Case Study: Toyota Prius Marketing Strategies

Toyota manufactures cars, which has a wide coverage from economic minibus to luxurious cars, SUV. The brand on sell includes Crown, Reiz, Vios, Corolla, Coaster and Prius. And Prius is the brand or car that Toyota has made a significant success in American market. It is a hybrid vehicle. What are the characteristics of it?

Hybrid vehicles have both a gas engine and an electric motor. When starting up or at very low speeds (under 15 mph), the auto runs on the electric motor. At roughly 15 mph, the gas engine kicks in. this means that the auto gets power from only the battery at low speeds, and from both the gas engine and electric motor during heavy acceleration. When starting up and operating at low speed speeds, the auto does not make noise, which seems eerie to some drivers and to pedestrians who don’t hear it coming!

Toyota Prius is the first mass produced hybrid car and the car is rated as the cleanest car sold in the United States, which was launched in US in 2001. The company sold close to 8 million units till date and more than half of the sales come from the US market. The word Prius in Latin means “before” and the reason why Toyota choose this name was to highlight the fact that the company is more focused on  environmental awareness and protection even before the whole auto industry started to focus on the environmental pollution caused by cars through the emissions. Toyota pioneered the concept of environmental friendly cars and also alternative fuel cars as the worldwide fossil fuel reserves like crude oil are exhausted and the cars need to have alternative fuel for running them. Toyota management had encouraged the development hybrid concept car that works on both gasoline and electricity and the current models also include the full electric car. Toyota Prius series created a new market segment of consumers who are highly environmental conscious and also gave an opportunity to all those consumers who want to focus on  saving the environment as global warming due to carbon fuel emissions had become a major concern worldwide.

Toyota Prius Marketing Strategies

Then, have a look back at Toyota’s history to find new Toyota has made its way to America. In 1957, Toyota exported to America at the first time and established the selling company. In 1984, a joint venture was established with General motor. Co. And in 1997, Prius was first in production and had a launch in America. It was such a great success that Toyota conquered American market. To dig into the reasons, it was largely contributed to the micro and macro environment at that time.

First, let’s have a look at micro-environments. We all know that American love cars so much. And due to oil crisis, Americans changed the need structure for cars, converting their needs to oil saving cars. While American car manufactures lacked producing such cars, then Toyota caught that opportunity and tried to occupy this niche market.

Toyota’s competitor at that time was Honda. It started to develop the hybrid car almost at the same time as us. It introduced the insight. Afterwards, but It didn’t sell well because of its poor design. As a result, Toyota got the first place in America. However, Toyota had no competitors in local at that time. GE and Ford were followers later.

In the macro environment there are many young men who love technique and pursue new technology products. And they are also highly educated and so have a strong environmental protect spirit. And Prius is just the combination of the concepts of environment and technology. Other factors are natural resources and pollution. Before the environment problem and energy crisis come into people’s attentions, Toyota began to research and develop the hybrid cars with a long term view, which was designed to reduce oil consumption and gas emissions.

In a country where everyone was ecstatic when governments raised speed limits above 55 mph, why would the Prius be so successful? For the first model, the answer lies in Toyota’s clever marketing campaign. To begin with, it wasn’t aimed at the mass market. Instead, Toyota thought that the first hybrid buyers would be “techies” and early adopters (people who are highly likely to buy something just because it’s new). The company was right. Once Toyota identified the target market, it was able to educate the right consumers 2 years before introduction. The company established a Web site to distribute information and set 3-brochures to 40,000 likely buyers just before the introduction. The press was also excited about the technology. Auto magazines, and even general interest media, ran articles describing, enthusing, or belittling the hybrids. All of this coverage helped Toyota sell 1,800 cars immediately.

In all, Toyota spent $15 million in 1997 touting the Prius. There were print ads in magazines such as Newsweek and Vanity Fair, but the bulk of the campaign was in television advertising on channels such as Discovery, the History Channel, the Learning Channel, and MSNBC. These ads helped to position Toyota as an “environmentally concerned” company and more subtly stressed the technology aspect of the car. After all, Americans love technology and are quick adopters of it.

