Business Case - TVM - 2007 - Toyota

Toyota
Marketing Strategy for

Plug-in Hybrids
TEAM COCA (GROUP

10)
BERKELEY COLUMBIA MBA
Ron Berthiaume
MARKETING STRATEGY CASE
Bhavik Joshi
PROFESSOR NOEL CAPON
Erin Longdo
SUMMER 2007
Varad Seshadri
Table of Contents
Page
The individuals in
connection with this
Executive Summary
report are:
Preamble: Toyota Plug-in Hybrids 2
Berkeley-Columbia MBA
Headlines 7
Summer 2007
Situational Awareness
TEAM COCA (Group 10): Market overview 25
Ron Berthiaume Customer purchase decision 32

Bhavik Joshi
Erin Longdo Competition and complimenters 46
Varad Seshadri
Market Strategy
Market segmentation 66
Branding strategy 99
Implementation Plan
Marketing offer 106
Distribution plan 124
Monitoring the firm’s performance 139
1
Executive Summary
Preamble: Business Case for this Marketing Strategy project
Team COCA will be taking on the role of Toyota’s Marketing Executives. The team is tasked with formulating a marketing strategy before it commits to
the commercialization of Plug in Hybrid Electric Vehicles. Team COCA will use the framework of The Virgin Marketer and develop a market strategy to
capture the market share in the Plug in Hybrid Electric Vehicle (referred to as PHEV in the rest of the document). Team COCA has decided to put
strategic emphasis on the following areas:
Technology recommendations
Market segments to pursue
Sales channel changes
Federal and State Incentives for PHEV buyers
Licensing technology
Toyota has only recently announced its Prius PHEV Pilot program in Japan, U.S. and Europe, starting with eight vehicles for road-testing. Masatami
Takimoto, Toyota’s EVP for Power Train Development agrees on environmental and economic benefits; says batteries need further development
before a commitment to mass-production can be made. The push for hydrogen fuel cell technology seems to be far greater. GM has announced the
launch of their first PHEV, the Saturn VUE PHEV in 2009, followed by the Chevy Volt in 2010. GM has awarded two advanced battery development
contracts. Ford has announced a strategic partnership with Southern California Edison. Honda is also forging ahead with a limited introduction of the
Honda FCX in 2008. Fuel-cell technology is not expected to be commercialized until approximately 2018. Toyota acknowledges the race to be first –
and to do it best.
As the current leader in Hybrid Electric Vehicles (HEV), Toyota is well positioned to increase its market share rather than merely maintain it. For this
Toyota needs to continue to innovate. As hybrid electric drive trains become standard over the next decade, we believe that PHEV’s will provide the
solution to several pressing issues at hand: energy independence, global warming and smart energy grids to name a few. As the current leader in
clean transportation and an innovator in the automotive industry, we (Toyota) must decide how to proceed to maintain and grow our leadership
position in this rapidly expanding segment.
Key contacts at the Company: Bill Reinert, National Manager, Adv. Technologies Group
Steve Sturm, VP Toyota Motor Sales
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Executive Summary
Preamble: Introduction to Toyota Motors
Company overview Company overview (cont.)
World HQ: Toyota
City, Japan Founded in 1933, Toyota Motor Corporation is one of the Toyota is introducing environmentally sensitive transportation
world's leading auto manufacturers. Toyota Motors North solutions for each market world wide. In Brazil, Toyota is
America is comprised of the following divisions: introducing Flex-fuel vehicles that run on up to 100% bio-
Toyota is the ethanol. In the US market, Toyota is considering flex-fuel and
Scion
second best- Hydrogen fuel cell vehicles. For Europe, Toyota is developing
selling brand in Toyota new bio-diesel fuel technology that reduces Nitrous Oxide
the U.S. Lexus emissions 50% below EURO IV regulations. Toyota is also
seeking innovations in battery technology that can raise energy
Powered by record sales of hybrid vehicles in 2006,
capacity and output while reducing size and weight.
Toyota is a global Toyota recently became the second best-selling brand in
leader in hybrid the U.S. The Prius hybrid posted all-time best-ever monthly
sales with 19,156 units sold in March 2007, an increase of
vehicle 133.2 percent over March 2006. The Prius hybrid is a Top
technology with a Pick in the "green" car category for the fourth year in a row.
goal to introduce Record U.S. sales of Toyota and Lexus hybrids have now
hybrid drive trains topped the million mark. Toyota will offer a hybrid option on
across its vehicle its entire lineup of cars, trucks, and SUVs by 2010 and
line up by 2020. expects the cumulative global hybrid vehicle sales to cross
the million vehicles mark.
Exchange: NYSE | In 2004 Toyota licensed its Hybrid technology to Ford
Ticker: TM Motor Company followed by Nissan Motor Corporation in
2006. Ford is currently offering this Hybrid technology in the
Escape SUV and has plans to offer it in the Fusion sedan.
2006 Revenue Nissan offers it for the 2007 Altima. This will ultimately lower
$196.55 Billion. the cost of Toyota’s hybrids to the consumer, further
cementing Toyota’s dominance in the sector.
Market
Capitalization:
$227.95 Billion
Hybrid Vehicle Sales in the U.S., 1999-2006
Employees:
299,394
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Executive Summary
Preamble: Introduction to Toyota Motor Corporation
Toyota’s phenomenal
success in the Hybrid Electric
Vehicle (HEV) market (76%
market share) has had a “halo
effect” on its overall US
Market Share growth.
US Market share of the Big

Three auto makers has been
significantly eroded (with
Ford and Chrysler being hit
the hardest) by the Japanese
auto makers.
Toyota is # 1 auto maker in

the world by revenue (USD
$212.39 billion), production
(first half 2007: 4.72 million)
and profit ($15.09 billion).
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Executive Summary
Preamble: Introduction to Product/Market area
A plug-in hybrid electric vehicle (PHEV) is a hybrid vehicle with batteries that can be recharged by connecting a plug to an electrical power source.
Plug-in hybrids have characteristics of both conventional hybrid electric vehicles and of battery electric vehicles. PHEVs can also be commercial
passenger vans, utility trucks, school buses, scooters, and military vehicles. PHEVs are sometimes called grid-connected hybrids, gas-optional
hybrids or GO-HEVs.
As of 2007, the cost for electricity to power plug-in hybrids during all-electric operation in California has been estimated as less than one fourth the cost of
gasoline. In comparison to conventional vehicles, PHEVs can help reduce air pollution and dependence on petroleum, and lessen greenhouse gas
emissions that cause global warming. Plug-in hybrids use no fossil fuel during their all-electric range if their batteries are charged from renewable energy
sources. Other benefits include improved national energy security, fewer fill-ups at the filling station, the convenience of home recharging, opportunities
to provide emergency backup power in the home, and vehicle to grid applications.
Toyota has said it plans to migrate to lithium-ion batteries in future hybrid models, but not in the next-generation Prius, expected in fall 2008. Lithium-ion
batteries are expected to significantly improve fuel economy, and have a lower weight-to-energy ratio, but cost more to produce, and face safety
concerns due to high operating temperatures.
On November 29, 2006 GM announced plans to introduce a production plug-in hybrid version of Saturn's Greenline Vue SUV with an all-electric range of
10 mi (16 km. The model's sale is anticipated by fall 2009, and GM announced in January, 2007 that contracts had been awarded to two companies to
design and test lithium-ion batteries for the vehicle. GM has said that they plan on introducing plug-in and other hybrids "for the next several years."
In January 2007, GM unveiled the Chevrolet Volt, which is expected to initially feature a plug-in capable, battery-dominant series hybrid architecture
which they are calling E-Flex. Future E-Flex plug-in hybrid vehicles may use gasoline, diesel, or hydrogen fuel cell power to supplement the vehicle's
battery. General Motors envisions an eventual progression of E-Flex vehicles from plug-in hybrids to pure electric vehicles, as battery technology
improves. General Motors presented the Volt as a PHEV-40 that starts its engine when 40% of the battery charge
remains, and which can achieve a fuel economy of 50 mpg–U.S. (4.7 L/100 km / 60.1 mpg–imp),
even if the vehicle is not plugged in.
PHEVs typically require deeper battery charging and discharging cycles than conventional hybrids.
Because the number of full cycles influences battery lifetime, battery life may be less than in traditional
HEVs which do not deplete their batteries as deeply. However, some authors argue that PHEVs will
soon become standard in the automobile industry. Design issues and trade-offs concerning battery life,
capacity, heat dissipation, weight, costs, and safety need to be solved. Advanced battery technology is
under development, promising greater energy densities by both mass and volume, and battery life
expectancy is expected to increase.
Interest in plug-in hybrids increased in 2006 to such a level that the architecture was included as an area of research in President George W. Bush's
advanced energy initiative and mentioned in his 2007 State of the Union Address. After hearing an explanation of PHEVs, 49% of consumers surveyed in
2006 said they would consider purchasing one. That is about the same level of interest as standard hybrid technology.
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Executive Summary
Preamble: Introduction to Toyota Motors
Historical Financial Results for Toyota

