Last updated: May 25, 2019
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A Proposed Launch Campaign for the Daimler-Chrysler Smart

Terms of Reference
This paper responds to the requirement for a complete communications plan that would inaugurate the entry of the DaimlerChrysler “smart fortwo” line into the American market.  The marketing task is to move 10,000 units, with no term specified and a disclosed maximum budget of ?10 million.  This presupposes an economy of effort since, at last count, passenger car retail sales amounted to 7.7 million units annually, of which 2.2 million were foreign makes (U.S. Bureau of Transportation Statistics, 2007).

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The plan analyzes product-market fit and addresses a perceived weakness of all subcompacts, safety.  The proposed communication plan and advertising strategy is then presented, with due regard for real-life elements of the “smart” marketing mix: pricing, target buyers, dealer network, color choices, and a well-defined geographic market.

Background
Manufacturer and Origin
The “smart”, fondly referred to as a “breadbox on wheels” (Woodyard, 2007), is a product of Daimler AG subsidiary “smart fortwo GmbH”, a name change adopted in 2002.

This quirky hood-less and trunk-less design was hatched by famed Swiss watch manufacturer Swatch Group Ltd.  (Recall that “Swatch” stands not for “Swiss watch” but for “second watch” owing to its positioning as an affordable, mass-produced analogue counter to the inroads of Japanese digital manufacturers.  The company relies on an endless variety of designs to sustain market appeal.)  The “smart” concept design was originally offered to Volkswagen but when talks fell through, Swatch teamed up with Daimler-Benz.  Consistent with the aim of capturing the imagination of the public, the partnership adopted the “smart” brand (an acronym for “Swatch Mercedes ART) and renamed the built-to-suit factory completed in 1994 “Smartville”.

Product Mix
The smart configurations to be sold in the U.S.A. and Puerto Rico consist of three “fortwo” micro-car coupes.  The entry-level Pure is a solid-roof model while both Passion variants offer “panorama” or convertible configurations.  Like many European concept cars, the protective roll/side bars in the cabriolet model can be removed for a totally open look.

Car length is 8 feet and 8 inches.

Designation
Features and Accessories
“Pure” coupe
Central remote locking, tridion safety cell, electronic stability system, ABS, 4 airbags (incl. head/neck side bags), drive lock, rear window defroster and solid roof
Passion coupe
Plus AM/FM radio with CD player, “panorama” roof, alloy wheels, air conditioning, power windows, electric/heated side mirrors.  Instrument cluster with multifunctional display, Outside temperature indicator, Turn indicators with lane changer function, Front windshield wiper with speed-dependent interval wiping and wiper-/wash function
Intermittent rear windshield wiper with wiper-/wash function
Passion cabriolet
Upgraded radio, six-disk CD changer, all of the above plus adjustable-while-driving soft top, removable side roof bars, glass rear window. Electronic side mirrors
All power trains are 3-in-line fully-aluminum, 1.0-liter, 71 HP engines with 5-speed, dual “automated manual” transmission.  Paddle shift controls are just behind the steering wheel.  All models officially boast a maximum speed of 90 mph and acceleration time from 0 to 60 mph is 12.8 seconds.

Going by EPA 2008 standards, fuel efficiency is 33 mpg in city driving and 41 highway.  An advanced catalytic converter and a pump that blows fresh air into the exhaust system ensures that the Smart handily conforms with rigid BINS5 (a measure of hydrocarbon ratio and particle size), as well as ULEV (“ultra-low emission vehicle) emissions regulations of California, stricter than in the rest of the nation.

Safety Features
Safety is a prime concern for anyone who considers driving the “fortwo” in American streets and highways filled with brawny SUV’s and trucks.  Confronting this concern squarely, Smart USA (2008b) touts its “tridion safety cell” as the answer.  This is a combination of transverse and longitudinal steel members that not only surround the passengers but also “dissipate” impact force over the rest of the vehicle.  In addition, both front and rear ends are designed as impact-absorbing “crumple zones”.  These assurances, of course, apply only if impact comes across the full front or rear width of the “fortwo”.

Other safety features Smart USA talks up are the elevated seats, head and neck airbags, fuel system cut-off on impact, central locking switch-off when a crash occurs, electronic stability program, cornering brake control, electronic brake assist, Acceleration Skid Control and Engine Torque Control, and Hill Start Assist.

