BUS011 – Marketing (3)

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BUS011 Marketing

Lecturer Gregor Claude

Friday 23rd

March 2012

Critical Case Study

- Toyota Prius

FA10150

100649303


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Introduction

Besides the cultural context that encompasses marketing and consumer behavior,

consumption is influenced by social, economic and historical factors too. Apart from a

contemporary consumers basic necessities, his ever-present desire to purchase is not

only driven by the will to accommodate the personal image he sets for himself, he is

influenced by continuously changing consumption trends derived from the social and

cultural standards that typify the societies he interacts with. He is a participant in a

phenomenon called a consumer society (EOEarth, 2012).

Comprehending why certain people consume certain goods, and subsequently how and

to what extent the producers market and advertise these respective goods, have been

topics of constantly increasing scientific analysis and discussion. This essay aims to

address the question What is the role of marketing in a consumer society?

This willbe tackled by analyzing the marketing strategies of Japanese car manufacturer

Toyota concerning its hybrid brand Prius. Furthermore, the broader marketing

environment in which the Prius is situated will be considered. From the Priuss point of

view, I will briefly discuss its share in the hybrid vehicle market and perform a marketing

mix and SWOT analysis in order to determine the position of the brand in the car

environment. From Toyotas point of view, I will discuss its variety of marketing

strategies and advertising campaigns since the Priuss entry in 2001 while also

identifying its consumers. Based upon consumerism theories and with reference to the

abovementioned, I will describe the role of marketing in the consumer society.


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Background Information

Marketing

The American Marketing Association defines marketing as the activities, processes and

institutions assigned in order to create, advertise, communicate, deliver and exchangegoods/services that customers, clients, corporations, partners, and the society as whole

attaches value to (AMA, 2012). Marketing practice thus involves identifying customers

needs and desires and subsequently converting them to products that will satisfy those

needs and desires in order to finally extract financial benefit. Marketing finally

encompasses how a business is projected upon its customers and its behavior in the

market (Baines et. al, 2011).

The Consumer Society

The term is often used to imply increasingly consumption-oriented Western civilizationsin contrast with societies related to the production of goods and services. Post-modern

sociological features like the collapse of social class, adoption of bourgeois values, and

increasing privatism are all part of a mechanism that has enabled mass markets,

industrialization and globalization, and finally an inclination to ensure that increased

income will be used to find more meaning and satisfaction in life through the purchase

of an ever-increasing output (Baines et. al, 2011). Furthermore, the concept of

conspicuous consumption, the purchasing of goods simply to display wealth and social

standing, portrays consumerism as the division between rich and poor (Veblen, 1899).

During the 90s, identity, culture and style were the driving forces of consumption.However, more recent analyses have identified consumption as being more

economically driven and politically divisive (Edwards, 1999).

Toyota Prius

Commonly known as the first commercial hybrid vehicle, this mid-size hatchback is rated

by both the USs EPA and UKs Environment Agency as one of the cleanest motorized

vehicles sold based on CO2 emissions. It can be propelled by fuel and/or electricity

(Toyota, 2012).

The Prius went on sale in Japan in 1997 and worldwide in 2001, and surpassed the 3

million unit sales mark in September 2011. Its biggest markets are Japan and the US

(Toyota, 2012).

From a philosophical viewpoint, Toyotas intentions can be derived from the brands

name: Prius means before in Latin, which refers to the cars launch before


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environmental awareness became an established issue, and also to identify it as a

predecessor of cars for the future, thus portraying itself as a pioneer in

commercializing environmentally friendly vehicles (Toyota, 2012).

Toyota Prius & The UK Automobile EnvironmentThe UK automotive market is considered to be mature, with high car purchases favored

by a relatively solid UK economy. The market is almost completely dominated by non-

UK manufacturers, with 16% of them having an individual market share of more than

1%. The UK market is subdivided between private consumers and company/client

buyers. A general trend for fleet buyers is that their demand for price reductions has

become generally less beneficial for manufacturers to concentrate on this segment,

despite its high volume. Recently, the private market thus witnessed increased

importance. However, the Prius has witnessed significantly higher fleet sales since its

gradual entry into the UK market (Toyota, 2012). The UK car consumer is fickle, andinfluenced by price, specification and finally status. Hence, the UK market is typified by

the extensive use of advertising through various channels (magazines, TV, radio, online,

etc.). Toyota is a major investor in these campaigns, with its financial contribution

towards advertising (4%) matching its relative stance in the market (Andidas, 2003).