All numbers in thousands of $ Mar-07 Mar-06 Mar-05
Sales Revenues 202,864,000 179,083,000 172,749,000
COGS 162,883,000 144,249,000 138,469,000
Gross Profit 39,981,000 34,834,000 34,280,000
Expenses 21,017,000 18,844,000 18,709,000
Operating Income 18,964,000 15,990,000 15,571,000
Net Income 13,927,000 11,681,000 10,907,000
Stock Price (Average Yearly) $110 $104 $75
Assets 275,941,000 244,587,000 226,604,000
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Executive Summary
Headlines
Chapter 1: • The Halo effect created by the Prius HEV has provided a perfect launch pad for Toyota to introduce a
Introduction to PHEV. However, at this time there seems to be serious competition on the horizon from GM. The Chevy
managing
marketing
Volt, with its stunning looks and E-Flex platform is poised to capture several market segments.
• Traditionally, Toyota has not been the leader in innovation. However, they’ve had tremendous success at
being a very fast second. They outdid Honda (who launched the first hybrid car) in the hybrid vehicle
market with Honda “pulling the plug” on their Accord hybrid vehicles.
• The PESTLE forces in play since early 2006 is creating a perfect wave that Toyota can ride successfully if
it chooses to.
• Toyota did show initial reluctance in responding to PHEV advocates. This did create negative press for
Toyota but not enough to create any permanent damages to the goodwill it enjoys in the market.
• Jim Press was recently appointed president of Toyota Motor North America, the first non-Japanese to hold
the post. Changes such as these do indicate that Toyota is serious about change from the top down.
• Toyota values its customers in a number of different ways. First, it emphasizes product quality It strives to
create a perception with the customer that buying a Toyota ,whether it is a Lexus or a Corolla, will offer
Chapter 2: The quality and dependability. Second, it measures a customer satisfaction index within the organization as a
value of customers continuous metric. Some compensation aspects of the employees are tied to this measure.
and optimizing
shareholder value • Toyota relies on its dealer networks to sell these cars and also to do service. To that end, they ensure
dealers are sufficiently trained and can deliver excellent service to the customers.
• The customer retention rate is close to 90% for Toyota, a significantly high percentage compared to its
American counterparts.
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Executive summary
Headlines (2)
Chapter 3: Market The overall product class that we are dealing with in our case is the automotive market with the product form
insight being the plug-in hybrid market. Our further refined product form upon which our marketing case is based the
plug-in hybrid market. The base product form that we are focused on within are the Pioneer, Showboats,
Laggers and Fleet segments.
Key industry forces and characteristics include:
• Market is relatively in early growth, with Toyota and GM having big aspirations. Other direct competitors
include Honda and Nissan.
• Non-direct competitors include pure Electric vehicle manufactures (EV) such as Tesla Motors and Zap
Cars.
• Indirect competitors include mass transit, telecommuting options, Car pooling, higher vehicle efficiency
from auto makers
• As competition gets aggressive, brands will simplify purchasing choice/decisions for consumers and
Toyota will be having its own brand to market plug-in hybrids.
• Lithium Ion batteries are a key to plug-in hybrids and the improvement of technology will decrease the
battery price and hence the plug-in hybrid price
Key political, environmental, socio-cultural, technological, legal and environmental (PESTLE)
considerations include:
• The price of gasoline, driven by supply concerns and increasing demand will serve to increase the
attractiveness of vehicle options like plug in hybrids that are less dependent on gasoline.
• Environmental benefits of plug in hybrids become more significant selling features as public awareness of
the seriousness of the issues at stake increases and the positive effects on these issues by plug in hybrids
become more widely known.
• Governmental incentives such as tax credits/usage of car pool lanes for plug-in hybrid owners will serve as
attractors for the plug-in hybrid customers
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Executive summary
Headlines (3)
Chapter 4: • There are different kinds of Plug In Hybrid customers and each distinct type is motivated by different
Customer insight desires.
• Different aspects of the Plug in Hybrid product appeal to different customers. This insight must drive both
product development and marketing communications..
• Three primary subsets of benefits are presented by the Plug In Hybrid:
• Environmentalism and geo-political concerns (Doing good for the ecosystem and the country)
• Fashion and vanity (Not just doing good, but looking good and appearing to do good)
• Economics (vehicle operating costs)
• The benefits that appeal to Plug in Hybrid customers are valuable enough to merit a premium selling price
such that governmental and commercial subsidies that exist can be shared both by the purchaser and
Toyota PHEV division. The economic value provided by the Plug in Hybrid (tax credits and lower gasoline
consumption) are approximately the same as the current purchase price premium. When Plug in Hybrids
get more widely accepted and manufacturing economies of scale manifest, Toyota will enjoy additional
margins and have the ability to pass some of these savings on as a response to competitive pricing
pressures in the future.
Chapter 5: Insight • The competitive landscape for PHEVs is quite involved and very dynamic. Competitors range from the
about competitors most direct to the very remotely related. Examples include
and complementers
• Other potential manufacturers of PHEVs: GM and Honda
• Traditional hybrids: Toyota, Honda, Ford
• Manufacturers of other alternative energy vehicles: Tesla, BMW, Mercedes
• Market analysis also indicates that the role of the battery developers and suppliers is critical to the success
of the overall technology. Gaining access to the IP or successfully pairing with a key supplier could provide
a competitive advantage.
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Executive summary
Headlines (4)
Chapter 6: • The starting point of our marketing research has been the rapid growth of the hybrid vehicles market:
Marketing research
• The geo-political instability, increasing demand for crude oil from China and India, the declining supply
of cheap oil and increasing impacts of Global warming have created forces which will keep oil from
dropping down below $30 per barrel.
• Battery technology is improving at the rate of 8% per year. This means the batteries can store 8% more
energy within the same physical dimensions. This played a significant role in our strategy to pursue
PHEV with the larger Lithium Ion batteries rather than the small format Nickel Metal Hydride batteries
in the current hybrids.
• The US Senate increased the automobile fuel economy standards to 35 miles per gallon, the first
significant boost demanded of automakers in nearly 20 years. In his State of the Union Address, the
President announced a "Twenty in Ten" goal to reduce U.S. gasoline consumption by 20 percent over
the next 10 years. California is leading the fight against global warming and setting an example for the
rest of the world by passing AB 32 into law. California has led the nation in passing Assembly Bills into
laws (AB1492 and AB32) to reduce Green House Gases (GHG) from mobile sources (vehicles) and
stationary source (power plants, oil refineries) and develop a mandatory reporting system for these
emissions. Such legal forces mean that every automaker will have to find innovative ways to improve
the fuel efficiency of its entire vehicle line up.
• California is the most populous state in the US. It also helps that the most number of hybrid vehicles
sold in the nation are in California. The initial launch of the Toyota PHEV will be targeted in California.
Toyota is set to send two Prius PHEV’s in the fall of 2007 for road tests in Northern and Southern
California.
• We used available research data for our pricing models – a $4000 premium for PHEVs to be offset by
Federal and State tax rebates until the batteries get cheaper with mass adoption.
• International Investment managers Alliance Bernstein projects that by 2030, hybrids and PHEVs could
be 85% of new car sales. An end to business as usual because of higher fuel prices, carbon caps or
taxes, employee benefits, government incentives. PHEVs will become the dominant platform for MOST
automobiles, building on PHEVs simple concept: power local travel electrically from an ever-greener
grid, and evolve the range extender fuel to increasingly renewable sources.
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Executive summary
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Chapter 7: • Toyota PHEV will experience rapid growth by leveraging the success of the Prius hybrids.
Determine and
recommend which • Existing Hybrid customers will be targeted for “upgrade” in their next car purchase.
markets to address
• Pioneering Test product roll out will begin in Japan with the US and EU market rollouts following
• Partnerships with municipalities, large employers, electric utility companies and lobbying groups will be
key to creating the buzz initially, and to developing the longer – term service offering.
• Internal growth of R&D will be supplemented with strategic acquisition of businesses that have
technologies that can extend Toyota PHEV’s comparative advantages.
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Executive summary
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Chapter 8: Market • Eleven market segments were identified using three basic criteria: Hybrid-ownership, Income, and
segmentation and Environmental Benefit/Appearance. Several other criteria were considered but none of them offered
targeting
enough discrimination to be used in the high-level segmentation. The high-level segments we identified
each need to be further refined - particularly when designing the advertising campaign. (The same set of
product features may be perfect for more than one segment but the VALUE they derive can be totally
different.)
• Determining which segments to target was based on evaluation of both the segments and Toyota. Market
attractiveness was measured based on the following criteria: size (# of vehicles), wealth, growth, degree of
influence on other segments, and the ability to identify a segment’s members.
• Business strengths were analyzed for each individual segment because different segments call on
different strengths of the company. For example, providing high quality service is critical for Fleets while
flexing our engineering muscles is critical for success in the Pioneer segment.
Chapter 9: Market • Team COCA identified 11 market segments but will focus their strategy on four strategic segments aimed