After introduction, the ads appealed more to emotion with taglines such as “When it sees red, it charges”——a reference to the recharging of the battery at stoplights. Such ads are based on ambiguity where the headline attracts attention because its meaning is not clear. The consumer must process the information in the ad in order to interpret it. The result is higher ad impact and longer ad recall. Toyota also took advantage of the environmental appeal by sending out green seed cars shaped like Toyota’s logo to prospective buyers on Earth Day. They also wrapped some Priuses in green and gave away cars at Earth Day events.

Much of the Prius’s success is based on correct identification of the target market. Many early purchasers were attracted by the technology, began to modify cars, and shared their experiences through chat rooms such as

Even though the Internet played a major part in the Prius launch, Toyota does not sell the car from its Web site. Buyers go to online to look at colors and decide on options such as CD players and floor mats. After that, the dealers get involved, but it takes specially trained salespeople to explain and promote the Prius. Therefore, Toyota is planning to launch and educational campaign aimed at salespeople and consumers.

Strategies After the Year 2004

Enlarge the Market

  1. Launch a new product: As more and more people accepted the new Hybrid vehicles, Toyota decided to enlarge the market, from the market of techies and adopters to a wider market. In order to reach this purpose, Toyota launched a new Prius. The new Prius improved styling, performance and gas efficiency. It is a sleek, Asian-inspired design including seven colors. Inside the Prius, there is a stubby switch to engage reverse or drive and a push button that turns everything on. A 7-inch energy monitor touch screen displays fuel consumption, outside temperature, and battery charge level. It also explains whether you’re running on gas, electricity, regenerated energy, or a combination of these. There are also screens to show how much electricity you have stored and to arrange your air conditioning, audio, and satellite navigation system. The interior is roomy and practical, with plenty of rear legroom. There are many storage space cubbyholes and shelves in the front, as well as a deep dashboard which leaves ample space for maps, books, and even your lunch. The CD player holders six discs.
  2. Large promotion: To launch the new Pirus, Toyota spent more than $40 million dollars spread over media in more consumer-oriented magazines and TV. The promotion is successful, as Prius sales are up 120 percent and have reached 28000 units in 2004.
  3. Relatively moderate price: Because of the “environmentally friendly” aspects of the car, there are government breaks on the car. The federal government gives a $1500 tax deduction, and some states allow single-occupant hybrids in HOV (High Occupancy Vehicle) lanes. Although the federal deduction will be phased out in the near future, other bills are pending to extend the tax break based on greater fuel efficiency and lower emissions from vehicles. So compared SUV cars there is a relative low cost because of the tax relief, and the price is moderate.
  4. Increased production from external incentives: Because of the rising gasoline prices, the demand for Priuses increased. Sales of full-sized SUVs such as the Ford Excursion and Expedition and the Lincoln Navigator suffered a sharp drop. The increased demand can be seem from the long for 6 months or more waiting lists. Spots on dealers’ waiting lists were even being auctioned on E-bay for $500. Toyota increased monthly production of Prius from 7500 to 15000, but just alleviated the shortages. During this time, the reputation of Prius increased and the sales increased a lot. However, though the excess demand for Prius, Toyota had no plans at that time to start production at a second plant, perhaps because he couldn’t predict how long this high demand would last. The new Prius made Hybrid familiar to the common consumers, the target of enlarging the market has reached. However, as the excess benefit exists in this market, there must be competitors coming in, and because of the internal learning curve. What strategies will Toyota make to offend these competitors?

Bring Hybrid to a Luxury Car Level

After Toyota’s success in Hybrid car, many competitors came up. Honda is another Japanese automaker. Ford began production of a hybrid model of the Escape SUV, giving consumers a choice of a hybrid or regular model. To promote the hybrid, Ford began an environmental print campaign built around mileage, emissions and other environmental concerns. GM is following the similar strategy, putting hybrid technology in vehicles that use the most gas. It has also developed a hybrid model of its Silverado truck.

