Current Marketing Situation

• Aero Motors •

Several top engineers, scientists, and designers from automobile companies across the globe saw a need in the current automobile market. They realized that people should not have to choose between being supremely fuel­efficient and exceptionally good looking. Aero Motors was founded in 2007 in order to create a hybrid automobile with sleek, aerodynamic styling that could achieve fifty miles­per­gallon, all while being affordable to the average person with a target base price of $30,000. Since the launch of the automobile available for sale in 2009, Aero Motors has experienced a dramatic increase in sales each year since the launch. Last year, in 2013, Aero Motors sold over 14,000 units, had a revenue of half a billion dollars, and had a profit of $90 million.

The hybrid market has been growing at a rapid rate ever since the steep rise in gasoline prices to over three dollars per gallon in 2005, and four dollars per gallon in 2008. With gas prices unlikely to decline in future years, it is expected that the need for hybrid cars will increase as well. Further, due to President Obama’s mandate setting U.S. fleet­fuel standards to nearly double by 2025, the amount of hybrids being offered to customers is increasing as well. 2012 and 2013 averaged a 38% increase in hybrids sales from year to year. In 2013, almost half a million hybrids were sold in the United States. While a decline can be expected, double digit growth is very probable with the present hybrid market. However, because Aero Motors is a new company still gaining traction, we believe that our sales will continue to rise with the 2012/2013 average for many years to come.

Competition in the hybrid market is both intense and growing. Every well known car company has a hybrid vehicle on their fleet. However, the Toyota Prius has been the best selling hybrid vehicle on the market since it’s creation. The Prius has slightly over 50% market share. In order to compete in this growing and very competitive market, Aero Motors appeals to a segment of the population that the large automakers cannot. Market Description The hybrid car market consists of many different types of vehicles. Virtually every type of vehicle is available with a hybrid option, such as SUVs, sports cars, sedans, and compact cars. Further, there are three basic types of hybrids: E85 ethanol hybrids, plug­in hybrids, and traditional hybrids. As previously mentioned, almost every car company offers a hybrid model, and there are currently over 50 different hybrid models available in the U.S. market.

Manufacturers can differentiate themselves by offering lower prices than the competition, offering standard features that others do not, providing better fuel economy, and different styling ­­ to name a few. Customers in the hybrid are largely interested in cost effectiveness and efficiency. This includes how the price point matches the benefits, how fuel efficient the vehicle is, how reliable the vehicle is, and how many emissions the vehicle puts off. Also, it is crucial to mention that there is a desire in the hybrid market to display the fact that the vehicle is in fact a hybrid. Many hybrid buyers are part of a social mission to clean up the environment. Many of these people like to belong to a group of people who are making contributions to save the planet. There is a reason the Prius has been the number one selling hybrid car ­­ it looks like one.

Targeted Segment Customer Need Corresponding Needs

Those looking for efficiency Good fuel economy Affordable price point

50 mpg 29,990 price point

Those looking to have a stylish/efficient vehicle

Good fuel economy sleek looks

50 mpg Aerodynamic styling

Those looking not necessarily interested in a hybrid

Affordable vehicle Stylish looks performance

50 mpg; 29,990 price point Sleek, aerodynamic look 230 hp, sports handling

Product Review Aero Motors’ Efna has the following features: • Stylish, aerodynamic, lightweight, two­seater design • Three trim levels: Sport, Premium, X­Series • Sports handling • 230 hp • Durable cloth and leather options • Standard Features: Radio, Aux Input, Heat and A/C, Power Windows, iPhone App feature • Available in 5 colors: Black, Blue, Grey, Green, and White. • Average 50 miles per gallon • Starting at $29,990 • Traditional hybrid engine standard, plug­in hybrid option available Competitive Review

