Integrated Marketing Communications Strategy

Launching the Prius Diesel into the UK market while establishing awareness of Toyota as an environmentally friendly performance brand

Macro analysis of the Automobile Industry and Micro analysis of Toyota

Martin David Beauchamp 01076684 MA Marketing Communications 4MMC7A5 IMC Campaign Planning 2005/6 (full time) Westminster Business School Date of submission: 31/09/2006 Supervisor: Andrew Reeve

Acknowledgements I would like to thank everyone who has influenced my life and therefore my work. With special thanks to all those who have helped me to keep my sanity through this thesis and the last year.

Abstract
This report analyses the automotive industry paying particular attention to the UK marketplace. Furthermore, Toyota will be critically evaluated on the basis that it will be the host company from which the new vehicle will be launched into the UK market. However, the global market will be analysed in order to ascertain current issues, as these will ultimately impact on the UK market. Additionally, the proposed new product will have to be sold in markets other than the UK as to recoup the cost of development, thus the importance of understanding the international market. After the analysis is made the report will continue to outline a market entry strategy using a comprehensive integrated marketing communications plan that will ensure a successful launch whilst achieving other synergistic effects on the Toyota brand. The launch campaign will attributed a budget of 12.5 million and this is expected to achieve a revenue of in excess 85 million. As the automobile industry operates with small margins the campaign expenditure is estimated to exceed profitability, however this can be justified due to raising awareness levels and residual effect the campaign is likely to have on other models during the campaign and upon the diesel hybrid after the campaigns completion.

Contextual Reading This project is largely based on data exhumed from: AID Newsletter, Schmidts auto publications an industry magazine. Mintel Reports Toyota Annual Report 2005 SMMT and DfI ESMAR: The Positioning of Green Technology Kotlers Marketing Management text book Mediatel While these sources were instrumental, this project could not have been completed without the countless other sources, which have been used directly or indirectly for contextual reading and broadened the overall value of this thesis.

Methodology All major marketing models were used to a varying degree in analysing the market place and establishing the communications programme.

Research Sources This report is heavily dependent on secondary research. The importance of the automobile industry has ensured that it is widely written about and that all facts and figures that are available and of interesting to shareholder are published. A verity of sources were consulted in establish many sections of this report. While researching, one research paper from March 2004 was unearthed. Published in ESMAR and entitled: The Positioning of Green Technology (questioning 1,300+ people), this paper presented an insight into the perceptions of hybrid technology in particular for the Toyota Prius. Despite the age of this research it did research many of the finding are still valid and were either observed at the London Motor Show or after informally interviewing a Toyota and Honda representative. The reason for not conducting and independent survey was difficulty of accessing the required numbers in the target demographic to gain statistically valid results. It was also felt that combining the above mentioned research with research conducted by Mintel (2004) into car retailing (based on a universe of 25,000 people) along with the informal interviews and blog/car reviews this would give ample basis in understanding consumers views.

Executive Summary The automotive industry is highly competitive with margins continually being squeezed. It is also an industry that is going through considerable change, where the western goliaths are faulting and suffering financial difficulties. It is their size and number of brands within their portfolio which is slowing their ability to change as well as the establish unionisation of their workforce. Furthermore, due to the high fixed cost nature of the business that they must keep the metal moving and thus offer large discounts to make sales. Japanese manufacturer, Toyota, has radically changed the industry with efficient production techniques, organic growth and technological advances; they are now emerging as the worlds largest car producer and one of the most profitable.

As consumers continue to worry about the ever increasing fuel prices they are seeking alternatives. The Toyota Prius was one of the first cars that offered a genuine satisfactory solution. While awareness of this technology is still low and misunderstood, that will begin to change as other manufacturers enter the fray. This report proposes extending the current second generation Prius to a third more economical Prius being fuelled with diesel or biodiesel where available and will be named the Prius D3.

This model would be an extension of the range and would take inspiration from Toyotas business objective of being and providing greener solutions. The target psychographic should find green technology appealing, however they will be more persuaded by the considerable savings this car can bring, as will the lucrative leasing/renting/corporate car market.

In launching the Prius D3 into the UK market two key aspects must be noted, first of all the consumers desire to downgrade cars to smaller and therefore more efficient vehicles and secondly the scepticism of the new hybrid technology from the target AB 35-64 demographic. As such the PR and DM campaigns have been aimed at establishing awareness and understanding of the concept. The proposed advertising campaign has tried embracing consumers fear both to the monetary and environmental cost of running a car. For this reason the slogan that will be used to link the entire campaign together will be Dare to drive. If consumers test drive the hybrid their initial qualms will vanish according to research. Furthermore, the message brings home that no longer does driving have to be about compromising, daring to drive is all about having a car that is big, friendly and cheap to run.

As a flagship brand that will also increase the publics understanding of the future direction of Toyota a budget of 12.5 million has been proposed to be spent over a 12 month period. It is estimated that this will generate sales of 3,759 units or a revenue of 85 million.
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Contents
Acknowledgements ........................................................................................................................................................................ 2 Abstract ............................................................................................................................................................................................ 3 Contextual Reading ........................................................................................................................................................................ 4 Methodology .................................................................................................................................................................................... 4 Research Sources ........................................................................................................................................................................... 4 Executive Summary ........................................................................................................................................................................ 5 1.0 Macro Environment.................................................................................................................................................................. 9 Figure 1: R&D Expenses as Share of Total Costs & Expenses .......................................................................................... 10 2.0 Globalisation of an industry .................................................................................................................................................. 10 3.0 Market Structure .................................................................................................................................................................... 11 Table 1: Global Sales and Market Share .............................................................................................................................. 11 Table 2: Western Europe, USA and Japan Market share (January December 2005) ................................................. 12 4.0 Competition within the Industry .......................................................................................................................................... 13 5.0 The cars role in society and the changing framework for manufacturers ..................................................................... 14 6.0 UK Market Place ..................................................................................................................................................................... 15 Table 3: United Kingdom Automobiles Sales ................................................................................................................... 15 7.0 Summation.............................................................................................................................................................................. 16 Table 4: Environment An Industry overview.................................................................................................................... 17 Micro analysis .......................................................................................................................................................................... 18 8.0 Host Organisation - Toyota .................................................................................................................................................. 18 9.0 Branding and Image .............................................................................................................................................................. 18 Table 5: The Top Global Automotive Brands 2005/06 ....................................................................................................... 19 10.0 Toyotas products and price ............................................................................................................................................... 20 11.0 Financial Highlights ............................................................................................................................................................. 21 Table 7: Toyotas Financial Ratios ........................................................................................................................................ 21 Table 6: Ford and GMs Financial Ratios .............................................................................................................................. 21 12.0 The Toyota Way .................................................................................................................................................................. 22 13.0 Going Global ......................................................................................................................................................................... 22 14.0 Distribution Network ........................................................................................................................................................... 23 15.0 Main Issues Facing Toyota ................................................................................................................................................. 23 16.0 Conclusion & Recommendation ......................................................................................................................................... 24 Table 7: Diesel car sales in the UK ....................................................................................................................................... 24 17.0 Product information ............................................................................................................................................................. 25 17.1 The Product ..................................................................................................................................................................... 25 17.2 Product functions and point of difference ................................................................................................................... 26 Table 8: Emission levels of existing vehicles ....................................................................................................................... 26 17.3 Price ................................................................................................................................................................................. 27 Table 9: The best selling fleet cars in terms of volume for 2004 ..................................................................................... 27 18.0 Campaign Mix Performance Objective .............................................................................................................................. 28 18.1 Business Objective ......................................................................................................................................................... 28 18.2 Marketing Objectives ..................................................................................................................................................... 28 18.3 PR objectives................................................................................................................................................................... 28 18.4 DM objectives ................................................................................................................................................................. 29 18.5 Advertising objectives .................................................................................................................................................... 29 18.6 SP objectives ................................................................................................................................................................... 29 18.7 Database Objectives ...................................................................................................................................................... 29 19.0 Budget ................................................................................................................................................................................... 30 Table 10: Worldwide Advertising Expenditure .................................................................................................................... 30 Table 11: Best Selling Models in the UK 2005 and their Marketing expenditure ........................................................... 30 20.0 Timeframe ............................................................................................................................................................................ 31 Figure 2.1: First half of Campaign ........................................................................................................................................ 32 Figure 2.2: Second half of the campaign ............................................................................................................................. 32 21.0 Target Consumer Market .................................................................................................................................................... 33 21.1 Demographics ................................................................................................................................................................. 33 21.2 Psychographics ............................................................................................................................................................... 33 21.3 Target Market Size - Private buyers ............................................................................................................................ 34 Table 17: Target size breakdown .................................................................................................................................... 34 22.0 Corporate Target ................................................................................................................................................................. 34 22.1 Corporate car market ..................................................................................................................................................... 35 22.2 Target Size ...................................................................................................................................................................... 36
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23.0 Consumer behaviour ........................................................................................................................................................... 36 Figure 3: First impression after testing driving (the old) Toyota Prius ............................................................................ 38 Figure 4: Opinions of hybrid technology Pre and Post driving the car ............................................................................ 39 24.0 Prius D3 Positioning ............................................................................................................................................................ 40 Figure 5: Creating new inferences ........................................................................................................................................ 40 22.1 Early adopters ................................................................................................................................................................. 40 23.0 Prius (D3) Branding Issues................................................................................................................................................. 41 Figure 6: Prius Perceptual Mapping ...................................................................................................................................... 41 26.0 Communications Brief ......................................................................................................................................................... 42 26.1 The Copy Proposition ..................................................................................................................................................... 43 27.0 Creative Solutions ................................................................................................................................................................ 44 28.0 Campaign strategy .............................................................................................................................................................. 48 28.1 Micro needs ..................................................................................................................................................................... 48 28.2 Macro needs .................................................................................................................................................................... 48 28.3 Push ................................................................................................................................................................................. 49 28.4 Sales Promotion .............................................................................................................................................................. 49 28.4.1 Promotion 1 ............................................................................................................................................................ 49 28.4.2 Promotion 2 ............................................................................................................................................................ 50 28.4.3 Promotion 3 ............................................................................................................................................................ 50 28.5 Advertising....................................................................................................................................................................... 51 28.5.1 National Newspaper advertisement .................................................................................................................... 51 Table 18: Media Frequency, Cost and Reach (6 months of press in total)................................................................ 52 28.5.2 Special regional Newspapers................................................................................................................................ 52 28.5.3 Bus Rear .............................................................................................................................................................. 53 Table 19: Mega Rears (Double Deck) ............................................................................................................................. 53 Figure 7 Example of a Bus Wrap ..................................................................................................................................... 53 28.5.4 Billboards ................................................................................................................................................................ 54 Table 20: Cost and reach breakdown of billboards ....................................................................................................... 54 28.5.5 Television ................................................................................................................................................................ 54 Table 21: TV Commercial cost and response rate breakdown .................................................................................... 54 Response Rate summation .................................................................................................................................................... 55 Table 22: Summery of number of Interested respondents.......................................................................................... 55 28.6 Database.......................................................................................................................................................................... 55 28.6 Direct Marketing Plan..................................................................................................................................................... 56 Figure 8: Retention of Private Buyers - Direct Mail ....................................................................................................... 56 Table 23: Direct Mail Costing, first step Private Buyer .............................................................................................. 57 Table 24: Direct Mail costing, second step- Private Buyer ........................................................................................... 57 Above the Line - DM .......................................................................................................................................................... 57 Figure 9: Acquisition from above the line activities ...................................................................................................... 57 Table 25: ATL costs ........................................................................................................................................................... 58 Corporate ............................................................................................................................................................................ 58 Figure 10: Acquisition of Fleet/Leasing/Rental companies and sales made .............................................................. 58 Table 26: Direct Mail Costing Corporate ..................................................................................................................... 59 28.7 Personal selling to end buyers ...................................................................................................................................... 60 28.8 Public Relations............................................................................................................................................................... 60 28.8.1 Press Cars ............................................................................................................................................................... 61 29.0 Performance Outcomes ...................................................................................................................................................... 62 30.0 Horizontal synergy ............................................................................................................................................................... 63 31.0 Vertical integration .............................................................................................................................................................. 64 Appendices .................................................................................................................................................................................... 65 I. The Unions ................................................................................................................................................................................ 66 II. Governing Emissions: Clean in California Green everywhere else ................................................................................ 66 California ............................................................................................................................................................................. 66 Attempts by the UK government to persuade motorist to go green .............................................................................. 67 Tax credits incentives..................................................................................................................................................... 67 What the Commission for Integrated Transport think? ................................................................................................ 68 Euro 5 emission standards ..................................................................................................................................................... 68 III. Problems with acquisitions and mergers ............................................................................................................................ 69 IV. Shorter lifecycles .................................................................................................................................................................... 69 V. What marketing has been able to do for Toyota ................................................................................................................ 70 VI. Corporate Culture ................................................................................................................................................................... 71 Figure 11: Guiding Principles and Values............................................................................................................................. 72 VII. Toyota Green methods ....................................................................................................................................................... 72
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Figure 12: Earth Charter ........................................................................................................................................................ 73 VIII. Strategic Position ................................................................................................................................................................. 74 Figure 13: The Toyota Strategy Clock .................................................................................................................................. 74 Figure 14: Strategic Groups ................................................................................................................................................... 74 IX. Toyotas Distinctiveness ........................................................................................................................................................ 75 X. Sources of fuel for automobiles ............................................................................................................................................. 75 Hybrid Technology .................................................................................................................................................................. 76 Diesel Hybrid ............................................................................................................................................................................ 77 XI. Fleet Services .......................................................................................................................................................................... 78 XII. Consumers Hybrid Perceptions and myths ........................................................................................................................ 78 Figure 15:Propulsion technology awareness (2004) .......................................................................................................... 79 XIII. The Toyota Range ............................................................................................................................................................... 81 XIV. London Motor Show interview and findings ..................................................................................................................... 82 XV. Estimated UK population by social grading 2005 .............................................................................................................. 84 XVI. Hybrid Costs and Savings Comparisons ............................................................................................................................ 85 Fuel Costs ................................................................................................................................................................................. 85 BIK company car tax .............................................................................................................................................................. 86 Hybrid batteries and depreciation ......................................................................................................................................... 87 XVII. Consumer interests ............................................................................................................................................................ 88 XVIII. Past and Present Campaigns for the Toyota Prius ....................................................................................................... 89 Figure 16: Previous Prius advertisement used by Toyota UK. ......................................................................................... 89 Figure 17: Current Campaign ................................................................................................................................................ 90 XIX. Screen Shots of online request forms ............................................................................................................................... 91 Figure 18: Brochure Request ................................................................................................................................................. 91 Figure 19: E Brochure Request ............................................................................................................................................. 91 Figure 20: E-Newsletter ........................................................................................................................................................ 92 XX. Readership breakdown including rates. ............................................................................................................................. 93 Daily National Papers Readership ......................................................................................................................................... 93 Sunday Papers ......................................................................................................................................................................... 93 XXI. Media Schedule .................................................................................................................................................................... 94 XXII. PR important dates............................................................................................................................................................. 95 XXIII: Profit and Loss statement ................................................................................................................................................ 96 References ..................................................................................................................................................................................... 97 Books ........................................................................................................................................................................................ 97 Electronic Source ..................................................................................................................................................................... 97 Annual Reports/ Industry Research ...................................................................................................................................... 98 Trade/Press Magazines ........................................................................................................................................................... 98 Bibliography................................................................................................................................................................................... 99 Books ........................................................................................................................................................................................ 99 Annual Reports/ Industry Reports ...................................................................................................................................... 100 Electronic sources ................................................................................................................................................................. 100

1.0 Macro Environment The car industry has traditionally been cyclical, responding in parallel with the economic climate they operate within. In recent years, despite weak economic growth, high oil prices and maturity of an oligopolistic industry, sales figures have been stable in the main markets.1 Within these markets this can either be attributed to the emergence of new customer segments, triggering new growth or the stability could come from the large discounts and frequent launches of new models, effectively persuading people to buy new cars. Price wars have arisen due to the car industry being a high fixed-cost business where capacity cannot be reduced. Therefore, every unit sold, even if sold at low profit or loss, contributes to fixed costs. The American manufacturers in particular have increased their reliance on incentives to shift vehicles, a strategy that will surely lead to consumers expecting this as the norm, leaving higher margins a distant memory. The impact of pension funds, especially for the US manufacturers can not be ignored. In order for GM to cover their pension liabilities an additional $3,500 is added to the price of each and every vehicle they produce, the same is also true for Ford, with these costs representing $1,000 per vehicle.2 The UAW union in America is still very powerful and active hindering the growth of the Detroit three.3 To cover those costs, manufacturers try to maintain a high output volume. In a report published by the Consumers Association (2000) entitled The forecourt revolution: the future of the car industry, it states that there is still a predilection for building cars to stock and then pushing them into the market. However, output volume is less important within the industry now than it used to be, as the benefits of economies of scale in manufacturing are becoming less prevalent as they merely represent an industry threshold. Nevertheless, the R&D costs are increasing, as manufacturers try to maintain shorter life cycles, while investing in new technologies. Movement within the industry can be seen trying to counter this, with various partnerships and sharing of platforms. R&D cost increases can be seen in this example from Toyota (Figure 1), where the increasing expenses are depicted as is the cost of R&D as a ratio of this. It is expected that for other companies to remain competitive then they must invest at a similar rate or proportion.

1 2 3

Main markets being North America, Europe and Asia http://www.guardian.co.uk/cars/story/0,,1647254,00.html and http://abcnews.go.com/WNT/Autos/story?id=1533901 More on the Unions and what it means to the Detroit three. See Appendix I (The Unions)
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Figure 1: R&D Expenses as Share of Total Costs & Expenses

bn 16000

6.00%

14000 12000

5.00%

4.00% 10000 8000 6000 2.00% 4000 1.00% 2000 0

Costs & Expenses, total (bn) share of R&D

3.00%

2000 9840 4.59%

2001 10219 4.66%

2002 10874 5.42%

2003 11914 5.61%

2004 13506 5.05%

2005 14500 5.21%

0.00%

Source: Own adaptation of data taken from: Toyota Annual Report 2004 (year ended March 31st 2005)

2.0 Globalisation of an industry Globalisation has increased the intensity of competition. The once separate domestic markets, which were protected by trade barriers, are becoming integrated supra-national free-trade areas. Trade barriers have declined due to trade agreements (e.g. WTO, NAFTA, and ASEAN). However, this fact at the same time represents an opportunity for manufacturers to use global sourcing and manufacturing of components in optimal locations and distribute them to assembly locations. In addition to this, manufacturers sell across many markets to recoup the R&D costs.