Toyota Prius Target Market (UK)

This is the customer group that a corporation has decided to focus its marketing

practices and consumer goods on. Adequately defining a target market is a primal

component of a marketing strategy. Together with the marketing mix variables itdetermines a products success (Baines et. al, 2011).

The Priuss market is new with very limited competition, since it is the first mass

production hybrid. It is unique in the sense that the only non-Toyota hybrid

manufacturer, Honda, offers only smaller and thus less convenient cars. However,

aiming to compete with regular sedans/hatchbacks, the Prius provides comfort like any

other in similar size and division, and is aware that any potential customer is likely to

have owned a conventional fuel car before (Andidas, 2003).

The target market consists of two categories: private buyers and fleet buyers:

Private buyers: Those who buy the car for personal use from a dealership. This is themost important market.


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Fleet buyers: These are clients and partners of Toyota, and corporate buyers also fallinto this group; they rent or buy the cars for company fleets. The Priuss

environmental advantages provide the edge for corporate buyers, thanks to its fuel

economy and finally, a fleet of Prii is reflective of a companys intentions of

contributing to a green environment (Andidas, 2003).

Market Segmentation

Part of targeting a products market is classifying its potential private or corporate

customers into categories according to their specific product demands (Baines et. al,

2011).

Geographic: Private buyers are spread all over the UK, although more people wholive in urbanized areas tend to buy a Prius since they feel they can attribute to the

problems of pollution (Andidas, 2003). Demographic: Consumers are educated males and females in their mid-life (30 to

50), and likely to be married with children. They tend to be from the upper middle

class and frequently in highly-placed professional occupations. Due to their wish to

contribute to the environmental cause, they are not only willing to drive

environmentally friendly cars, but they are prepared to part with more of their

disposable income for it (Andidas, 2003). Psychographic: For high technology products like the Prius, this segment

incorporates the concept of technology adoption life cycle (Baines et. al, 2011).

Three mindsets of potential buyers can be witnessed and most buyers will include

the three mindsets, as the decision to purchase a Prius is not underlain by one

motive. The relatively small size of this group explains why Prii are not colloquial yet.1. Innovators & Early Adopters: People who pursue highly technological and

innovative products aggressively. They are followed by imaginative thinkers who

buy the Prius early into its life cycle, based on their own intuition, and usually

tolerate eventual flaws in the Prius more than the mainstream consumer

(Rodriguez & Page, 2004).


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Figure 1: Technology Adoption Life Cycle (Source: Rodriguez & Page, 2004)

2. Environmentally Friendly: Including the environmentally aware mainstream,which on one hand is distressed by the environmental impact and wishes to ease

its conscience, but on the other hand hesitates to buy new and unestablished

technology (Andidas, 2003).

3. Value Conscious: People who are searching for low fuel consumption andpreservation cost in the long term, at a price they can still afford (Andidas, 2003).

Toyota Prius Marketing Mix

This product-marketing tool is critical when identifying the Priuss exclusive selling

advantage. It clarifies the qualities that distinguish the Prius from its competitors in

order to finally generate higher sales (Baines et. al, 2011).

Product: Besides the reliability of Toyota products, the Priuss unique design visuallydistinguishes it from other cars. It is quieter than other cars, and judging by its

customers it offers a more gentle drive. The car comes with various options,

including a revolutionary solar-powered roof that cools the car during warm days.

From 2012 the brand will offer diverse sizes of the Prius. It has a longer lasting nickel

hybrid battery, and both a fuel and electric engine. Furthermore, Toyota constantly

increases maintenance centers so service will be optimal. Last but not least, it is

environmentally friendly and energy-efficient (Toyota, 2012).