Market Analysis and Segmentation
The American car market can be segmented according to size, fuel used and price points (Car and Driver, 2008).  With no end in sight to crude oil price increases, it comes as no surprise that foreign car makers have introduced subcompacts and carved out a solid niche in the market.  Bob Cosmai, consultant and ex-CEO of Hyundai Motor America, asserts that “Timing couldn’t be any better.”

 

Size and Fuel
Price ranges
Crossover – Big
Crossover – Compact
Crossover – Mid-Size
Diesel
Economy
Hybrid
Hybrid SUV
Luxury
Performance Variant
Sports/GT
$18,000 and under
$18,001-$25,000
$25,001-$33,000
$33,001-$40,000
$40,001-$60,000
$60,001-$100,000
$100,001+

From January to November 2007, Autodata reports suggest, compact car sales retreated 3.3 percent to 1.64 million units while sub-compacts – the Nissan Versa, Honda Fit, Toyota Prius, Chevrolet Aveo and Kia Spectra among them – barreled ahead at a 22 percent clip to reach a recent high in excess of 320,000 vehicles (Tierney, 2007).  Further analysis suggests that the growth in subcompact demand may have come largely from the compact market trading down with the balance accounted for by owners of mid-size or larger vehicles and those coming into the market for the first time.

Amid reports that Honda is selling all the Fits it can produce, even it its home market, Detroit is obviously not about to sit still for the flood of Asian makes virtually owning the subcompact segment.  Besides, the superior mileage numbers of subcompacts will go a long way towards meeting “fleet” performance on increasingly-stringent fuel-economy guidelines.  Hence, this initiative by Daimler-Chrysler with the “smart”.  As well, Ford unveiled the Verve concept study in September.

A direct match-up against the similarly-priced Toyota Yaris Liftback points up the following advantages: the “smart” is more compact (three feet, 10 inches shorter than the Yaris and four inches narrower), a smaller turning radius (28 feet versus 38 for the Yaris), dual transmission options (exclusively 5-speed manual for the Yaris), and what looks like 10% better fuel economy according to the respective manufacturer’s claims (33 mpg in the city versus 29 for the Yaris, 40 mpg on the highway against just 36 mpg).  Drawbacks of the “smart fortwo”, on the other hand, consist of the fact it is offered in only a two-seat configuration (four seats are standard on the Yaris and a “smart forfour” was available until 2005 in selected European markets and up to the present in Mexico), a smaller, more anemic engine (the Yaris is a 1.5-liter 4 cylinder car delivering 106 HP), and accordingly, slower acceleration (the Yaris is rated to go from a standing start to 60 mph about two seconds faster).  For what it is worth, the Yaris is aggressively-priced, $290 lower for the economy model (Toyota, 2008).

There is also, of course, segmentation by socio-demographics, values, lifestyle and stage in life cycle.  The relevant factors are discussed in “Target Publics and Market Drivers” below.  A cursory SWOT would have to include the following factors (see overleaf).

 

Strengths

Production expertise dating back to 2004

Eye-pleasing customization means greater individuality, very important for the youth market.

Plant-based fixed costs have long been accounted for since 800,000 have been sold in 36 countries. The company has to reckon mainly with raw materials and can, in fact, use marginal pricing.  This gives it pricing flexibility, as well as a more accurate picture of operational profits.
Weaknesses

Production efficiencies did not prevent the company from losing money ($3.6 billion since 1998).

Parent companies better known in performance and luxury segments

High labor cost in the Smartville plant.
Opportunities

Crude oil prices will continue to rise into the foreseeable future owing to Arab greed, arguments about demand and supply economics notwithstanding.
Threats

Economies of scale gained by producers by hydrogen, flex-fuel, electric and bio-fuel vehicles.

A one-product company, its future rests on the “smart” amassing appreciable volume in the American market.

Foreign exchange rate fluctuations will continue to buffet overseas production cost and require creative juggling to maintain domestic profitability.

Both the global and American car markets are static, getting sales means battling for market share.

Over the horizon, a Chinese model that is not only dirt cheap but durable at last.
In the view of Michael Robinet, vice president of consultants CSM Worldwide, “There is a nice market for tight parking, people who want to drive something a bit different, as long as they know this is not exactly a cross-country vehicle but an urban traveler.” (Woodyard, 2007)

Marketing Objectives
Sales and Marketing Targets
A.      Create awareness and recognition for SmartUSA as a credible Car maker.