strategy – the at establishing an early market share lead over competition: (Pioneers, Showboats, Laggers, Fleet
integrator
Vehicles)
• Major shift in strategy from Hybrid vehicles include:
• The PHEV has to look different. Pioneers, Laggers and Showboats want others to notice at a glance
that they are driving a PHEV and not “just another hybrid”. We call this the product offering - Sparky.
For fleet vehicles, a Plug in version of the Prius will suffice. We call it Prius Plus.
• Toyota PHEV will sport a Series-Parallel combination drive train offering Flex fuel option. PHEV plus
Ethanol will provide the “biggest bang for the buck” to reduce gasoline consumption and emissions.
Toyota will need to move on to Li-Ion batteries.
• A Lexus version (Sparkilicious) of the PHEV will be launched a year after Sparky. This will compete
with luxury vehicles in the $40,000 - $55,000 price range.
• The positioning statements made for each target segment reflect the focus as expressed above. Specific
and different actions will be taken for each market segment in terms of Product, Promotion, Distribution,
Service, Price and Functional Support.
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Executive summary
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Chapter 10: •Toyota will be playing in a market that is in the early growth stages for plug-in hybrids.
Managing through
the life cycle •The strategic option for Toyota is to target niche segments and to add benefits to satisfy specific types of
customers in the market, while at the same time focusing on the quality and desirability.
•Toyota will focus its efforts in Showboats, Laggers, Pioneers, and Fleet segments. The objectives are
different for each market segment:
• For the high income lifestyle customers (Showboats & Laggers) the intent is to generate profits and
increase the revenues.
• For the Pioneers , who are environmentally conscious and want to be perceived as cool. The intent is
to expand the market share and the brand awareness.
• For the Fleet, the intent is to target big corporations who care about reducing their operating costs and
a go-green” approach.
Chapter 11: •Toyota plug-in hybrid branding statement focuses on owning a fashionable and dependable car more
Managing brands prominently than on cost-savings in gasoline. Toyota will be marketing the plug-in hybrids under a different
brand and will monitor disparity between what Toyota sees its image to be and the reaction from customers.
•Toyota will take advantage of the positive associations of the customers with its Prius brand and will suggest
plug-in hybrids are even more of the same.
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Chapters 12 and 13: • The definition of the product line is critical to Toyota PHEV’s success. By managing three distinctly
Managing the different product offerings, Toyota PHEV will capture different customers seeking different benefits.
product line
• The growth / market share interaction will drive the timing and resource allocation of the marketing effort
• Developing the Prius Plus product for fleets
• Developing the Sparkilicious (Lexus brand) product for the upscale “Showboats” segment
• Developing the Sparky product with broader appeal
• Toyota PHEV is classified as an Interactor, with a high customer focus and high innovation focus. Toyota
has demonstrated both a knack for innovation and for anticipating and satisfying customer needs.
Customer feedback, new product development, and technological investment will drive the product to
consistently innovate and provide functionality as soon as technology allows.
• New product development, using the Idea Generator to identify product enhancements and modifications,
will be a primary focus. Creative thinking about applications that complement customer desires will be
sought and rewarded.
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Chapter 14: The marketing communications planning for PHEV vehicles at Toyota is quite involved and sophisticated.
Integrated Toyota will be launching at least 3 vehicles in this overall form in the next 4-5 years - each offering dealing
marketing
communications
with a specific segment at a particular moment in time.
Prius Plus for Fleet and some Pioneers
Sparky for Pioneers and some Laggers
Sparkilicious for Showboats and some Laggers.
In each segment, communications will be targeted at various groups in various stages of the product life
cycle.
Some of the earliest targets for Toyota will be Pioneers – the early adopters in the traditional hybrid
market. Following on from this there will be additional product launches targeted at Laggers and
Showboats. In all cases there is a phased marketing communications budget with different primary targets.
For example, in the Fleet segment, it is imperative to have properly trained salespeople to deal with Fleet
Managers and their concerns. This internal salesforce is one important target of communications.
In other segments, the consumer is the most important target for communication. This is true for Laggers
and Showboats, although we use Showboats as the primary example in this write-up.
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Chapter 15: Non- • The overall goal in each market segment is to raise brand awareness and increase sales. The creative
personal brief is focused on the Showboat segment as we believe that this is the most challenging segment to
communications
attract.
• Toyota will ultimately spend millions of dollars in the various stages of PHEV product launches and
virtually all media outlets will be utilized in some form or another.
• Two separate campaign ideas are presented. Royalty and Passing the Pump. Although both are initially
positioned for the Showboat Luxury segment, only the royalty campaign is suitable. Passing the Pump is
highly adaptable to the Laggers segment however and represents a promising campaign for Sparky.
• Showboat ads are targeted to TV programs and magazines of interest to this segment as well as several
other media classes and vehicles.
• The integrated campaign for each segment will include a ramping up period, a launch period and finally a
maintenance/sales period. The ramping up period can begin anywhere from 6 months prior to launch to a
year or more before product introduction.
Chapter 16: • The objective is not necessarily to gain the first mover’s advantage, but to be a fast second and then gain
Directing and market share with a superior line of products that have a real economic and environmental value for the
managing the field
sales effort
customer.
• The Toyota PHEV product line must be able to gain a 70% market share of Pioneers within a year from
launch. The Lexus PHEV product line must be able to gain 20% market share of Showboat by 2012.
• In terms of sales force organization, the recommended change is to add a new e-commerce channel
similar to that employed by Tesla Motors to sell the PHEVs directly from the Toyota web site with pickup
scheduled from local dealerships.
• We recommend having more women in the sales force at car dealerships:
• The entire sales force needs to be trained to act as “myth busters” to dispel common myths regarding
battery life, safety, residual cost, weight etc.
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Chapter 17: • Toyota’s distribution systems are one of the best in the auto industry. Team COCA does not recommend
Distribution any changes.
decisions
• Toyota should keep supply in check to create an pent up demand.
Chapters 18: • Toyota enjoys a strong customer service infrastructure and distribution channel including both on stage
Managing services, (dealerships, auto show presence) and off stage (service departments, financing offices).
customer service
and customer • Training in the particularities of the Plug in hybrid product offering and customer benefits will be the key
relationship change to the existing infrastructure.
management
• The three primary gateways to Toyota PHEV’s customers are
• Toyota.com
• Toyota’s 800 and local dealership telephone numbers
• Toyota dealerships (walk-in/ drive–in)
Chapter 19: • Toyota PHEV’s price / service positioning is closer to the “fair value line” than either competitor.
Managing price and
value • As the dominant player, Toyota should set pricing and not follow competitors. Toyota PHEVs will enjoy a
premium value in the marketplace, and as such, price competition can be avoided for the intermediate
future.
• Brand awareness is our first goal, then market share growth. All the while the quality (cutting edge) image
must be maintained in order to remain in the dominant position relative to the competition.
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Chapter 20: •Toyota plug-in hybrid division's mission statement states: "Toyota will be the industry leader in plug in
Ensuring the hybrids, leveraging the successes of Toyota’s hybrid vehicle line-up. Continuous improvement and
marketing offer is
implemented as
technological innovation will be the means by which we achieve the goal”.
planned •The marketing function effectively permeates the entire company, thereby crossing traditional functional or
organizational lines. We have a well established marketing and sales organization but Toyota should develop
a think global, act local policy and to that effect recruit top talent locally and provide them with decision
making powers instead of having the control in Japan. This will allow Toyota to expand faster in the US plug-
in hybrid market.
•Additional systems and processes should be developed as the company progresses through it’s growth
stages in the plug-in hybrid market. For example, integrating battery suppliers in the supply chain ( “hard
system”). This will aid the company in integrating "Just in Time" inventory control for battery and accessories.
Toyota should invest in improvements in battery, charging, and metering technologies. Patenting these
technological improvements will serve to create competitive advantages.
•Toyota through its dealership network should assist the consumers in simplifying the federal and state tax
credit/ incentives in buying a plug-in hybrid.
Chapter 21: •Toyota is a well established company and has rigorous monitoring systems and processes in place. Toyota
Monitoring and also has launched several new products over the years, including Prius and can leverage the lessons learned
controlling firm
performance and
in establishing controls for plug-in hybrids. Many of the suggested monitors include additions to existing
firm functioning processes or best practices or benchmarks against Toyota's other launches that can be put in place for plug-
in hybrids. We also will leverage existing systems to measure customer profitability in addition to product
profitability.
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SITUATIONAL AWARENESS
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1A.2 COLOR – Marketing orientation of the firm
A. THE PLANNING SYSTEM
A.1 Objective setting
Our objectives are set with a predominantly internal focus Toyota maintains a strong external focus in setting objectives
A.2 Planning and budgeting

