STRATEGIC MARKETING MANAGEMENT

SUBMITTED TO: SUBMITTED BY:

Prof. Dilip Chandra Pranay Patvari -1828022
Nitin Kumar- 1827923
Aleena Babu- 1827934
Sanjana Prakash- 1827953
Varsha M- 1828058
Valued Customer and Value Proposition

1. How does the company define criteria to identify customers who are willing to pay for
solutions?
Local Motors, an Arizona-based car manufacturer is, by choice and strategy, a low volume
manufacturing company. The company is known for its USP of co-creation of automobiles.
The ideas are submitted online and the most voted idea for the car design goes into
production stage. The very first step in this whole process is submitting your very own
ideas, concepts and designs in a practical format. Local Motors invites the users to share
their ideas and designs how they would like the car to look, feel and perform. It also
encourages tinkering, which means though the contribution is open for the online
community to share. The price of the car is so high that it would be bought only by the
super-elite class of users for adding them into their collection of cars. For the super-elite
class users price is not likely to be a topic of concern because for them the value they get
is that they have a car that is totally customized to their needs and the fact that only 2000
units will be out in the market so it is like a limited edition, hence it is in fact a matter of
extreme pride to some. Keeping the niche target in mind, their plan is when a customer
walks into their store, all they have to do is to go up to a screen, choose one of nine or 10
unibodies, choose powertrains which they buy from other manufacturers, choose wheels
and tires and colors — and they will print it while the customer waits or by the next day
when the customer comes back. (Titus, 2018)

2. What is the primary value proposition to solution customers-increase revenue, lower total
cost, or reduce risk?
 Local Motors aims to target only a niche market and produce/sell just 2000 units before
retiring that model. Their focus is NOT to build a million units; instead their focus is
on an “economy of scope” instead of an economy of scale. Local Motors had spent $3
million on the car’s development, which is much less than what is spent on commercial
models by the major automakers. The benefits are therefore passed to the customers.
 Local Motors are innovative in the way they retain their customer loyalty, for example
if the customer wants to upgrade the hardware within a year then they would strip it
down and melt it and give the credit to put towards your next vehicle. The other option
 is if the customer comes back within a month then they can swap in a new battery
technology that has just comes out. Their focus is to integrate technology as quickly as
it comes to the market rather than waiting seven years in order to give an entirely
different experience to the consumer.
 The experience of walking into the factory and watching your car get customized right
in front of you is exceptional. For such an unique and unmatchable experience, people
will not hesitate in paying a higher price.
 It is worthwhile to note that Local Motors were profitable even with their very first car,
in terms of the variable costs. They were able to bring a vehicle to market at about
1/100th the cost and five times faster as they brought in the expertise from diverse
background.

3. Does the company offer customers various payment options such as pay per use, revenue,
or cost savings sharing?
Local Motors are innovative ad unique in the way they retain their customer loyalty. For
instance, if the customer wants to upgrade the hardware within a year then they would strip
it down and melt it and give the credit to put towards your next vehicle. The other option
is if the customer comes back within a month then they can swap in a new battery
technology that has just comes out.

4. Does the company guarantee customer outcomes instead of product performance?

Local Motors is a producer of vehicles that perceives the importance of co-creation
significantly. The company therefore allows the design of its own car for customers and
car lovers. The company will manufacture the model as its product, whichever has the
most votes. The impact of consumers and industry helps to efficiently and sustainably
improve the company's product. Yes, the company gives more importance to customers’
expectations. The company should often update to live up-to the industry standards.
5. Is the company product agnostic?
The CEO of the company says the company is moving towards power train agnostic
vehicles. All this will also rely on where regulators will enable customers to explore the
full potential of autonomous vehicles and with the new hands-off driving technology.

6. Does the integration make money off integration?

Most of the choices customers can make will depend on technology “We want to be able
to integrate state-of-the-art technologies such as LIDAR, artificial intelligence, and
sensors very quickly, so that our customers will continuously get the most up-to-date
technology in their vehicles. Local Motors wants to land their market prices in the range
of $12,000 to $60,000 when the cars launch in 2018. The price range is wide with the
lower end becoming a neighborhood truck and whereas the higher end being a very well-
configured and appointed highway-capable vehicle.