With the rising need for more fuel efficient cars in the future, and the government requiring efficiency fleet­standards to increase across the board, the supply of hybrid cars is surely to increase in the coming years. However, it is expected that the market share of hybrid vehicles will increase among all vehicles as well. The market is most competitive where low price points meet high fuel efficiency. This competitive analysis focuses on the top selling vehicles in the hybrid market which have similar technical qualities and price points of the Efna. While the fuel economy might match other top competitors, the styling does not. Aero Motors is going after the market segment that is interested in all of the benefits of a hybrid car without the fall backs: looks. The Ford Fusion and the Lexus CT 200h are Aero Motors more direct competitors. However, because the Efna is trying to unseat the top sellers, they are competitors as well. • Toyota Prius ­ Entering the U.S. market in 2000, the Prius has been the most popular hybrid car since its inception. The Prius’ body style is a four door hatchback. The most recent model boasts 51 mpg in the city, and 48 on the highway. The 2014 starting price is $24,200. However, there is a cheaper variation, the Prius C, that starts at $19,080. The Prius is a traditional hybrid, but a plug­in option is available as well. In 2013, the Prius line of vehicles sold 222,140 units. • Toyota Camry ­ The Camry hybrid was introduced to the market in 2006, and it had been the second most popular hybrid behind its fleet cousin, the Prius. The camry is a four door mid­sized sedan. The current model gets 43 mpg in the city and 39 on the highway. The Hybrid model starts at $26,330. in 2013, Toyota sold 44,448 hybrid Camrys. • Ford Fusion ­ The Ford Fusion hybrid was introduced to the market in 2009. The Ford Fusion is a full­sized four­door sedan. The Fusion hybrid’s fuel economy is very competitive, achieving 47 mpg in both the city and on the highway. The starting price is $27,280. 37,270 Ford Fusion hybrids were sold in 2013. • Lexus CT 200h ­ The Lexus CT 200h is a four­door hatchback with sleek lines that was introduced in 2009. The CT 200h has a combined fuel economy of 42 mpg. This vehicle comes standard with leather and a screen­equipped dash. The CT 200h starts at $32,050. In 2013, 15,071 units were sold. Aero Motors is confident that the two seater Efna model will attract buyers already interested in hybrids, and those are looking for a stylish, fun, and affordable mode of transportation. With features on par with the rest of the market leaders, Aero Motors is very confident in its ability to compete for the top market spots.

Brand Model Price MPG 2013 Sales

Toyota Prius $24,200 51/48 222,140

Toyota Camry $26,330 43/39 44,448

Ford Fusion $27,280 47/47 37,270

Lexus CT 200h $32,050 43/41 15,071

Channels and Logistics Review Aero Motors has three main showrooms: one in Los Angeles, New York City, and Chicago. Because these locations could not possibly reach all of the potential customers, Aero Motors Licenses many car dealers across the country to sell and service our automobiles. Also, our interactive website allows customers to view, customize, and even purchase the models we offer. Strengths, Weaknesses, Opportunities, Threat Analysis Aero Motors has new, innovative ideas and knows how to implement them in the hybrid car market. Therefore it considers its car design as a strength. However, one weakness is that the company is still relatively small and needs to gain a bigger share of the market. Fortunately, it can capitalize on the opportunity such as government legislation that will increase the market size, although one direct threat is that many strong competitors will also try to capture new demand.

Strengths 1.Sleek, aerodynamic styling: Aero Motors aims to distinguish itself as the primary hybrid car manufacturer that produces quality vehicles that not only look better than its competitors’ but are also comparable with non­hybrid vehicles when it comes to unique styling. Therefore the first marketing strength is that the company can advantage of its unique product features. 2.Fuel efficiency: Another pro of upping the company’s advertising capability is to focus on fuel efficiency.The company views efficiency as one of its most important goals, therefore Aero Motors has implemented advanced research and development efforts that place its vehicle, the Efna, above competitors at a respectable estimated fuel consumption of 50 miles­per­gallon, an average of 10% increase over competitors. 3.Affordability: Advertising the $30,000 dollar price point presents the Efna is an affordable option to any interested buyer. The price is also very competitive because it is a less expensive alternative than other hybrid cars. Additionally, this price places the Efna as not only an excellent buy in the hybrid market, but also a unique substitute to gas and diesel powered vehicles. 4.Premium brand image: Advertising sleek design gives the impression of a premium good. By default, premium means high priced, but at Aero Motors, the definition goes beyond in order to achieve customer satisfaction, and that is why it positions the Efna as the hybrid car that provides more than what a typical hybrid does. The company wants its buyers to realize that the Efna has the highest customer­perceived value in the market. Weaknesses 1.Small market presence: Our present in fewer locations means that our advertising plans are not fully targeting our potential markets. Due to the company’s relatively recent inception, Aero Motors is still perceived as a very small hybrid car manufacturer with limited dealership outlets throughout the country. However, with record growth sales and impressive retained earnings, Aero Motors plans to invest more to build more licensed dealers and to increase geographic advertising to boost awareness 2.Constrained control over sellers: The process of renewing and bettering our promotion efforts is limited because Aero Motors sells more vehicles through licensed dealerships than through company­owned outlets. Opportunities 1.Rapid market growth: According to a study in the U.S., over the past decade, hybrid car sales have increased by more than eight times. Meanwhile, gasoline prices have more than doubled, therefore putting a significant strain on demand for more efficient vehicles. With a nearly guaranteed strong demand insight, Aero Motors expects to gain a fair share of the market in the years to come. This translates into using our marketing strategy to envelop this new market.