Our plans comprise largely numerical budgets Toyota budgets are a balance of quality and quantity.
A.3 Gathering market information

We pay little attention to customer/competitor data gathering Toyota employs a holistic approach into customer/competitor
and analysis data gathering and analysis
A.4 Sales Forecasting

We do a terrible job of forecasting sales volume Toyota does a good job of forecasting sales volume
A.5 Information systems

We develop information systems to reduce costs and increase Toyota is always looking to improve efficiencies and cut costs
operating efficiency by employing IT solutions.
B. DEFINING THE MARKET ARENA

B.1 Attitude toward the “rules of the game”
We accept the rulings made by various legal and regulatory Being a Japanese company, Toyota does not have the lobbying
bodies power exercised by rival US automakers.
B.2 Attitude toward regulation
We actively dislike all forms of regulation The Big 3 US automakers sued the state of California in late
1990’s for its stringent emission regulations, whereas Toyota
started working on its Prius.
B.3 Competitive View
We believe our competition comprises firms attempting to meet Toyota plays in an extremely competitive market globally.
the same customer needs and wants as ourselves
C. TREATMENT OF CUSTOMERS
C.1 Attitude toward customer service
Having to deliver customer service is a necessary evil Toyota strives for the best customer experience as it builds
customer lifetime value and customer retention, both of which
tie to the bottom line.
C.2 Attitude toward product/service defects
We believe in “buyer beware” Toyota Quality is set as the industry benchmark.
C.3 Allocation under scarcity

When we have supply shortages, we use standard allocation Toyota make strategic allocation decisions when faced with
formulae to allocate our capacity steel shortages a few years ago.
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1A.2 COLOR – Marketing orientation of the firm (2)
D. MARKETING SPENDING
D.1 Attitude toward marketing expenditures
When profits are under pressure, marketing budgets Toyota continues to prove that good products backed by
are the first to be cut solid marketing has improved their bottom line.
D.2 Response to shortfalls

When we are under financial pressure, we cut budgets Financial pressure or not, Toyota strives to carve out
by the same percent across the board efficiencies in its operations. Pioneering the Just in Time
inventory is an example.
D.3 Response to recession

In recessionary times, we cut our marketing budgets In recessionary times, Toyota will increase or hold firm
marketing budgets.
E. PRODUCT LINE DECISIONS
E.1 Approach to product development

We have a haphazard approach to new product Toyota has the shortest concept to production
development timeframes in the auto industry. They use state of the art
CAD/robotics tools to achieve this.
E.2 Product line breadth

Our product line is misbalanced (too narrow or too Toyota has a full lineup of 21 vehicles to address every
broad) market segment.
F. COST TO THE CUSTOMER
F.1 Approach to setting prices

We set prices on a cost-plus or target-return basis The auto industry is highly competitive. Toyota brand
value allows it to enjoy higher margins that other US
automakers.
F.2 Credit extension

Our credit policy is rigidly applied regardless of Toyota uses its credit policy for strategic accounts.
customer
G. BUSINESS ORGANIZATION
Our organization structure is characterized by Though Toyota is not run like traditional US companies,
functional silos it places high value on cross-functional integration
21
1B.1 Toyota’s approach to marketing
Organizational survival is the major firm objective 7 Shareholder value is the major firm objective
Accounting profit is critical 7 Shareholder value is critical
Product markets are pre-eminent 2 Capital markets are pre-eminent
Marketing is one of the functions 6 Marketing is a philosophy as well as a function

We manage the status quo 7 We manage change
Customers are a “necessary evil” 7 Customer are key assets
The supplier chooses options 5 The customer chooses options
Seller power dominates 7 Customer power dominates
Customer have non-discretionary purchasing power 5 Customers have discretionary purchasing power
The firm accepts all orders 1 The firm selects customers
A department markets 7 The firm markets
Marketing is a one-way process 7 Marketing is an interactive process
Analysis
Marketing is considered key to success for Toyota and every activity is oriented toward the customer.
Toyota actively listens to customers and is very effective in analyzing and using the information collected to define the future
actions, investments and overall marketing strategy.
Toyota has been well known to be an externally focused organization with relentless focus on its customers.
22
1B.2 Marketing imperatives and marketing principles
Marketing Imperatives Reason for Importance
Identify and Target Market Plug in hybrid is a new concept with high risks and high rewards. Identifying and targeting the right
Segments market segments will cement the road for future growth.
Toyota aims to capturing the PHEV market the way it has captured the hybrid markets. This has
allowed Toyota to make strong profits while the other US automakers suffer the worst losses in
Set Strategic Direction
history. Setting the strategic direction for the next generation of automobile technology will allow
Toyota to be the dominant player in this highly competitive market.
Toyota has strong competition from GM in the PHEV market. Toyota needs to differentiate itself
Design the Marketing Offer from GM and thus it is imperative to put together a fresh marketing offer for each segment
targeted.
Marketing Principles Reason for Importance

Brand Value is fundamental in the auto industry. Strong brand loyalty can fuel strong growth for
several years. Market research, direct interaction with the customers, surveys and most
Brand Value
importantly a thorough analysis of all the data collected will be key to the success of Toyota in the
PHEV market.
GM has secured the early movers advantage by showcasing a stunning Chevy Volt with an
impressive 40 mile all electric range. Toyota is road testing an 8 mile all electric range plug in Prius
Differential Advantage
in Japan and the US. Toyota PHEV will have to differentiate itself not only from the Chevy Volt but
from the highly successful Toyota Prius.
23
2A.1 Current customer lifetime value (LTV)
Toyota March 2007
Term Calculation Toyota’s Mar 2007 Notes
Financial Statements
have been used to
compute the LTV. From Mar 2007
Net Margin per customer m $13,327
Financial Data
Toyota enjoys a large
customer retention From LIBOR rate
Discount Rate d 8%
rate and with the (5.5%) plus 2.5%
introduction of plug-in 90% retention rate is
hybrids, we are Customer Retention Rate r 90% forecasted for plug-
expecting that it will in hybrids
continue to do so.
Margin Multiple r / (1 + d – r) 5
Customer Lifetime Value m * r / (1 + d – r) $66,635
Analysis
Toyota has built-in a customer satisfaction measure as part of the organization and monitors this very closely. In fact, some of
the compensation of the employees are tied to that measure to create accountability.
Toyota has been able to demonstrate a high customer retention rate (and subsequently less defection) because of its focus on
customers
Guidance
Toyota should constantly renew and measure customer profitability ( as opposed to product profitability), and should evaluate
deleting customers, growing the margins and increase the retention. As we can see increasing the retention from 90 to 95%
will increase the LTV of the customer
24
3A.1 Market Structure Analysis
2006 Passenger
vehicles = 49
Million Transportation
(Cars & light
trucks) Automotive
Vehicles
2006 US Hybrid
sales = 250,000
Passenger
Toyota/Lexus = Alternate Energy Vehicles Vehicles
190K US 49Million
Toyota/ Plug In Hybrids

Lexus
PHEV
25
3B.1 Product Lifecycle Analysis
Gasoline
Product Form Life Cycles

Hybrids
Plug-in Hybrids
Sales Volume
Fuel cell Hybrids
Time 2011
• Product Class is Automotive market, Product Form is the Plug-in Hybrids, Product Item is the Toyota Plug-in Hybrid
225,000 cars
Sales
Profit Margin
2011 Time
Toyota PHEV Projected Sales and Profit Margins
Profit Margins are greatest in early growth and drop in late growth/maturity.
26
3B.1 Product Lifecycle Analysis
Toyota’s Product Life Cycle and Environment Policy
27
3C.1 Industry forces analysis
Direct Industry “five forces” analysis

