumption. With increasing gas prices and a poor economic state, this makes the Volt attractive to these eco-friendly customers. As GM seeks to be a part of the Go Green initiative, many consumers who value this idea will begin to become loyal to General Motors. When GM set out to price the Volt, they had a good idea of where to position their product. Some other big automobile companies have already dipped into this market and give the Volts marketers a good idea of a fair price for this type of vehicle. Nissans Altima Hybrid is priced at $34,000, followed by Hondas Accord ranging from $35,000-$40,000 (23). The Toyota Camry Hybrid rounds off this vehicle class with a standard price tag of $37,000 (24). These prices made it apparent to Chevrolet that for the Volt to be competitive it should be priced somewhere in the range of $30,000 to $40,000 depending on available options. The anticipation of the introduction of the Volt is growing, according to Chevrolet. They have over 30,000 potential buyers that cannot wait to drive one of these fascinating cars. Chevrolet wants consumers to see the car as more than just an inexpensive way to travel. They want to the vehicle to reflect style, and be a car that people aspire to own (24). However, some automakers are skeptical of the Volt. Some of the more luxurious competitors feel that most consumers will not pay a higher premium for a car that really doesnt offer much more than a basic automobile. Chevrolet hopes to shock them as well as the consumers it captures with the Volts release. Chevy and GM have worked hard to make the Volt a user friendly and customizable car. One of the features they are offering will be a few different gauge interfaces from which the driver will be able to choose. One set contains a standard, traditional gauge set with all normal gauges placed directly over the steering wheel, while a second set displays the gauges from the center of the dash. This second set is impressive, in that it uses touch screen technology and backlit LED lighting for a bright, clear display. Both sets allow drivers to see how they are using the cars energy, which can let them adjust driving patterns to reduce lost energy (25). Still, the location of the interface is strictly up to the driver, and consumers like the idea of being able to customize a vehicle to their liking. Another advantage the Volt has over foreign electric vehicles is its federal rebate program. The government offers $7,500 off for buying the Chevrolet brand. This becomes quite a bargaining chip when talking about a sticker price of 30-40K. General Motors is planning to produce tens of thousands of these new vehicles to be sold around the world. An actual price has not been set but the pricing strategy and final MSRP will factor in gasoline prices (26). Chevrolet offers many services that other companys lack. An important service that Chevrolet has is a life saving service called On-Star. The Chevrolet Volt will be equipped with On-Star, but not just any On-Star, it will come with On-Star EV Lab. This version is offered to give the Volt a more high tech appeal (6). One of the features includes communicating with the Volt by telling it to charge during the night at off peak times to take advantage of lower rates; this technology is called smart charging (6). On-Star automatically runs hundreds of diagnostic and maintenance checks on your vehicles key operating systems and deliver a summary report right to your inbox every month (7). Chevrolet has been a loyal company that has always been superb when coming up with new ideas for vehicles. Chevrolet has been working hard to process this new advanced automobile. Volt is an electric vehicle with a range extender. Volt runs on electricity from its battery, and then it runs on electricity it creates from gas. Depending on the weather, the electrical features that are turned on and how you drive, you can drive up to 40 miles on the electricity stored in the battery totally gas and emissions free(8). After this takes place, the range-extending generator automatically kicks in to provide the electrical power. This allows the Volt to go for several hundred additional miles, until it is plugged in again. Chevrolets brand is becoming more solid after GM filed for chapter 11 bankruptcies and has just recently emerged. Chevrolet is one of the leading automobile brands in America. The automakers are continuing to launch fuel efficiency options, while also introducing safety and security packages for the new models. Trailing the American urban congestion, the Chevys hybrids are poised to surpass their mainstream competitors. Above all, the most visually arresting feature for the brand of Chevrolet vehicles is the Chevrolets corporate logo that creates a distinct look for the exterior(9). Financials: The Chevrolet Volt has an estimated price of around $40,000, in the U.S. market. Due to the capacity of the Volts battery pack it qualifies for the maximum US $7,500 federal tax credit. The former vice president Bob Lutz initially wanted the Volt to be sold at around $30,000. Electricity is an extremely affordable way to power a car the average American pays less than 12 cents per kilowatt hour. If the average American drives less than 40 miles, it will cost about a dollar a day for electricity (8). This is about the same cost as running a basic household appliance. To save even more, some utility companies recommend charging overnight for off-peak rates and may even offer incentives to customers who do so (8). The Volt is being endorsed by Dalton McGuinty and the Ontario government in Canada. The province will provide a $10,000 subsidy, and will purchase 500 Volts for the Ontario Public Service fleet. The subsidies are part of McGuintys target to have electric vehicles make up 5% o f all cars in Ontario by 2020. (10) At the Sydney Motor Show in October 2008, Holden stated that the Volt would be available in Australia by 2012 for more than $30,000. At the U.S. average cost of electricity (approximately 11 cents per kWh), a typical Volt driver would pay about $2.75 for electricity to travel 100 miles, or less than 3 cents per