B.      Support the drive to move at least 10,000 units the first year.

C.      Maximize revenue per unit.

Entry Strategy
Since SmartUSA effectively starts in the American market from scratch, I recommend a threefold strategy consisting of:

A. Product Imagery
Craft and communicate an image of the “smart fortwo” as an icon of utilitarian but trendy appeal.

Identify “smart fortwo” with the self-image, wants, social issues and leisure pursuits of the target market.

Solicit those in authority (such as the Governor of California) and celebrity musicians (e.g., Beyonce, Guns and Roses) to endorse the brand.
B. Corporate Image
Build credibility by superimposing the Daimler-Chrysler marque on all vehicles, all advertising and publicity materials.

Excite the student and youth market with sponsorships of landmark events.
C. Cost Control
Outsource component production to India, China or the Philippines.
Distribution: the Dealer Network
Daimler-Chrysler has opted not to handle American distribution itself.  Nor will Chrysler USA.  Instead, 73 branches of number two dealer chain, Penske Automotive Group, have been tapped to act as the exclusive distribution arm for the “smart fortwo”.

This communication plan will provide heavy merchandising support in California because the “smart fortwo” already meets the state’s stringent emissions regulations and because the market is very receptive to trendy, leading-edge technologies.  In the first quarter of 2008, the entire dealer support and merchandising budget will be spent in support of the ten dealers in California, particularly three in Los Angeles and one in San Frsncisco.  In the latter market, street parking is scarce and this fact alone could give the “smart” a leg up.

Communication Plan
Pricing
Model Designation
BasePrice
Pure coupe
$ 11,590
Passion coupe
$ 13,590.
Passion cabriolet
$ 16,590
Target Publics and Market Drivers
On balance, the prime prospects for the “fortwo” have to be college students, young workers still hobbled by low personal incomes, small businesses that could use a small vehicle able to squeeze into congested city streets and closet-sized parking spaces.  Going by the experience of the Honda Fit, there may also be brisk demand in the “baby boomer” demographic, especially those in their 50s who get by on modest incomes of under $50,000.  Subcompacts also seem a viable option for second- and third-car buyers.

All these suggest that affordability and fuel economy may be more important than performance, comfort or sturdiness.

By geography, the prime market could well be California owing to its very large population, teeming student bodies and excellent receptivity to “earth-friendly” vehicles.

It is logical to position the “smart” as a second car for environmentally-conscious car owners who want to do their bit for climate change but are unable to afford the $30,000 to $100,000 MRSP’s of hybrid and pure-electric models.

The atrocious breadbox body aside, two-tone exterior trim and a virtually limitless spectrum of exterior-interior color combinations call to mind the casual-chic of Swatch watches.  Such personalization is likely to make up for the embarrassment of having to settle for an economy-priced model.  Hence,, Daimler-Chrysler looked inclined toward pitching the “fortwo” to the creative types in San Francisco, Seattle and New York, the very same socio-demographics behind the cult of the Macintosh and the Cooper Mini.  But it can be argued that the “smart” is more geek than chic (Babej & Pollak, 2006).

To help maximize average unit revenue, I recommend implementing a parallel campaign pitching the cabriolet version to a market segment of trendy, well-off prime prospects.  Our pre-campaign market research and early results from the reservations programs profile this “premier sub-market” as more male than female, relatively affluent and homeowners.  The Internet, rather than television, is their primary channel for comparison-shopping and they much prefer ecommerce from the comfort of their desks or dens to going around car dealerships.  Such prime prospects are likely to see the “fortwo” as an attractive, no-nonsense second or third car.

At the end of the day, one hazards that fuel economy is likely to drive “fortwo” sales in the months and years ahead.  As of February 11, 2008, the California Energy Commission reported that both branded and unbranded gasoline retailed at an average of $3.11.  Americans are groaning over gas prices and, owing to Arab producer intransigence, there can be no end to “pump price pain” in the years ahead until solar, electric, hydrogen and bio-fuel technologies truly come on their own.

Customization
Beyond salving environment-aware consciences with the promise of high fuel efficiency, the greatest attraction of the “smart” may well be the fact that one can very easily swap new colors for the sake of variety or as the mood strikes the owner.  Dealer staff or a do-it-yourself kind of owner can easily manage the change.

The tridion safety cell pillars come in black and silver to accent the six colors available: deep black, light yellow, crystal white, blue metallic, red metallic and silver metallic.  Assuming a college student or adventurous baby boomer wishes to make a personal statement with a monotone kit (black pillars with black body panels and likewise with silver), one can see there are 12 possible color combinations.  The available permutations rise to 98 because interior trim and upholstery are available in four colors (grey, black, red and beige) and a choice of fabric or leather.  One can conceivably look at a parking lot full of “smarts” and be hard pt finding two that are exactly alike.