competitors
having lost the
Hybrid vehicle Industry force Important players Potential impact on firm or business unit
market to Toyota Current direct General Motors, Honda, Nissan The world's #1 car-maker is placing a big bet on
are now competitors electrification of transportation as a strategy for growth and
determined to prosperity. In doing so, it is first out of the gate in the great
plug-in car race of 2007. GM and Toyota have both said
capture the Plug
they want to be first on PHEVs.
in Hybrid market
Non-direct Tesla Motors, Zap Cars, Phoenix Motorcars, Pure Electric Vehicles (EVs) are available but at a
segment.
competitors BMW, Mercedes Benz significantly higher price point than Plug in Hybrid Electric
Vehicles (PHEVs); European luxury brands are bringing
Indirect cleaner burning diesel engines to the US.
competitors are Indirect competitors Increased efficiency of hybrid vehicles, Car Increased fuel efficiency on hybrid vehicles could lessen
mostly targeting pooling, Mass Transit, High density housing the incentive to turn to plug-in hybrid vehicles. Several
the high end near offices, tele-commuting cities are providing greater incentives for using public
sports car/ luxury transport, car pooling and telecommuting to improve worker
productivity. Daily commute times have been on the rise in
car market most metropolitan areas in the US since the past 10 year.
segment at a Suppliers Lithium Ion Battery manufacturers Energy density of Li-Ion batteries has been improving at 8-
much higher price 10% per year allowing automakers to increase the all
point and reduced electric range of PHEVs. Economies of scale would bring
all electric range. the price point of batteries and hence the PHEVs to that of
Hybrid Vehicles.
Buyers Consumers, rental car companies, corporate Increased interest in PHEVs will bring down the breakeven
and government fleet, for automakers speeding up commercialization of PHEVs
which would align with the current energy policy.
28
3D.1 PESTLE Analysis
Force Important factors Potential impact on firm or business unit
Political 20 in 10 The instability serves to make fuel efficiency a more significant
Hostile governments in Venezuela and Nigeria have decision factor for vehicle consumers, increasing the desirability of
increased US dependence on OPEC and Russian the plug in hybrid.
oil. Certain consumers may see purchasing a plug in hybrid as a move
Political instability in the Middle east including the that reduces dependence on foreign oil and one that serves to
Iraq war, Iranian tension and Israel / Palestine bolster US independence while reducing the bargaining power in
hostility adversarial governments.
Economic Steep increase in crude oil price. Gasoline prices The price of price of gasoline, driven by supply concerns and
have remained high. increasing demand will serve to increase the attractiveness of
Talks of gasoline tax in Washington vehicle options like plug in hybrids that are less dependent on
gasoline.
Global demand has exceeded global oil production.
China and India growing at 8-10% annually have put Governmental tax increases and tax credits on gasoline will
a huge demand on oil in the global market keeping increase the desirability of plug in hybrids
prices steady.
Socio-cultural Much greater awareness of environmental impact. This is a positive force for Toyota overall as the market leader in
An Inconvenient Truth has done nearly $42M in box hybrid technology. Consumers will become more and more aware
office and there is a great deal of celebrity effort of their ecological footprint in the coming years. Also, there will be
around reducing global warming. Driving a hybrid is increasing pressure to reduce that footprint and value associated
a status symbol in young Hollywood. with doing so.
Technological Over the next 3 years Toyota and Honda plan to: Increased sales of hybrid vehicles, competitive advantage over
Reduce the weight of hybrid power train by 50%.
late entrants, maintain leadership position.
Reduce the price of hybrid technology from $4000

Potential to mass market hybrid technology.
per vehicle to $1900. Position to innovate and build on the hybrid platform to keep
competition at bay.
Legal AB32, California ZEV Governmental initiatives to encourage low emission / high fuel
economy will serve as attractors for Plug In Hybrid customers.
Environmental Motion to allow drilling in Alaska’s Arctic National Environmental benefits of plug in hybrids become more significant
(physical) Wildlife Refuge was defeated. selling features as public awareness of the seriousness of the
Global warming report presented by the Association issues at stake increases and the positive effects on these issues
of scientists by plug in hybrids become more widely known.
29
3D.2 Summary of PESTLE forces
Planning horizon: 3 to 5 years

Force Important factors Summary impact of environmental force
Political US External oil dependence Customer desirability towards plug-in hybrids
Economic Talks of gasoline tax in Washington, increased demand Customer desirability towards plug-in hybrids
of oil due to emerging markets,
Socio-cultural Movies/Books on global-warming increased awareness of Customers will become increasingly aware of plug-in hybrids
going green
Technological Toyota plans to reduce price and weight of hybrids Potential mass market opportunity for Toyota PHEV
Legal AB3, California ZEV Governmental incentives increase customer desirability towards plug-in
hybrids
Environmental (physical) Arctic and Alaska drilling of oil Motion defeated
30
3D.3 and 3E.1 Challenges and opportunities from PESTLE forces
Overall the Challenges and opportunities from “PESTLE” analysis and

various PESTLE Market insight
forces represent a Planning horizon: 3 to 5 years
significant Challenges and key insights for Firm Opportunities and issues for Firm
opportunity for
PHEV technology. Competitors: Toyota is a target having taken a truly Legal pressures are increasing for car
The company that dominant lead in traditional hybrids. GM has been manufacturers to improve performance based on
moves quickly very public in their goal be first with PHEV emissions and to meet minimum mpg standards.
and strategically technology and dethrone Toyota.
to take advantage
The strong ethanol lobby may create noise and Several factors are likely to substantially increase
stands to win
confusion in the marketplace around which gasoline prices in the short and long term future.
substantial long-
technology is better from a political point of reducing This will drive consumer demand for very low mpg
term gains. US dependence on foreign oil. vehicles like the PHEV.
Technically, the challenge of batteries for PHEV is Culturally there is a growing emphasis on
crucial. Major advances are need to deliver on the environmentally conscious living. Positioning your
promise of the technology. product or service in-line with a green approach to
living can be seen in everything from cars, to farming
to insurance. This movement is so significant it has
even been parodied on Comedy Central’s South
Park.
Vehicle to grid is touted by public utilities as a major There will likely be tax incentives for purchasing
potential benefit of PHEV but the PHEVs as there were with hybrids, increasing the
overall economic value of the technology to the
consumer.
31
Figure 4A.1: Purchase Decision Map
Firm/Business Unit
Toyota
Influencer/Advisor
Organizations
Car Magazines, Reviews,

Car TV and radio shows
Other Firm Business Units Direct Customer Environmental Activist

Groups, Calcars.org
Dealerships, Fleet & Car Rental
GM, Honda,Tesla, Citroen companies
Governments and
government agencies
Utility companies (PGE)
Fuel cell proponents
End User
Consumers/Drivers
32
Figure 4B.1: The Purchase Decision Process
Purchase- Explanation Behavior of Customer Type

Decision Step
Recognition Decision to buy can be driven by several factors: Many customers have been waiting for an
1. Life change (student leaving for college for example) environmentally friendly car whose value proposition is
2. Current vehicle determined to be inadequate due to significant enough to get them to move. PHEV is it.
age, service…
3. High gas prices are shifting customer preference from
horsepower to mpg
4. Environmental concerns are also a factor – awareness
of carbon footprints and the impact of global warming
make very low or zero emissions more important as
well.
Information Customers seek complete feature lists and comparisons Nearly all customers do research online before visiting a
to other vehicles both internal and competitive. Most dealer for a test drive.
customers drive the vehicle or identical make/model
before deciding to purchase it.
Evaluation Customers evaluate alternatives based on vehicle Of these, PHEV customers will pay most attention to
specifications, finances, availability, service and technical/functional, finances and what the car says
emotional factors – “What does this car tell other people about them.
about me?”
Choice Customers are weighing technical & functional PHEV customers will take a longer term view on the
considerations, economic factors, and emotional economic issues and will give the environmental
responses in their purchase decision. benefits a greater weight. There will be a basic level of
technical and functional performance required. (For
example, a 2-seat vehicle is not appropriate.)
Post-purchase After the purchase, customers decide where to get the Most PHEV customers will be big brand advocates once
vehicle serviced and whether they would recommend it they have committed to a vehicle.
to friends.
33
Figure 4C.1: Roles in the Fleet Purchase Decision Process
Role in the Organization Perceptions of our

Name Decision Position/Degree of Firm versus “Hot Buttons”
Process Influence Competitors
Not very authoritative,

Fleet Manager Decider Toyota = Quality Service as well as low costs.
subject to influencers
F l e e t Influencer/ Moderate ability to Service

Administrator Toyota = Quality
Champion influence decision
Purchasing or P o t e n t i a l Biggest
potential Low purchase, operating and
other Financial Toyota = Quality
Manager Gatekeeper/ Spoiler influencer maintenance costs.
Toyota is the leader in

