Leonard Agranat, Daniel Cady, Amanda Cohen, Nikhil Kulkarni, Chris Machielse, Linda Yeung

Agenda

Origins

Current Big Picture

Areas for Improvement

Revised Big Picture

Recommendations

Q & A

2

Origins

Assembly Plant opened

October 27, 1997

January, 2009 Waiting list in US is 12 months

Idea developed by Nicholas Hayek, CEO of SMH

Late 1980’s

July 3, 1991 Agreement reached with Volkswagen to develop new project

Volkswagen terminated

project

1993

March 4, 1994 Joined forces with Mercedes-Benz October, 1998

Smart car sales launched in 9 European Countries

2010 sales were only 5,927 units

December, 2010 No longer associated with SMH

January 1, 1999

Officially launched in the U.S.

2008

3

July 1, 2011 Penske Automotive Group rescinds all US distribution rights to Mercedes-Benz

Current Big Picture

marketing objective

source of volume

business objective

place

price

promotion

execute

product

service

position

segment

target

STP

4

Current Big Picture

marketing objective

source of volume

business objective

place

price

promotion

execute

product

service

position

segment

target

STP

5

Business Objective

• Smart Car USA Fundamental Entity

• Technology

• Engineering Core

Competence

• Undefined Goal

6

Marketing Objective

Acquisition

– Small category: fuel-efficient subcompacts

– Recent entry to market (2008)

– Small customer base

– Challenge: Overcome head and heart loyalty

7

Source of Volume

Only have 0.1% market share

Stimulate Demand for subcompacts

– Main variable: small size and fuel efficiency

– Dynamic variable: price and customizability

“SmartCar is unique and has no real competition”

Raising awareness for subcompact cars

8

Who is Smart talking to?

Pulling buyers

into the subcompact

category.

Target buyers of competing

vehicles.

Have current

owners purchase more

Smart Cars.

Retain current customers who

also own competing vehicles.

retention acquisition

stimulate demand

steal share

Marketing Objective

Source of Volume

9

Current Big Picture

marketing objective

source of volume

business objective

place

price

promotion

execute

product

service

position

segment

target

STP

10

Segment

Source: Strategic Business Insights

11

How does Smart segment?

Address high degree for self-expression

Need to look “cool”

– Regular compact cars are boring

Sponsorship at young, urban events

12

Target

Jenna

Age 23

“Urban hipster”

13

Lives in the city

14

•Large cars hard to park •Public transportation is tedious

15

Cares about the environment

16

Fashion forward

17

Smart Car changes with her style

18

Positioning

“unBig, unCar”

Small cars are just as capable as big cars

Deemphasize importance of having big car

Small cars are fuel efficient

19

5-Box Positioning Statement

When I look to buy a car, I will buy a big car,

or SUV

When I want to buy a car, I

want something big

and strong

Bigger cars are not necessarily

better

Driving small cars are smarter.

When I look to buy a car, I will

buy a Smart Car.

20

Current Picture Diagram

marketing objective

source of volume

business objective

place

price

promotion

execute

product

service

position

segment

target

STP

21

Product

Has not changed product line since 2008

– Pure coupe

– Passion coupe

– Passion cabriolet

22

Search Attributes

Price

Miles per gallon

Appearance

Safety

23

Price

Base price $12,490

All models under $20,000

– Offer affordable car to young target market

Competitive with other subcompact cars

2 year, 24,000 mile warranty

24

Miles per Gallon

High fuel economy

– 33 city and 44 highway mpg

Highest mileage, gas-only vehicle in US

25

Source: FuelEconomy.gov

Appearance

Sleek look

Small enough to fit in tight spaces

Entirely customizable exterior

– Color, design, pattern, change panels

26

Safety

Highest possible crash test ratings

– Frontal offset

– Side-impact

– Roof strength

Source: Insurance Institute for Highway Safety

27

Experience Attributes

Ride quality

– Excels in turning radius and parking ease

– Stiff suspension

– Automatic transmission feels like manual

– Rough riding experience

28

Promotion

Buzz around US launch

Few TV or print ads

Active on social media

Lowest brand awareness car in America

29

Source: Young Intelligence

Promotion

30

Place

Sold in Mercedes-Benz dealerships

– Share the same showrooms

Intimidates potential Smart Car buyers

– Loss of sales due to this reason

31

The unSales Growth

32

Rick Perry, General Manager

34

Revised Big Picture

marketing objective

source of volume

business objective

place

price

promotion

execute

product

position

segment

target

STP

35

Revised Big Picture

marketing objective

source of volume

business objective

place

price

promotion

execute

product

position

segment

target

STP

36

unGoal: 1500 units/month

37

Revised Big Picture

marketing objective

source of volume

business objective

place

price

promotion

execute

product

position

segment

target

STP

38

Revised Big Picture

marketing objective

source of volume

business objective

place

price

promotion

execute

product

position

segment

target

STP

39

Source of Volume

Steal Share from other cars in category

Clearly not the market leader

40

41

42

Size

Safe

ty

43

Size

Val

ue

Revised Big Picture

marketing objective

source of volume

business objective

place

price

promotion

execute

product

position

segment

target

STP

44

Important Attributes

3.56

3.95

3.46

3.85

4.44

4.11 4.02

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Size Fuel Economy Brand Name Exterior Styling Reliability Value Safety

Re

po

rte

d Im

po

rtan

ce

Attribute

Importance

n=92 45

Most Important Attributes

1. Reliability

2. Value

3. Safety

46

Address Importance

I will buy a new

car without

considering MPG.

