Daimler Sales Of Its Smart Car In The U S Marketing Essay

Published Date: 23 Mar 2015

Purpose of commentary

The reason why I write this commentary is because I want to find out more about the company, Daimler AG, which manufacture the well known car brand, Mercedes Benz. Despite that, I am also interested to investigate the strategy that is being implemented by Daimler to sell its failing Smart car and determine whether the strategy will be a success or not.

Methodology

I conducted my research based on secondary resources. Below is the list of the main supporting documents I used during my research:

Business tools, techniques and theory

The business tools, techniques and theory which I am using to investigate about this issue is SWOT analysis, Product Life Cycle and Marketing Mix.

Smart in the Small Car Market

The intense competition in the small car market, as well as the decrease in sales revenue in the U.S. has placed Smart in the saturation stage in the Product Life Cycle. Based on the report from Penske Automotive Group [1] , the total sales of Smart in the U.S. have shown a decline throughout these 3 years. During its debut year, the total number of Smart cars that had been sold is about 25,000 vehicles in the U.S. However, after the second year, the sales dropped 41% to 14,600 vehicles last year, while this year, the sale is estimated to be 7,000 vehicles only [2] . Therefore, in order to prevent Smart from falling to the decline stage, Daimler has utilized a few extension strategies to prolong the life of its product. From the supporting documents, I have identified two extension strategies, which are: the launch of Smart electric car [3] and the development of the next generation of Smart cars together with Renault-Nissan. To find out more, about the extension strategy, Ansoff matrix is used to analyze the product and its market growth strategy.

Market Share

High

Market Growth

High

Stars

Low

Cash Cows

The Boston Matrix

On the other hand, if we look into the Boston Matrix, Smart is considered as the Problem Children [4] as it possess low market share in a high market growth. Problem children refer to a product which needed high investment but gives small return to the company [5] . Due to the small return, Smart is not able to finance itself, thus depends on the Daimler's Cash Cow [6] like Mercedes Benz, for the money. Despite of having the chance to become the Stars, Smart might also be risked of falling under Dogs. Therefore, measurable strategy need to be taken by Daimler to ensure Smart become a success. One of the possible cause of Smart's low market share might be due to its below par marketing strategy. Hence, to identify the problem occur in the product marketing strategy, the marketing mix of Smart is assessed.

Analysis and Evaluation

Product

New

Market

Existing

Market penetration

New

Market development

The Ansoff Matrix

Previously, I've stated the two extension strategies which Daimler are dwelling into that is the introduction of Smart electric car [7] and the development of the next generation of Smart cars with Renault-Nissan company. By referring to the Ansoff Matrix, we can see that, Daimler has chosen to maintain its existing product [8] together with its existing market. This shows that, instead of entering new market or producing new product, Daimler is concentrating on the market and product it has familiar with in order to lower the costs and risks. Based on the Ansoff Matrix, the strategy which is being implemented by Daimler is Market Penetration. And usually, the strategy is done by improving its marketing mix.

The existing price of Smart is about $14,000 to $16,500 depending of its model [9] . For a size so small, some customers think that it is not worth the price. Thus, many customers tend to buy competitor's product such as BMW's Mini [10] , a cheaper alternatives with high quality and a well known brand with its price starting from $11,900. Although maintaining premium price for Smart is one of a strategy to create its image, price reduction might also be a solution for Daimler to attract existing customer as well all potential customers. Other than that, Daimler could also choose to add more additional value to the product so that customers would be attracted to buy it even in a high price.

Apart from that, place or distribution is also an important aspect to be considered. Throughout the U.S., there are only 77 dealers available to distribute the Smart cars and most of them are congested in the east part of the U.S. Meanwhile, some states like Montana, Idaho, North Dakota and South Dakota have no Smart car dealer at all [11] . Hence, to increase the sales of Smart in the U.S., Daimler must set at least one Smart dealer in each states besides targeting only the main City. By doing so, the distribution of Smart can be widen to allow more potential customers to buy it.

As for the promotional method, Daimler had used both above-the-line and below-the-line promotion. The appearance of Smart car in the "Pink Panther" films in the year 2006 has given the car a long term image of urban style. Apart from that, some of the parking facilities operators across New York City have been charging half price for its parking tickets because of Smart's small size [12] . If this is applied to all cities throughout the U.S. this can possibly increase the sales of Smart cars in this country. This is because, indirectly, customers will be influenced to buy Smart in order to avoid parking problem and even traffic congestion. In the contrary, not all cities in the U.S. suffer traffic congestion and parking problem.

Even though it only has a limited cargo space, the urban style and its small size has make up Smart car's distinctive identity. Despite of its after sales service, Daimler has also given the opportunity for the customers to design their own Smart car through Smart Expression Program [13] . This profitable program will not only attract customers to buy it, but it can also satisfy the customer's wants. This can surely provide Smart its competitive advantage and customers loyalty if it is a success. However, the Smart Expression Program will increase the car price and not every customers is willing to pay for it.

Furthermore, Daimler has also planned a few more extension strategies to boost the sales of Smart car. One of them is to develop new Smart car models. A strategic alliance has been formed between Daimler and Renault-Nissan last April where both sides had agreed to manufacture the next generation of Smart and Twingo [14] which includes the manufacture of the electric version. The

Moreover, its engine also uses low consumption of fuel and release low emission of carbon dioxide coherent with the green life program. In additional to that, Daimler has also produced a new electric Smart model. This shows that Daimler plays its corporate social responsibility towards the environment. This good reputation of Smart cars may attract customers who support the campaign.

Conclusion

In conclusion, the intense competition in the market as well as the decline in sales revenue has really put Daimler's Smart car in jeopardy. Without the right marketing strategies, Smart car which is the Problem Children might have the tendency to become Dog and later enter its decline in its Product Life Cycle. Since Daimler is now facing a financial problem, it is best if the cost is kept to minimum. The action of forming a strategic alliance with Renault-Nissan is a good step taken by Daimler to spread its cost and risks.

The extension strategies plan by Daimler has a big potential to succeed. After the marketing mix is assessed, there are still space for Daimler to improve its Smart car