The burden of R&D costs has shifted slightly with upstream outsourcing becoming more prevalent within the industry. However, outsourcing also poses a threat of supplier dependency, increasing switching cost and the threat of new entrants within the industry. As suppliers try to achieve their own economies of scale and scope in order to maximise their own profits, they must sell their technically complex components to those wishing to buy. This could allow new entrants from emerging economy, China. Integrating manufacturer and supplier R&D efforts have helped to secure more security within the interdependent relations, as has just-in-time production.
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In order to gain the advantage manufacturers are now creating profits from downstream activities, such as dealer networks, after-sales service and repairs, and in particular financing and leasing rather than just lowing upstream costs. With more control here and direct contact with consumers the manufacturers seem to changing their business focus. In being more consumer centric they should be able to see that the cost of motoring and therefore lifetime value of cars is becoming an important issue in consumers minds. 4

Governments have reacted to environmental issues by trying to reduce negative impacts (fuel taxes, emission levels, congestion charges) and thus have narrowed the framework of operation.5 This has resulted in greater consumer awareness and the demand for fuel efficient, clean cars. Manufacturers may have the opportunity to reap benefits in the form of subsidies and profits by promoting cars such as hybrids that may stimulate new growth. As consumers become more sophisticated, another important trend is the fragmentation of consumer segments. They demand a high degree of customisation and frequent new model launches, thus stimulating a forced reduction of product lifecycles.

3.0 Market Structure Table 1 depicts the top 10 brands in terms of global sales and gives and estimate of global market share. It is important to note that Toyota has closed the gap to GM (but not yet surpassed) significantly since this data was published. Table 1: Global Sales and Market Share
Global Vehicle units sold (in US$ million) 8.59 6.78 6.54 5.02 4.36 3.29 3.05 2.97 2.91 2.39 Sales (in US$ billion) 185.5 153.1 164.2 98.4 171.9 61.2 38.9 65.8 77.2 42.4 Global Market Share* 14% 11% 11% 8% 7% 5% 5% 5% 5% 4%

General Motors Toyota Ford Volkswagen DaimlerChrysler PSA/Peugeot Citroen Hyundai Automotive Nissan Honda Renault

* Global market share calculated on the basis of 60 million vehicles sold in 2003. Source: Own adaptation of data taken from: Perpetual Motion; page 4; published in: The Economist, September 4th,, 2004
4 J. Nasser, former Ford CEO, suggested, The idea of selling mobility not cars. (e.g. once a car is sold ownership will transfer for a pre-stated period, thereafter Toyota would either part exchange it at a favorable rate or buy it back for proper disposal) This notion will not be examined in any greater detail as such a business model shift would require its own IMC strategy thus distracting from the objectives that are trying to be achieved within this IMC, namely a vehicle launch. 5 The USA, the EU and subsequently the UK are looking to persuade motorist to go green. Californias strict rules, EU directives and the UKs own carrot and stick can be found in Appendix II.

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Table 2: Western Europe, USA and Japan Market share (January December 2005)
Western European % Share (Jan-Dec 2005) VW Group PSA Group Ford Group GM Group Renault Fiat Group Daimler Chrysler Toyota Group BMW Group Hyundai Group Nissan Group Honda Group Mazda Suzuki Mitsubishi Subaru MG Rover Porsche Others Total 18.9 13.7 10.9 10.6 9.8 6.6 6.2 5.5 5.2 3.7 2.4 1.6 1.6 1.3 0.9 0.3 0.3 0.3 100 USA % Share (Jan 2006)* 3.6 14.3 24.4 0.0 11.8 15.1 3.1 5.2 6.7 9.8 2.2 0.8 0.8 1.9 0.4 100 Japan % Share (2005) 1.5 0.3 0.5 0.1 0.1 0.2 1.2 41.1 1.2 0.1 15.7 14.0 5.0 11.5 3.7 3.6 0.0 0.1 0.3 100 Average market share across these areas 8.0 4.7 8.6 11.7 3.3 2.3 6.4 20.6 3.1 3.0 8.2 8.4 2.9 4.5 1.8 1.9 0.1 0.3 0.3 100

*USA figures only represent Januarys sales due to insufficient data available. Source: Own adaptation from data sourced from: AID Newsletter, Schmidts auto publications, 0602, 2.02.06, p ii and p16 et al Jama/JAIA. Also 0603, 17.02.06, p19 et al Automotive News

Toyotas market share is relatively low in Western Europe when it is compared to USA and unsurprisingly Japan. Japan does distort the average market share across these markets but it does show Toyotas overall dominance in that market, something they are sure to be trying to replicate globally. The markets shown in the table above are considered by most experts as the most important; however all see the emerging economies of China and India to be the next frontier. In China, in 2005 the VW Group had the greatest market share (17.9%), with Hyundai Group (11.9%), GM (11.0%), Toyota (10.7%) and Honda (8.0%) following respectively. Due to Chinas strict regulation all of these manufacturers must enter into joint ventures with Chinese companies in order to be able to operate. China is also expected to promote a national manufacturer in the near future. While their domestic markets is not subjected to free market rules they will have the opportunity to enter international markets (in the same manner as Korean and Malaysian manufacturers) protected by barriers erected in their domestic markets.

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4.0 Competition within the Industry Americas car makers have enjoyed close to a century of growth and success. Since the Ford Model T the industry has not looked backed and mass produced cars have become a systemic part of economic success. Ford, General Motors (GM) and Chrysler built their empires, with Ford and GM growing through acquisitions while Chrysler merged with Daimler-Benz to form DaimlerChrysler. Likewise in Europe volume car manufacture grew at a steady pace, not only did Daimler find strength in Europe but Volkswagen made a significant impact along side Renault, Peugeot and BMW to name a few. Like their American counterparts VW, BMW, PSA and Fiat all grew through acquisitions. Although exceptions exist (e.g. Nissan & Renault), by and large those mergers and acquisitions have been plagued by difficulties and consumed time and large amounts of resources (e.g. DaimlerChrysler, BMW/Rover).6 Therefore, further consolidation seems unlikely.

However, Japanese and other Asian competition do not have consolidation problems. They are far leaner organisations which have chosen to growth organically through their own brands. Honda is competing with Toyota in every sense. Both companies laud their prowess in the hybrid technology field and both have the financial strength and production flexibility to incorporate further technological change and innovation. This will become increasingly more important as consumers appetite for fuel efficient cars increases and the technology within this market is proliferated.

For more information on the problematic mergers and acquisitions see appendix III
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5.0 The cars role in society and the changing framework for manufacturers

The role of the automobile has changed considerably from the early days of Fordism. From being an item of the wealthy it has transcended over the decades into either a highly fashionable, desirable status symbol (for the luxury cars) or into an object of necessity. However, the rising costs of running the vehicles means cars could become an unattractive means of transportation. With respect to long-distance journeys, cheap air-travel has almost completely replaced car travel, especially in developed economies. It is largely because of the ever increasing oil prices that the car industry is putting increased efforts in producing more efficient cars.

Long ago were the days of standardisation where manufacturers sold identical products with inferior quality, which would now ultimately lead to a decline in sales and long term brand reputation.7 Customers are now demanding a higher degree of quality customisations, which is putting pressure on manufacturers to be flexible and responsive to these needs.8 In order to continue to stimulate demand in mature markets new models must be released with some frequency across all segments. Innovation and R&D time has been cut in order to maintain short conception to birth times and thereafter to shorten the lifecycle.9 This has caused greater collaboration and knowledge sharing within the industry to reduce these costs. Flexibility in manufacturing, such as a greater degree of outsourcing and just-in-time management will also aid in cutting cost to maintain innovation. Of course outsourcing means dependence on suppliers and a relationship which will convince them to continually pander to the needs of the manufacturers.

There is also a deteriorating importance of the car industry in the financial markets, although governments still regard it as an important industry. Consequently, governments will support weak manufacturers, and unions will make it difficult to cut jobs. Furthermore, the liquidation of assets poses a barrier to exit.

In addition, customers place more emphasis on the brand image as cars are becoming a fashion piece.

Skoda was one such car until its takeover and redesign and substantial marketing efforts. By customisation it meant pseudo customisation where standardize products ranges are offered. These products are mere standardise substitutes; however the complexity comes in amalgamating these in one car. While localised constraints must be met. 9 For more on Shorter life cycles see Appendix IV
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6.0 UK Market Place Table 3: United Kingdom Automobiles Sales

Year 2005 Ford Group - Ford - Volvo - Land Rover - Jaguar - Aston Martin GM Group - Vauxhall - Chevrolet/Daewoo - Saab VW Group - Volkswagen - Audi - Skoda - Seat - Bentley PSA Group - Peugeot - Citroen Renault BMW Group - BMW - Mini Toyota Group - Toyota - Daihatsu - Lexus DaimlerChrysler - Mercedes - Smart - Chrysler Honda Nissan Hyundai Group - Hyundai - Kia Fiat Group - Fiat - Alfa Romeo Mazda Suzuki MG Rover Mitsubishi Porsche Subaru Proton SsangYong Lotus Perodua Isuzu Others Total 457,820 347,551 38,376 43,769 26,328 1,796 362,955 317,353 18,137 27,465 336,345 185,519 82,496 37,803 28,431 2,096 243,908 144,332 99,576 174,743 156,436 111,666 44,770 137,357 122,534 4,275 10,548 107,046 82,247 10,137 14,662 98,344 86,727 76,389 36,640 39,749 42,224 35,828 6,396 45,706 32,090 29,091 24,972 10,542 8,926 1,652 1,281 934 644 229 3,356 2,439,717 % Share 18.8 14.2 1.6 1.8 1.1 0.1 14.9 13.0 0.7 1.1 13.8 7.6 3.4 1.5 1.2 0.1 10.0 5.9 4.1 7.2 6.4 4.6 1.8 5.6 5.0 0.2 0.4 4.4 3.4 0.4 0.6 4.0 3.6 3.1 1.5 1.6 1.7 1.5 0.3 1.9 1.3 1.2 1.0 0.4 0.4 0.1 0.1 0.0 0.0 0.0 0.1 100.0 Year 2004 481,735 367,158 40,005 41,401 32,535 636 362,899 325,012 17,593 20,294 329,186 181,897 77,039 35,029 33,228 1,993 273,418 167,822 105,596 189,342 145,860 102,200 43,660 135,269 121,081 4,141 10,047 110,037 81,963 11,844 16,230 91,241 90,223 71,030 37,611 33,419 80,897 72,825 8,072 47,739 33,656 76,768 22,573 8,622 8,823 1,754 928 879 760 510 3,120 2,567,269 % Share 18.8 14.3 1.6 1.6 1.3 0.0 14.1 12.7 0.7 0.8 12.8 7.1 3.0 1.4 1.3 0.1 10.7 6.5 4.1 7.4 5.7 4.0 1.7 5.3 4.7 0.2 0.4 4.3 3.2 0.5 0.6 3.6 3.5 2.8 1.5 1.3 3.2 2.8 0.3 1.9 1.3 3.0 0.9 0.3 0.3 0.1 0.0 0.0 0.0 0.0 0.1 100.0 % Change -5.0 -5.3 -4.1 5.7 -19.1 182.4 0.0 -2.4 3.1 35.3 2.2 2.0 7.1 7.9 -14.4 5.2 -10.8 -14.0 -5.7 -7.7 7.3 9.3 2.5 1.5 1.2 3.2 5.0 -2.7 0.3 -14.4 -9.7 7.8 -3.9 7.5 -2.6 18.9 -47.8 -50.0 -20.8 -4.3 -4.7 -62.1 10.6 22.3 1.2 -5.8 38.0 6.3 -15.3 -55.1 -5.0

Source: AID Newsletter, Schmidts auto publications, 0601, 17.01.06, p 11

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More specific to this report is the state of the UK market and who the major players are and where they stand. From the table it can be seen that the two largest players in terms of market share are the American giants Ford and GM. The UK market is one place where Toyota is struggling to steal share from their main rivals. Lying in seventh place with a market share of 5.6%, there is still plenty of ground to make up against front runners Ford.

Overall, in the UK market there was a 5% decline in the numbers of cars sold from 2004 on 2005 registrations. This is a decline that started in 2004 and has continued to the end of 2005. The question that remains unanswered is when will the cycle of decline reverse? The next question that follows is at what point manufacturers will behave as they have done in the USA and offer aggressive incentives. The answer to this is that it is already happening, Citroen offered in the beginning part of 2006, 3,650 cashback on the Xsara Picasso 1.6Hdi LX (according to advertisements at that time). Long term sustainability of this strategy would prove damaging to the industry overall as it would induce unnecessary price wars.10

7.0 Summation

As can be seen in table 4 (next page) the growing importance of suppliers, possible threat of substitution and high bargaining power of customers reduces the overall attractiveness of the industry. For companies already in the industry this means that competition is fierce. With further consolidation and oligopolistic behaviour being unlikely, and with potential new entrants (from China), competition is about to become tougher. Finally, all competitors are growing globally as manufacturers have to recoup R&D costs in as many markets as possible in increasingly short periods of time. Thus, those wanting to remain truly competitive must follow suit.

10

Toyota has some history in avoiding price wars in the Chicago. See Appendix V
16

Table 4: Environment An Industry overview11 from 1920s Nature of Competition low competition, based on price; profit margins: 20% 1980s 1990s 2000-2005 Future based on quality in in addition, based on environ. friendliness & competition fierce competition addition to price brand image; speed of new product increasingly based on (price wars, (caused by superior developments & innovation (importance of quality; profit overcapacity); profit quality of Japanese R&D); still price wars; more customization; margins: 10% margins: under 5% Increasing fuel prices & taxation; environmental legislation; demand for 'clean' solutions (hybrid, fuel cells, ethanol, Bio diesel, hydrogen) manufacturers) global sourcing more important enhanced by new Proliferation of segments (SUVs), alternative fuels switch from growth to mature; enhanced product growth in US renewed growth due should generate maturity in US; maturing by newly developing slowing down to economic growth development; growth in Europe markets new markets to be growth in China, exploited India new technologies high oil price--> could fundamentally demand for efficient weak economic change cars (esp. in growth (9/11; stock manufacturing market crash; high oil crisis--> focus on fragmentation of Europe); WTO, process (e.g. fuel post-war period in decreasing trade environmental customers; US bailglobalisation (shift oil price); Europe--> new barriers; increasing cells and other issues; thus new out of major environmental to low-cost market internationalisation alternative fuels). R&D required manufacturers manufacturing issues (global Legislation will also warming; Kyoto locations); environ. create demand for legislation esp. in Protocol) new cleaner Europe technologies increasing, less backward integration & JIT outsourcing (components assembled by suppliers increasingly large; assemble suppliers)--> increasing switching costs increasingly complex components; little backward integration; very high switching costs; new technologies could decrease supplier power due to new entrants increasing; safety issues coming up; more focus on buyers demands; high due to high; customers very sophisticated; more open markets-->competing products segmentation; no increasing choice for each segment; price switching costs wars & deep discounts still high fixed costs but established players enter new still high increasing (entry of government-backed markets-->increasing threat low, separate barriers to manufacturers, e.g. Chinese likely); barriers low in Japan; national markets, entry due to medium in US & to entry declining due to diminishing high economies of high economies of scale & outsourcing; however, Europe scale investment R&D costs increasingly pose entry barrier in robotics increasing (cheap air travel); legislation forces people to use alternative means of transportation Fordism, mass production regional production & competition Lean manufacturing (introduced by Toyota) outsourcing of upstream activities global production, global sourcing, global competition 1950s 1960s 1970s

Stage of Life Cycle

Introductory phase

PEST

unionization of workers

Supplier Power

very low due to high degree of vertical integration

Buyer Power

low, few choices

Threat of Entry

low due to high fixed costs

Threat of Substitution Main Trends

high, but starting to decline as car substitutes other means of transportation

11

Adaptation of table compiled by Beauchamp, Kirchhof, Weinand, (2005) for coursework submitted for International Business Strategy at Westminster Business School 17

Micro analysis 8.0 Host Organisation - Toyota Toyota, domestically sell far more cars than their competition. In 2005, the Toyota group accounted for 42.1% of all cars sold in Japan. Their nearest rival in this market was the Nissan Group, representing 15.7% (AID et al Jama/JAIA). It is also the worlds second largest car manufacturer and it is only a matter of time until it surpasses General Motors on that front, according to all leading analyst. Their techniques and business concepts stem from their guiding principles and values.12 In the annual report (2005) their Chairman said they have a goal of realizing long-term, stable growth, as a trusted member of the international society. Some of this trust will be further propagated by continuing to fulfil their 1992 environment charter, which ensures cleaner automobiles in the future.13 This seems to be in step with society needs and government wants, and as such should ensure that the above statement is fulfilled.

Additionally, marketing will play a critical part in bringing the aforementioned statement into reality. Toyota is not a company that shies away from their commitment to advertising, with their measured adverting expenditure being estimated at $2.6 bn (based on figures from Advertising Age) making it the worlds sixth largest advertiser. Toyotas published advertising figure in the same year, 2004 was $3.5 bn. In the UK, Nielsen Media Research state that in 2003 Toyota was the 18th largest advertiser, spending 48.2 million on the brand and sub branded vehicles.

9.0 Branding and Image Toyotas vehicles have been noted as having a higher resale value in the second hand market than competing cars. This is a positive signal of the strength of its brand and reputation that it receives. Residual value becoming particularly important as the cost of maintaining and running a car increases. The Toyota brand appeals to large and varied demographic as reflected by their portfolio as such brand communications must be inclusive of many demographics. It is only once particular cars are looked at can the market be segmented as can their typical target consumers.