Solution Capabilities

1. Are the sales personnel capable of demonstrating consulting abilities, skills and deep
customer industry knowledge?
Yes, the sales personnel are capable of demonstrating consulting abilities, skills and deep
customer industry knowledge. Company uses 3D technology, virtual reality and augmented
reality emerging to help the executive and its customer to develop their own version of
cars. Now that huge development can be seen in the field of technology, it is actually
technically possible to design and customize and co-create absolutely anything in today’s
world. The employees of the company are trained to help the its customer to co-create cars
that would suit their requirement. Company has experts and other people who help
customers to build their own version of car. So, it’s definitely possible to design and build
our own cars. So far, this has remained largely confined to re-building the body of the cars,
or redesigning its interiors. Now we step beyond that.
2. Is the company capable of articulating customer’ total cost and operating economics?
Yes, the company is capable of articulating customer’ total cost and operating economics.
It is worthwhile to note that Local Motors were profitable even with their very first car, in
terms of the variable costs. They were able to bring a vehicle to market at about 1/100th the
cost and five times faster as they brought in the expertise from diverse background. The
capital costs got taken care of, by their 60th odd vehicle and that portends good signals for
the way ahead. Local Motors’ own first vehicle, the Rally Fighter, took just 18 months to
go from a 2D drawing to a vehicle ready for pick-up. That compares to the industry standard
of 3 to 5 years. The company wants to streamline this even further, with a goal of a 12-
month timeline. According to Justin Fishkin, Local Motors’ chief strategy officer, the Rally
Fighter was profitable around its 60th unit. He also estimated that a micro-factory costs an
average of $20 million to build, a fraction of the billions that go into opening traditional
auto plants. This itself shows that company is capable of articulating the company’s total
cost and operating economics as it was capable of breaking the industry standards and
deliver the goods within less time frame work.

3. Does the company have access to the best possible customer information/knowledge bank?
Yes, the company have access to the best possible customer information as it focuses on a
niche segment who are capable and willing to pay a big amount for a something out of box
or unique. As the product is unique and targeted to a niche segment Local Motors
incorporates a combination of submitting, tinkering and co-designing type of co-creation,
which is something not being offered by any other company. Normally companies operating
in automobile industry consider themselves as transporting company but Local Motors are
more than a transporting company. So, we can say that company by offering something that
is required by the elite class and doing it in such a manner that it was able to make profit in
such less time has good access to its customers information and know what are their
requirements.
4. Is the company focused on developing modular products that interface easily with its
competitors’ products?
The major competitors of Local Motors are May Mobility, Next Future Transportation,
Auro Robotics, EasyMile and NAVYA. Though much information on developing
modular products which would interface with its competitors’ products is not found, one
major finding is that two of its French competitors will not be subjected to the additional
costs of tariff and this could undercut LM in the marketplace i.e., this would slow down
the production.

5. Does the company have the capability of guaranteeing system performance at customer
sites?
Local Motor’s Rally fighter is the first production vehicle to be designed through crowd
sourcing and its components are procured from General Motors, Volkswagen and Honda.
Therefore, the components are easily available, assured with good quality and easily
serviceable. Though the company draws inputs from the global community the final
decision on the feasibility of the production of any car is taken by the company itself,
hence the risk is shared but then it is equally mitigated because of quality procurement.

6. Has the company developed effective tools to assess customer value?

The business of Local Motors engages with customers in a process called co-creation,
where the customer co-creates with the business in order to be able to come up with ideas
quickly. That process generates a large set of differentiated ideas. As part of the process,
this online community of people are informed that when solving a problem gives LM a
greater chance of solving a problem and developing individual solutions.
Therefore, starting from the manufacturing of the car till its sale, there is complete
engagement with the customer and if the company uses the community’s design then they
get a royalty for every car that is sold. Hence, the business model of LM itself helps to
assess customer value as everyone’s knowledge and experience is counted.