New scientific inventions focusing on reduction of carbon dioxide and greenhouse gases have gained increasing importance in the automobile industry. Today, vehicles with electric propulsion are viewed as an alternate option. To a large extent, they offer an opportunity to replace internal combustion engine vehicles with low-emission cars in the near future. The success of BEVs will also reduce dependency on foreign oil and oil shocks that impact the economy of a nation. Hence, during the last decade, battery electric vehicles (BEVs) have created increased interest in the US federal policies, and public awareness has also been raised significantly.
Due to significant developments in battery technology, a foreign manufacturer of bulldozers and earth moving equipment has planned to launch a battery electric vehicle (BEV), Ohm car, with electric operation in the Californian market. In fact, electronic cars produce the highest engine efficiency and zero tailpipe emissions. The replacement of gasoline operated vehicles with the usage electricity in vehicles increases the opportunity to use a range of energy sources in the Californian road transport.
Battery electric vehicles provide a significant value such as protection of environment, grid construction and improve economical efficiency. From the perspective of the environmental damage, internal combustion engine cars (ICCs), which use petrol or gasoline, produce CO2, NO, SO2 and other pollutants. However, promoting Ohm BEV will minimize these pollutants, and the dependence on fossil fuels will be reduced. The pollution generated by electric cars is chiefly from electricity charging progress.
The continuous rise in prices of oil and the awareness to minimize pollution levels reflect that the EVs will become an increasingly attractive option in future years. The objective of the current paper is to examine the barriers that Ohm BEV must overcome to achieve success in the Californian market. It also reviews the national policies that federal government has implemented in overcoming these obstacles. First, the paper identifies groups of potential buyers of an electric vehicle Ohm on the basis of psycho-graphic, socio-demographic and behavioral aspects. The second objective is to design effective marketing strategies and compare its impact on the EV’s perceived product benefits and desire to use such vehicles according to their attributes. In addition to this, the study examines the inclination of customers to use Ohm BEV in their daily travel.
SWOT evaluates weaknesses, strengths, threats, and opportunities of the business situation. Hence, it is mandatory to use this tool in order to examine the Ohm BEV image in the market.
One of the prime reasons for launching Ohm BEVs is that they are more energy efficient than the gasoline vehicles. According to WWF (2008) and the IEA (2010) report, BEVs are five times more efficient than ICE vehicles. This increased energy efficiency also results in the minimization of greenhouse gas emissions and other pollutants although the level of these reductions is dependent largely on the technology used to generate the electricity. If the electricity can be generated by using renewable energy sources, such as wind and solar, reductions in greenhouse gas emissions will be high.
The following strength of the BEV is the fact that it leads to an improvement in quality of air because electricity generating facilities are situated away from cities and noise levels. In addition, the increasing demand of BEVs will create additional jobs and employment opportunities in the automobile sector. The automobile pundits assume that the rising oil prices and dependency on foreign oil will also be reduced with the popularization of electric vehicle in the next decade.
Despite the potential advantages of electric cars, they do not offer an unequivocal panacea. The present advancements in deployment of electric cars reflect that the development of this industry will involve huge spending on research activities to comply with the greenhouse gases reduction fixed for the coming years. The sales volume of BEVs is expected to remain low until a charging network is established. The non-availability to charging infrastructures at home, in parking space, or urban locations is the prime weakness for developing the large scale market of electric vehicles. Another reason for the slow introduction of BEVs is the slow technology development if compared to ICE vehicles.
A cost is one of the factors that determine the weakness of EVs. Although the long-term costs of EVs are not as high as those of ICE cars, the acquisition cost will be higher because of the battery price. Therefore, offering a competitive purchase price largely depends on the battery costs, which constitutes the prime cost in electric cars.
Various reports suggest that buyers will be hesitant to buy electric vehicles because of less mileage produced by such cars. They are apprehensive regarding availability of charging network across the city but would be inclined to switch over the electric vehicle if it reduced energy costs. Vyas, Hurst, and Gartner (2009) suggest that buyers would purchase electric vehicles at a higher price if they are acquainted with the savings in energy costs.