Canadian shopkeepers and small-scale businessmen who had had the “smart” years earlier showed another customization possibility: they slapped business name or brand decals on the or “fortwo’s”.  It occurs to me that the ultimate in personalization may well be sticking large-size personal, school and state decals all over the “smart”.

Advertising Concept and Executions
Options for positioning concepts are:

1.      Fuel economy.

2.      Convenience in day-to-day use, when commuting to school or congested city streets since the “smart” can be parked perpendicularly where one would otherwise have to parallel-park.

3.      Fun and personalization owing to the great number of roof-configuration, exterior- and interior-color choices.

4.      Affordable, entry-level sticker price.

5.      Earth-friendly technology from two global leaders.

I propose to run matched test markets for alternative advertising campaigns.  One can run the Daimler-approved campaign themed “Open your mind” in San Francisco.  Since this seems rather reticent and even inexcusably defensive, I conceptualized another theme, “The smart look.  So you, so earth-friendly…without busting your wallet.”  We shall test this in Los Angeles.  This option seems the stronger ad concept because it emphasizes personal bravado and being conscientious about keeping car emissions down while cheerfully paying less than for a compact.

Irrespective of market, there should be a strong merchandising and mailer campaign pushing option kits.  The objective is to increase revenue per unit sold and provide a buffer for profitability

Media Mix
A & P Mix
Strategy and Tactics
Rationale
Mainstream advertising:
Television ads on primetime

Placements in college newspapers

Appearances on “Ellen Degeneres”, “Oprah” and other talk shows

“Casual mentions” and appearances on every TV show and movie in production

Top 40, M.O.R./pop radio

Double-page spreads in weekend issues of leading newspapers
Rapid awareness build-up

Visual communication needed

Image boost
Public Relations
Press briefing, distribute CD’s of the smart-sponsored “Live Earth” concerts.

Have concerts series aired for two straight weeks before launch

Test drives for automotive columnists

“The Oscars Parade” – pay Billy Joel and four other celebrities to arrive in deep red “smart” passion cabriolets emblazoned with stickers, “So you, so smart!”

February: “Mystery Sighting” contest

Interview Gov. Schwarzenegger re ULEV aspect of “smart”
Solicit endorsement of trade press and media celebrities
Promotions
Zany contests e.g., how many college students can cram themselves into the standard-roof “pure” and win the Frisco-to-San Jose race?

The “Great Dago to Tijuana and Back” race (exclusive to owners of modified “smarts”)

The L.A. to Frisco Fuel-saving Run

The “$99 reserve your ‘fortwo’” campaign

Declare shortage of manufactured units 4 weeks before launch date

Announce zero stock availability two weeks before launch

The weekend before launch, announce that there is enough stock only for the five Frisco and L.A. dealers.
Build excitement, arouse expectation and suspense.

Identify with target market lifestyle and aspirations
Merchandising
Take over all Mercedes-Benz dealerships and put fully built-up kits on the display floor

Frat house atmosphere, heavy on music, laser displays, free-flowing beverages

Bookmark giveaways in all the exterior and interior colors

Video’s demonstrating how easy it is to change colors and the “fortwo” getting into impossibly tight spaces

Cap, t-shirt and movie premiere tickets to the largest group that arrives by 9:00 A.M. for a test drive
Sustain excitement

Encourage purchase of options
Sponsorships
ZAP Zinfandel Festival: January 23 – 26, San Francisco

January: SF Sports and Boat Show

Feb 2-March 29, 2008 Napa Valley Mustard Festival

Feb. 18: President’s Day parade, L.A.

March: L.A. Marathon

March 17: St. Patrick’s Day parade, L.A.
Identify with target market lifestyles.

Imbue brand with fun but sophisticated image.
Internet marketing
Downloadable e-books heavy on car design/colors and upgrade kits

Run TV commercial on YouTube

Put virtual test drive game on both YouTube and brand site

Viral marketing

Run “zaniest smart car get-up” video on YouTube and solicit votes in return for

Optimize “smart” brand site for search engines, speed it up

Release “sneak peek” and “mystery sightings” stories on social book marking sites weekly
Reach, inform, excite deskbound and internet-savvy prime prospects.
Timelines
This communication plan is slated to run for just one quarter.  In fact, January and February will be really pre-launch publicity and pre-selling.  The plan counts on building anticipation and hype so that the sales goal of 10,000 units will be attained in just one month, March.