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Price: While costing an average of 2000 GBP more than other cars in the same sizeand class category, the most recent Prius does an average of 1.7 l/100 km less than

most recent diesels and 2.6 l/100 km less than most recent gasoline cars (Prius3,

2012). Toyota has opted for a penetration pricing strategy over price skimming firstly

due to the hybrid cars demands high elasticity , and finally in order to increase itsmarket share and raise mass appeal for the Prius quicker (Baines et. al, 2011).

Competitive financing and lease conditions by Toyota provide them an advantage

over their competitors (Prius3, 2012).

Place: In the US, Toyota currently holds a 16% general market share, in the UK this is4%. Concerning the hybrid market, which varies around 2.5% in the US and 8% in the

UK, the Prius accounts for 50% and 75% of the respective markets (CNN, 2012). With

soaring oil prices, Toyota is planning to concentrate more on introducing the Prius in

emerging markets like India and Nigeria in the near future (CleanTechnica, 2012).

Promotion: Besides Toyotas focus on educating and creating environmentalawareness, they aim to create an excitement around the Prius. This is accomplished

through green as well as economical advertising, sales promotions and

establishing an informative website and handing out online brochures for potential

customers (before its introduction). Furthermore, the Prius has become a Hollywood

icon, frequently featuring in movies and being driven by main characters in

primetime series CSI and Weeds. Finally, major inspirational figures in Hollywood

have openly praised the Prius, creating a general sense of coolness of owning it and

driving green.

Toyota Prius Marketing Strategies

Prior to describing marketing strategies related to the Prius, I will briefly discuss

Toyotas main techniques applied to their entire fleet.

Localization

The corporation customizes its products and services to individual preferences and

differing demands by country, a technique that has aided them to establish themselves

in foreign markets besides their dominant position in the Japanese market. By localizing

its production, basing production on local demand and manufacturing in that same area,

Toyota has avoided exchange rate fluctuations and increased flexibility and distribution

(Toyota, 2012).


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E-Business

Toyota has employed this strategy in order to reduce supplies and parts ordering and

tracking costs, and also to incorporate the Just In Time production system in order to

reduce holding inventory and carrying costs. Toyota also turns to the internet to

advertise and publicize its products and campaigns as it has identified it as the primalsource of information, especially for the US car market (Toyota, 2012).

First Generation Prius

Toyota turned to social media marketing in order to inform innovators and early

adopters about the hybrid technology. The 2000 Prius-Genius campaign focused on

putting the corporations commitment to create environmentally friendly cars in the

spotlight. The majority of the Prius, and on providing a special website for technophiles

and potential customers about the Priuss development 2 years before its entry into the

market. The majority of the Priuss advertising budget was allocated to dealers in orderto communicate the hybrid technology to potential purchasers. Toyota identified

convenient design, new technology, reliability, comfort and safety to be the decisive

factors in buying a Prius. Toyotas TV and print advertisements focused on the evolution

of hybrid technology and non-dependence on fossil fuels. In the US the Priuss main x-

factor was fuel economy, which it identified as the most effective way of breaking into

the SUV culture of the US. Lower emissions were just the icing on the cake.

Prospective customers were able to pre-order Prii, finalized by local dealerships in order

to accelerate purchases, while also able to rent a Prius for 1 day as in order to

extensively test it. Online, initial demand uncertainty was tackled by centrally stockingup the Prius and making dealers provide order details in order to materialize an efficient

distribution of the Prius fleet. Production-wise, the Prius was manufactured in Japan,

since demand at that time did not require local factories (Rodriguez & Page, 2004).