2.Government mandates ensure demand: New legislation under Barack Obama’s administration that requires vehicles to increase fuel efficiency creates additional demand and incentive for consumers to switch to more attractive options. Aero Motors is looking to capitalize on this regulation and capture more target markets. That means that our advertising will be viewed more positively because it agrees with the government on key issues. 3. Appeal to buyers without compromise: While many hybrid vehicle manufacturers are still focusing on fuel efficiency and price, they often forget styling. At Aero Motors, the emphasis on the looks is just as strong as it is on efficiency. Thus our advertising can take advantage of eliminating consumer doubt. Consequently, this creates a unique option for buyers to drive a hybrid vehicle without remorse. Furthermore, this allows the company to attract more buyers who until now have been avoiding hybrids due to their “less than desirable, not­so­sporty” looks. Threats 1.Strong competition from reputable carmakers: Competitors exert an excessive amount of advertisement for their vehicles too, which shrinks the effectives of our ads because they become less visible. With more than 50 hybrid model options available in the U.S. from a diverse selection of manufacturers, expanding into the market is not an easy task. With Toyota dominating the field and capturing more than 50% of the market, other carmakers also present strong strategies to promote their own products. Aero Motors perceives the importance of being a unique company to separate itself from the rest and attract a decent amount of consumers. To achieve that goal, Aero Motors aims to combine premium value with efficiency in order to provide the highest customer­perceived value. 2.Rising production costs: Over the last five years, raw materials such as steel and aluminum have doubled in prices. Additionally, as part of creating product value, advertising costs have also risen. When these factors are combined, manufacturing and promoting vehicles at a reasonable price becomes a long term strategy with big consequences. To reduce the impact of high prices and keep costs low, Aero Motors seeks advanced purchasing options through derivatives and reach mutual agreement with advertising agencies.

Objectives and Issues Objectives and Issues Aero Motors is revamping its marketing strategy to adapt to a projected surge of demand starting in 2014 and 2015 as indicated by an analysis as of December, 2013. The company aims to capture a significant share of the potential market. Year 2014 marks the eighth operating year, while the year 2015 will be the company’s ninth year in the market. Eighth­Year Objectives This year will be groundbreaking because Aero Motors aims to increase its sales by a remarkable 21% which should results in annual sales of $508 million. Given very low volatility of the costs that have been reported recently, the company projects to sell 16,940 vehicles and nearly double its profits to $157 million. Ninth­Year Objectives Nearing the end of its first decade in the market, Aero Motors faces a slower growth in the market. However, after a fantastic 21% growth rate, the company is expected to grow by 7% in 2015, which will result in revenue of $543 million, however, due to increased material costs, profits are forecasted to dip to $143 million. The company maintains a long­term goal to grow at a healthy 5% rate, therefore this year will still be above average. Issues The newly redesigned marketing strategy is meant to capture a significant share of the growing market in the years 2014­2019. The main issue is that consumers are still skeptical of the Efna and why it should be their choice of war. Additionally, brand awareness is still not fully developed and continues to advance through the growth stage. Aero Motors intends to rapidly increase its marketing campaign beginning summer of 2014. This new campaign will have a positive effect of creating a greater demand for the following years. This effectiveness will be measured by the amount of cars sold each year.

Marketing Strategy

Aero Motors marketing strategy will involve developing a “Let’s Build Perfection” positioning, based on being socially responsible with our vehicles while not losing any of our technological benefits or modern design. The brand will establish a differentiation by combining two different segments into one target market. The two target markets being combined are those who want to be socially responsible by driving an eco friendly car; and those who want to drive a stylish car. The primary target segment Millennial and Generation X. This segment is comprised of young

adults (19 to 34) and middle­age adults (35to 50). Subsets of this generation segment includes socially responsible, environmentally aware, and culturally aware of new products.