Although so many competitors come up, they are followers. Toyota is still the market leader because of its more mature technology than other automakers and the reputation it made and because Toyota is the first to come into this niche market. In order to keep its advantages Toyota keeps on updating its technology and its Lexus division introduced a Lexus SUV hybrid, moving Hybrids up to the luxury car level.

Thus, Toyota has a big jump on US automakers who have only dabbled in this market at that time. So hybrid has taken a seat from medium car level to the luxury car level and until now Toyota is updating the hybrid technology and improving the performance of the hybrid car. Now the newest model is 2008 Prius model. The effort of Toyota makes common consumers remember Toyota every time someone mentions hybrid.

Now in the car market, most people still like stockcar racing, and SUV vehicle is still appealing to people’s taste. But as the gasoline price increases these years and people’s environmental protection awareness chances, the hybrid car which brings fuel efficiency and low emissions will become more and more popular in the future. And the competition will become more and more violence. So Toyota should keep on producing hybrid cars and updating technology.

When a new version of Prius which is improved from the old one is launched, Toyota also consider a lot of macro and micro-environment factors to establish their marketing strategy. Micro-environment factors usually contain the company, suppliers, marketing intermediaries, customers, competitors and publics, while macro-environment factors usually contain demographic, economic, natural, technological, political, and cultural environment factors. As for different companies, these factors have various levels of influence. And Toyota also has some particular factors which are more important and need closely monitored. We discuss such factors in detail in the following paragraphs.

Micro-environmental Factors

  1. The company: The slogan and concept of Toyota express explicitly that Toyota is always pursuing the product which is environment-friendly and fuel efficient. As the previous version, the new version is also continued to use this concept and the improved Prius is in accordance with the company’s image perfectly.
  2. Suppliers: There are not some apparent elements changed from the earlier period, so this factor does not contribute much to the decision making about marketing strategy.
  3. Marketing intermediaries: Compared with 1997, the intermediaries are more familiar with the product and can sale it more efficiently. However, this is also not a very important factor since it does not change too much.
  4. Customers: The customers are more familiar with such new environment-friendly product and accept the concept. From the past promotion and the practical driving experience of customer, they have form a quite stable and growing market for the new version of Prius. This factor is more beneficial than the prior years when the product was first introduced to the market.
  5. Competitors: Changes in this factor are quite important to the strategy decision. There arise some competitors in the market, such as Honda, Ford, GM. So the competition in this market is fiercer than before. Toyota should monitor its competitors closely and try to predict their marketing strategy and establish the reaction plan.
  6. Public’s: Until now, It seems that the public always appreciate Toyota’s concept since Toyota emphasis on the new technology and environmental protection idea which is in the interest of the public.

Macro-environmental Factors

  1. Demographic environment: There are more educated people nowadays and this trend will continue in the foreseeable future. It is a factor that has no changes compared to prior years.
  2. Economic environment: This summer, the price of gas has climbed to the record high level. And the experts predicted that such price rising is not temporary but permanent. It is likely that the price will rise further, so the demand of the hybrid car which can use fuel more efficiently is growing. Toyota’s new product can meet such growing demand exactly. Such changing factor certainly contribute a lot to the decision-making process of marketing strategy.
  3. Natural environment: Since the resource is limited, it enhances the need of the public to find substitute resource and the need to use the fuel more efficiently. So Toyota’s product suits the need of the times well.
  4. Technological environment: Toyota has already been the top producer of the hybrid cars and although the other producers are providing the similar products, their technological ability is still far behind Toyota. However, Toyota needs to further enhance their leading position and keep up to date about any technology changes.
  5. Political environment: This is the most important factor in the macro-environment. The government has already given the tax incentives to the people who purchase the hybrid car that they can enjoy the tax deduction of $1500 when they buy it. Although such benefit will be out of date recently, there qre more other tax incentives which are under discussion and probably to be approved by the government in the near future. Furthermore, some states even provide the exclusive lane for the hybrid car in some highway. All these favorable government policies give more incentive for the public to purchase hybrid cars. So Toyota should take advantage of this factor.
  6. Cultural environment: Cultural factors are not changed so much and generally the culture of the public shows that the hybrid concept is well accepted.

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