mile. GMs average annual sales growth over the past five years is a low 0.7 per cent. It has accumulated losses of $51 billion (U.S.) since 2005, and the shareholder value of GM, with 2007 sales of $297 billion, is a humbling $12 billion. (21) An analysis of the financial statements of the Chevrolet Volt show that the accounts receivable remain at about $500,000 throughout the year; not including a seasonal fluctuation in sales. The accounts receivable turns over once every 60 days. The inventory on the other hand remains about $800,000 and turns over every 90 days. The accounts payable remains at $400,000 and turns over about once every 45 days. With an accounts receivable collection period of 60 days and an average balance outstanding of $500,000, results show that $750,000, is the amount that should be collected on the receivables in 90 days. If the inventory of $800,000 valued at cost turns over once in 90 days and if the average markup is about $200,000, cash sales should amount to about $250,000. If there is no seasonal factor, the total amount divided by four should be an approximate test on the amount budgeted for the next 90 days. A Chevy Volt owner could theoretically drive 15,000 miles for less than $300.00 a year, assuming current rates for electricity stay the same. Volt uses about 2500 kWh annually, which is an extremely affordable way to power a car as the average American pays less than 12 cents per kilowatt hour. In other words, if you drive 40 miles or less that could work out to be about a dollar a day. And that can add up to big savings. (27). Depending on the weather, the electrical features that are turned on and how you drive, you can drive up to 40 miles on the electricity stored in the battery totally gas and emissions free. After that, its gas-powered, range-extending generator automatically kicks in to provide electrical power. Assuming the EPA estimates $2,000 a year in fuel cost for a compact car, like the Chevy Cobalt or Honda Civic cost savings in fuel would go a long way toward offsetting the cost of a $40,000 electric vehicle. Battery and size and vehicle cost should fall rapidly as pr oduction rises.   (27). In Flint Michigan, General Motors Company is investing more than $230 million in four different GM plants in the greater Flint area to support the production of the fuel-efficient 2011 Chevrolet Cruze and Volt, according to the automaker.   The four GM plants include Flint Engine South, Flint Metal Center, Flint Tool Die, and Grand Blanc Weld Tool Center.   At the Flint Engine South nearly $202 million dollars have been invested to renovate the former I5/I6 manufacturing operations for production of a 1.4L four-cylinder engine generator for the Chevrolet Volt.   In the Flint metal center, $1.7 million has been invested to refurbish press lines that will produce sheet metal stampings for the Volt.   All dies for the Chevy Volt were engineered at Flint Tool Die. Approximately 50 percent of dies for the Volt were designed at this facility. At the Grand Blanc Weld Tool Center, approximately $30 million invested in this facility to build the robotic weld tool cells that will ass emble the Volt body at the Volt assembly plant. Grand Blanc Weld Tool Center also built the robotic weld tool cells for the body shop to assemble the Chevrolet Cruze at Lordstown (Ohio) Assembly (28). When GM CEO Rick Wagoner testified that the Volt is being pushed into production for 2011, he added that, It will not be at that point fully cost competitive.   GM has actually spent about three quarters of a billion to develop the Volt, and much of that is in battery research. GM recognizes the importance of staying ahead of the competition in developing new technology. They are willing to take the risk of spending a large amount of money even in these desperate times of recession. Without doubt, some of that money will eventually be spread across the automobile industry when the Volts power train and battery advances get shared with other GM models. However, it is still unlikely that the Volts addition will bring down the bottom line until a second generation model is introduced, which may not be until 2014 to 2016   (29). Electricity is defiantly the way of the future when talking about the automobile. Electricity runs clean in a vehicle, therefore there will be no tailpipe emissions. And if the electricity is generated using alternate power sources such as wind, hydro, solar or bio-fuels, there is the potential to considerably reduce the emissions associated with personal transportation. Advancements in electricity production along with reduction in emissions from electric-powered driven cars can make our world a cleaner place.(30)   General Motors Corporation will open the first lithium-ion battery pack manufacturing plant in the United States in Michigan with production expected by 2010. The lithium-ion battery cells will be supplied by Compact Power Inc., a subsidiary of South Koreas LG Chem based in Troy, Michigan for Volt prototype vehicles until GMs battery facility is operational. GM has also signed a joint engineering contract with Compact Power and LG Chem to develop Volts lithium-ion batt ery technology. The advanced battery strategy is expected to strengthen GMs capabilities to develop hybrid and electric vehicles (30). By using the battery as a power source, we will in the long run help cut back our dependency from other countries. Since almost all of our electricity is produced domestically, its a great way to reduce our dependence on foreign oil. The U.S. has a variety of electricity sources, all with the potential to help us become more energy-independent. (31) Because the market of electric cars is still forming, there is not any real information available about cash flows.   There are a few known factors, though.   First of all, GM has spent about $750 million to develop the Volt, and will probably still spend even more.   For another, there is no way to break even on this investment for at least another several years (and several models) have passed.   Only time and 2011 income statements will tell how well GMs bottom line fairs with its new Volt.