The continuous increase in oil prices, dependency on foreign oil and recent oil shocks demonstrate that there is tremendous opportunity in increasing the production and marketing of the electric cars. Additionally, the degradation of environment has initiated federal government to introduce new protective measures to prevent ecological disaster. In such a case, future of electric cars is bright. Moreover, the EV industry does not require significant investments as in the case of ICE vehicles as well as creation of new markets because of the existing infrastructure of leading automobile manufacturers. This factor has initiated car manufacturers to become aware of the opportunities and start investing in developing new models of electric vehicles.
President Obama has suggested measures to accelerate the nation’s leadership in EV deployment, which includes signification changes in existing consumer tax credits and rebates on purchase of electric cars. Many programs have been introduced, which encourages manufacturers to prepare for the increasing demand of electric vehicles with financial assistance also available for research activities. The president has also offered financial cooperation of the federal government in establishing charging infrastructures at a national level. Since there is a possibility to increase the life-cycle of battery and reduction in its cost, it is predicted that BEVs will capture a large market share of the existing ICE vehicles in the next decade (Potoglou & Kanaroglou, 2007).
Standardization and normalization at the international level are crucial threats for technology and market penetration of electric cars. In addition, there is a lack of reliable data on lifetime costs, technological requirements and environmental effect of electric cars, which may offer resistance to buyers’ acceptance of the new travel patterns. Further, many potential buyers are not familiar with the performance of electric vehicles; thus, they may harbor misperceptions in regard with the vehicle features such as speed, range of mileage, effect on electricity bills, and other features of BEV ownership. The evolution of the existing technologies is another threat. The existence of cars using other technologies such as bio-fuels, hydrogen, ethanol in the combustion engine cars represent competitors for BEVs because they are fuel efficient and eco-friendly, as well (Offer, Howey, Contestabile, Clague, & Brandon, 2009). Numerous leading automobile producers such as Nissan, Ford, Toyota, and Mazda have already developed attractive models of electric vehicles. The established marketing network of these producers will pose a key challenge to Ohm BEV in competing with them with respect to quality, price and other features of their electric cars (Werber, Fischer, & Schwartz, 2009).
1. Profitability: The producers of Ohm BEV will achieve 20 percent investment return after 2 years of launching Ohm in the Californian market.
2. Market share objectives: The Company will achieve 25 percent of the market share for Ohm BEV in the first two years.
3. Promotional objectives: The company will invest substantially in promotional and advertising campaigns for increasing Ohm sales and popularity in the Californian market.
4. Objectives for survival: In order to survive during the period of recession, the company will reduce overheads and avoid wasteful expenditures.
5. Objectives for growth: To increase the sales volume from $500,000 in 2015 to $650,000 in 2016, it is necessary to start component production in 2016 for increasing profitability and reducing import duties.
All objectives are beneficial for popularizing the Ohm BEV in the Californian market.
Further, there is a growing consent that BEVs will market green technology, which is the prime marketing objective of launching Ohm BEV. The marketing efforts will spread awareness on the usage of lithium-ion batteries, which has been successful in other industries, such as mobile phones and laptop computers. These batteries carry more energy, and Ohm vehicles are being developed with less re-chargeable time, which will make it a better proposition for the customers.
The marketing team will launch intensive marketing campaigns in order to spread awareness of utility of Ohm BEV. It will further enable to capture a large market share being the beginners to introduce electric cars in the Californian market. The lack of competition will provide an edge over other producers who are preparing to launch their models of electric vehicles in the coming years. Finally, the aim of marketing is to acquaint the customers with the technological features of Ohm BEV, in particular, with the fact that the car can run at a speed of 80km/hour and cover a distance of 200 miles in a single charging (Kotler & Armstrong, 2001; Brown, Pyke, & Steenhof, 2010).