The car in front is a Toyota is the copy that the company has chosen to adopt and this is certainly true in how the brand is ranked globally and in terms of value (see table 5). This slogan has been mainly used as a corporate message to consumers, with individual vehicles having their own essence summed up in
12 13

See appendix VI for guiding principles and values Environment charter to be found in appendix VII

different copy lines. The important thing with the car in front is a Toyota is to make everyone believe that this is true, both in innovation and style. At least in the product categories in which they operate within. In giving each of their cars a sub brand they can effectively model and shape its identity in order for it to relate to target consumers. Table 5: The Top Global Automotive Brands 2005/06
Brand Millwood Brown* Rank 2005 10 17 Value ($m) 2005 30,201 23,820 InterBrand Rank** 2006 2005 7 9 15 16 10 11 19 19 30 22 74 79 75 84 80 76 90 85 92 NA Value ($m) 2006 27,941 19,617 21,795 17,049 11,056 4,165 4,078 3,927 3,108 3,070 2005 24,837 17,126 20,006 15,788 13,159 3,686 3,480 3,777 3,203 NA

Toyota BMW Mercedes-Benz Honda Ford Audi Hyundai Porsche Nissan Lexus

Source: * WPP annual report 2005 p82, ** Business Week, the top 100 brands 2006, http://images.businessweek.com/ss/06/07/top_brands/index_01.htm?campaign_id=di4

Millwood Brown and InterBrand both agree that Toyota is the top automotive brand globally. However, the agreement ends there. The ranking of Toyota in relation to other non automotive global brands differs marginally as does the valuation of the brand (especially so with BMW and Mercedes-Benz). This differs in the UK market where Superbrands found that consumers ranked Toyota 317th amongst the super brands and 9th amongst the automotive brands. Table 6: Superbrands Top automotive brands
Rank 4 5 15 16 127 248 250 260 317 380 381 416 446 470 492 Brand Mercedes-Benz Porsche BMW Jaguar Lexus Volvo Saab Ford Toyota Honda Mini Peugeot Vauxhall Mitsubishi motors Renault YouGov Index 88.7 87.5 78.7 78.5 49.6 37.9 37.8 37.2 33.0 29.3 29.3 27.4 24.3 23.4 21.2 Council Index 93.0 87.7 94.6 85.8 75.3 80.2 69.0 76.2 73.6 79.4 80.0 68.3 67.3 58.6 69.5

Source: SuperBrands http://www.superbrands.com/uk/

19

The Toyota brand possesses three distinct traits, they are known for quality, durability and reliability. In the 2006, J.D. Power and Associates quality control survey, Toyota including Lexus took the top spot in 11 of the 19 vehicle categories. Overall, Toyota was placed in 4th with the executive director of quality and customer satisfaction research at J.D. Power commenting Theyre the closest thing to defect free. This comment is important to convey (through PR activities) in a climate where servicing costs are an increasing issue for consumers.

10.0 Toyotas products and price Toyota has a varied range each appealing to different target segments. Inclusive of this range is the inexpensive small car (e.g. an Aygo) to the more expensive executive car (e.g. Amazone) and of course their cash cow middle of the road (or popular priced) car, the Corolla.14 With such an extensive range in both product and price (cars cost from 6,700 - 51,000 in the UK) Toyota places itself into direct competition with all the major players in the market place.

One segment in which Toyota has had and will continue to have an important part in developing is that of hybrid cars. Competition in this area is currently relatively low, although this will rapidly change with Ford, PSA and others entering the segment. In this market prices will also vary depending on the type of car and the segment it is aimed at. However, currently the cost of a new Prius ranges from 17,700 to 20,200, whereas its most direct competitor Honda (Hybrid Civic) is pricing their two-seater from 16,300.15 This puts Toyota in a strong position (and aids it to develop the segment) within in the hybrid market place as it offers a middle of the range car for a popular price.

14 15

In the USA a separate brand called Scion exists for the most inexpensive brands and is marketed mainly to first time car buyers Other cars in this price range are the Jaguar X-Type, the Ford Mondeo, the Honda Accord and the BMW 3 Series Saloon
20

11.0 Financial Highlights Table 7: Toyotas Financial Ratios

2000 Net Income (in Yen millions) ROE ROA ROCE Cash Dividends 481,936 7.10% 2.90% 7.10% 24.00 2001 674,898 9.60% 4.00% 7.80% 25.00 2002 556,567 7.80% 2.90% 10.00% 28.00 2003 750,942 10.40% 3.70% 11.30% 36.00 2004 1,162,098 15.20% 5.30% 13.40% 45.00 2005 1,171,260 13.60% 5.30% 13.40% 65.00

Source: Own adaptation of data taken from: Toyota Annual Report 2005 (year ended March 31st 2005)

As can been seen by the table, financially Toyota is becoming increasingly stronger. Net income has more than doubled over the last 5 years for which their shareholders are being rewarded in dividends. This also acts as a way of keeping share value high and as such increasing the value of the company. Only their return on equity ratio has fallen over the 5 year period but with dividend increasing over this period it suggests that this small decline has less relevance than it first appears. Also there is a net increase in ROE of 6.5% over the beginning of this period,16 a positive sign that the company is well placed to take on future challenges. Table 6: Ford and GMs Financial Ratios
Ford Net Income (in $ millions) ROE ROA ROCE Cash Dividends 2004 3,487 20.60% 1.18% 14.18% 0.40 2005* 2,024 14.38% 0.75% 28.67% 0.40 GM Net Income (in $ millions) ROE ROA ROCE Cash Dividends 2004 2,804 10.10% 0.58% 16.14% 2.00 2005 (10,567) (67.58)% (2.22)% 23.10% 2.00

*includes the sale of Hertz Motor company for ($1095 where operating profit with this exclusion would sum to $901)

General Motors ratios are far less positive reflecting the financial struggle facing the corporation. Ford is only posting positive figures due to an exceptional sale of subsidiary company Hertz.

16

With no exceptional items occurring

21

12.0 The Toyota Way The Toyota Way is a concept that encompasses wider business practices that have since their evolution been incorporated as industry standard. The Toyota Production System (TPS) is an integral part of the legacy left by Taiichi Ohno17, who implemented its foundation. This system encourages and expects employees to improve the production process, allowing for constant and successful modification that will fit the changing environment. In reducing waste both in a physical and bureaucratic sense, Toyota has been able to become more flexible in production using minimal of resources, without compromising quality.18

13.0 Going Global After success of operating a transnational, hybrid strategy,19 Fujio Cho has commenced Toyotas shift towards a global company and has succeeded in exporting the Toyota culture to overseas manufacturing locations. This enables Toyota to enjoy the benefits of global sourcing and manufacture their products in the most cost effective way. Toyota has less financial burdens than its main US rivals resulting in access to cheaper external sources of finance, which can be deployed to build a sustainable position. In contrast to most of their main competitors, Toyota has distanced itself from acquiring other manufacturers, thereby retaining its financial assets and being able to focus its activities mainly on one brand. Added advantages are a higher degree of co-ordination and the ability to serve a broader market segment with one brand (marketing synergies can arise from this). While competitors serve the market with several brands that have to be positioned precisely in order to avoid overlapping competition. In hindsight, the organic growth strategy adopted by Toyota has left it in a position to embrace globalisation and to establish itself as a global player. The main danger faced by Toyota being truly globalise is that it becomes more susceptible to the environment and less able to have a controlling influence due to chains of command lengthening. Internal linkages will come under pressure as Toyota is forced to move more of its operations to overseas locations and recruit more non-Japanese executives. This may pose a threat as the Toyota way may become diluted. However, at the present speed of transition, Toyota has successfully managed to retain the company culture by balancing the need to grow and globalise against the necessity of educating employees. In continuing in the same manner the problems envisaged should not be forthright.
17 18 19

Taiichi Ohno, Toyota's chief of production in post-WWII period. Corporate Culture and linkages to suppliers - and how they helped Toyotas success. See Appendix IX Strategic position. See appendix VII
22

14.0 Distribution Network Currently, two main forms of distribution exist for Toyota. Either, cars are sold through independent affiliate retailers, who also sell other marques along side the Toyota brand, or the cars are sold in Toyota branded showrooms.20 In the branded showrooms, the Lexus brand does also feature for Toyota to be able to capture the luxury end of the market. On their website just over 200 dealers are listed spanning the length and breadth of the UK. Distributors are not only fundamental in being able to maximise profits by cross selling but also have a critical role in obtaining high consumer satisfaction.

In the Top Gear Survey 2005 which ranks actual consumers satisfaction, the brand that ranked the highest was Lexus (scoring 93.2 out of 100) and Toyota can be found in 5th place with (88.4). In the same survey their customer care consistently scored 4 out of 5, meaning there is room for improvement. After sales service, is an important part of creating loyalty and therefore lifelong customers.

15.0 Main Issues Facing Toyota A sustainable advantage is gained from linkages to suppliers as they have been nurtured over time and thus cannot be copied easily.21 The tangible results of these linkages occur in many areas, ranging from production to R&D where they mainly reduce costs and provide for flexibility. In the light of increasing supplier power within the industry, Toyotas current superior linkages will dilute these pressures and, in addition, Toyota will benefit from economies of scale on a global level that large suppliers can achieve. Apart from these main issues facing Toyota, the likely implementation of environmental legislation will force many manufacturers to come up with suitable solutions such as hybrid cars. Toyota, however, has already positioned itself in this segment and has accumulated valuable knowledge in developing, producing, and marketing environmental friendly solutions. Toyota has actively changed the marketplace and made such cars acceptable by introducing the Prius, which has ensured first-mover advantage into this future-orientated growth segment. As the car industry is in a mature phase where growth is limited to emerging markets, gaining market share from competitors is the most effective way for Toyota to grow. In Britain, this is obviously the only way to achieve greater success. One way to find new growth is through product differentiation an example being a hybrid car range.

20 The EU block emption for automotive distribution and servicing expired in September 2002. This opened distribution up to free market forces, allowing for supermarket car retailers and more independent retailers. However, manufacturers still retain the right to select main Toyota dealer so they can protect their brand. 21 For more on the benefits of close ties with suppliers. See appendix IX (Toyotas distinctiveness)

23

In investing in R&D of hybrid cars, Toyota has strategically positioned itself to bridge the gap between conventional combustion engines and fuel cell or hydrogen technology. Hybrid cars, along with other factors such as the global and local environmental legislation and regulations, and the diminishing supply of fossil fuels will fundamentally change the industry. These changes are underway and the industry is should be seeing their effects with more prevalence within the next 5 years. Especially so with governments promoting green products and possibly in the future offering greater subsidies to allow the hybrid market to grow.22

16.0 Conclusion & Recommendation In light of the ever increasing costs of motoring through oil prices and the burden that the governments Green policy will in the future place on the driving population. Consumers will become more open to replacing their high CO2 emission cars for something far greener and ultimately far more efficient. Attempts at wholly electric cars have failed due to the lack of being able to drive long distances and poor top speed. As such, it is felt that the hybrid car offers the consumers the luxury of oil based fuels with the savings potential of electric. As Toyota already has developed and launched a petrol hybrid it is thought that a (bio) diesel hybrid is missing from their portfolio. With diesel becoming increasingly popular in the UK (see Table 7) it is important that Toyota is not left wanting. Furthermore, a hybrid diesel would bring about fuel economies far beyond what a Prius could offer and like many new diesels cars it should be bio fuel compatible. 23 Leaving, Toyota in a position to be one of the first manufacturers to gain access into the potentially lucrative market place. Table 7: Diesel car sales in the UK
% European share 12.5% Year Dsls 2005 Year 2005 Diesel Share 36.8% Year Dsls 2004 Year 2004 Diesel Share 32.5% % Diesel Change 7.5%

897,900

835,300

Source: AID:0603:p13

Such a car would also reflect their ambitions according to the Earth Charter, while also making sure that they are staying ahead of competition. This development would also do much for the brand and reputation especially in the field of Toyota being at the forefront of innovation. And with Toyota having a deeper understanding of this technology than most, both the Prius and the new Launch car could potentially share many of the same components, creating greater economies and reducing R&D costs. This would allow Toyota to continue their cost leadership approach to business.

See appendix II (Attempts by the UK Government to persuade motorist to go green) for government incentives, tax breaks and support. 23 For more information as to why (bio) diesel hybrids are the most viable option, rather than ethanol, hydrogen or fuel cell only cars can be found in the appendix as can a more comprehensive evaluation as to benefits of bio diesel hybrid cars. See Appendix X: Sources of fuel for automobiles
24

22

Such a product development would also extend the performance of the current Prius, making it more attractive to consumers and fleet buyers who consider petrol as a superior fuel and hybrid as the best solution but still have yet to convert.24 However perceptions of hybrid and in some circumstances diesel still need to be overcome25 and this will have to be done through a comprehensive 360 degree marketing communication strategy, giving the bio diesel hybrid an identity to trade upon. The task of the next part of this project is to develop a marketing communications strategy for the launch of the first Toyota (bio) Diesel Hybrid in the UK market.

17.0 Product information 17.1 The Product AID (2006:0610) writes that the biggest single aspect of this years consumer buying trendis that more and more new car buyers appear to seek shelter from the looming fuel price storms, by opting for smaller, cheaper more frugal passenger cars. A hybrid diesel car would address frugality in terms of fuel cost as in many cases it would exceed the average mpg of smaller cars. Furthermore, the car will be able to capitalise upon the growing diesel trend. Therefore, the proposed car will continue on the road that the Prius made. In keeping to a four door saloon consumers will not need compromise between fuel economy and size, giving them a real alternative to smaller economical cars and fuel thirsty saloon cars.

It will also give the Prius brand a face lift (a newer fresher look) with the move to diesel fronting the change. In keeping the Prius name the car should be able to develop the benefits that the name Prius already offers. In Latin the word Prius means first, or before. As an extension to the range, the diesel Prius needs to distinguish itself. As such it will be hereon in named the Prius D3. D standing for Diesel and 3 to mean the third generation Prius or suggesting that the car has the ability to run on three different fuels, diesel, bio-diesel and electric.

Product mission: The main charge of this IMC project is to launch the Prius D3 into the UK market.

Note: due to the relatively low awareness and availability of bio diesel fuel this will not be featured in advertisements. Moreover, much effort and cost would have to be invested into educating consumers.

24 25

See appendix XI Fleet Services See appendix XII hybrid perceptions

25

17.2 Product functions and point of difference The combination of a diesel hybrid becomes evermore appealing due to its fuel efficiency. With a particle filter fitted as standard the diesel engine would emit similar if not equal quantities of pollutants and it would also produce less carbon dioxide.

Jean-Martin Folz Peugoet CEO was quoted in AID magazine as saying the HDI Hybrid produces a complete breakthrough, a 30% lowering of fuel consumption and CO2 emissions compared to similar vehicles equipped with just the 1.6 HDi engine, which is already hugely optimised where reduced emissions and consumption are concerned. This would make it as brown if not green compared to the petrol Prius. Moreover, using any grade of bio-diesel would compound its green status and also the costs of powering the car. Table 8: Emission levels of existing vehicles26
Model Ford Focus (27.9 mpg, BIN 8) VW Golf (26.5 mpg, LEV II) Jaguar S-Type (21.1 mpg, LEV II) Honda Civic Hybrid (47.7 mpg, BIN 9) Toyota Prius (55.6 mpg, BIN 3) Consumption (US gal) 448 471 293 262 225 Cost $864 $909 $1145 $506 $434 Carbon Dioxide 8682 9136 11505 5088 4363 Carbon Monoxide 307.3 lb 307.3 lb 307.3 lb 307.3 lb 208.3 lb Nitrogen Oxides 12.7 lb 8.6 lb 8.6 lb 15.4 lb 7.2 lb Hydrocarbons 7.9 lb 6.9 lb 6.9 lb 7.0 lb 5.5 lb

lb lb lb lb lb

Source: http://www.environmentaldefense.org/TailpipeTally/

This table shows that Toyota is far less polluting that the other brands of automobiles. More importantly compared to the Honda Civic hybrid, Toyota has fewer emissions, an excellent USP for the target psychographic.

At this juncture it is import to iterate that the Prius D3 must serve as a boosting mechanism to Toyota hybrid technology, due other marques having jumped on the hybrid bandwagon and as such cluttering the market place. Although, Toyota are not in the habit of manufacturing the most eye catching cars that wow audiences, they do look for mass market appeal within their target and rely on offering value for money.

26

Based on 12,500 miles travelled per annum by 2004 models and all figures are American measurements
26

17.3 Price In order to establish a price range for the car (with a lack of R&D and other business data) three areas will be looked at. Firstly, comparably pricing the car so it fits into the portfolio as to not cannibalise sales, secondly the premium that diesels attracts and thirdly to understand what price range fleet purchasers are buying at. Currently the Prius is priced from 17,000 to 20,000. However, appendix XIII (depicting the portfolio) suggests that Toyota is currently not manufacturing a four door saloon that sells between 20,000 to 24,000 OTR. Diesel cars carry a price premium above their petrol counterparts and as such so will the Prius D3. Not only do consumers expect to pay extra for a diesel (as they realise that the price is offset by future fuel savings) but also higher price will act as a differentiator and will also ensure that the current Prius sales are not affected to a worse degree than any other model would be with a diesel alternative. Table 9: The best selling fleet cars in terms of volume for 2004
Marque and Model Ford Focus Vauxhall Corsa Ford Fiesta Peugeot 206 Renault Megane Vauxhall Astra Renault Clio Volkswagen Golf Ford Mondeo Peugeot 307 List Price Range () 11,395-17,520 6,995-12,735 8,390-13,595 8,345-14,145 11,670-19,310 10,995-20,235 8,995-15,995 11,995-26,070 15,680-24,540 11,550-17,350

Source: Mintel (2006) et al SMMT

As can be seen in table 9, fleet buyers tend to purchase the more inexpensive cars. However, there is still a place for the top end cars to be comparably priced to Golf or Mondeo. As such the Prius D3 should still be desirable to the corporate clients (as future savings will offset all of the initial price tag costs). This vehicles cost efficiency will optimise its desirability both to corporate and private buyers.

27

18.0 Campaign Mix Performance Objective 18.1 Business Objective Toyota must continue gain market share currently 5.0% (122,534 units), thus a primary objective is: To sell 3,750 units in the first year of launch. This would match the unit sales for the Prius petrol 2005 (AID).27 To increase overall market share by 0.15% (through Prius Diesel sales alone) in the UK. This would increase the number of units sold by Toyota by 3% Generate revenue of 82.5 million through the sale of Prius Diesel Increase awareness and understanding of Hybrid technology by 30% and 40% to 81% and 80% respectively amongst the target market.28

Hybrid technology awareness levels differ depending on which research is read. As such TNS should be commissioned to redo their research at the end of the campaign so that all variables remain constant. Fundamentally having Hybrid synergy drive technology and Toyota explicitly linked.

18.2 Marketing Objectives Measure interest of consumers to the product through time spent on the website, qualitative and quantitative research.