Corporate Social Influencer/ Environmental benefit and ability
Moderate ability to traditional hybrid
Responsibility to signal that commitment to
Oficer Champion influence decision technology and has the
consumers.
“greenest” reputation.
34
Figure 4C.2: The Multiple Person Purchase-Decision Process
Question Response
Will the purchase decision be For fleet customers, this decision will be made by a group that includes the Fleet
made by an individual or by a Manager, Fleet Administrator and Finance as a minimum. It might also include a
group? If a group, who do you representative from Corporate Social Responsibility.
expect to be involved?
What are the power relationships The power is mainly balanced between the Fleet office and Finance.
among the actors in the purchase
decision?
Do you expect coalitions of No major coalitions are expected. It will be a fairly objective decision. There is a small
individuals to form for this concern that there will be pressure to buy American particularly for the rental car
purchase decision? If yes, identify companies.
the coalitions for this purchase.
What mechanisms does the Purchase conflicts that can not be resolved within an implementation team are escalated
customer use to resolve conflicts up the chain of command.
in its purchase decisions?
Based on your answers to the Toyota needs to highlight its American manufacturing in its communications with fleet
foregoing questions, what actions customers. The PHEVs will be manufactured in the US – at both NUMMI and Tupelo.
should you consider taking?
35
4D.2: Consolidated List of Customer Benefits (needs)
Environmentalism / Politics
1. Desire to drive a car that is consistent with genuine concern for the environment.
2. Desire to protect the environment by emitting less pollution
3. Desire to reduce dependence on oil imports
Fashion / Vanity
1. Desire to be more attractive and “cool” by driving the “in” technology
2. Desire to be on the cutting edge of technology
3. Desire to set an example for others in family, peer group, and community
4. Desire to appear to be “green” “Conspicuous environmentalism”
Economics
1. Desire to spend less money on gasoline
Attributes/Benefits/Values Ladders follow for each major benefit category
36
4E.1.1: The Attributes/Benefits/Values Ladder - Environmentalism
Start from Attributes and work up the Start from Values and work down
ladder the ladder
Customer Values Better air quality and less pollution means that the Protect the environment that we all
environment as a whole is healthier which is good share. Cleaner is healthier
for everyone.
Benefit level 3 Means better air quality / less pollution
Benefit level 2 Less gasoline used means less emissions / smog
Benefit level 1 Less gasoline used means less oil exploration /

transportation / processing
Attributes PHEV uses less gasoline Less gasoline use protects the
environment
37
4E.1.2: The Attributes/Benefits/Values Ladder – Fashion / Vanity
ladder the ladder
Customer Values Desire to be admired, be liked, be respected. Appear to be in fashion, cool, and
sensitive to the environment
Benefit level 3 If people like and listen to me more, I’ll get to be a

leader and that will feel good
Benefit level 2 Increasing my attractiveness makes people like me

and listen to my opinions more
Benefit level 1 Driving a cool car increases my attractiveness
Attributes PHEV is aero-dynamic and conspicuously labeled Driving a hybrid is a form of

as hybrid “conspicuous environmentalism”
38
4E.1.3: The Attributes/Benefits/Values Ladder - Economics
ladder the ladder
Customer Values Don’t overspend when possible to avoid doing so. A penny saved is a penny earned
Benefit level 3 When Plug in hybrids become a reality, the

electricity arbitrage effect will further reduce
operating costs
Benefit level 2 Tax credits exist to offset the initial purchase price
Benefit level 1 Better gas mileage results in buying less gasoline

and in being less at the whim of the volatile gasoline
price market
Attributes PHEV consumes less fuel and costs less to operate Hybrid cars operating costs are lower
than traditional cars.
39
4F.1: Economic Value for the Customer (EVC)
Negative “Early adopter”

Differentiation Risk, Higher initial cost
Value
Value
Of meeting
Positive Total customers’ desires Total
Differentiation
Value Economic to save $, Economic
help the Value

Value
environment,
and appear
“Green”
Reference Value of
Value Non-hybrid
Same Model
40
4F.2: Brainstorm Sources of Positive Economic Value and Additional Costs for the
Customer
Sources of Positive Economic Value Sources of Additional Costs

Federal Tax credits for low emission vehicles Higher vehicle cost due to dealership markup
Several states also offer tax deductions for the purchase of plug-in hybrid
vehicles.
Reduced gasoline costs of ownership.
Projected higher resale values resulting from plug-in hybrids being “in”
fashion
Many states offer sales or excise tax exemptions for plug-in hybrid
vehicles
Many states offer carpool access for single occupants and special parking
permits.
Projected lower insurance costs for plug-in hybrids (true for traditional
hybrids)
41
4F.4.1: Calculation of Economic Value – Gasoline Consumption
42
4F.4.2: Calculation of Economic Value – Greenhouse Emissions
Greenhouse Gas Emissions National Mix vs California vs Renewables
Midsize Car Comparison
43
4F.3: Economic Value Table – Lexus RX 400h FWD example
Sources of Positive Economic Value Economic Sources of Additional Costs Additional

Value ($) Costs ($)
Tax credits for low emission vehicles $1,500 Higher vehicle cost from dealership $3,780
Reduced gasoline costs of ownership (PA) $780
Lower insurance costs (5-10% PA) $100
Many states offer sales or excise tax exemptions for
hybrid vehicles
Many states offer HOV access for single occupants and
special parking permits.
Higher resale values resulting from hybrids being “in”
fashion
Total – First year of ownership $2,380 Total $3,780
This example is based on 2007 Lexus RX 400h FWD conventional hybrid. As PHEVs are yet a concept
vehicle, no actual economic cost information is available. PHEV economics will be similar to conventional
hybrids.
44
4F.4: Calculation of Economic Value
Reference Value – Price of Competitive Product (Lexus RX 350 FWD – Non-hybrid) $37,400
Total of Positive Sources of Economic Value (Average ownership 3 years) $2,380 *3 = $7,140
Sum of Reference Value plus Positive Sources $44,540
Total Additional Costs -$3,780
Total Economic Value $40,760 (Actual RX400h (Hybrid) Price $41,180)
This example is based on 2007 Lexus RX 400h FWD conventional hybrid. As PHEVs are yet a concept
vehicle, no actual economic cost information is available. PHEV economics will be similar to
conventional hybrids.
45
Figure 5A.1 Overview of competitors and complementers
Competitors Complementers
Direct spectrum Indirect
Lithium Ion battery

Automakers manufacturers, Carbon
pursuing bio-diesel/ trading programs, Public
Automakers
cleaner diesel Utilities pushing for
pursuing Automakers Car pooling, Mass
vehicles Vehicle 2 Grid
commercializatio Automakers pursuing pursuing Electric Transit, High
(Mercedes Benz, technologies, President
Actual n of PHEVs Fuel Cell Vehicles Vehicles (EVs) density housing
BMW) Bush’s 20 in 10 energy
(GM, Nissan) (FCVs) (Honda) (Tesla, Phoenix, near offices, tele-
and traditional policy
Zap) commuting Environmental groups
hybrid
manufacturers (Calcars)
(Toyota, Honda)
Visionary
Daimler Chrysler Electric scooters
Vehicles
(Not clear whether Automakers pursuing EV imports (personal
(a series PHEV
Potential built in China to
program remains a PHEV fuel-cell (Venturi Fetish, transporters)
joint venture after concept cars (Ford) REVA, Think City) (Xtreme Scooters,
the US market
sale of Chrysler) Segway)
in 2009 )
Toyota will focus on two main competitors:

1) GM
2) Honda
46
Figure 5B.1a General Motors – Business System
Design Manufacturing Marketing Sales Services
E-flex power-train GM has partnerships Huge marketing Strategic Strong

makes the Volt with Li-ion battery budget with partnerships/stakes relationships with
adaptable to changing producers and will be presence at most in global markets – dealerships and
Cost Advantage fuel options – even able to save money on major sporting Opel in Europe, an established
after purchase. these relative to other events. Holden in Australia, service network
manufacturers. Daewoo in S. Korea trained on GM
etc. vehicles.
Differential advantage GM should be able to American brand = Ability to market the Sales and Service
– ability to gain the move the price closer valuable in US Chevy Volt under just becomes that
support of corn to the Prius. local brands – much more
Value Advantage ethanol lobby in US reduces marketing easier.
and sugarcane lobby costs
in Brazil.
- Established brand – may gain market share in US hybrid market from customers who want to buy local vs
Major foreign manufacturers
Strengths -Strong relationship with flex-fuel in the customers’ minds
- GM has not been successful with environmentally friendly cars and has little experience. They have a major
Major brand problem in this area.
Weaknesses
47
Figure 5B.1b Honda – Business System
Design Manufacturing Marketing Sales Services
Low cost and efficient Cost rationalized Honda marketing is Honda sales model Honda service is
engineering production facilities among the most competes head to world class. The
are well established effective at new head with Toyota. products are
Cost Advantage
and can be re- product introduction highly reliable.
purposed to PHEV
Offer amazing value to Manufacturing costs This makes Honda Allows Honda to Honda vehicles
the customer at are among the best in products believable. offer extremely consistently have
competitive pricing – class, allowing for Honda enjoys high competitive model the least cost per
Value Advantage example the Honda flexibility in pricing trust among its year end pricing to mile – a major
Ridgeline is best in customers. customers. selling point.
class and redefines
utility in pick up trucks
-Reputation of reliability and value

Major -Effective marketing and distribution systems
Strengths
Not currently engaged in Plug in Hybrid research. No current plans to compete in the PHEV space.
Major
Weaknesses
48
Exhibit 5C.1 SWOT Analysis
Opportunities: Threats:
Leverage the “halo” effect of their hybrid vehicles to Major investment in R&D, Marketing and Operations
capture an untapped PHEV market by GM may erode Toyota’s ambitions to capture the
Generate revenue by licensing the PHEV technology PHEV market.
like they’ve done with Ford and Nissan for the Hybrid Safety recalls due to “overheating” problems with
Synergy Drive Lithium Ion batteries may impact Toyota’s quality
Become the “Uber” green car company by pushing image.
for 100 mpg vehicles. Public policy favoring alternative technologies such
as Hydrogen fuel cells.
Strengths: Weaknesses:
World’s largest car manufacturer Not known to make bold, innovative first moves;
Reliable and High Quality Image rather play a fast second role
Taken a very conservative approach to Lithium Ion
R&D, biggest spend amongst car manufacturers;
innovative battery technology
‘Just In Time’ Production