This is entirely realistic and based on the fact that the Yaris did around 7,000 early in its life cycle in the American market.  One can reasonably expect that the “smart” will improve on the sales performance of the Yaris owing to its Daimler-Benz heritage and because this is a very strong and thorough communications plan backstopping the American launch.
January
February
March

(Campaign Period, by weeks)

1
2
3
4
5
6
7
8
9
10
11
12
13

Television spots

Consumer print

Student publications

Casual mentions

Radio

Public relations

Promotions

Merchandising

Sponsorships

Internet marketing

Budget Allocation
Of the allocated funds of ?10 million ($ 19,417,477 at current exchange rates), we will likely complete the West Coast test market launch and sell off the goal of 10,000 vehicles by end-March.  There will be a budget surplus of around $8.6 million.

 

Media/Effort
Budget
Specifications
Television
$9,600,000
Two stations per market, 8 spots a night each1
Newspapers
$90,180
One publication per market, 6 weekends2
Student publications
$50,000
Four universities
Casual mentions
$60,000
Give away 6 cars that will be used
Radio
$210,000
Three stations per city, 10 spots daily3
PR
$45,000
Talent fees and press briefing costs
Promotions
$75,000
Press coverage, conduct of promo’s plus prizes
Merchandising
$65,000
Basically production of materials
Event sponsorships
$120,000
Six events
Internet marketing
$450,000
Inclusive of search engine and designer fees

TOTAL
$10,765,180

1 Basis: Mid-point of concessional rates of $2,200/spot for political ads and $22,000 for initiative/Proposition placements (source: Russell, J. (2006) Los Angeles Business Journal)
2 Basis: San Francisco Business Times, full-page, eight-insertion rate, eff. January 2008, http://sanfrancisco.bizjournals.com/sanfrancisco/aboutus/ratecard.html
3 Source: Radio Advertising rates in California, http://www.gaebler.com/Radio-Advertising-in-California
N.B. All other rates and recommended frequencies provided by Customer Response, Milpitas, CA.
Evaluation and Review
Preliminary…………………….. March 15

Benchmarking………………… March 31

Conclusion
Leveraging the extant market opportunity with the strengths of the “smart” line and rendering the principal weakness of subcompact safety irrelevant by focusing on color/trim customization possibilities, this communication plan is primed with all the elements required to meet the initial sales goal.  The targeted volume will be achieved within a matter of weeks, thereby outperforming the rival import, with an exciting mix of mass-media advertising, an on-target ad concept, numerous public relations, support and promotions aligned with the interests and lifestyles of college students, young workers and perhaps even well-off, ecologically conscious second car buyers.  The ?10 million granted by Mercedes Benz will be used judiciously to create a short-burst, concentrated, high-impact and cult-shaping advertising effort that will generate reams of free publicity and get the “smart” talked about as the eye-catching way to do one’s bit for global warming.
Bibliography

Bureau of Transportation Statistics (2007) Retail new passenger car sales. http://www.bts.gov/publications/national_transportation_statistics/html/table_01_16.html [Last accessed 16th February 2008].

Car and Driver (2008) New car buying guide. CarandDriver.com http://www.caranddriver.com/ [Last accessed 16th February 2008].

Babej, M. E. ; Pollak, T. (2006, December 7) Is smart a dumb idea? Forbes.com http://www.forbes.com/2006/07/12/unsolicited-advice-advertising-meb_0712smart.html [Last accessed 16th February 2008].

California Energy Commission (2008) Estimated 2008 gasoline price breakdown ; margins details. 15 February [Internet], CEC http://www.energy.ca.gov/gasoline/ margins/index.html [Last accessed 16th February 2008].

Smart USA (2008a) Smart technical specifications. [Internet], Smart USA http://www.smartusa.com/smart-car-technical-specifications.aspx [Last accessed 16th February 2008].

Smart USA (2008b) A hard shell with a soft interior. [Internet], Smart USA http://www.smartusa.com/smart-fortwo-safety-design.aspx [Last accessed 16th February 2008].

Tierney, C. (2007) Subcompact sales boom. The Detroit News, 10 December, p. 3.

Toyota (2008) Explore the Yaris 08. [Internet], Toyota USA http://www.toyota.com/yaris/ [Last accessed 16th February 2008].

Woodyard, C. (2007) America crazy about breadbox on wheels called smart car. USA Today, 3 November, p. 1.

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