Marketing Communication Strategies
Marketing is often considered as a sequence of logical processes in order to provide answers to questions such as Where the company is positioned? What it wants to achieve? How it is going to achieve this? The answer to the first and the second question is that the development of new EV technology minimizes some disadvantages of ICE vehicle technology. The company also needs to substitute conventional vehicle technology and find a way to achieve this. Since the BEV technology largely differs from the conventional in some aspects such as longer fuelling time, limited speed and mileage, therefore, different marketing communication strategies might be needed to attract buyers, develop interests, instigate desires and finally, drive them to purchase. Usually, three marketing communication strategies are used in forecasting the acceptance of EVs.
The marketing strategies for competing in the market are: information acceleration, show room visits opportunity, and free trials offer. A computerized marketing program based on web-marketing can be developed and used for the implementation of the first strategy. This strategy is easy to access, it is inexpensive and creates an interest to find desired information. The second strategy encourages buyers to visit show rooms, which can be achieved through various promotional and advertisement campaigns. The third strategy resides in offering free trials to prospective buyers during their show room visits, which is an extension of the second strategy.
In addition, the prime objective of marketing strategy will be to focus on developing charging network across California state because, without an appropriate recharging facility, EVs cannot be successfully be introduced in the market. Marketing of electric vehicles depends largely on the energy sector. The energy sector will be required to build up recharging facilities, which is deemed as a prerequisite for buyers’ acceptance of BEVs (Kotler & Keller, 2006).
Target Marketing Mix Approach
Segmentation: Market segmentation starts with the identification of new markets. Large markets are divided into smaller markets depending on shared characteristics. Segmentation is further segregated into socio-demographics, psychographics, and behavior variables.
Demographic: The Ohm BEV is a family car created for those who cannot afford gasoline costs and yet dream of a luxury car. The car is highly suitable for various strata of society such as professionals, students, managers and people who travel much and are extremely cautious on gasoline spending.
Psychographic: Ohm BEV is a vehicle designed for middle and upper class society. The car is most suitable for those people who have awareness of environmental degradation and actively want to protect the environment.
Behavioral: Many people are already aware of the benefits of electric vehicles that will increase preference for Ohm BEV. They are aware that Ohm models are cheaper although show better performance and have less wear and tear rate; in addition to this, the company offers battery charging installation free of cost at customers’ homes or any selected avenue.
Targeting: The Company will position Ohm BEV as a family car having a great potential for a family that uses two wheelers for commuting. Ohm poised for entry in the Californian market will target multiple segments where it can find a clear share of the educated society. Further, targeting will depend on a number of demographic factors such as income, age, education, and profession. The business strategy of Ohm BEV is to target middle and upper class society, which includes a huge number of people with income of various levels. The objective behind the launch is to offer two more wheels to the users of two-wheelers (Walker, Boyd, Mullins, & Larreche, 2002).
Positioning: Positioning strategy determines how a company will project the Ohm EV in the market for capturing the desired market share. Ohm BEV will adopt product differentiation strategies for positioning the electronic car in the Californian market.
Positioning by Product Differentiation Strategy
The product differentiation strategy would focus on marketing Ohm EV in the California, without any major changes in the car shape and/or body. This strategy will be advantageous to the Ohm Company since there are no changes in the production and designing costs. As a first step, the three models of Ohm EV will be available in the market: Ohm TK, Ohm LX, and Ohm GXL. The company will introduce Ohm TK model in the California for evaluating the response of public at the first stage (Arora, 2006).
Stylish and Comfortable
Ohm EV is designed for a family of four persons; it provides a spacious compartment with a high rooftop and sufficient leg space. The design offers a length of 3.5 meters, width of 1.6 meters, and a roof-top of 1.5 meters. The EV has high tolerance for ground clearance, which helps to maneuver in dense traffic and congested roads. Moreover, the wheels tolerance bar allows easy and smooth maneuverability thus providing an advantage to Ohm EV (Lang 2010).