18.3 PR objectives Increase understanding of product and the way in which Toyota is developing the much needed technology Spur on the energy debate and show that Toyota and the hybrid-synergy drive is moving towards the solution Generate awareness of diesel hybrids and the viability of the car in consumers eyes Generate favourable coverage Show that the Prius Diesel has the lowest emission among comparable cars

In summation, turn the somewhat sceptical non users today into optimistic user of the future. Make them believe that hybrids are a move forward in replacing the conventional powered automobile.

27

Prius Petrol sold 1,590 units in 2004. (http://www.carpages.co.uk/toyota/toyota-prius-07-04-05.asp) In 2005, 18,758 units (an increase of 130% on the year before) were sold throughout Europe and globally over 500,000 units. http://motoring.timesofmalta.com/article.php?id=702 28 Seen Appendix XII
28

18.4 DM objectives To reach sales of all 3,750 cars (as all sales will be intrinsically linked through the DM programme) through a programme balanced as follows:

53% through acquisition of corporate customers (feet buyers) 3% through retention of previous Toyota buyers (as these people will be on Toyotas database and can be targeted and approached with fewer difficulties) 44% through acquisition of new customers

A strong call to action is required to test drive the new Prius D3, for customers to able understand the technology.

18.5 Advertising objectives Generate model and brand awareness (model being the most important). 80% amongst target market Brand development - secure first mover perception, seen as an innovator Create a greater affinity to the brand SuperBrand Ranked Toyota 317th in Britons favourite brand. It this relatively low performance that needs to be surpassed (aiming to take Ford position) for next years list.29

18.6 SP objectives Achieve 8,000 test drives with an average conversion rate of 20% of the testers. 18.7 Database Objectives Acquire 30,000 number of unconverted enquires onto a database, which will later be used to target these people through direct marketing

29

See table 6 section 9.0 Branding and Image

29

19.0 Budget Table 10: Worldwide Advertising Expenditure

Rank Brand Worldwide advertising spend 2004 $m 2004 2003 2,798 2,608 2,371 2,434 2,475 2,081 % change US measured media spending 2004 ($m) 2004 2003 1,643 1,098 1,811 1,449 1,016 1,607 % change Spend by region ($m)

2004 4 6 8

2003 5 4 8 Ford Motor Co. Toyota DaimlerChrysler

Asia 13 8 13 98 901 38

Europe 919 499 439

15 5.4 14.1

Latin America 51 20 30

Source: Ad Age Global Marketing Report November 2005 et al WPP annual report and accounts 2005

As can be seen Toyota is the second largest automobile advertiser worldwide and increased their expenditure by 5.4% showing their commitment and understanding of the importance of advertising activities. This sustained increase has also been seen in the UK, according to Creative Club from 1st January 2005 to 31st December 2005, Toyota spent 58,815,080 in advertising an increase of 10 million on 2003s expenditure. Of which nearly 28% was spent on TV advertisements (15,836,252). The majority of expenditure occurs in the first and last quarter, with July also proving to be a high expenditure month.

Single Model marketing expenditure amongst other automotive brands varies. Table 11 shows the expenditure in relation to the best selling models. As can be seen with the exception of the Honda Jazz, Ford Ka and Mini, marketing spend is in excess of 7 million. Due to the competitive nature of the industry, in order to gain a visual presence, which is on par with other models similar expenditure should be expected or exceeded.

Table 11: Best Selling Models in the UK 2005 and their Marketing expenditure
Rank 1 2 3 4 5 6 7 8 9 10 Model Peugeot 206 Ford Fiesta Mini Vauxhall Corsa Volkswagen Golf Ford Ka Toyota Yaris Honda Jazz Renault Clio Ford Focus Marketing Spend () 11,048,876 11,328,693 3,977,946 10,875,669 16,584,611 3,886,557 12,841,677 25,543 7,090,147 23,905,013

Source: SMMT/Nielsen Media Research et al Marketing September 2005. Figures represents sales ending for the year 31st March 2005

30

In this campaign the corporate brand is considered an integral element. The Prius D3 should be seen as a flagship sub brand, which encapsulates the essence of the way Toyota sees the immediate and long term future. This brand must stand for innovation, using technology to solve and create cleaner transportation. Toyota is seeking to become environmentally friendly.

As this is not only a model branding exercise, the communications budget will be set at 12.5 million, this matches expenditure on the Toyota Yaris.

20.0 Timeframe The will campaign will last 12 months and run from April 2007 till March 2008 inclusive. This includes lead times and post analysis.

The creative brief will be issued to whole communications agencies (except PR) to bid upon in September 2006. This will allow them one month to prepare and propose their solutions. The winning agency will be required to submit finished advertisements both TVC 1 and Print on the first of February 2007 for finale approval.

Media space will be bought in December 2006 for the years campaign to ensure desired spaces are acquired. Although, some media space in the second half will be bought closer to the time to ensure continuation only if first half is successful.

The first press advertising will go to print to coincide with the European launch at Vienna. The first TVC will air one week after the launch as it is expected that at it this point PR press coverage will wane. This should provide synergies amongst reviews and advertising, maximising initial impact.

31

Figure 2.1: First half of Campaign

PR, reporting what happened at the Hybrid Vehicles Symposium Global launch at Seoul Motor show PR documenting the launch Direct mail to be sent to companies TVC1 to start Direct Mail to be sent to previous Toyota customers fitting the demographic to inform of the Prius D3

TVC1 to stop

Press Campaign to continue

Press release informing of impending launch

Monthly Enewsletter to contain launch info First Prius D3 to be shipped to showrooms, ready for European launch

European Launch at Vienna Motor Show

Information to be sent to showrooms as to inform employees of the new cars features Start of campaign Feb Mar

PR European launch Press Campaign start based on TVC1 imagery

National and London Billboard to start end of month will stop Bus wraps to start (16 weeks)

April

May

June

July

Aug

Figure 2.2: Second half of the campaign

Campaign measurement and evaluation to conducted to see whether targets will be reached Interim sales figures to be released internally and to shareholders the public

PR, press release about CVT- Hybrid 2007

TVC2 to Stop Press Campaign to restart based on TVC2 imagery

DVD to be released in the Times on Sunday

TVC2 to start

Bus wraps to stop

Internal Combustion Engine: Performance, Fuel Economy and Emissions

Campaign ends, measurement and evaluation to begin

Press campaign to stop Aug Sept Oct Nov Dec Jan

End of campaign Feb

Despite the Governments best attempts to remove seasonality in car purchasing, there still remains two months where sales always peak. March and September are the months in which new registration occurs. However, evidence from Mintel (2004) suggest that only 7% of consumers would actually delay purchase for these dates, so much of the peak can be explained by dealerships trying to reach manufacturers targets. Winter is one period where private buyers are less likely to make a purchase due to weather conditions.

32

Conversely, Mintel (2004) finds that there is a slight peak in fleet buying during the winter so that they have new cars for the coming year. However, Mintel (2006) states there is little seasonal variation in demand in this sector, and the small variations are inconsistent between the years. Ultimately, it can be concluded that their neither a good nor a bad time for selling cars.

21.0 Target Consumer Market

21.1 Demographics Primary Target: A B Males and Females Aged between 35 64 years This target group has been chosen on the basis that these will be able to afford a new vehicle of 22,000. Mintel 2004 state that 45+ age groups are more financially secure and thus more likely to be able to afford a new car. This is also the group that are most likely to fit the psychographic suited to this car and who will buy new from a franchised dealer.30

21.2 Psychographics They have embraced the world and all that it can offer; occasionally this meant doing damage to the environment along the way. Starting a family and raising their children became another part of lifes stresses and joys. However, it did not stop them from working hard in their careers to become successful urbanites. All this hard work has afforded them a good standing in their communities which is equally affluent. Growing up in the swinging 60s has left the scare of the peace and love movement, this hippy fairing generation may not have been as environmentally friendly as they would have like, after they fell into the throw away lifestyle because of the ease it offered them while their children grew up. Now post family, they want to repay the debt to the environment in the best way they can. They have a positive green attitude and like to feel they are doing the best. It is time to give something back. The educated middle classes who are financially secure. Post the largest commitments (their children) they now have cash to spare and are looking to replace the family car or to add a second car to their driveway. Hence the reason why price is not the biggest motivator in the decision making process. In hitting terminal values such as freedom and friendly shows how import attitude is to the purchase.

The psychographic was largely developed from a discussion about current hybrid buyers with a Honda representative at the London motor show (see appendix XIV)
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30

These are the people that want their voices heard but they are not aggressive in nature. If a car says something about you then this car should scream I am the friendlier face of the future. Being future orientated is what these consumers mindset is. They need not be technology savvy as the technology of the car is only there to assist and increase functionality. Rather, than a complex piece of machinery that needs to be mastered. However, for some this car because of its technology will help to elevate their social status.

21.3 Target Market Size - Private buyers The target population has been estimated using data from Mintel 2004 and NRS.31 Table 17: Target size breakdown
Target population A B Total Desired target (48% aged 35-64) People 1,818,000 10,552,000 12,370,000 5,937,600

22.0 Corporate Target Fleet buyers include car rental companies, large public or private corporations and public sector organisations. In 2005, company cars represented 53% of all new cars registered according to the Department for Transport.32 For those wanting to buy from Toyota it is highly likely that they would deal with the Toyota Business Fleet Network or indirectly through an independent leasing company rather than an individual showroom.

Corporate customers are more clinical about their purchasing decisions but at the same time they are susceptible to consumer targeted advertising, which will undoubtedly influence their decisions. More so now that employees are liable for covering some the company car tax. Employees must contribute 22% or 40% of the total company car tax payable depending on their income tax bracket, so they have increasing premise to make their own demands.

31 32

See appendix XV for a detailed breakdown of social grade and age. Transport Statistics Bulletin, vehicle licensing statistics 2005
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In their decision making process these aspects are looked at: acquisition and disposals, competitive financing, fuel incentives, vehicle management, sourcing vehicles at competitive prices that fit requirements, insurance group

and for some vehicles that are environmentally friendly as to fit into their environment charters/policies

22.1 Corporate car market Company cars are essential for high mileage middle management/sales representatives. These companies will either provide cars for their employees or as an increasing number do, they will give their employees a car allowance to put towards a privately owned car. This is in order to avoid company car tax. Mintel 2006 suggests that over the last 6 years some of the UK biggest companies have reduced their fleet by over 30%. Furthermore, they report that an increasing number of drivers are opting for a cash imbursement rather than any car. It is the goal of Toyota to capture as much of the remaining market as possible, which is still sizable.

Corporate cars are highly utilised assets, Mintel 2006 states that replacement cycles for corporate cars are significantly shorter at just under 3 years, compared with over 4 years for all carshowever annual mileage maybe up to 25% higher than that of vehicles solely in private use. Much of the thought behind their purchase is monetary and the financial sense of the Prius D3 must be explained.33 A Prius D3 as company car that has to drive through or into the London congestion car zone can save 2,000 in charges per annum and 3,200 in company car tax. In addition to this fuel efficiency savings can amount from 700 - 1,500 against an equivalent priced petrol car.34

Apart from the monetary saving there is also a movement within companies to act in a more socially responsible way. Like Toyota they have an earth charter or similar idealistic principles which they want to be seen as actively seeking and thus improving their own brand equity.

33 34

See appendix XVI for costs and savings. Over 3 years this could amount to 10,000 + multiply that by a fleet and the car makes economic sense. 35

22.2 Target Size Mintel 2006 continues that the number of businesses active in the UK automotive renting industry is 2330. The most significant association with in this sector is British Vehicle Rental and Leasing Association (BVRLA) representing 800 members, who represent more than 65% of the commercial vehicle rental and leasing fleet, 85% plus of the car rental fleet and over 95% of the leasing and contract hire fleet.35 It is imperative to target each of these members and this will be done using Toyotas Business fleet network company (through direct mail).

23.0 Consumer behaviour Car purchase is high involvement using high levels of cognitive processing with affective views also playing a decisive part. Consumers will spend a large amount of time researching and seeking information about cars that fits their basic criteria like size and price.

Attributes are used as a filter in the decision making process and its importance can not be ignored. The target market is an experienced buyer with this car being unlikely to be their first. In already having an understanding of what they require they are likely to be largely uncompromising on size and price. However, emotion will drive the final decision once the choice has been narrowed down through the various fixed/perceived attributes.

Table 13: Attributes

Attributes Concrete Colour Engine Size Price Safety (NCAP rating) Brand Leg Room Abstract Quality Comfort Style Safe Enjoyable to drive

Mintel 2004 shows results from a TGI survey that questioned around 25 000 adults about 4 key areas of consumer automobile purchasing. In asking about functionality, looks, safety and car comfort it is possible to ascertain the importance of these distinguishing criteria.36 It found that what buyers want first and foremost is: how safe the car is and what features does it have to protect the driver and passenger?
35

http://www.bvrla.co.uk/public/The_BVRLA/What_is_the_BVRLA.cfm a members list is not freely available but it is safe to assume that many major manufactures are part of the BVRLA and that these would not promote or have interesting in leasing/renting/buying any Toyota branded automobiles. For the purposes of ease of calculations 2330 will be the number of renting companies that will be approach. 36 See appendix XVII for the question and numeric tables of the results. 36

Thereafter, cars are seen as a functional item and somewhat surprisingly the majority of people survey felt that looks is of least importance. This provides some insight into why Toyota, Ford and Honda are selling such high volume, which many agree are not visually impressive. However, many of these cars are not aesthetically displeasing and re-launches after a facelift does rejuvenate the car and keep it current in the mind of consumers. Style will always sell especially when a premium is being asked for.

As the one of the largest purchases a consumer is ever likely to make, their decision is also based on the benefits of car ownership and the fundamental values it will fulfil. Each car brings its own benefit and values that it is able to fulfil to the table. At the same time many cars share similar values and benefits, like that of freedom and independence or getting you from A-B while being approved of by your peers. Table 14: Benefits and Values
Benefits of a hybrid Functional Miles per gallon Takes you from A to B Reliable Psychosocial - People will think I'm: Wealthy Caring Understanding Clever a nice person Values of a hybrid Instrumental Showing self reliance To be more environmentally friendly Show consideration

Terminal Freedom Unity with nature

The obvious USP of a hybrid is the superior fuel economy (for its size) and the lower emissions. However, in 2004, a survey conducted by Thun (Basis-Kontakt and Maritz Research Deutschland) and commissioned by the Strategic Research Division of Toyota Motor Marketing in Europe, on the positioning of a green technology in consumers consciousness found notably that fuel type was not a decision criterion in the early stages. Unlike the aforementioned attributes, price, brand, segment, body type and design, which were far more relevant.

Included in the survey was allowing respondents to test-drive the (first generation) Prius. After this demonstration, testers commented on the quietness of the engine, smoothness of switching between the two engines, acceleration and most importantly the enjoyment of the drive.

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Figure 3: First impression after testing driving (the old) Toyota Prius
60% 50% 40% 30% 20% 10% 10% 0% Much better than expected Better than expected As expected Worse than expected Much worse than expected 7% 0% 5% 43% 36% Premium 54% 43% Volume

1% 2%

The conclusion that can be drawn from this is how critical it is to get the target market to test drive (kiss) the car. A test drive in conjunction with personal selling will aid as a powerful tool in aiding understanding and helping customers finalise their decisions. The research further concluded that awareness of the green technology and knowledge of the hybrid system was low. In terms of the technology many doubt its performance and reliability, a significant proportion even believe that a hybrid must be plugged in for recharging (a belief also observed at the London Motor Show). The concern as to the cost of maintenance was also highlighted in the finding, something that the Toyota representative at the motor show claimed not to be a valid concern.

Whilst this research was carried out an advertising campaign was underway in which environmental friendliness was depicted and was the core message.37 It was found during the research that the for all of us environmental advantages were able to arouse a certain conceptual interest but ultimately it was not the driving choice. The campaign did add to a limited extent to Toyotas overall brand perception and cachet. However, it has since been replaced by an advertisement that leads on innovation and technological advancement.38

The survey also conducted research on the opinions about hybrid technology to ascertain its awareness and importance in the decision making process once the choice has been narrowed.

37 38

See appendix XXVI for campaign See appendix XXVI for campaign
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Figure 4: Opinions of hybrid technology Pre and Post driving the car
Total before test drive (n=313) Total after test drive (n=308)

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 86%

93% 81% 72% 53% 57% 48% 47%

16%

13%

is more environmentally friendly than the conventional engines

offers intelligent performance combining low fuel consumption with good acceleration

is a real breakthrough innovation

offers high level of driving pleasure

offers high performance

Like in the first survey it can be seen again from figure 4 that after testing the vehicle, perceptions drastically changed for the better. One aspect that the majority of people surveyed seemed to understand pre and post test drive is that the car will be more environmentally friendly than conventional cars. After testing there was also an improvement in thoughts of fuel efficiency and performance.

The researchers recommended that as hybrid technology (or engine size and fuel type) is not a key selling point the Prius should be positioned as a stylish, innovative vehicle offering fun to drive. Whilst these aspects are importance since the research fuel consumption and the type of fuel due to its cost is emerging as very decisive issue. Combining the savings with the green aspect should act as a powerful catalyst in terms of brand establishment and desirability. According to informal interviews that were taken place at the London Motor Show, both Toyota and Honda do highlight the significance of lower emission and technological advantages as something their target psychographic find very important. It is for this reason that Toyota should continue advertising using their hybrid synergy drive logo. Although, this logo should no longer be the main force behind future communications as it may act as a perceptual barrier rather than something that explains the technology.

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24.0 Prius D3 Positioning A major apprehension that potential customers have with the Prius is the belief that it would be more expensive to service and that it is an underperforming vehicle. These issues that must be addressed in future communications and the Prius D3 must invoke new perceptions amongst potential customers. The Toyota brand should aid the perceptual move (as shown in Figure xx) but as the technology is new, persuasion will be difficult. So the campaign must ensure this shift in beliefs. Figure 5: Creating new inferences
Expensive to Service

Unreliable

Reliable

Cheap to service

Good performance

22.1 Early adopters As the automobile industry continues to embrace hybrid technology and the renewed growth potential it can bring, consumers will begin to trust the technology due to more information being available. For early adopters the risk was significant, however manufacturers have sought to quell some uncertainty by offering extended warranties especially on the fuel cell battery (8 years currently on the Prius). This generation of confidence in the automobile has facilitated demand to swell as early majority start entering the market. It is this market that it is hope will be captured by Prius D3. The established faith in petrol hybrid should also transfer to diesel fuelled hybrids.