Second Generation Prius

Introduced in 2004, Toyota targeted customers that demand established, reliable yet

affordable products, contrary to the innovators and early adopters previously. In the US

it responded to demand for bigger cars by introducing a mid-size hatchback at the same

price than its predecessor, mainly due to increased production efficiencies. The Priuss

TV campaign primarily promoted its size and performance and focused on its low

emissions, despite the aforementioned. Furthermore, it aimed to educate the

mainstream on hybrid technology and aired spots concentrating on the fact that the

Prius does not need to be plugged in. Toyota also maintained healthy relationships with

purchasers of the first generation by offering reduced prices applicable only for them on

1.200 pre-orders. Its production was eventually localized to the US, where a Prius plant


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was built in order to satisfy increasing demand, which currently outweighs supply and

led to a waiting list of one year for 2011. Toyota also concentrated on Facebook and

Twitter in order to further familiarize the Prius technology with the audience (Rodriguez

& Page, 2004).

Third Generation Prius

Becoming a household name, Toyota thrives on the Priuss popularity in order to

promote its man, car and nature in harmony campaign, which mainly puts the Prius as

a transition to an emission-free future. Following a disastrous 2011, where over 450,000

Prii were recalled due to widespread reports of brake malfunctions, Toyota focused

intensively on its safety, with reference to high NCAP (test) scores in Europe (Toyota,

2012).

Toyota Prius & The Consumer SocietyHow the case study of the Toyota Prius fits into a selection of consumerism theories will

be discussed below.

Consumer Motivation & Behavior (Maslows Theory)

The psychological aspects, which underlie a consumers desire for a good and to

subsequently perceive it through consumption, have been categorized through various

researches relating to both individual motivations and social influences (Baines et. al,

2011).

Figure 2: Maslows hierarchy of needs


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The innovators and early adopters of the first generation Prius can be classified in the

lower echelons of Maslows pyramid, since they prize hybrid technology highly and

believe it will boost their self esteem and satisfy their technophile desire. Like

mentioned before, Toyota aimed its initial campaign at the upper echelons. The

campaigns of the second and third generation Prii concentrates on the lower echelons:Safety is important in a car, fuel economy saves up money for other basic needs, and

environmental awareness is also part of the middle echelon, since they will buy a Prius

in order to be part of a growing environmentally-friendly culture.

Ethical Marketing & Social Responsibilities

Corporations are responsible to market, advertise and sell their products in an ethical

manner. This involves no deception of the consumer by the company itself, false

advertising, exaggerated markups and selling unsafe goods (Baines et. al, 2011). Apart

from a small technological glitch in the Priuss brakes in 2010, where the company actedswiftly and recalled all vehicles related to this model, Toyota was not reported to be

involved in such practices. The Prius has witnessed only a very limited amount of

criticism, mainly because it appeals both to the ever-increasing environmentally aware

society and the rest, and because it is a great car in general.

Excessive Materialism

This concept relates to the attaching of too much social and emotional value to goods

(materials), and creating a mainstream where a persons wealth/social status is directly

reflected by the goods he purchases (Baines et. al, 2011). This is not a critical concernfor the Prius, since it is reasonably priced in relation to the relatively new technologies

employed and has not yet witnessed any depreciation.

Cultural Pollution

This occurs when traditional procedures from one a particular society are replaced

(polluted) by a more mainstream, pop culture (Bidinotto, 2012). The Prius relates to

this concept as it is trying to tackle the environmentally unfriendly North American SUV

and American Muscle car culture. It is aided by governmental financial incentives

(lower road tax) in order to gradually switch to an environmentally friendly car culture.

Social Goods

A good or service that benefits as many people as possible in as much ways as possible,

for example clean water (Baines et. al, 2011). The Prius was a motivator for other

carmakers to engage in hybrid technology and enter this relatively unexploited market

during a period of high oil prices. In the long run this technology will reduce dependency


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on fossil fuels throughout our society. General Motors has even produced a military

hybrid vehicle, which indicates that this technology will emerge in other fields than the

private consumer market.

Enlightened MarketingThis concept holds that a corporations marketing strategy should stick by the best long-

term performance of the marketing system (Baines et. al, 2011). Firstly, Toyota holds

multiple technological patents that will benefit the company financially in the long run.

Fortunately for Toyota, the Prius is both a desirable and salutary good, although the

former is outweighing the latter. The Prius has gained so much social appeal recently

that it has practically marketed itself. Waiting lists are up to 1 year, and consumers are

willing to pay for used Prii in excess of the contemporary retail price (Prius3, 2012).