Marketing Mix Strategies
Psychological factors and preferences of buyers play a crucial role during product decision and are extremely significant. The factors include customers’ attitudes, personality self-image and lifestyle, and for fleet buyers, some concerns include corporate culture, risk perception and company image. In a nut shell, BEV is not only meant for travelling but projects a symbol of identity. The success of the marketing strategy depends largely on how the product will be projected in the market and how customers will perceive the product. Ohm EV is an environment friendly and energy saving vehicle that is consistent with lifestyle of environmentalists. The fuel saving technological developments also make buyers feel that they are moving in trend. Hence, product features reflect the success of Ohm EV, without any doubts and misconceptions.
However, the body shape of Ohm EV may not appeal to a section of buyers, especially younger generation. Americans born between the 1960s and the 1970s usually evaluate the vehicle from the perspective of its brand image, its utility, and the purpose of buying the vehicle, whereas the new generation considers vehicles as expressions of their personality and identity. The buyers born in the 1990s identify certain criteria for selection of a car, such as safety (52%), exterior design (46%), price (35%) and quality (35%). Thus, improving the appearance and performance of EV can elevate its image and change the negative perceptions of buyers (Huang, 2010).
Considering the features mentioned above, Ohm BEV will be available in the California with six-year or 99,000 km warranty, whichever applies first. After establishing the Ohm TK brand in the market, the company will introduce another model in the next year. The future BEV will display its logo and brand on the front and in the rear of the body. The company will also ensure availability of spare parts at various locations because sales of EVs might be affected by non-availability of essential spare parts.
Pricing Strategies: The federal government currently offers a tax credit of up to $7,500 for EV purchases. BEV users can drive on high-occupancy vehicle lanes irrespective of the number of passengers. In addition, federal guidelines instruct that all light-duty passenger vehicles used by states agencies should be based on alternative fuel, except for hospital or police vehicles. Long Island Power Authority (LIPA) offers a rebate of $500 to buyers who purchase EVs. The California City Private Fleet Association provides significant benefits to bulk buyers on the purchase of light-duty passenger EVs (Diamond, 2009).
In regard with the type of subsidy, there are three ways to procure the electric vehicle.
(1) Direct purchase: the federal government provides subsidies and incentives to automobile producers based on the volume of EVs sold for private use in the state of California. It enables the companies to sell electric cars to private customers at the price after deduction of allowances.
(2) The electric vehicle leasing: automobile companies can sell EVs to rental car firms at the price including the subsidies.
(3) Battery leasing incentives: subsidies are provided to battery leasing companies that can take responsibility for batteries maintenance, renting facility, replacement, and manage re-charging stations (Anderson, 2009).
Ohm EV selling price will approximately comprise $25,500 for Californian market, which excludes sales tax, excise, import tax, shipment charges and the cost of assembly. The prospective users will not bear charges for road tax, number plate, and registration number in respective locations where they reside.
The purpose of promotional campaigns is to establish brand awareness and concept of the new Ohm BEV eco-friendly vehicle. This is only economically priced electric vehicle, which is expected to be successful not only in California but also will popularize in the world auto market in a short period. The company will utilize all direct advertising media such as Television/radio, Internet, billboards, as well as print media at the time of launching of the electric vehicle. Launching plays a pivotal role in promotional activities as it builds awareness in the mindset of prospective buyers. The company will chose prominent locations in California such as Disney Land and International Trade Fair Center where Ohm EV will be introduced to the market. From July to September, the company will concentrate its marketing campaigns in all prominent universities, colleges and other institutions during the time of fresh admissions and convocation by displaying the vehicle and banner advertising. The student community can test-drive Ohm EV by driving a car around the campus.
The main theme for this promotional campaign will be “Your Bright Future with Eco-friendly Ohm”. The strategy behind this campaign is to target students community such as fresh students and post graduates who will begin their careers after completion of their education. Fresh students seeking suitable jobs require a transportation facility, but they cannot afford an expensive vehicle, and international students just need the ordinary vehicle, which is more economical and can be used for a period of four to five years of their student life. This is an inexpensive means of holding such campaigns or events in the campus.