Global leader in Hybrid vehicles
49
Figure 5D.1a: General Motors - Competitor Assessment Analysis
Required Capabilities or Resources
Importance Effective
Customer Required Benefits/ Values Fast
Engineering Green marketing
Rank Time to
Expertise Brand Communicatio
Market
ns
Desire to drive a car that is consistent with genuine

1
concern for the environment.
Desire to reduce dependence on oil imports 5 *YN *YYY

Desire to be more attractive and “cool” by driving the “in”
technology
2 *YYY
Desire to set an example for others in family, peer

4
group, and community
Desire to appear to be “green” “Conspicuous
6 *YYN
environmentalism”
Desire to spend less money on gasoline 3 *N
Legend:
*YYY = Toyota PHEV has a sustainable superiority in a value that customers care about
*YYN = Toyota PHEV has a superiority in a value that customers care about (may not be sustainable)
*YN = Toyota PHEV has a capability in a value that customers care about (but not a superiority)
*N = Toyota PHEV does not have a capability in a value that customers care about
50
Figure 5D.1b: Honda - Competitor Assessment Analysis
Required Capabilities or Resources
Customer Required Benefits/ Values Importance Engineering Effective

Fast Time Green
marketing
Rank Expertise to Market Brand
Communications
Desire to drive a car that is consistent with genuine *YYN

1
Desire to reduce dependence on oil imports 5 *YN *YYY

Desire to be more attractive and “cool” by driving the
2
“in” technology
Desire to set an example for others in family, peer

4
Desire to appear to be “green” “Conspicuous
6 *YYN
environmentalism”
Desire to spend less money on gasoline 3 *N
Legend:
*YYY = Toyota PHEV has a sustainable superiority in a value that customers care about
*YYN = Toyota PHEV has a superiority in a value that customers care about (may not be sustainable)
*YN = Toyota PHEV has a capability in a value that customers care about (but not a superiority)
*N = Toyota PHEV does not have a capability in a value that customers care about
51
Figure 5D.2: Competitor Assessment Analysis -- Summary
Importance Summarize Results Potential Sources of Potential Sources of

Customer Required Rank per Required the Firm’s Competitors’
Benefits/Values Benefit/Value Differential Differential
Advantage Advantages
Desire to drive a car that is consistent 1 Toyota PHEV has a short- Marketing strengths and GM has a head start in
with genuine concern for the term advantage in this area hard – earned reputation developing a ready for
environment. for environmentally market PHEV (the Volt)
conscious products give and is banking on serial
Desire to reduce dependence on oil 5 Toyota PHEV has an Toyota PHEV an initial hybrid technology.
imports advantage in this area advantage. Toyota must Should this become the
Desire to be more attractive and “cool” 2 No competitor has a clear launch within 12 months standard, GM will have
by driving the “in” technology advantage in this area. of GM if they do not make the first mover advantage.
the first move.
Desire to set an example for others in 4 Toyota PHEV has a short-
family, peer group, and community term advantage in this area Honda is a well respected
brand known for quality
Desire to appear to be “green” 6 Toyota PHEV has an and dependability. Their
“Conspicuous environmentalism” advantage in this area entry into the PHEV space
will encounter little
3 No competitor has a clear
Desire to spend less money on resistance.
advantage in this area.
gasoline
Key items of competitor information required for a deeper analysis:

1. GM’s marketing strategy
2. Honda’s PHEV market entry plans
52
5E.1 Competitor strategy analysis
Competitor Total Level of Likely Likely Possible Firm

Hybrid Competitor’s Competitor’s Competitor’s Strategy
Electric Threat to the Firm objectives Strategy
Vehicle
Market
Share
GM Small High Capture leadership Marketing blitz to play on Toyota Tundra is now the
(<1%) position in the PHEV the patriotic emotions of biggest truck in the US full
market. Erode Toyota’s the US market plus their size pick up truck market.
market share and love of driving sexy, Toyota gave the American
regain # 1 automaker powerful American cars consumer what they
spot in the US. and not Japanese CUBS wanted.
– Cute Ugly Boxes. Use this strategy to create
Flex Fuel E-Flex an aggressive
platform allows Chevy European/American design
Volt to operate on for Sparky.
Ethanol. Strong Use the fact that Series
relationship with the hybrid (Volt) is less efficient
Corn lobby will work to than the series- parallel
get subsidies for GM, hybrid to be used for the
allowing them to price Toyota PHEV.
the Volt competitively.
Toyota began road testing
PHEV technology in 2007.
Honda High Medium Maintain market share Not play in the PHEV Keep working on their Fuel
(24%) of Honda loyalists. market. Instead push cell vehicle program.
Compressed Natural Toyota does not have to
Gas vehicles and the react to Honda in this
new hydrogen fuel cell market.
Honda FCX.
53
5F.1: Complementer Analysis
Complementer Nature of the Likely Change in Likely Actions by Possible Firm
Complementer Complementer Importance Complementer that will Actions
to the Firm. Why? or why Impact the Firm
not?
Federal, State and Tax Credits for hybrids To stay the same then get less If tax Credits phases out, the Lobby for continuation
Local Governments encourage ownership important. As hybrid volumes go increased cost of Hybrid technology of tax credits
up, cost differentials should becomes more of a barrier to
reduce. buyers
Battery technology Research and development of To get more important then less. Until better, safer, cheaper batteries Invest in and
companies new and better battery There is a diminishing return are created, battery efficiency will encourage R&D
technology be a barrier operations
Popular Culture Creation of public perception of To get more important. If icons Leo DiCaprio is credited with the Select
(Hollywood) the benefits vs costs of plug-in drive plug-in hybrids, the public early acceptance of the Prius. spokespersons,
hybrids will follow. Need more icons. product placements
Public Utilities Promotion of “grid” benefits of To get more important Solving the vehicle to grid Partner with Utilities
Plug In Hybrids practicalities will give consumers for media campaigns
more incentive to buy
Environmental Lobbying of governments, To get more important for a period Successful lobbying / media will Support
/Advocacy Groups publicity campaigns, attention then less important as plug-in increase public acceptance of / environmental groups.
(CalCars, etc) drawn to the environmental hybrids achieve mass acceptance desire for plug-in hybrids Share data. Coop
benefits of plug-in hybrids Ads
News Media Attention drawn to the Not likely to change Media coverage of the underlying Manage media
geopolitical implications of oil problems that plug-in hybrids help relations. No bad
dependence, to the to solve increases public demand press to offset the
environmental impact of gasoline good work that the
vehicles, and to the declining media are doing for
reserves of oil us.
54
6A Planning assumptions
With 70% market share U.S. Hybrid Vehicle Sales Estimates, 1999-2006
in the Hybrid Electric
Vehicle (HEV) market, 1999 2000 2001 2002 2003 2004 2005 2006 Total
Toyota is clearly
Honda Insight 17 3,800 4,700 2,200 1,200 600 700 700 13,900
maintaining its
leadership position. Toyota Prius - 5,600 15,600 20,100 24,600 54,000 107,900 107,000 334,700
With 24% market share

in the HEV market, Honda Civic - - - 13,700 21,800 26,000 25,900 31,300 118,600
Honda may relinquish
its second position to
GM after announcing to Ford Escape - - - - - 2,600 15,800 19,200 37,600
discontinue sales of the
Accord Hybrid and Ford Mariner - - - - - - 1,600 3,400 5,000
pursuing the Hydrogen
Honda Accord - - - - - 700 16,800 5,600 23,100
Fuel Cell route.
Toyota - - - - - - 18,000 31,500 49,500
GM with almost no Highlander
market share in the
HEV market is keen to Lexus RX 400h - - - - - - 20,700 20,200 40,800
capture the PHEV
market with its 1 million Toyota Camry - - - - - - - 31,300 31,300
Chevy Volts by 2015
strategy. GS 450h - - - - - - - 1,800 1,800
One would assume that 50% lighter hybrid vehicles would also result in more fuel efficient vehicles, just in weight reduction
alone. When better batteries and software are added to this equation, the outcome is fantastic. In 3 years Toyota and Honda
hybrids will be more fuel efficient and significantly cheaper. .
55
Figure 6B.2: Estimating Market Potential
The market is flooded with

forecasts for the growth of
hybrid sales in the next 10
years.
The exponential growth

shown in the graph leads
to the fact that “hybrid
drives” will become the
de-facto standard for
automobiles the way “fuel
injection” replaced
carburetors in the 1980s-
1990s.
The next big jump for fuel

saving and emissions
reduction will come from
PHEVs. Many hybrid
vehicles such as the Ford
Escape will not meet the
new CAFÉ standards.
President Bush’s new