Conclusion The Role Of (Green) Marketing In The Consumer Society

In order for a corporation to plan and produce a successful marketing strategy, aiming

to create brand awareness, brand equity, be innovative and take advantage of new

opportunities, it must follow the following rules of thumb (Ottman, 2008):

Knowing your customer: Contributing to awareness and concern of the issues thatyour product attempts to address. Toyota has done just that in their marketing

strategy of the first Prius, i.e. communicating hybrid technology and the issue of car-

related pollution to its customers.

Engage and empower consumers: Ensuring that potential consumers get the feelingthat they, together with their peers, are actively contributing to the mitigation of

environmental issues. Toyota has done just that by focusing their latter campaigns

on lower emissions, projecting the Prius as the car of an environmentally friendly

future.

Transparency: Ensuring that your product is legitimate and abides by the specificclaims the corporation is making. Toyota have always included its fuel economy and

environmental benefits in its marketing campaigns, regularly referring to numerical

benefits concerning longer mileage and lower CO2 emissions.

Reassuring the customer: Buyers need to believe that the product performsaccording to the companys claims; basically referring to the products quality and

reliability. Toyota have offered potential Prius buyers the chance to test drive it for


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one whole day and become familiar with hybrid technology. Eventual malfunctions

have been dealt with swiftly throughout (referring to 2010 brake malfunctions).

Price Consideration: When charging augmented prices for products that involve newtechnologies and higher-quality specifications ensure that the customers can andwill want to afford it in relation to similar products on the market. Toyota has

highlighted that the (slightly) higher price of the Prius in relation to other mid-size

middle class sedans will be nullified in the long run by fuel efficiency, lower road

taxes, lower insurance tax, with eventual price reductions for future models thanks

to economies of scale and advancement of technologies.

ReferencesAMA. Definition of Marketing.

[http://www.marketingpower.com/AboutAMA/Pages/DefinitionofMarketing.aspx] 20-03-2012

Andidas (2003). Toyota Prius; Marketing Communications Plan.

Baines, P. , Fill, C. , Page, K. (2011). Marketing. 2. Oxford University Press. Oxford, UK.

Bidinotto, R.J. Cultural Pollution: A Matter Of Principle. [http://www.mind-

trek.com/articles/l10.htm] 20-03-2012

CleanTechnica. Toyota Overwhelmed By Demand For Prius In India.

[http://cleantechnica.com/2010/06/09/toyota-overwhelmed-by-demand-for-prius-in-india/] 19-03-2012

CNN. Hybrid Car Sales: Lots of Options, Few Takers.

[http://money.cnn.com/2011/09/30/autos/hybrid_car_sales/index.htm?iid=HP_LN]

21-03-2012

Ottman, J.A. (2008). The Five Simple Rules of Green Marketing. Design Management

Review.

Edwards, T. (1999). Contradictions of Consumption: Concepts, Practices and Politics in

Consumer Society. Open University Press. Buckingham, UK.

EOEarth. Consumer Society. [http://www.eoearth.org/article/Consumer_society] 21-03-

2012

Prius3. How Does The Prius Fuel Consumption Compare With Other Cars Out There?

[http://prius3.wordpress.com/2011/01/11/how-does-the-prius-fuel-consumption-

compare-with-other-cars-out-there/] 20-03-2012


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Rodriguez, A. , Page, C. (2004).A Comparison of Toyota and Honda Hybrid Vehicle

Marketing Strategies. Rocky Mountain Institute. Boulder, USA.

Saatchi. Prius Goes Plural.

[http://www.saatchi.com/news/archive/prius_goes_plural_in_new_campaign_from_sa

atchi__saatchi_la] 20-03-2012

Toyota. [www.toyota.com/prius-hybrid/] 21-03-2012

Toyota (2012). Annual Report 2011.

Toyota (2012). Sustainability Report 2011.

Veblen, T. (1899). The Theory Of The Leisure Class. Chicago, USA.

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BUS011 – Marketing (3)