I don’t think fuel

economy is very

important.

Smart is not only

a great value, but

it can save you

money on gas too.

When I look to

buy a car, I will

buy a Smart Car.

I can travel & do

more for my gas

money with a fuel

efficient Smart.

47

Perception Problems

1.96

4.46

2.83

2.11

2.82

2.55

1.80

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Size Fuel Economy Brand Name Exterior Styling Reliability Value Safety

Perception

48

Lowest Ranking Perceptions

1. Safety

2. Size

3. Styling

49

Address Perceptions

When I look to

buy a car, I will

purchase a larger

vehicle.

Smart is a great

value, but it is too

dangerous.

Smart is a great

value, and it

performs well in

crash tests.

When I look to

buy a car, I will

buy a Smart Car.

Smart is both a

great value and a

safe vehicle.

50

Discrepancies Between Importance and Perceptions

3.56

3.95

3.46

3.85

4.44

4.11 4.02

1.96

4.46

2.83

2.11

2.82

2.55

1.80

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Size Fuel Economy Brand Name Exterior Styling Reliability Value Safety

Importance

Perception

51

Revised Big Picture

marketing objective

source of volume

business objective

place

price

promotion

execute

product

position

segment

target

STP

52

Improve Warranty Coverage

Increase beyond 2 year/24,000 mile

Match Ford Fiesta

– 3 year/36,000 mile bumper-to-bumper warranty

– 5 year/60,000 mile powertrain warranty

– 5 year/60,000 mile roadside assistance

53

Revised Big Picture

marketing objective

source of volume

business objective

place

price

promotion

execute

product

position

segment

target

STP

54

Place

Make separate dealership for Smart Cars

Different target markets hurt potential sales of Smart Cars

55

Price Ranges

$38,000

$12,000

$160,000

$19,000

$0

$50,000

$100,000

$150,000

$200,000

Mercedes-Benz Smart Car

Min

Max

56

Cost of Implementation

Add 26 dealerships in urban areas with Jennas

– e.g. Southfield, MI instead of Bloomfield Hills

Cost per new dealer = $816k

– $265k annual salaries

– $551k startup costs

Total cost = $21,216,000

57

Revised Big Picture

marketing objective

source of volume

business objective

place

price

promotion

execute

product

position

segment

target

STP

58

Promotion

Image promotion need people to realize what Smart Car can offer for value.

– Currently there are poor views of Smart Car.

– More GRP’s

– Promote on young, hip shows (Modern Family, America’s Next Top Model, etc.)

Promote what matters to consumers

– Safety, value

Mercedes has allocated $25 million for media

59

60

Example Ad

61

Small is safe.

The Smart Fortwo earns the highest possible ratings in roof strength, frontal offset, and side impact tests.

Cost of New Promotion

Cost per 30 second spot:

– Modern Family: $250k

– America’s Next Top Model: $61k

1 exposure per episode

– 24 episodes for Modern; 10 for Top Model per season

Total Cost: $6,610,000

Total GRPs: 167

62

Key Takeaways

Cost per 30 second spot:

– Modern Family: $250k

– America’s Next Top Model: $61k

1 exposures per episode

– 24 episodes for Modern; 10 for Top Model per season

Total Cost: $6,610,000

Total GRPs: 167

63

Current Recommended

Business Objective – Goal -- 1500 units / month

Source of Volume Stimulate Demand Steal Share

Position Emphasize Smallness Emphasize Safety, Value

Product 2 year / 24,000 mi 3 year / 36,000 mi

Place In Mercedes Showroom Standalone Dealership

Promotion Focus on Social Media More TV & Print ads

Questions?

64

Works Cited

http://www.strategicbusinessinsights.com/vals/usframework.jpg

http://www.iihs.org/ratings/ratingsbyseries.aspx?id=632

http://young-intelligence.com/2011/11/ad-review-smarts-uncar-campaign/

Interview with Rick Perry, General Manager of Mercedes-Benz of Bloomfield Hills

Business Plan Handbook

65

SUPPLEMENTAL SLIDES

66

Supplemental Slides

Competing Vehicles Launched Since 2008

Dealership Cost Calculations

GRP Calculations

unBig, unCar spot

Crash test video

67

Must Keep Pace in Increasingly Competitive Segment

Chevy Cruze Chevy Sonic Fiat 500

Ford Fiesta Kia Forte Kia Soul

Nissan Cube Nissan Leaf Scion iQ

68

Dealership Costs

Currently: 74 dealerships; add 26

Average unit sales for US car dealer: 653

– Smart Car goal: 180 (1500 units/mo. * 12 mo. / 100 dealerships)

27.5% of operation

Dealership Startup Costs: $265k

Average payroll: $2M/yr. * 27.5% = $551k

69

Source: Business Plans Handbook

Dealership Costs

Cost per new dealer = 551k + 265k = $816k

Total Cost (26 new) = 816 * 26 = $21,216,000

70

GRP Calculation

Viewers per episode

Modern: 13.5 million

Model: 4 million

Episodes per season

Modern: 24

Model: 10

18+ citizens of America: 217.8 million

71

Source: TVbytheNumbers.com

GRP Calcuation

GRPs = ∑ reachi × frequencyi

GRPs = 13.5𝑀

217.8𝑀∗ 24 +

4𝑀

217.8𝑀∗ 10 = 167.125

72