Due to the relatively high price, the Prius D3 automatically features at the higher end of its class range. This position will be substantiated with the luxury gadgets and gizmos that will enthral techies and that will generally be expected on a model of this cost. The car will be designed with two things in mind, enhancing the experience of driving and making it pleasurable again.

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23.0 Prius (D3) Branding Issues The Prius brand does have its own problems in regards to it being one of the lesser known brands in the range, this is compounded through a lack of understanding of the hybrid concept. Moreover, while it scored highly in the manufacturing tests of the J.D. Power survey, its score was curtailed in areas such as style, comfort and design (appearance). Ultimately reviews from respected car commentators need to be starkly contrast that of Jemery Clarkson where on Top Gear he has this to say about the Prius, To sum up then, its a very expensive, very complex, not terribly green, slow, cheaply made and pointless way of moving around. This was in contrast to this review of the Lexus GS 450h in The Times (30/07/06) where he was more favourable to the hybrid concept concluding it was technology with a point.

Figure 6: Prius Perceptual Mapping39

Fuel efficient High Value Attractive Sporty

Basic

Luxury

Economical

Poorly built

Low Value

Fuel Inefficient

Results based upon an amalgamation of UK journalist reviews and comments left on UK based websites by Toyota users and non users (but still commentators). Note: this diagram is based purely on subjective comments and is not statistically representative and as such should be treated as results would be from a focus group.
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26.0 Communications Brief40

Background As a massively important brand in automotive industry Toyota has striven to become global leader. Their business practices have helped shaped the industry, leaving many of their adversaries to be playing catch-up. In championing a shift towards sustainability and therefore more environmentally friendly, Toyota is again pioneering new business methods and technology, which hybrid synergy drive being a flagship invention. Business & Marketing Objectives Increase market share in the UK territory. Attract new customers and retain existing ones. Recruit lapsed users by reinforcing positive attitudes towards the Toyota brand. Increase brand awareness and recognition especially in relation to the hybrid synergy drive technology Communication Objectives Communicate USP Communicate the green strategy Toyota is adopting. Communicate corporate philosophy and values of Toyota. Communicate clear call to action thus drive traffic to the Website Communicate benefits (a cleaner burning engine, efficiency, a new way to travel purity, freedom, style, safe, performance) Green does not equal boring and demonstrate that the technology carries no risk. Target Audience Affluent (AB) post family people, who are now/or nearly empty nesters looking to give something back. A new car has been on the cards for a few years now and he/she or they want something that they can talk about at dinner parties, ultimately it is saying we have the future of automobile travel and we/I care about the effect on the environment. Aged 35 to 64 years and is employed or just entering retirement. A car is a necessity for them. What do we want them to do as result of the communication Visit website and order a free brochure (i.e. Respond to the call to action and provide personal details.) Enquire about the car by visiting a dealership Be less afraid of the technology Purchase the car. What do they want them to feel and think as the result of the communication (consumer insight) A fuel efficient car without having to compromise on size or performance. Performance doesnt have to cost the earth Single Most Important Message Dare to drive What supports the message Toyota pioneered this technology and as a result has the lowest emissions in its class. Toyota is bringing tomorrow today, as their corporate slogan implies Today Tomorrow Toyota. The worlds largest manufacturer leading the way and trying to make a real difference. No longer do they have to fear the technology, nor do they have fear cost driving (economic and environmental) Personality/ Tone Reassuring, reliable, trustworthy, caring, understated, daring, intelligent Guidelines URL to be visible. Logo. Maintain Toyotas colouring and font. Hybrid Synergy Drive to be used. Not to be too prominent. Requirements and Mandatories TV and press reflecting AB profile. 8 years warranty on the battery. Timing 12 Month Campaign, starting Feb. 1st 2007 Budget 12 500 0000

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Adapted from Club Mediteranee, Direct Marketing Management coursework, Westminster Business School
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Shinichi Sasaki, president and CEO of Toyota Motor Europe (TME), said, our aim is always to provide customers with the superior quality products, services and value they deservewhile developing advanced technologies to respond to demands for greater sustainable mobility."

26.1 The Copy Proposition The Dare to Drive copy has been chosen because the target audience needs to be tempted/dared into driving hybrid technology. Furthermore, it is also playing on the consumers fears about the cost of driving and possibly the cost to the environment. As the hybrid can significantly lower fuel costs it is giving hybrid drivers a reason to drive. No longer will every trip have to assed upon necessity or not, the Prius D3 should simply be driven.

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27.0 Creative Solutions The creative solutions are merely suggested. They are designed to spur on a Creative and not meant to constrain creativity. It is hoped that including their design into this report will enable the reader to follow the imagery and to be clear on what message ultimately needs to be conveyed. TVC1 Opening shot, a fast moving Prius D341

Voice Over: Driving one of the most fuel efficient and technologically advanced cars in the world, is an experience that youll never forget. Computer generated internal shot of engines working together Instantly to roaring motor switches to silent serenity VO: With its diesel and electric engine working together in total harmony, youll soon notice the difference. All the performance of a 1.6 diesel, the comfort of a saloon, and the fuel economy of a supermini, The Prius D3, the car full of solutions with non of the compromises On black, red type appears - Dare to Drive VO: Discover motion in harmony. The Toyota Prius D3, where performance doesnt cost the earth. An image of the car will fade in at this point Sub copy proposition While this creative leads with the main dare to drive copy it ends with expressing reliability in harmony and not costing the earth both in an environmental and monetary sense.

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Image from http://www.flickr.com/photos/firebookduo/5505704

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Print advertisement 1) Imagery The car is to be the biggest element of the advertisement and is to use the same imagery as for the TVC1 campaign.

Dare toDrive The Toyota Prius D3 To include the competition F1 race weekend in Japan and ULR

TVC2 The next features travelling along a wide country road passing fuelling station after station, where each are full with a variety of vehicles. The last fuelling station has lots of small cars waiting to refuel and the hybrid pulls along side them. Its size in comparison is obvious. The driver steps out not to refuel but to buy a chocolate. The driver gets back in the car and drives off into the sunset. Dare toDrive further without compromising on size Sub copy proposition Here the sub copy is expressing that there is no need to downsize to get fuel economy.

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Print advertisement 2) Where size and performance does matter

Dare to Drive further without compromising on size ULR also needs to be added to this advertisement.

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Bus Rear Wrap Campaign Special London Campaign highlighting the fact that driving the Prius D3 means avoiding the Congestion Charge. Imagery

ULR will also feature on this advertisement and the car will be made bigger. All advertisements to feature the Prius D3 name on the licence plate of the car.

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28.0 Campaign strategy

28.1 Micro needs In owning its dealership network, Toyota will be required to communicate new model launches to each showroom. In that communication employees must be aware of the cars name, USP, features, release date and values that the vehicle caters to. As such brochures will be sent to all showrooms one month before the car is due to ship and 3 months prior to this a newsletter will be sent to the dealerships for initial awareness.

Area managers will be required to hold meetings at the start of the campaign and at regular intervals in order to gain feedback and assess the knowledge of employees. Secret buyers will be deployed after release and during the whole campaign in order to ensure quality of personal selling and test knowledge. Personal selling techniques to buyers will not need to differ; there will be only slight adjustment in the information that should be conveyed.

Toyota showrooms will be required to make space for the Prius D3 giving it a prime location during the campaign. Car supermarkets and independent showrooms will not be target as it felt that they will not be able to provide the optimum sales atmosphere. Furthermore, margins will be squeezed and the ability to cross and up sell would not exist to the same degree.

Those working within the Toyota fleet centre will also receive the same literature. They will also be informed of bulk promotions that can be given. Promotions will vary depending on size of order. However, discounting is not to be used during the campaign. Value offers will be acceptable form of promotions but will be left to the fleet centre manger to decide what is acceptable.

28.2 Macro needs As a year long campaign in which many issue needing to be addressed, the information that needs to convey will be varying. As such it is suggested that TVC is run as a series, while Press advertisements reflect the story being told through the TVC. Running the campaign as a series will give and interest factor and provide a subtle reminder of development within the brand.

Note: This campaign and the creative solutions within have been designed so that the imagery can be used across Europe (apart from the London campaign). As such all creative, design and production costs will be covered by Toyota Europe and will not be included in the budget of the Toyota UK, unless where stated.
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28.3 Push There will be very little push activities required for this campaign due to the Toyota distribution network already being established. However, Toyota must ensure that major fleet, leasing and renting companies are contacted. They will be reached through a direct mail on the push side. However, on the pull side there will be no direct advertisements concerning fleet operations to this audience. Instead it is felt that they will be susceptible to the other advertising activities undertaken, which will use broad scale media. Through this method demand should swell from fleet managers in individual corporations. Thus, fleet, leasing or renting corporations will be forced to offer the Prius D3 or lose business to the Toyota Fleet Network Centre (which of course they will have use for purchases anyway). Additionally, categorising the model as a company car would be to niche the brand and could end up having a detrimental effect on its overall appeal. A fleet microsite will be set up explaining all the cost benefits and emission levels for the corporate buyer.

28.4 Sales Promotion Discounting is part and parcel of car retailing. It is unique to each selling situation and is largely based upon how good the customer is at negotiation and what profit margins the showroom will want to maintain. However, like fleet buyers, private buyers will not be offered price discounting, instead the salespersons are to be given usual freedoms in value offers they tender in order to secure the sales of the Prius D3.

NOTE: it will be assumed in future calculations that the average sales price of the vehicle will be 22,000 even where discounting has occurred.

During the campaign there will be three standard sales promotions will occur covering all customers.

28.4.1 Promotion 1

The first promotion is a value offer and is only there to act as a possible reward to those buying a Prius D3. They will be entered into a prize draw:

The prize draw is to win a week in Japan including two VIP tickets to the Japanese Grand Prix as guest of the Toyota team. At the birthplace of Toyota, winners will be able see the Toyota Factory and the race from the Toyota stand at the Suzuka International Racing Course in October.
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Budget allocated for Prize draw Flights (x2) = 1,200 Accommodation - 2 Persons (Ana Hotel Tokyo) = 1,250 Spending Money = 2,000 Race day = 550 (Grand Stand tickets) Miscellaneous = 1,000 Total = 6,000 In running this sales promotion it will create added extra interest on the advertisements which display the offers. Additionally, it may secure some buyers bringing forward their purchase within the first half of the campaign so they can be apart of this opportunity.

28.4.2 Promotion 2 In order to communicate detailed information to the target group who are likely to feel that a website is not enough or difficult to navigate, a brochure will be made available. In order to fit with the green and non compromising image Toyota is wanting to portray all copies will made from a high quality glossy paper that is made from 100% recyclable material.

28.4.3 Promotion 3 The whole campaign will be concluded in collaboration with The Sunday Times where a DVD will be given away with the newspaper, which will include the 2 TVCs, video testimonials from current drivers, performance drives and a video promo on Toyotas corporate social responsibility programs (CSR) and how the Earth Charter is a fundamental part of their way of thinking and manufacturing. It is a getting to know the brand experience that goes far deeper than an advertisement could.42 The cost of the actual DVD is 5p per unit 3 495 000 x 0.05p Production Cost Cost of Insert Total Costs = = = = 174,750 NA 122,000 296,750

42

Similar to the successful campaign run by Sony for their Bravia brand.
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28.5 Advertising As has been suggested by the creative solutions there will be two television commercials and print advertisements made. A London only advertisement will ensue to ensure awareness of Congestion Charge avoidance. All advertisement will contain a call to action to motivate persons to the Toyota website or the Prius D3 micro site where a brochure can be ordered.43 28.5.1 National Newspaper advertisement Run of paper (ROP) colour full page advertisements are being chosen over other sizes to maximise impact and increase opportunities to see. Focus is been given to newspapers rather than magazines as better synergies can be gained through combining PR activities and advertising. It is also in newspapers where the environment and congestion debates will continue. Each Newspaper has been chosen due to their high reach of the targeted socio demographic. A large spread of newspapers is being used to optimise coverage. With the exception of the Express and Daily Mail all the other national papers listed here have a high (>50%) AB readership. Making Newspapers an ideal way to target the Prius D3s desired audience. In addition to this Newspapers will be heavily used in PR activities creating synergies between Press Releases/reviews and advertisements. All the newspapers will be used in table 18 to maximise spread rather than concentration. Despite the Express and Daily Mail having lower AB profile, due to their large distribution they impact on a sizeable proportion of the AB demographic therefore ignoring them is not an option.44 The Sunday papers have higher readership figures than the weekday counterparts. However, the cost of higher readership is two fold, firstly the cost of advertising is higher and secondly the number of inserts makes the paper cluttered with more advertisements. This is why it is being proposed that all advertisements are placed in the run of the main paper. The advertisement must reach the core target and not those just interested in certain supplements. In running the campaign in the publications shown in table 18, the cost and response rate has been calculated.

43 44

See appendix XIX for screen shots of different entry forms See appendix XX for readership profile and cost of display
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Table 18: Media Frequency, Cost and Reach (6 months of press in total)
Publication No. of ad appearances 8 4 24 14 10 12 10 12 Display Rate () 31,500 47,124 18,000 22,000 59,000 25,900 61,200 20,000 Expenditure () 252,000 188,496 432,000 308,000 590,000 310,800 612,000 240,000 2,933,296 162,900 408,000 220,000 264,000 420,000 857,500 2,332,400 5,265,696 No. of interested people (average 0.03% response rate)* 7,068 26,294 12,402 7,074 15,050 17,709 4,328 6,051 95,976 8,522 33,097 13,887 6,566 14,470 37,746 114,228 210,264

Express Daily Mail Guardian Independent Telegraph Times Financial Times Evening Standard

Sunday Express Mail on Sunday Independent Observer Sunday Telegraph Sunday Times

4 8 10 12 10 10

40,725 51,000 22,000 22,000 42,000 85,750

Total Costs

*Based on target reached. Furthermore, many of these interested people will read more than one newspaper so only a fraction of these respondents will be unique (uniqueness to be set at 40% across all above the line activities).

28.5.2 Special regional Newspapers The Evening Standard is an important paper in terms of its region. More so as much of what the Prius D3 can offer can really benefit Londoners. Providing these city dwellers a car that is particularly efficient at low speeds and that avoids the Congestion Charge. This is a paper that has a high daily readership of affluent business people.

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28.5.3 Bus Rear Outdoor advertising whilst not as targeted as newspapers, it does have the ability of reaching the target market in a unique way, it is suggested that it would receive a response rate of 0.01%. Placing advertisements on buses as per figure 7 is a prime example of the impact it can have on drivers. Here the message must be simple as to communicate the message instantly.45 Table 19: Mega Rears (Double Deck)
Cost per Bus for 16 weeks 9,280 6,804 5,460 Production cost per Bus 10+ 1,600 1,600 1,600 Number of buses 25 30 50 Total Costs Reach Response Rate 0.01 0.01 0.01 Number of Respondents 4,000 6,000 2,000 12,000

London Gold London West End Grater London Total Costs

Source: Viacom

272,000 252,120 353,000 877,120

400,000 600,000 200,000

Figure 7 Example of a Bus Wrap

45

See section 27.0 for proposed advertisement

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28.5.4 Billboards The National Billboard will feature imagery and copy from TVC1, whereas the London panels will feature the artwork and slogan from the Bus campaign, as to ensure consistency. This part of the campaign will run throughout July. Table 20: Cost and reach breakdown of billboards
Reach National: 100 Prestige panels (96 sheet) for 4 weeks London : 50 Elite panels (96 sheet) for 4 weeks Production costs for both Total 264,000 172,500 30,000 466,500 300,000 Interested (RR=0.01%) 20,000

Source: www.clearchannel.co.uk/billboards/ratecards/national (or London)

28.5.5 Television The television campaign will run in two separate parts, both communicating a slightly different message while remaining true to the core message. Hence each TVC will be aired for 2 consecutive months, while then taking off air for 3 month before being replaced with the next TVC also to be aired for 2 months. This means sustained TV coverage will run for 4 months. Television will play a vital role in the communications process. The visual message will ensure exposure and will aid attention and increase comprehension. Table 21: TV Commercial cost and response rate breakdown
Packages required ITV1: Centre Break 26 TVRs (Coronation Street) ITV1: 21.20 14 TVRs eg ITV drama Channel 4 (220 TVRs between 19:30 01:00)* Total 24 24 4 Cost per package () 82,932 44,656 550,000 Total costs 1,990,368 1,071,744 2,200,000 5,262,112 30,000 Interested people (response rate 0.1%) 43,000

Source: http://www.itvsales.com/itv/export/download/pdf/1326v04_ITV_AdvertGuideFINI.pdf *Channel 4 no longer has a rate card and negotiates each contract separately as such airtime will be based on costs of ITV1

NOTE: Advertisement Reach is the number of individuals who fit the targeted socio demographic, viewing the advertisement once. Response rate (RR) is the number of the reached interested and motivated to seek more information. Be this visiting the website(s) or a showroom. Clearly many of these are interested people will not move beyond information seeking. A large proportion will not be motivated to leave details on the website for future information and an even larger proportion will not commit to buy the Prius D3 within the next 12 months.

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Furthermore, many of the advertisements will impact on peoples more than once. This will skew response rates to higher numbers that should be expected. At the end of this analysis response numbers will be altered to reflect this fact.

Response Rate summation While the ATL activities objectives were mainly to build affinity to the brand and increase awareness and understanding of the Prius D3. They were also to motion a call to action, it is this call to action that acts as a precursor to the DM strategy, where from their sales figures can be estimated from response rates. Table 22: Summery of number of Interested respondents
Press campaign TV Bus Poster Total @ 40% Respondents 210,264 73,000 12,000 20,000 126,105

The interested respondents were calculated on the basis that each media would reach separate individuals; this is clearly untrue as many will be exposed to more than one element of the campaign. As such, only a fraction of these respondents will be unique, it will be assumed that uniqueness will be set at 40% across all above the line activities. Furthermore, not all of the 126,105 respondents will leave any personal details on the website or with the showroom. It is estimated that only 20% (or 25,221 people) of these respondents would leave any contact details, in order for them to gain more information (a brochure through DM). The majority of this target may investigate but their interest may not stem further than a showroom or website visit.

A detailed media plan can be found in the appendix XXI showing the timing of all activities occurring with in this campaign.