Positioning Aero Motors will be positioned on a “More for the same” value proposition. This will allow Aero Motors brand to be differentiated based on combining two desirable wants in the automotive industry without compromising (having great fuel and eco friendly car, while having a luxury appearance. It will also allow Aero Motors to be in the same price range as our competitors who offer one only need while we offer both. Marketing will focus on conveying that Aero Motors is not just an automobile: It gives customers a way to easily join the movement of being eco friendly without losing any benefits of a luxury low MPG vehicle such as speed, special interior features and exterior appearance. Product Strategy Aero Motors will be sold with all the features described in the Product Review section. As luxury vehicles change with new features and modern design, Aero Motors will do the same to meet the market demands. As the market changes, Aero Motors will stick to our value proposition of staying in a middle­class affordable price range while losing zero benefits. Currently we have one design which is a two­seat car. Once launching into the market and developing brand awareness, Aero Motors will be prepared to launch a new product line with more seating. Utilizing our top automotive design team as well as, our hybrid engine experts will be applied as a part of our product strategy especially when launching a new line. All aspects of the marketing mix will be consistent with Aero Motors. Pricing The price variation among hybrid cars increases as the Brand changes. There is a direct correlation with the affordability of the vehicle as related to the style of the vehicle. What was interesting to Aero Motors was, the price gets more expensive with the brand, however the MPG decreases. Aero Motors will follow a competition­based strategy. Aero Motors hybrid will have superior quality in both MPG as well as luxury. Aero Motors will not position itself at the lowest price. However, it will not position itself to be the highest either. Aero Motors will be unique with pricing because unlike competitors, the luxury will go up, price will be met in the median of competitors, and MPG will go up as well; standing by our value of “nothing to lose.” The price for Aero Motors starts at $29,990 with 50 MPG. Aero Motors is priced to target the middle class while the luxury design attracts the upper class. If consumers wanted a car that had good gas mileage and great exterior design before Aero Motors, it would cost $32,050. Consumers would

pay more than Aero Motors vehicle and would lose 7MPG. To have the equivalent miles per gallon consumers would pay $24,200 however, losing many benefits such as a sleek, modern design. Distribution Strategy Based on the information presented in the Channels and Logistics Review section, Aero Motors will be selective of show­room locations. Aero motors will chose to have high­end show rooms based on well­known cities that bring in a lot of people as well as are known for a luxurious lifestyle. These show­rooms will give Aero Motors credibility as an automotive company by having excellent customer service, luxurious retail space, and experts of the brand as well as competitors. Aero Motors will make the vehicles in the United States. Once a vehicle is completed it can either be sent to a showroom, or to a licensed dealership. Marketing Communication Strategy Aero Motors is a unique brand, therefore when choosing the marketing communication strategy Aero Motors made sure to represent that. Aero Motors initially will not use broadcast or print advertising. Luxury vehicles such a Audi do not advertise on the radio, therefore Aero Motors doesn’t either. Promotional resources for Aero Motors will focus on three areas; ∙ Event marketing; Aero Motors send out a team of experts to the big auto shows in Detroit, Chicago, New York, Miami, and Los Angeles to launch. At the launch, Aero Motors will be able to answer any potential buyers questions about our hybrid vehicle. Launching at the auto show will give us a grand entrance into the market as well as begin social media marketing. ∙ Online marketing: Within our target market, our typical target consumer spends a lot of time online and is technologically savvy. To reach our target customer we need to be on the web where they can easily find us. A core component of the online marketing will be building a web site. It is important that potential buyers can find information about Aero Motors quickly. Like our hybrid, our website will be designed unlike other websites; it will be eye grabbing and interactive. To drive traffic to our website, we will create a presence on social networks such as Facebook, Twitter, and Instagram. These social media networks will also be used to drive traffic to Aero Motors dealerships. ∙ Promotional Event; Aero Motors will kick­off each opening of dealership with a promotion event. This event will consist of special trade­in offers on current vehicles; low APR; and winning numbers which will be mailed out through personal invitations to get our customers excited about the Brand. This event, like the vehicle, will be high­end which means the event will have a great ambiance, good food, and most importantly perfect customer service.

