consumers willingness to pay for innovative technology: hybrid vehicles
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Consumers willingness to pay for innovative technology: Hybrid Vehicles. Evolution of the Vehicle. Late 19 th and early 20 th century Steam, electricity, and gasoline Problems? Vibration and Friction Weight Power/Fuel/Distance Internal Combustion Engine emerged dominate (early 1900s) . - PowerPoint PPT PresentationTRANSCRIPT
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Consumers willingness to pay for innovative technology: Hybrid Vehicles
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Evolution of the Vehicle
• Late 19th and early 20th century – Steam, electricity, and gasoline
• Problems?– Vibration and Friction– Weight – Power/Fuel/Distance
• Internal Combustion Engine emerged dominate (early 1900s)
Introduction Theory Case Analysis Conclusion Questions?
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Evolution of the Vehicle
• Late 20th and early 21st century – Traditional gasoline engine receives criticism • Global warming• Fear of limited oil supply • Rising gasoline prices • Inefficient
• Introduction of the hybrid – Combination of gas/electric engine – Late 2000 First mover Toyota releases the Prius
Introduction Theory Case Analysis Conclusion Questions?
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Evolution of the Vehicle
• Expansion of product assortment and growth
Introduction Theory Case Analysis Conclusion Questions?
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Objectives of Analysis
• Consumers willingness to pay for:– New technologies – Vehicles -> Demographics
• Exploration through scenario analysis
Introduction Theory Case Analysis Conclusion Questions?
?
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Innovation Adaption and the Hybrid
Introduction Theory Case Analysis Conclusion Questions?
Relative Advantage• Degree of superiority to existing products
Compatibility • Fit of values and experiences
Complexity • Difficulty of use
Divisibility • Limited basis of trial
Communicability • Ability to be observed or described to others
Kotler (2008)
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Innovation Adaption Diffusion Model
Introduction Theory Case Analysis Conclusion Questions?
(Rogers, 1962)
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Conclusions from Kotler and Rogers
Introduction Theory Case Analysis Conclusion Questions?
Consumers willingness
Environment
Fuel PricesGovernment Incentives
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Demographic Correlation Studies
• Economic Logit models– Whether or not to upgrade • Multinomial Logit (Train, 1980) and Nested Logit
(Hocherman et. al. 1983)• Mixed Logits integrating combined and stated
preferences
• Demographic Correlation – “What kind of Person chooses a vehicle type”– Choo and Mohktarian (2004) and Sangkapichai and
Saphors (2009)
Introduction Theory Case Analysis Conclusion Questions?
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Putting the Theories together
Introduction Theory Case Analysis Conclusion Questions?
Different Demographics
Environmental concern
Fuel Prices
Government incentives
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Three Factors that Affect Consumers
• Government incentives– Government Tax Credit up to $3500– Access to High-occupancy Vehicle Lane– Discount on Insurance premiums
• Environmental Issues– More environmentally friendly then conventional counterpart– Emit less green house gases and consume less gases
• Cost-savings– High fuel efficiency cuts fuel costs– However, due to the high premium takes years to recover the
premium in fuel cost savings
Introduction Theory Case Analysis Conclusion Questions?
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Consumer Segments
Introduction Theory Case Analysis Conclusion Questions?
Early Bloomers• 18-24, single with high school education• Household income of less than $20,000
Wealthy Elite• 35 to 44, married with graduate degree • Household income of greater than $150,000
American Dream• 35 to 44, married with kids and University
degree• Household income between $75,000 to $90,000
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Early Bloomer• Government incentives are important– Purchase price is a significant factor in a lower income
bracket• Although they are environmentally conscious, they are
not willing to pay a high premium to drive a hybrid• Fuel Efficiency and Cost-Savings are important– Research finding showed that income has non-linear effect – High interest in hybrids to save fuel costs– However, due to a high premium the cost-saving is not
significant
Introduction Theory Case Analysis Conclusion Questions?
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Wealthy Elite• Government incentives are not as vital
– Purchasing price becomes less important– High disposable income
• Non-financial incentives may be more important– Access to HOV lanes can be a strong factor
• Environmentally conscious– More educated consumers are more environmentally conscious– Ownership of a hybrid goes beyond means of transportation, it’s
making a social statement• Long-term cost savings will less likely matter
– Only saves cost if driven for a long period of time
Introduction Theory Case Analysis Conclusion Questions?
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American Dream
Introduction Theory Case Analysis Conclusion Questions?
• Government Incentives – Lower disposable income– High-occupancy Vehicle Lane
• Environmental concern– Future for children
• Fuel cost – May be seen as an short term incentive for
saving
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Conclusion
Introduction Theory Case Analysis Conclusion Questions?
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Thank You for your attention.We will now open the floor to questions
Introduction Theory Case Analysis Conclusion Questions?