28.6 Database This campaign will be heavily dependent on the existing databases that Toyota has and its development and addition during the campaign run. The integrity must be insured for it to be a useful asset and all data should be held centrally (both internet and dealership databases must be integrated). In creating a large database not only will it aid the proposed campaign but it will also be vital in future communications for other campaigns as targeting can be specific.

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28.6 Direct Marketing Plan Direct Mail can convey far more factual information and will follow a multi-step process to both corporate and private buyers. The purpose of this campaign is to gain test drives as it is once potential customers gain physical contact they are far more understanding of its benefits and open to the selling tactics of the salesperson.

Private Buyers Targeted as they are previous purchasers or have left their details on the Toyota database. Those matching the demographics and deemed likely to be renewing their car within the next year will be targeted. As such this DM initiative will be a retention program. First they will receive a letter notifying them of the launch and the benefits the car can bring. Thereafter, if they enquire after more information they will be sent a brochure.

Based on an assumed database size of 500,000 (4 years of sales including postal registered database members). Of this number it will be presumed that it will follow the general populations distribution. That being true the number fitting the target is 62,160 people According to DMIS the typical Direct Mail response rates for the automotive sector is 7.6%46 A cost breakdown will follow each DM section in order to provide clarity in how much each mail will cost and what the likely sales numbers will be stemming from the expenditure.

Figure 8: Retention of Private Buyers - Direct Mail

Motivated to website or to Phone for more information/ brochure 7.6%

Taking a test drive 4,722 30% 1,416

Buy 18% 254 Retained customers

62,140 members

DM

Take no action

Take no further action Enter future retention programs Enter future retention programs

Enter future retention programs

46

Source: The Direct Mail Information Service (DMIS) - Response Rates Survey 2006
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Table 23: Direct Mail Costing, first step Private Buyer

Tactic Letter Letter design and copy Envelopes Postage Lasering & paper letter Total Unit Fixed Costs () 2,000 0,20 0,2345 0,08 12,428 14,571.83 4,971.2 31,971.03 Variable Cost per unit () Total Costs ()

1 62,140 62,140 62,140

Table 24: Direct Mail costing, second step- Private Buyer

Tactic Brochure Brochure design and copy + Letter Brochure Plastic bag envelopes Postage Lasering & paper letter Total Unit Fixed Costs () 1 4,722 4,722 4,722 4,722 80,000 1,00 0,005 0,6945 0,08 Variable Cost per unit () Total Costs () 80,000 4722 23.61 3,279.43 377.76 88,402.80

Above the Line - DM From the advertising activities undertaken it was previously stated that only 25,221 people will visit the website and leave their details with Toyota (either through the website or visiting a showroom). In leaving their details they will then receive a similar letter and exactly same brochure as those on the original database. The letter they will receive with the brochure will invite them to take a test drive and state where their local showroom is situated, along with contact details.

Figure 9: Acquisition from above the line activities

Motivated to take a test 25,221 members DM

Buy 7,566 20% 1,513 newly acquired customers

drive
30%

Take no action

Take no further action Enter future retention programs Enter future retention programs

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Table 25: ATL costs

Tactic Brochure Brochure design and copy + Letter Brochure Plastic bag envelopes Postage Lasering & paper letter Total Unit Fixed Costs () 1 25,221 25,221 25,221 25,221 NA 1,00 0,005 0,6945 0,08 Variable Cost per unit () Total Costs () NA 25,221 126.10 17,515.98 2,017.68 44,880.76

Across the ATL and retention campaign there will be a total of 8,982 test drives occurring. Meaning that on average 45 test drives will occur at each showroom throughout the entirety of the campaign. The number of cars sold to private buyers is estimated to be 1,767 or 47% of the targeted total.

Corporate DM will be an important part in communicating to the corporate client. All communications here will centre on cost savings and extra services that Toyota offer to fleet operators. This communication should provide residual pay off with the possibility that fleet managers may switch entire fleets to Toyota even if they do not opt for the Prius D3. Toyota must convey in its messages that it understands fleet management and the importance of vehicles to businesses.

Figure 10: Acquisition of Fleet/Leasing/Rental companies and sales made

Contact Toyota Fleet Network Centre Corporate client 2,330

Take Prius D3 on to their books 1,398 1,188 85%

Buy 21% 249 companies

DM

60% Take no further action

Take no action

Enter future retention programs

Enter future retention programs

Enter future retention programs

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Table 26: Direct Mail Costing Corporate

Tactic Corporate Brochure Brochure design and copy + Letter Brochure Plastic bag envelopes Postage Lasering & paper letter Total Unit Fixed Costs () Variable Cost per unit () Total Costs () 2,0000 1,00 0,005 0,6945 0,08 2,330 11.65 1,597.35 186.4 24,125.40

20,000* 2,330 2,330 2,330 2,330

2,0000

* Brochure is an extension of the Private buyers brochure. It includes relevant Benefit In Kind (BIK) taxation details and other relevant information on multiple buying and servicing.

From the 249 companies purchasing the Prius D3 it is supposed that on average 8 cars will be sold to each Fleet/Leasing/Rental company, resulting in actual sales of 1,992 vehicles.

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28.7 Personal selling to end buyers A fundamental aspect in selling this vehicle is educating potential buyers as to the hybrid synergy drive system in a way that is clear to them. Driving home key points such as will never need to be plugged in and servicing is like any other car. Of course the sales representatives will have to use their own wit in deciphering how educated the customer is and what is likely to create positive attitude. As such the selling story can be catered to the individual.

In closing sales this is then the optimum opportunity to incorporate cross and up selling items. The target demographic is unlikely to take any financing options. However servicing will be critical to maintain profitability over the whole life of the vehicle and options to enhance features will be critical for immediate profitability, while giving buyers a sense of customisation.

Whilst the brochure will explain the commitment Toyota has made to green policies and the way in which they plan to recycle their cars in the future. It could tenuously elude that in the future there is the possibility that Toyota may buy the car back for a fair scrap price, which should be higher than the residual value after 8-10 years of use. Trade-in will be treated more favourably gaining greater discounts on new models.

28.8 Public Relations While the hybrid market is being entered with such glee by other manufacturers, the dividend of this is they have same goal as Toyota, which is facilitating greater understanding of the benefits and needs of hybrid technology. Much of this will be done through Press agentry and the provision of easily accessible public information.

The in-house PR department will undertake all PR activities in order to keep the model brand values coherent to the corporate brand and its core values. PR must be treated as a management function, where it is not only the eyes and mouth of the company it should also be the ears. In correlating two-way asymmetric and symmetric PR the department will be able to become more persuasive while being able to modify Toyotas corporate behaviour in order to seek public approval, awareness, trust and attitude change. Toyota must monitor internet activity as well as carrying qualitative research to be able understands the strengths and weaknesses of the car. The department must be reactionary to breaking news stories and studies.

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Fundamentally, unity in the messages emerging from Toyota is a key aspect. Where the message is exacting and showing that it is the leading pack and that it has the lowest emissions. An important charge of the PR department is to develop awareness of their corporate social responsibility programme (CSR). In promoting an ecologically friendly car the CSR programme can be promoted creating synergies in the campaign.

Press liaison will be critical at the launch of the model providing journalist with all the relevant information and quotes. The launch in Seoul and Vienna will provide ample hype and photo opportunities, it will also be here that press packs will be issued.

A global strategy that Toyota should be adopting especially through their PR program is to make hybrid technology synonymous with their hybrid synergy drive. This in the future may offer Toyota a lucrative licensing agreement, whereby it will be offered to emerging manufacturers or faltering manufacturers who do not have the capacity to finance the research of the technology and its construction. This could allow Toyota with hybrid synergy drive to become its Intel of the motoring world. Press Releases will be issued throughout the year on the back of new developments or research and after global motoring events that will take place during the campaign period.47

No additional money will be allocated to this department as it will be financed through usual budgetary means rather than single model needs.

28.8.1 Press Cars Ten cars will be made available for UK Press testing. More will be made available if required. Once the cars are no longer required for testing, they will be used as test vehicles at Toyota Dealerships. Their costs and the cost of other test cars will neither be included in the budget for the campaign neither will their future sales count towards any revenues made.

Top Gear, Fifth gear and pulling power will all be invited to review the car. If the reviews are gained then the in house PR agency must ensure that the Toyota Prius D3 is mentioned in all TV listing guides. Also a E-Newsletter must be sent out to inform those on the list as to the time and date of the review being aired.

47

See appendix XXII for Important PR dates.

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Top gear will be a approached to include the Prius D3 into their section a Star in a reasonably priced car or as it will be suggested a Star in a low polluting hybrid car. This is unlikely to be accepted but if it were it would show the car racing around a track, in other words it would show its real performance.

29.0 Performance Outcomes A number of performance objectives were set out initially so that the campaign could be design around achieving them. Conservative estimates of response rates have been set in order to provide a pessimistic view of what is likely to occur. In this simulation the following objectives were set Communication tool PR Objective Increase understanding of the technology Achieve 53% of sales through corporate customers 3% through retentions 44% through acquisition 80% awareness Performance (est.) To be evaluated through qualitative measures 1992 units or 53% Achieved Unknown

DM

Yes

254 units or 6.75% 1513 units or 40.25% To be evaluated through quantitative research 8,982 test drives 25,221 3,759

Exceeded

Advertising

Unknown

SP Database Business

8,000 test drives 30,000 new entrants Sale of 3,750 vehicle

Exceeded Underperformed Exceeded

At the halfway point in this campaign performance will be assed, if it is deemed not to be on course to meeting the targets set. Then it will be halted except for where media space has already been bought. The campaign will only be continued once research is carried out to ascertain why the target market is not reacting favourably to it. Based on estimated outcomes of this campaign, its profitability is brought into question. Due to the low operating margins (9.75% of Toyota48) it has been concluded that marketing expenditure will exceed operating profit by 4,796,491. However, the numbers of cars sold during this campaign only relates to the Prius D3 model being sold as a result. It is assumed that the Prius Petrol will also see a sharp increase in sales as result of the campaign and that residual sales of the Prius D3 will occur after the campaign ends. Furthermore, as the campaign was designed as a Toyota branding exercise other models should benefit indirectly from this operation.
48

Google finance
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Launches are an expensive investment but they should provide for continued sustained gains in the future. More so that awareness has increased and corporate buyers should also make repeat purchases once their Toyota Prius D3 needs to be renewed. Moreover, cross and up selling items have not been included in the calculations and as such it is possible that the 4.7 million deficit over the lifetime of the vehicle should be clawed back. In conclusion this campaign despite its initial losses will continue to reward Toyota after it has run its course and should have established it as the leading hybrid technology innovator.

30.0 Horizontal synergy An important aspect to the success of this campaign is the relationships with dealers. It is through their finale communication that a sale would be realised. Thus, the flow of information to the showrooms is vital to ensure success. Their knowledge of the campaign structure and timings should aid their ability in communicating the same message. In employing similar imagery throughout the campaign and the leading Dare to Drive slogan on all advertisements, this should aid in tying the campaign together. In giving all communications a central theme it should enable perspective customers to build a coherent image of the Toyota Prius D3 brand. It is also thought that the other brands within Toyota portfolio will benefit from the extra Toyota exposure and from Toyota being portrayed as a technologically advance brand. The PR stage of this campaign will aim to educate, while advertising will stimulate desire and add brand value. DM has been used to coordinate and measure responses while reinforcing all other communications with further information. This approach should maximise impact and provide synergies.

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31.0 Vertical integration The campaign was created with two key aspects in mind, the business goals of Toyota (technologically advanced and consumer/environmentally aware) would have to be reflected in the product and subsequent advertisements. In combining these elements into the Prius D3 campaign it should enhance overall performance. The Dare to drive slogan gives the car an edgy appeal something that is important in creating an innovative and progressive brand. The coordination of the campaign has been deliberate allowing for lead times to be established and each task having a definite timeframe in which it must be completed. This will require regular meeting both pre and post launch to ensure that account managers and department heads are fully aware of the stage of campaign or its development they should be in. This should ensure exacting and unfaltering steps throughout campaign ensuring it achieves the objectives set out.

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Appendices

65

I. The Unions The power of the United Automobile Workers unions (UAW) in America can largely be blamed for inflexibility of these corporations, from blocking the introduction of robots to creating a rigid workforce. During the golden times, the UAW struck deals that would protect their members and secure those wages and pensions that were reflective of the times. However, these benefits have since become unsustainable. There are some 2300 GM employees being paid to sit idly around for 8 hours a day all because their contracts are such that they can not be released.49 American automobile manufactures are losing money per unit rather profiteering on an industry where others continue grow and increase profits year on year at the expense of them. As such the US manufactures are struggling with fighting off bankruptcy, paying the ever increasing pensions and healthcare, while trying to maintain market share, which is rapidly being lost to their Japanese and European counterparts. The UAW continued power and ability to lobby government is still substantial causing the likes of Ford and according to some analyst, and GM in particular to think about taking a Chapter 11 bankruptcy so that it can shrug off much of the pension debt. II. Governing Emissions: Clean in California Green everywhere else

In the wake of natural disasters such as the recent hurricane Katrina the Americans are slowly waking up to the realisation that the environment matters. With this awakening a new dawn in energy technology is emerging. The political arguments for this awakening are also gaining momentum, as the American Government is trying to manage the hole in its finances which can largely be attributed to its foreign policy, it would be able to save on importing (and subsiding) oil. Furthermore, they would be able to decrease their dependency upon the Middle East. California

California is seen as the axes of change in America and is said to have globally the some of the strictest emission laws.

Advanced Technology Partial Zero Emission Vehicles (AT-PZEVs) is Californias special regulations employed to reduce emissions further. This is the only Federal State where emission rules are strict and the fuel that is burned is cleaner burning than petroleum in other states. New cars must meet Californias strict pollution laws, which are the most stringent in the world. If they can meet Californias criterion then the automobile should have no problem in being accepted as a clean car.
49 http://www.mises.org/story/2124 Where Would General Motors Be Without the United Automobile Workers Union? by

George Reisman
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Attempts by the UK government to persuade motorist to go green Tax credits incentives

The Budget 2006 stated that on the main fuels there will be only an inflationary increase in tax. However, the government is still committed to reducing pollution levels in the UK. For this to be done a long term strategic approach has been adopted as not to have a detrimental effect on economic growth.

As stated in the annual Budget 2006 the government is having informal talks with the oil companies in order to persuade them to produce and sell sulphur-free diesel and sulphur-free grades of super petrol. The government has given the oil companies some lead time to bring forward these fuels but does expect it to reach forecourts at the beginning of 2007. The government is also supporting the biodiesel and bioethanol with placing a fixed levy of 20 pence per litre until the end of 2009 giving this market time to be established. It also cites the expansion of this market to 118 litres being sold (0.25% of fuel market).50

According to the government news network (GNN) the renewable transport fuel obligation (RTFO) are going to operate a system of certificates, whereby the oil companies would demonstrate how much biodiesel it sold. If the company was selling more than the 5% obligation set-out by the government, then it would be allowed to sell on the certificates to companies who need more to meet the obligation.51 Thus providing monetary benefits to those that strive to surpass the minimum level and therefore help to establish the market quickly.

The DVLA also have their own incentives for consumers to turn to less polluting vehicles. The Graduated Vehicle Excise Duty (GVED) measures the level of carbon dioxide in the emissions and taxes on that basis. Diesel cars tend to do worse off in this test as they have more pollutants (but lower CO2 emissions), however this is being continually reviewed and as diesel engines improve the level of duty being paid on them should also decline. The government websites seem to be inconclusive as to the benefits of diesel, with the DVLA sending out the message it is more pollutants (as seen by the higher road tax charges), while at the same time they claim it has significantly less CO2 emissions.52

50 51

http://www.hm-treasury.gov.uk/media/20F/1D/bud06_ch7_161.pdf http://www.gnn.gov.uk/environment/fullDetail.asp?ReleaseID=177217&NewsAreaID=2&NavigatedFromDepartment=False 52 http://www.vcacarfueldata.org.uk/information/cars-and-fuel-options.asp

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Table 27: Private Vehicles (registered on or after 1st March 2001) Diesel Car TC 49 6 Bands CO2 Emission 12 Figure (g/km) * months months rate rate Band A Up to 100 0.00 Band B 101 to 120 50.00 Band C 121 - 150 110.00 60.50 Band D 151 - 165 135.00 74.25 Band E 166 - 185 160.00 88.00 Band F Over 185 195.00 107.25 Vehicles registered on or after 23rd March 2006 Band G Over 225 215.00 118.25 Petrol Car TC 48 12 6 months months rate rate 0.00 40.00 100.00 55.00 125.00 68.75 150.00 82.50 190.00 104.50 Alternative Fuel Car TC 59 12 months 6 months rate rate 0.00 30.00 90.00 115.00 140.00 180.00 49.50 63.25 77.00 99.00

210.00

115.50

200.00

110.00

What the Commission for Integrated Transport think?

The Commission is an independent body which advises the Government on integrated transport policy and is therefore an influential group who could change the future of the industry in the UK. Suggestions so far are labelling cars according to their environmentally friendly status in order to inform and hopefully change consumers behaviour to buy greener cars. Since the suggestion a voluntary coding system is in place for manufacturers to use. They are also suggesting Car Clubs and Car Sharing measures as a method of reducing congestion. Another recommendation brought to the fore is charging for the amount of the road used. In short, the Commission is advising on how to change travel habits. By promoting more economical use of private cars and expanding the use of a public transport system, for which they recommend higher investment.53 The Government, however, must balance the need to reduce congestion without penalizing those least able to afford any stick measure brought in. Euro 5 emission standards

New automobiles that wish to be sold in Europe must from 2008 comply with the strict emission regulations being placed upon them. Europe is placing special empathises on regulating nitrogen oxide, carbon monoxide, hydrocarbons, oxides of nitrogen and particulate matter emissions. With all European countries signatories to the 1998 Gothenburg protocol, which sets out reduction in emission targets that must be met, it is in their interest to achieve these. As such governments are offering tax incentives, Germany for example has a tax exemption of 600 in place for new diesel vehicles with particle emissions under 0.0085g/km.54
53 54

http://www.cfit.gov.uk/ http://www.euractiv.com/Article?tcmuri=tcm:29-133325-16&type=LinksDossier&_print
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III. Problems with acquisitions and mergers

The DaimlerChrysler merger was thwarted with costs and incompatibility of management styles. Only now is it seeing the benefits of the merger which took place in 1998. Through having greater volume sales and one headquarter they are able to spread the expensive technological development cost over the groups portfolio. To get to this point the company had to go through much anguish including shedding 45,000 jobs.55

Americas largest two are having considerable financial difficulties with GM and Ford reporting combined losses of $7.2bn in their North American businesses in 2006 (FT: Motor Industry 2006) and job losses are to follow these announcements.56 Even the European Manufacturers are decreasing their overall salary burden by shedding jobs. It is reported that VW is threatening 20,000 job losses in Germany (AID:0604:p8). GM, DaimlerChrysler are also looking into other options to cut costs and that is by sellingoff brands. GM severed links with Fiat as the alliance looked to be too costly for both brands and DaimlerChrysler has their much troubled Smart car up for sale. IV. Shorter lifecycles

According to Bob Lutz at GM it takes 36 months for a new car to get into the showrooms as stated in the (Economist: Survey: Car Industry: Fighting Back, 2nd September 2004) it goes on to say that car makers are being pressured by market forces to update their models every year. This is a far cry from the 7 year average lifespan that was once found in Europe, major players are now keeping to the 3 year cycle. In Japan, Toyota has had the fortune of having very selective customers who expect revamped models every year, thus they do not have to change their business model to achieve this.