Marketing Research To remain consistent with our target customers, Aero motors will hire an excellent marketing team to update our social media pages daily as well as monitor online discussions about Aero Motors. Aero motors have a benefit by targeting the Generation X and the Millennial. These generations are becoming very tech savvy, which means their opinions about the brand will be posted on social media and easy to find. Aero Motors will gauge the customer perception of the hybrid vehicle as well as the general satisfaction. For future development of the Aero Motors hybrid vehicles, promotion events will be held. Aero Motors will be changing with the trends to satisfy the customers wants while creating vehicles that the environment needs.

Action Programs Aero Motors started off the year 2014 with a very intense marketing plan in order to achieve their goal of selling 16,940 vehicles which will yield them a $157 million profit. The following are summaries of action programs that will be used throughout the year to achieve the stated objectives. ∙ January­February: Aero Motors representatives will work with both Aero Motors dealerships as well as their licensed dealerships in order to educate them on the importance of the promotional campaign and the incentives that are available for selling these eco friendly vehicles. Representatives will also ensure each dealership is properly educated on the product features in order to be able to better describe the benefits customers will receive when purchasing this vehicle. At this time the representatives will also ensure that each dealership is properly equipped with the right equipment in order to service these vehicles for the loyal customers who already purchased Aero Motors vehicle. ∙ March­April: During this part of the year Aero Motors will concentrate on showing off their vehicles at car shows, the New York International Auto Show, the Florida Car Show, and the North American International Auto Show. This will help Aero Motors make a visible stance in the market. The more auto shows that show the Aero Motors vehicles, the more public awareness it will receive which will ultimately drive the sales up. ∙ May­June: At this time the online marketing will go forth in full force. The company’s sales team will concentrate on the incoming emails and social media comments. The IT department will concentrate on updating Aero Motor’s Facebook, Twitter, and Instagram. We will work on constantly updating information in order to provide potential customers with the most up to date information. The Aero Motors website will also be closely monitored for traffic and will show potential customers the closest dealership that carries Aero Motors vehicles. ∙ July­August: During the summer month Aero Motors will concentrate on campaigning to the public the MPG of the vehicle. During the summer months many people go on a vacation and try to find ways to make the vacation affordable. By marketing to them a vehicle that gets 50 miles

per gallon it will be a clear choice for the perfect road trip vehicle. This campaign will further emphasize the “Nothing to lose, everything to lose” value proposition. It will show customers that they will not be losing on the luxury of a vehicle and they will gain the bonus of getting more bang for their buck. ∙ September­October: Aero Motors will enhance their social marketing campaign by using location based services such as Foursquare and Facebook Places which will help to drive traffic toward participating dealerships. This will give individuals a better understand of all the locations that carry the Aero Motor vehicles. It will show them that not only do Aero Motors dealerships carry their vehicles but many other participating dealerships. ∙ November­December: In order to finish off the year strong Aero Motors will offer all participating dealerships a sales contest. This contest will offer additional incentives and cash bonuses to the dealership that is able to sell the most vehicles.

Budgets

The year 2014 will mark Aero Motors eighth year in the industry and they have set a sales goal of $508 million. The average cost of an Aero Motors vehicle is $30,000 and they estimate selling 16,940 units in the year 2014. It takes Aero Motors $20,730 to construct each hybrid vehicle so they must sell their vehicles for above that price in order to earn a profit. When selling their vehicles for $30,000, Aero Motors is able to make a profit of $9,270 per vehicle sold. The fixed costs for Aero Motors are $234 million while the variable costs are $10,000. Since Aero Motors is estimating selling 16,940 of their vehicles in the 2014 year, their breakeven point would be selling 11,700 vehicles which will cover the $351 million invested in producing the vehicles. The other 5,240 they project to sell will earn the company $157 million of profit. After expenses and taxes the profit will equal $124 million. Break even analysis:

Income Statement:

Aero Motor

Income Statement

For the year ended Dec.

31, 2014

(In millions)

Revenue $508

Less Cost of Gooods Sold 351

Gross Profit 157

Less GAS Expenses:

Advertising Expense 12

Salaries and Wages 9

Supplies 4

Net Profit 132

Less Taxes 8

Profit After taxes 124