Many families plan to buy a new car on special occasions. Using mobile communications, fliers, online information and e-mails will help acquaint potential customers with the availability of Ohm BEV, which will transform into ultimate sales.
November and December are crucial months for boosting sales of EVs. Leading shopping malls organize events and Mega Sales for New Year and Christmas. The company can attract shoppers by organizing product display of Ohm BEV with beneficial schemes. In March and April, most of the public and private sector employees receive the bonus, and they are interested to replace their old cars with a new one. Displaying the car in parking spaces of corporate sector will not only attract customers but become the cheapest mode of advertising, as well. The company can hold the road shows at all central locations, such as all prominent markets in the city. In addition, participating in Automobile Fair will bring awareness about the new vehicle and promote sales. The banks are also an attractive platform for increasing sales of electric vehicles. The banks actively finance the cars to their clients at a low rate of interest; thus, the company can explore this opportunity and increase its sales turnover.
Place and Distribution Strategies
Selling of Ohm BEV will be achieved directly to potential buyers through a networking of 10 authorized dealers across the state of California. Prospective buyers can contact these dealers and make the booking of Ohm EV. Further, 15 sales offices will provide the buyers with desired information. The customers can also make a booking via telephone, as well as fill in the booking form and make a booking on the company’s official website (Wheelen, Hunger & Rangarajan, 2006).
Implementation, Evaluation and Control
This section discusses some key challenges and opportunities that the company might face in the implementation of policies and strategies for making Ohm EV successful in the market. In addition, it evaluates the present and future trend of acceptability of electric vehicles. In the United States, federal government is implementing policies and planning huge investments to develop electro-mobility. Generally, the future of automobile industry directs towards electronic revolution of BEVs.
The federal plans include the following:
1. Financial and fiscal benefits of purchasing EVs by private buyers in the shape of tax exemptions and subsidies;
2. Incentives that promote green purchase and procurement procedures;
3. Financial assistance to those companies that are willing to establish battery charging infrastructure.
With these initiatives, the federal objective is to achieve set targets in regard with EDVs market sales. Replacing 1 million EVs with the current ICE vehicles by 2020 is the target of the US federal government (Beresteanu & Li 2011). The current scenario reflects that the usage of pure EVs will continue to remain limited until 2020. The availability of re-charging facilities at working place, home and public areas will be the prime obstacle to market development of electric vehicles. Faster market penetration is possible to achieve if all leading auto producers jump into fray and launch their EVs models vigorously in the market. Although Ohm EV being the first battery vehicle has some advantages, undoubtedly, the company will face stiff resistance from consumers who are not willing to adopt the new technology. The reason can be attributed to non-availability of other models, which helps customers to compare and evaluate the features offered by Ohm BEV. The fast development charging network would remove negative perceptions of customers and double the market penetration of BEVs by 2020. A public involvement would be a key to remove barriers and challenges presently faced by producers of electric vehicles (Beresteanu & Li 2011).
The costs of battery make electric vehicles’ upfront costs higher than ICE conventional vehicles. However, if efforts are done to spread over these costs over the vehicle life through the different business models, the attractiveness of BEVs could be enhanced. Some business models suggest that considering a lifetime perspective, BEVs are less costly than conventional cars. Further improvements in performance of battery and costs reduction are possible, which would improve the cost criteria in upfront costs. This reduction will become the second driver in accelerating the future success of electric vehicles market, particularly for Ohm EV (Axsen, Kurani, & Burke, 2010).
However, the evaluation reflects that the full advantages of progress on batteries would be receivable when the charging infrastructure is developed. Vehicle upfront costs including cost of battery and access to re-charging network will be the prime criteria for purchasing an electric car. In the case of electric vehicles, historical data on consumer preferences and behavior are not yet available. Thus, an in-depth research is needed to explore new business models, which will remove barriers that are retarding the success of electric vehicles.
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