55

56

This took considerable negotiations with the powerful union (UAW) Much of the financial difficulties facing Ford and GM can be laid at the door of deals made with the UAW in the 1970s. (see section The Unions)
69

V. What marketing has been able to do for Toyota

A summery of New York American Association (NYAA) (2005), Toyota: Fuel for Thought marketing campaign in Chicago (USA). Agency: Saatchi & Saatchi. Found on www.warc.com

Chicago is a highly competitive region for automobile manufacturers. The domestic players had all been seducing customers with discounts and incentives. However, and somewhat wisely in hindsight Toyota decided upon an aggressive marking stance instead of continuing with incentives. As incentives according to NYAA report devalued brand image and affected residual value. Also long term these discounts are expected by consumers which does not allow manufactures to return to higher margins.

The campaign ran over 2004 and its objectives were to increase sales over previous year, assist to grow overall market share, improve segment penetration for core models and aid dealers profitability.

Through market research of this region, it was found that that once a Toyota model was on a consumer's shopping list, it remained there until the purchase decision was made over 70% of the time and key issues that consumers valued included Quality, Safety, Cost-of-Ownership, Product Selection, and Innovation. Within these two findings it was found that to get on the consumers precious shopping list they would have to meet some if not all of things that consumers valued. The agency looked towards Toyotas heritage and core values and came up with a message strategy of quality-durability-reliability. The agency then took the decision to run an unconventional campaign of testimonials to communicate the message, with the final words of fuel for thought as the copy.

Using traditional media (TV, Radio, Newspaper) to carry the message the campaign was seen as a success. Toyota claimed that it was their best year in the 25 year history of operating in that region. Additionally, all of the campaign objectives were met in particular the profitability of dealers, which importantly shows that without using any increased incentives on the year before their margins were better. Therefore, it can be concluded that the value message of the Toyota brand had been delivered to the public.

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VI. Corporate Culture

In order to achieve the mantra set-out by Taiichi Ohno, Toyota has built a homogenous corporate culture and a philosophy that has become deep-rooted in every Toyota employee. In ensuring that complacency is avoided and set goals are surpassed, which facilitates the constant and continued improvement that leads ultimately to growth. This is stark contrast to their seemingly sluggish and overpopulated American counterparts, whose unionised workforce has hampered relationships.

To cultivate the learning process, Toyota has established an operations management consulting division (OMCD) and the Toyota institute, where managers are trained to Toyotas standards, and techniques are taught to preserve the philosophy so that through globalisation it is not lost, and they are also taught to manage suppliers. It is the relationships with suppliers that keep Toyota operationally competitive and helps achieve just-in-time deliveries.

Management is largely comprised of engineers with experience at the production level who have a profound understanding of the production process and empathy with employees, which enables information to flow from bottom to top, guaranteeing responsiveness and improvement. The Toyota way is striving for perfection.

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Figure 11: Guiding Principles and Values

Create stable business partnerships to achieve mutual growth

Pursue growth in harmony with the global community through innovation

Be a good corporate citizen of the world

Foster a Corporate culture that enhances relationships throughout the company

Guiding principles

Respect culture and custom. Act with corporate social responsibility

Provide and develop outstanding products that fulfil the needs of customers

Provide clean safe products which enhance quality of life everywhere

Source: own adaptation of guiding principles http://www.toyota.co.jp/en/vision/philosophy/

VII. Toyota Green methods

Toyota is well known for its production techniques it has developed business practices which have been admired by academics and impressed the business world. From conceptualising just-in-time production methods and extending these to TPS, Toyota has also moved further. In southern California they have built a Green Complex which is made from 95% recycled content and uses solar panels to power the plant. Another two manufacturing plants have been designed as zero landfill producing operations.

Toyota realises that for automobiles to continue to play an important part in the everyday lives of billions of people it must operate in an environmentally friendly way. As such it has laid down its own rules about how it wishes to protect the environment.

In their quest to be global environmental leader in both product and manufacturing processing Toyota is also requiring direct and indirect suppliers to follow and adopt their Earth Charter.

Toyota has also introduced what it calls Eco-Vehicle Assessment System (Eco-VAS), which measures the vehicles environmental impact over its life.
72

Figure 12: Earth Charter

Source: http://www.toyota.co.jp/en/environment/plan/ In taking up this code of conduct, Toyotas automobiles must reflect it. As such greater investment into environmentally friendlier cars is in line with its charter and remit.

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VIII. Strategic Position Figure 13: The Toyota Strategy Clock

High 3 Hybrid Differentiation 4 Focused Differentiation 5

Perceived Use Value

2 Low Price

1 No Frills 8 Low Low Price

7 6, 7 & 8: Strategies Destined for Ultimate Failure

High

Source: Haberberg, Adrian; Rieple, Alison (2001): The Strategic Management of Organisations; Great Britain: Prentice Hall, Financial Times; page 191

A hybrid strategy aims to achieve differentiation from competing products, while charging lower prices. Toyota has managed to do this repeatedly due largely to the fact that they have a lower cost base than others in their strategic group.

Figure 14: Strategic Groups

Broad

REGIONALLY FOCUSED, BROAD-LINE PRODUCERS e.g. Fiat, PSA, Renault, Chrysler

GLOBAL, BROAD-LINE PRODUCERS e.g. GM, Ford, Toyota, Nissan, Honda, VW GLOBAL SUPPLIERS OF NARROW MODEL RANGE e.g. Volvo, Subaru, Isuzu, Suzuki, Saab, Hyundai LUXUARY CAR MANUFACTURERS e.g. Jaguar, Rolls Royce, DaimlerBenz, BMW, Lexus

PRODUCT RANGE

NATIONALLY FOCUSED, INTERMEDIATE LINE, e.g. Tofas, Kia, Vaz, Maruti NATIONALLY FOCUSED, SMALL, SPECAILIST PRODUCERS e.g. Bristol(UK), Classic Roadsters (US), Morgan (UK)

Narrow

PERFORMANCE CAR PRODUCERS e.g. Porsche, Maserati, Lotus

GEOGRAPHIC SCOPE Global

National

Source: Own adaptation from Grant, R. (2002): Contemporary Strategy Analysis, 4th Edition, Blackwell
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IX. Toyotas Distinctiveness

Interrelationships with suppliers and the ability to gain all required parts at fair price has been the cornerstone of success for Toyota. Their suppliers are working to the Toyota ethos, implementing similar business practices (even complying with the Environment Charter) while ensuring they deliver Toyota quality products. The main advantage of harmonious linkages with suppliers is that outsourcing reduces setup costs, increases flexibility, allows Toyota to reap the benefits of their suppliers capabilities and knowledge, and the suppliers economies of scale and scope can be capitalised upon. Cross-holdings in suppliers and sharing a management resource and knowledge pool further deepen the interdependency and bonds of trust. It is this trust and the relationships that stem from it which can not be copied.

The benefits gained through their linkages with suppliers are not restricted to the manufacturing process but they also permeate product design and development. By integrating suppliers into R&D, Toyota can on the one hand ensure feasibility of new designs and on the other hand reduce costs by eliminating duplication. Both these benefits allow new models to be brought to market faster and through the setbased concurrent engineering (SBCE). Toyota can also ensure it can keep cost even lower by using many of the unseen parts from old models, which also allows them to be more customer responsive.

X. Sources of fuel for automobiles

Automobile fuel sources and technology are becoming varied and more advanced causing fragmentation in the industry to occur. The technological changes in the past decade will be merely a small reflection of what will likely happen in the next decade. For manufactures, they must either anticipate consumer wishes and pander to them, or lead development and try the build the framework in which they and others must operate to be competitive. Alternatively they could take a passive approach and make changes only when absolutely necessary (and of course not wasting billions of dollars in developing the engine fuel type that does not eventually win through).

Petrol and diesel are the forerunners for fuel in cars today and while not about to run out in the next 25 years it is still becoming less desirable. With the price of oil reaching new highs on the world market ($75 a barrel)57 and uncertainty of whether this will continue to rise or abate. Consumers are looking to seeking cheaper more economical forms of transportation. For manufacturers this means producing more efficient cars and/or less oil dependent automobiles.

57

Price at the time of writing

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Hydrogen is largely seen as the holy grail of fuel due to its abundance. However, it will remain a power source that is commercially unviable for at least the next decade. This is conclusion is largely drawn from the fact that production is currently low and expensive. Furthermore, storage of hydrogen is particularly difficult and the cost of implementing a distribution network will just act as a further barrier, raising the costs above that of conventional fuel (even with further oil price increases).

Ethanol fuel mixes, while has many fans is fuel is being discounted by this report as in short term the cost savings to motorist are not apparent. While it cost less per gallon ($2.40) compared to petrol ($2.80) the fuel is less efficient meaning a lower miles per gallon (Newman 2006: Ethanol explained, US News)58. In addition to this the distribution infrastructure would have to be developed and this is not in control of one company alone.

Consumers are unlikely to be willing to travel large distances just to refill their car, after current spread of petrol stations being wide and convenient. For these reasons the only viable option in the near future are that of hybrids

Hybrid Technology

Hybrid power: A multiple source propulsion system that uses a combination of energy to supply (in vehicles) an engine. The most common amalgamation is that of the currently very successful internal combustion engine and an electric engine.

Two manufactures in particular can be currently identified as leaders in the industry. Honda and Toyota have both developed roadworthy cars, which are impacting on the market place, last year hybrids accounted for 1% of market share in America (FT: Motor Industry: p2). The Prius was launched in the USA in 2000, making it the first hybrid to enter the market. Having caught the attention of celebrities in Hollywood the technology was boosted with cool status. The Prius was and still is a car which has been brought to market through a highly successful editorially driven PR communication strategy. And winning awards such as car of the year from Motor Trend Magazine and the North American Auto Show shows how it has been able to capitalize on press agentry.

Toyota calls its hybrid technology, Hybrid Synergy Drive and Honda terms it Integrated Motor Assist, but both amount to the same thing. A new market segment.

58

http://www.usnews.com/usnews/biztech/articles/060425/25ethanol_faq.htm?s_cid=rss:site1
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Hybrid Synergy Drive means that engine can be powered by gas, electric, diesel or petrol, alternatively it can operate a combination of systems simultaneously. Currently, only petrol hybrids have made it to market place. The reasoning behind this could possibly lay on the fact that Diesel is an unpopular fuel outside Europe. However, hybrid diesel may gain popularity when the efficiency and cost saving are seen.

Toyota is putting much behind the development of hybrid technology and has said (on the corporate website) it hopes to produce 1 million hybrid vehicles a year in 2010. And with the Prius sales continuing to climb this number looks to be attainable. It is also helping them achieve their goals in line with their Earth Charter. Although, they will have contend with a reduction of subsidies in the USA, which will mean that their price in relation to petrol vehicles will become less competitive. In the UK, some mediocre government incentives do exists for environmentally friendly cars, with cheaper road tax and no congestion charge payable in London. How much of this is a real incentive for conversion is debatable, the more promising force for change is consumers desire to pay less at the pump.

Diesel Hybrid

While the Japanese have inspired the petrol-hybrid combination, French vehicle manufacturer PSA (Peugeot-Citroen) are taking it in a new direction. The diesel-hybrid is some 25% better [more efficient] than a similar vehicle equipped with a petrol hybrid system according to the PSA hybrid vehicle project manager, Alain Klein. PSA are claiming fuel efficiency of 83mpg, which is above the 60mpg claimed by the Prius (the experience of users is that the actual mpg is far less approx. 40mpg). PSA are looking at a market entry date of spring 2010 as the costs of production need to be lowered before it can be a competitive.

This report proposes the launch of a similar automobile which is powered by a diesel fuel cell mix. The attractiveness of using diesel as a fuel is that in terms of miles per gallon (mpg) it will far exceed that of a petrol engine, something that consumers should desire in a climate of high oil prices. Diesel cars have also the opportunity to use biodiesel. It is seen by the government as a feasible solution to reducing emissions and already there is already a minor distribution network in place which is set to grow with demand. Even large players like Tesco have 23 forecourts where biodiesel is sold.59 There has also been a large increase in agricultural land which has been devoted to growing oil seed rape (the fuel crop).60 So signs suggest

59 60

http://driving.timesonline.co.uk/article/0,,22749-1853984,00.html http://news.bbc.co.uk/2/hi/uk_news/northern_ireland/4249962.stm
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this is strategically the most fitting and viable options. Especially as consumers will be paying less as they are getting more mile per gallon.

This option should also go some way in combating proactive competitors such as Mercedes, who have not been sitting idly by waiting for the hybrid revolution. As Schmidt (AID:0601: p1) writes it has developed its novel BLUETECH diesels to upstage these petrol-hybrids both on the fuel economy and increasingly vital cost side. The BLUETECH car is due to be released in autumn 2006. With cars such as this making their way into the market the consumer like never before are getting a choice as to what will power their cars.

XI. Fleet Services In the UK, the Fleet market was worth 11.8 bn in 2004 and with only a small (2%) decline projected for 2005, this market can not be ignored (Mintel 2005). The major players in this industry are Vauxhall and Ford both having 20% of the market each. Conversely, Toyota only has a 4% market share. However, like in the consumer market the potential to grow due congestion charging and other emission based taxes is very real. Fleet cars are also well known for there use of diesel due to their lower running cost making the hybrid diesel even more attractive. As with the consumer market it is susceptible to economic changes and a downturn would drastically reduce the market place. However, companies still have the ability during these times to turn to financing and leasing which aids in reducing initial impacting costs, and for manufacturers this is in the long term highly lucrative.

XII. Consumers Hybrid Perceptions and myths

Honda commissioned TNS to do research on British drivers attitude towards the environment and their understanding of alternative fuel vehicles. In a survey of 1,200 motorist, the results showed that 51% were not even aware of hybrid cars. Of those that said they knew of hybrids more than 40% were unaware that it uses both electric and petrol. This seems to suggest that the marketing efforts of Toyota and Honda (the two suppliers of hybrids) have been lacking in their effectiveness. From the 18% who would consider a hybrid, the top motivating factor was lower fuel cost (54%) rather than the environmental benefits (39%). This type of research reinforces the potential for diesel hybrids, as their main benefit is fuel consumption. There is also some environmental benefit although against other alternative fuels.

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Figure 15:Propulsion technology awareness (2004)

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Petrol Diesel Gas Electric Solar Hydrogen Hybrid 42% 32% 29% 18% 17% 100% 100%

Source: ESMAR: The Positioning of Green Technology (March 2004)

In January 2006 Business Week published a top 10 hybrid myth list which shows certain aspects that which needs to be overcome if the hybrid technology is to become widely accepted. Many of these myths will wane with the rise of more manufacturers entering the market place with their own hybrid technology; however this will take some time. The top 10 myths:61 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. You need to plug a hybrid in Hybrid Batteries need to be replaced Hybrids are a new phenomenon People buy hybrids only to save money on fuel Hybrids are expensive Hybrids are small and underpowered Only liberals buy hybrids Hybrids will pose a threat to first responders (emergency services) Hybrid will solve all our transport, energy and environmental problems Hybrid technology is only a fad

Of these myths 1, 2, 6 and 10 are the most important to dismiss. Myth 1 and 6 shows the level of ignorance of consumers as to what this technology is really about. Point 6 is reflective of what the perception of diesel power was and what it continues to suffer among the older generations especially.

61

http://www.businessweek.com/autos/content/jan2006/bw20060131_870391.htm
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Diesel perceptions In Europe, over the last 2 decades, diesels have gone through a radical perception change. From being a noisy, slow, vibrating and having high a wearing rate, consumers are now seeing them as a viable if not superior alternative to petrol. Much is being done to erode the old perception, from Audi winning La Mans in 2006 with a diesel engine to adverts featuring diesels cars, with consumers little realising that diesel cars are being used.

Honda is continually trying to increase consumers acceptance of diesel with their advertisement: HATE

Ad storyline Different animals in nature are taking out their frustrations at the unhealthy Diesel Engines, rabbits shoot arrows at them, goats rams them and penguins on a see-saw are smashing it mallets, however when the new Honda Diesel i-CTDi engine is release they leave it alone Creative agency Wieden & Kennedy

Increasingly, the old image of underpowered and noisy is being eroded from the consumers inferences. This is being replaced with an image of fuel efficiency and performance which is close to that of petrol. Consumers are obviously not being put off by the higher price of diesel at the pump in the UK market as is evident by the surging demand for diesel cars.

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XIII. The Toyota Range Model Avensis Price Range 13,995 - 23,150 Body style Estate / Hatchback / Saloon People Carrier Model in the range 52

Avensis Verso

18,600 - 22,100

Aygo

6,745 - 7,995

Hatchback

Celica

16,650 - 22,595

Coupe

10

Corolla

10,995 - 16,000

Estate / Hatchback / Saloon People Carrier

39

Corolla Verso

14,500 - 19,795

Land Cruiser

27,000 - 37,900

4X4

Land Cruiser Amazon MR2

45,580 - 48,175

4X4

17,150 - 18,000

Convertible

Previa

20,405 - 24,955

People Carrier

Prius

17,545 - 20,045

Hatchback

RAV4

17,250 - 24,450

4X4

12

Yaris Yaris Verso

7,295 - 12,845 10,945 - 12,645

Hatchback People Carrier

19 3

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The Prius already occupies the higher end price rage of what fleet purchasers are expecting to pay. A similar target audience is being aimed at as the Prius. It is thought that it is this demographic is the only group who will possess attitude and inclination of environmentally friendly.

The Prius is currently being aimed at the 30 60 year old males and females, who come from the AB class, as this car does cost a premium above similar size and classified cars. Paying to be green.

XIV. London Motor Show interview and findings The interview was not audibly recorded so this a paraphrase of the discussion with the most important points noted. Honda Spokesperson Question: What would be the demographics of a customer of this car (Honda Civic Hybrid)? We do not talk about demographics when trying to target a car, its all about psychographics The spokes person then retorted the question back meAfter explaining that I had little understanding (at that point) about the particular model I offered the answer that hybrids in general despite their technological excellence seem to luring and middle aged audience (the type that would not know how to programme a VCR). H Spokesperson I agree, we dont sell this car as you would sell a computer but more on what the technology can do. In this case, a car which produces fewer emissions than an ordinary petrol engine Question: Would a hybrid be made for a younger target market, an example being first timer buyers (18+)? HSP Quote No. All they want is 6995 on the road including insurance they simply dont care about emissions and they certainly dont have the money This technology is expensive Question: why is Honda not making a diesel hybrid? HSP Talk to our R&D peopleAll I can say is that hybrids are seen as a short term solution, fuel cell will be next and then ultimately hydrogen Question: Surely diesel hybrids would have a higher mpg? HSP Would they? That maybe true but here at Honda we believe that petrol is a far cleaner solution Question: By cleaner I suggest that you mean the emissions other than CO2, which is they current measurement for pollutants in the UK? HSP Yes, but I also believe that it is only a matter of time before these the emissions measurements will include more stringent testing of other emissions, we only have to look to Germany for the future of a emissions testing standard. While emissions measurements may become more stringent this should have no adverse effect on diesel engines fitted with particle filters.
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Toyota interview Question: why would people buy a hybrid when the fuel savings are little more than a diesel of a VW Golf or Ford Focus? TSP it is the concept that people like, when you explain about the electric motor switching on when low speeds are being done people feel that is an excellent idea Question: who at the show is taking particular interest? TSP everyone walking pass always stop to look at the Prius show the Prius show being the Prius reverse parking automatically without the aid of a driver. Observation: People did look on in awe at the Prius reversing and it was an impressive sight, not least because the car was not making a noise. Question: how would you describe the car? TSP its a smart car, intelligent one of the first that is drive by wireNot only that but its a quality car that is also comfortable Question: Do you have problems with people not really understanding the concept? TSP its getting better, but there are still some that ask whether you have to plug the car in. When you tell them they dont and tell them how it really works they come onboard TSP clearly there is some issue with people feeling that maintenance costs will be high. The reality is that this car will be serviced in exactly the same way as any other car and the cost of that is no difference than an ordinary car Plus the 8 year warranty does provide extra comfort

Question: What about the battery issue, what happens after the 8 years, how much does it cost to replace? TSP Im not sure about the cost but what I can tell you is that the batteries have been extensively tested, and as yet we have seen no problems with them. The battery will do at least two hundred thousand miles. The technology behind them makes them very different to other batteries

Interview with a Car sales man at the official Toyota Dealer (Jemca, Croydon) Similar questions were asked as those at the motor and similar answers were given as to type of buyer. However, the most interesting piece of information gleamed from the sales man was that once a car was tested a conversion of between 5% to 20% could occur.

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XV. Estimated UK population by social grading 2005 Population by demographics

All adults 15+ 47,771 100% 1,818,000 3.80% 10,552,000 22.10% 1,380,000 28.90% 9,844,000 20.6 Men 23,150 100% 943,000 4.10% 5,336,000 23.10% 6,341,000 27.40% 5,312,000 22.9 Women 24,621 100% 875,000 3.60% 5,216,000 21.20% 7,459,000 30.30% 4,532,000 18.4

Total population Profile A Profile B Profile C1 Profile C2 Profile

Source: National Readership Survey, January-December 2005.

UK estimated population by age range (14+)

2004 est 7,626,000 7,939,000 9,132,000 7,633,000 6,905,000 9,577,000 48,812,000

14-24 25-34 35-44 24-54 55-64 65+

16% 16% 19% 16% 14% 20% 100%

48%

Source: Mintel 2004

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XVI. Hybrid Costs and Savings Comparisons Fuel Costs For the simplicity of the calculations all figures will be based on an English/European metric system. This avoids conversion confusion and loss of information. Calculations based on a corporate car travelling 32,200 km per year (20,000 miles) Average unleaded petrol price per litre = 98.4p Average unleaded petrol price per litre = 99.6p Prices sourced from www.petrolprices.com 24th July 2006 Average fuel consumption per litre varies depending on source. Source used www.autobytel.co.uk Make and Model Ford Fiesta hatchback 1.6 Ghia 5dr Ford Fiesta hatchback 1.6 TDCi Ghia 5dr Renault Megane hatchback1.6 VVT Privilege Renault Megane hatchback 1.5 dCi 106 Privilege 5dr Volkswagen Golf hatchback 1.6 SE FSI 5dr Volkswagen Golf hatchback 1.9 SE TDI 5dr Ford Mondeo saloon, 2.2 16V TDCi 155 Toyota Prius hatchback 1.5 VVTi T4 Hybrid 5dr CVT Auto New Prius D3 Fuel Type Petrol Cost of the Car 12,545 Fuel economy 15.61 km/l (44.1 mpg) 22.73 km/l (64.2 mpg) 14.48 km/l (40.9 mpg) 21.27 km/l (60.1 mpg) 14.30 km/l (40.4 mpg) Litres required 2,962.78 Total annual fuel costs 2,054 Diesel fuel saving 660

Diesel

13,110

1,416.63

1,394

Petrol

14,970

2,223.76

2,188

680

Diesel

16,030

1,513.87

1,508

Petrol

15,375

2,251.75

2,215

515

Diesel

16,265

18.87 km/l (53.3 mpg) 16.63 km/l (46.3 mpg) 23.26 km/l (65.7 mpg)

1,706.41

1,700

Diesel Petrol hybrid

22,795 18,580

1,936.25 1,384.35

1,928 1,362 355

Diesel Hybrid

22,000

31.85 km/l (90 mpg)*

1,010.99

1,007

*Based on a 38% fuel economy increase when switching to diesel

The Prius D3 Hybrid must achieve a high fuel saving cost above its petrol counterpart if it is worthwhile for the consumer to pay the premium placed upon it.

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In terms of fuel saving the Prius D3 will save the driver in excess of 350 per annum over the current Prius. If it is compared to a similar car using just a petrol engine, for example the Renault Megane the savings are even more substantial, an incredible 1,180 for a petrol engine or 500 for a diesel. The lower road tax will not concern customers of new cars as it is such a small fraction of overall costs. However, substantial savings can be made for those that continually drive into the Congestion Charge Zone in London (other cities are debating similar congestion charging). At a current cost of 8 per day in a 48 week working year this would summate to 1,920. Cumulative costs of fuel and Congestion Charge Make/Model Purchase cost 12,550 12,550 16,000 16,000 22,750 22,750 22,000 Year 1 14,600 16,520 17,500 19,420 24,680 26,600 23,000 Year 2 16,650 20,490 19,000 22,840 26,600 30,445 24,000 Year 3 18,700 24,460 20,500 26,260 28,530 34,290 25,000 Year 4 20,750 28,430 22,000 29,680 30,462 38,140 26,000

Non Ford Focus Petrol London London Non Renault Megane London Diesel London Non Ford Mondeo Diesel London London London Prius D3 Based on 20,000 miles driven each year

For a fleet buyer these savings begin to mount and the extra cost of the automobile diminishes making the Prius D3 increasingly more viable in pure monetary terms. The cachet that can be added to their own brand by owning a fleet of cars that are environmentally friendly should also pay dividend. Furthermore, fleet buyers must consider the extra company car tax payable. BIK company car tax Current Prius CO2 emissions are at 104g/km 2007/8 percentage charge is 12% giving a Benefit in Kind charge of 2,125 falling to 1,771 for the year 2008/9. Employee Tax payable at 22% = 468 or 390 in 2008/9 Employee Tax payable at 40% = 850 or 708 in 2008/9 With CO2 emissions forecasted to be 100g/km or lower the BIK tax is likely to be lower than the current Prius charges. If the diesel engine achieves a Euro 4 emission rating it will be exempt from the (3%) surcharge.

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If this is compared to a: Ford Mondeo saloon, 2.2 16V TDCi 155 Ghia X SIV Price of 22,000 2007/8 percentage charge is 22% giving a Benefit in Kind charge of 4,801 rising to 5,019 for the year 2008/9. Tax payable at 22% = 1,056 or 1,104 in 2008/9 Tax payable at 40% = 1,920 or 2,008 in 2008/9 Including initial BIK tax charges for 2008/9 Make/Model Non London London London Ford Mondeo Diesel Purchase cost 27,770 27,770 23,780 Year 1 29,700 31,620 24,780 Year 2 31,620 36,640 25,780 Year 3 33,550 39,310 26,780 Year 4 35,480 43,160 27,780

Prius D3

Savings can be considerable in this example, after 3 years a company could save 6,770 (or 12,530 if driving through the congestion charge zone). Multiply these savings by a large fleet and the monetary savings could seriously reduce cost, while not having to compromise on size.

Not only will savings be made through company car tax but also the Prius features in a far lower insurance group (currently 7E, as opposed to 13A), potentially saving hundreds of pounds per insurance package.

Hybrid batteries and depreciation

Toyota claims that it is very possible that the battery could last for the entire life of the Prius (10 years or more). If this is true then peoples apprehension is unjustified. Furthermore, as the hybrid market is developed then the price of the battery will fall, not only that but it is plausible that the technology will improve vastly over the currently types. As such the replacement of a battery could mean making the car more fuel efficient as the battery could take more load. Therefore, bringing a new lease of life to the automobile, this would have a radical impact on the depreciation rate of a hybrid. It is for this reason that depreciation rates are difficult to quantify. Unlike conventional fuelled cars these are still relatively new and those that are going to the second hand market are few and far between (creating disproportionate supply to demand). Currently, it is documented that the Prius is holding its value to upwards of 5% on similar sized comparable models and even if the future hybrids depreciate at a similar rate to other automobiles, the would involve no more risk as an investment.

It is reasoned that Toyota will also takeover the disposal of corporate cars.

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XVII. Consumer interests Q1) The Functionality question: Consumers level of agreement with the statement my car is the only there to get me from A to B
Q1 Definitely agree Tend to agree Neither agree nor disagree Tend to disagree Definitely disagree Final total Importance Rank 2 1 0 -1 -2 2003 (%) 13 25 12 16 7 Overall score 26 25 0 -16 -14 21

Q2) The Looks question: Consumers levels of agreement with the statement I would choose a car mainly on the basis of its looks
Q2 Definitely agree Tend to agree Neither agree nor disagree Tend to disagree Definitely disagree Final total Importance Rank 2 1 0 -1 -2 2003 (%) 3 14 18 29 20 Overall score 6 14 0 -29 -40 -49

Q3) Safety: Consumers levels of agreement with the statement My car should be equipped with all possible safety features
Q3 Definitely agree Tend to agree Neither agree nor disagree Tend to disagree Definitely disagree Final total Importance Rank 2 1 0 -1 -2 2003 (%) 18 39 15 3 1 Overall score 36 39 0 -3 -2 70

Q4) Comfort: Consumers levels of agreement with the statement Comfort is the most important thing in a car
Q4 Definitely agree Tend to agree Neither agree nor disagree Tend to disagree Definitely disagree Final total Importance Rank 2 1 0 -1 -2 2003 (%) 6 22 28 20 6 Overall score 12 22 0 -20 -12 2

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XVIII. Past and Present Campaigns for the Toyota Prius Figure 16: Previous Prius advertisement used by Toyota UK.

89

Figure 17: Current Campaign

90

XIX. Screen Shots of online request forms

Figure 18: Brochure Request

Figure 19: E Brochure Request

91

Figure 20: E-Newsletter

92

XX. Readership breakdown including rates. Daily National Papers Readership

Dailies Page, ROP, Full Colour NRS (Adults) Dec 05 - May 06 Men Women 35-44 45-54 55-64 65+ A B C1 Express 31,500.00 1,777,000 50 50 15 16 20 30 3 23 34 Daily Mail 47,124.00 5,312,000 45 55 16 18 21 28 5 25 35 Guardian 18,000.00 1,276,000 60 40 18 19 17 15 11 49 29 Independent 22,000.00 809,000 56 44 19 22 14 11 11 42 32 Telegraph 59,000.00 2,012,000 52 48 13 14 22 37 15 44 29 Times 25,900.00 1,892,000 57 43 18 16 18 19 14 46 29 Financial Times 61,200.00 347,000 71 29 30 20 13 8 17 49 26

Source: Meidatel.co.uk Sunday Papers

Sundays Page, ROP, Full Colour () NRS (Adults) Dec 05 - May 06 Men Women 35-44 45-54 55-64 65+ A B C1 Sunday Express 40,725.00 2,063,000 50 50 15 16 20 27 3 24 35 Mail on Sunday 51,000.00 6,136,000 46 54 19 19 20 21 4 27 34 Observer 22,000.00 1,478,000 55 45 21 17 16 12 10 48 29 Independent 22,000.00 826,000 54 46 23 13 17 8 10 40 28 Telegraph 42,000.00 1,896,000 54 46 14 15 19 33 13 40 32 Times 85,750.00 3,495,000 53 47 22 20 18 13 13 47 26

Source: Mediatel.co.uk

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XXI. Media Schedule National Newspapers Express Sunday Express Daily Mail Sunday Mail Guardian Observer Independent Independent on Sunday Telegraph Sunday Telegraph Times Sunday Times Financial Times Evening Standard TV Commercials ITV1 Channel 4 Billboards London National Bus Wrap DM Newsletter Retention Acquisition Corporate

Apr 4 x x xxx x x x xx x x x x x x x x 1

May 2 x 3 4 x x x x x xx x x xx x x xx xx xx x xx x x x x x xx x 1 x

June 2 3 x x xxx x x x x x x x x x 4 1

July 2 3 4 1

Aug 2 3 4 1

Sept 2 3 4 1

Oct 2 x x 3 4 1 2

Nov 3 4 1

Dec 2 3 4 x xxx 1 x 2

Jan 3 4

xxx x x x x x x xx x x x x x x x x x x x

x x x x x x x xx x x x x x xx x x x x x x x

x x x x x x x x

x x x xx x

xx x xx xx xx xx

x x

x x

x x

x x

x x

x x

x x

x x

x x

x x

x x

x x

x x

x x

x x

x x

x x x x x x x

x x x

x x x

x x x x x x x x x

x x x

x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x

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XXII. PR important dates

Date 7 - 8 February 2007 Event Hybrid Vehicle Technologies Symposium Seoul Motor Show 2007 - Worldwide launch to happen here 28th International Vienna Motor Symposium -European Launch CVT - HYBRID 2007 Yokohama, International Congress on Continuously Variable and Hybrid Transmissions Internal Combustion Engine: Performance, Fuel Economy and Emissions Location California, United States Seoul, Korea Organiser SAE International

6 - 15 April 2007

Organizing Committee for Seoul Motor Show VK

26 - 27 April 2007

Vienna, Austria

12 - 14 September 2007

Yokohama, Japan

JSAE

11 - 12 December 2007

London, United Kingdom

IMechE

PR Press Releases to be made after each of these events

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XXIII: Profit and Loss statement

Revenue Vehicles sales (avg. 22000 per unit) Operating margin (9.15%)

82,698,000 7,566,867

Expenditure Advertising Press Television Bus wraps Billboards Sales Promotion Prize Draw DVD Direct Mail 1st step Retention 2nd step Retention Acquisition Corporate Acquisition PR Total costs Campaign Operating profit

5,265,696 5,262,112 877,120 466,500

6,000 296,750

31,971 88,204 44,880 24,125 - 12,363,358 4,796,491

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References Books Grant, R. (2002): Contemporary Strategy Analysis, 4th Edition, Blackwell Haberberg, Adrian; Rieple, Alison (2001): The Strategic Management of Organisations; Great Britain: Prentice Hall, Financial Times; page 191

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http://www.autobytel.co.uk http://auto.consumerguide.com/Articles/ http://abcnews.go.com/WNT/Autos/story?id=1533901 http://www.bvrla.co.uk/public/The_BVRLA/What_is_the_BVRLA.cfm http://www.cfit.gov.uk/ http://www.clearchannel.co.uk/billboards/ratecards/national/ http://www.consumeraffairs.com/news04/2006/05/cr_gas_prices.html http://driving.timesonline.co.uk/article/0,,22749-1853984,00.html http://www.eco-logica.co.uk/DirtyfromCradletoGrave.pdf http://www.environmentaldefense.org/TailpipeTally/ http://www.gnn.gov.uk/environment/fullDetail.asp?ReleaseID=177217&NewsAreaID=2&Navigate dFromDepartment=False http://www.guardian.co.uk/cars/story/0,,1647254,00.html http://www.hm-treasury.gov.uk/media/20F/1D/bud06_ch7_161.pdf http://images.businessweek.com/ss/06/07/top_brands/index_01.htm?campaign_id=di4 http://www.itvsales.com/itv/export/download/pdf/1326v04_ITV_AdvertGuideFINI.pdf http://www.kgpauto.com/Initiatives/Diesel.htm http://mediatel.co.uk http://www.mises.org/story/2124 Where Would General Motors Be Without the United http://news.bbc.co.uk/2/hi/uk_news/northern_ireland/4249962.stm http://www.petrolprices.com http://www.soultek.com/clean_energy/hybrid_cars/consumer_concerns_of_hybrid_cars.htm http://www.superbrands.com/uk/ http://www.topgear.com Top Gear Survey 2005 http://www.toyota.co.jp/en/vision/philosophy/ Automobile Workers Union? by George Reisman http://usa.polk.com/News/LatestNews/2006_0131_pcas_3rdstudy.htm http://www.usnews.com/usnews/biztech/articles/060425/25ethanol_faq.htm?s_cid=rss:site1 http://www.vcacarfueldata.org.uk/information/cars-and-fuel-options.asp http://www.warc.com

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