energy policy to reduce
20% of gasoline
consumption by 2017 is
also not possible just by
switching to hybrid
vehicles alone. PHEV’s
can also make the Ethanol
economics work better.
56
Figure 6C.1: Forecasting the Firm’s Sales
Assumption: PHEV market will be 10% of Hybrid Vehicle market which is projected to be 1 Million in 2011 and 2 Million vehicles by 2015.
2011 2012 (15% 2013 (20% 2014 (25% 2015 (30%

growth) growth) growth) growth)
Market Forecast (from Figure 100,000 115,000 138,000 172,500 224,250
6C.1)
Market Share Estimates 50% 53% 55% 58% 60%
Justification of Market Share Toyota maintains Toyota maintains Toyota maintains T o y o t a Toyota would
Estimates its 70% hybrid its 67% hybrid its 65% hybrid maintains its have 60% of
vehicles market vehicles market vehicles market 62% hybrid hybrid vehicles
share. share. share. vehicles market market share.
share.
Sales Forecasts (units) 50,000 60,950 75,900 100,050 134,550
Forecast Average Selling Price $25,000 $26,500 $27,500 $26,500 $25,000
Sales Forecasts (dollars) $1.25 Bn $1.615 Bn $2.087 Bn $2.651 Bn $3.363 Bn
57
Figure 6D.1: Forecasting Market Size
Forecasting Year 1 Year 2 Year 3 Year 4 Year 5

Method
5% year on 2011 – year 1 2012 (15% 2013 (20% 2014 (25% 2015 (30%
year linear for PHEV growth) growth) growth) growth)
growth in commercial
PHEV sales sales – 45%
(average of the
various
industry
analysts in the
previous slide)
of Hybrid
vehicle market
of 1 million
vehicles/ year
58
Figure 6E.1: Estimating Market Potential
Market Partition Total Percent Number of Number of Units Market Partition

Number of Likely to Customers Likely to that those Potential
Customers Buy (%) Buy Purchasing are Calculation
A B C = A*B Likely to Purchase E = C*D
D

Consumers 100,000 45 45,000 1 45,000
2a. Corporate 200 50 100 40 4,000

Fleet
2b.Rental Car fleet 10 50 5 200 1,000
Total Market Potential 50,000

in 2011
59
MARKET STRATEGY
60
Market Strategy
Figure 7A.1 Vision and Mission
Vision
“A Plug In Hybrid in the garage of every environmentally conscious automobile enthusiast”.
Mission
“Toyota will be the industry leader in plug in hybrids, leveraging the successes of Toyota’s hybrid
vehicle line-up. Continuous improvement and technological innovation will be the means by which
we achieve the goal”.
61
Market Strategy
Figure 7A.2: The Growth Path
Penetrate International
Penetrate Penetrate market with next
international international Generation PHEV with
markets with markets with Vehicle to Grid
New PHEV Ethanol E85 Technology
PHEV
Sell PHEV to Create and When technology is

Current Gasoline market an feasible, create and
car owners Ethanol E85 market Fuel Cell
Market
Related PHEV PHEV
Increase PHEV Convert some Next Generation

Awareness current first PHEV with
Existing generation Vehicle to Grid
hybrid owners to Technology
PHEV
Existing Related New
Products/Technologies
62
Market Strategy
Figure 7A.3: Timing of Entry
Timing of Entry Firm or Business Unit Examples
Pioneer Toyota PHEV will be one of the early pioneers in the Plug In market, entering at or about the same time as GM.
Pilot programs in the fleet segment and in Japan will be used to create awareness and refine the concept.
Follow the leader If GM beats Toyota in the race to commercialize PHEVs, Toyota will be a fast second as they did with the Prius.
Segmenter As we and GM prove the concept and achieve early publicity, other competitors will enter. We will stay ahead of
the competition by expanding PHEV from the small car segment to the full size and SUV segments, ahead of the
competitor’s entries. Our superior technology will be our competitive advantage, leveraging our head start in
the research an development process (similar to the strategy that we used in the First Generation Hybrids
(Prius)
Me-too Timing of Entry

Options
63
Market Strategy
Figure 7A.4: Assessing the Strategy for Growth
Favourable Elements Unfavourable Elements

Gasoline prices continue to rise
People are becoming more environmentally conscious PHEV market is nascent
Technological development in other green options distracts the
consumer base
Competition is developing directly competitive products (Volt)
Customer mindset needs to be changed to overcome the initial
price differential
Do not sacrifice quality Toyota Motor Credit to provide below market financing for a pilot
Embrace publicity that PHEVs will generate
program that will encourage high visibility (high likelihood of
being visible to future PHEV buyers) to purchase PHEVs. The
Form strategic alliances with advocacy groups like CALCARS cost of the below marketing financing will be treated as marketing
and Plug in America who’s mission is to raise market awareness brand expense (channel development)
Begin with Fleets and large purchasers (car rental,
municipalities.
Lobby state and federal governments to encourage subsidies /
incentives that reward consumers for the environmental benefits
delivered by PHEVs.
Suggested Strategy for Growth
64
Market Strategy
Figure 7B.1: Implementing a Strategy for Growth
Implementation Firm and Business Unit Objectives

Options
Internal development Motivate marketing department and R&D to encourage zealotry within the firm and create a culture of
“PHEV evangelism”. Every employee of the PHEV division should be conspicuously loyal to Toyota first
then to PHEVs second.
Acquisition Purchase investments in battery R&D companies as well as in companies engaging in developing
Vehicle to Grid metering and billing solutions.
Strategic alliance Create strategic alliances with battery manufacturers to foster efficient battery developments. Partner
with Utility companies to encourage the creation of charging stations at Park n Rides and at large
employer parking lots. Partner with large employers to extend employer subsidies for Hybrids
(particularly with Plug in Hybrids)
Licensing and technology None yet.

purchase
Equity investment Toyota will internally finance the development of the product and the marketing and brand development.
65
Market Strategy
8A.1-8B.1 Required customer benefits, values and potential market segments
8A.1: Customer Benefits and Values, in priority order:

Desire to appear green – conspicuous environmentalism
Desire to be less of a burden on the environment
Desire to save money or at least breakeven on gas/car
Desire to drive a cutting-edge car (technology is cool!)
8B.1: Potential Customer Segment Examples:

Segments:

Age
21 - 30, 30 - 45, 45 - 65, 65+
Current/previous hybrid owner Yes, No
Income Level $35K - $60K, $60K+
Geographic Location California Residents, US Residents,
Importance of saving money/ Low, Med, High
Sensitivity to gas price
Importance of environmental benefit
None, appearance only, appearance & actual benefits, Most important factor
Importance of vehicle performance
Med, High
(standard measures)
Opinion on reliance on electric grid
for energy Not-favorable, Favorable
66
Market Strategy
Figure 8C.1: Select Segmentation Dimensions and Form Groups
Dimension A. Current or Previous hybrid Owner Group 1. Hybrid Owners
Group 2. Non-hybrid owners
Dimension B. Income Group 1. Lower ($35K-$60K)
Group 2. Higher (>$60K)
Dimension C. Environmental Benefit/Appearance Group 1. High benefits/appearance BOTH
Group 2. Appearance High (benefits nice)
Group 3. Neither is particularly important
67
Market Strategy
Figure 8D.1a: Forming Consumer Market Segments – Hybrid Owners
Pioneers
Classic early adopters who High
love technology. And they love Kermits Pioneers
to show-off their new
technology. Hybrid pioneers
also care about the
environment.
Kermits
These are hybrid owners who
believe passionately in
Dimension 1:
environmental causes. They Environmental
bought at a time when the Benefits &
economic value of the hybrid Appearance
might not have made sense
but the overall value
proposition did.
Opportunists Opportunists
These hybrid owners bought
not because of the
environmental benefits but for
all the perks that come with it:
carpool lanes, better parking,
tax benefits and the like. Low
Lower Higher
Dimension 2: Income
68
Market Strategy
Figure 8D.1b: Forming Consumer Market Segments – NON-Hybrid Owners
Laggers
This is the higher income majority/ High
late majority. They follow the Lizards Laggers
Pioneers and Kermits. Substantial
value must be demonstrated to
get them to move earlier.
Lizards
This is the lower income
majority/late majority. They are
very similar to Kermits but have
not committed to hybrids of any Dimension 1:
kind yet. Environmental
Benefits & Wannabes Showboats
Showboats Appearance
Showboats follow trends and like
to be admired. They are
influenced by celebrity and
popular culture. Showboats care
more that others view them as
environmentally conscious than
about actually being so.
The Simpsons The Affluentials
Wannabes
Similar to the Showboats but with Hard-working Joes
less money. The financials will be Low
much more important to this
segment.
Lower Higher
Dimension 2: Income
The Affluentials
Luxury consumers primarily
concerned with the good things in Hard-Working Joes The Simpsons
life. Environmental image may These are consumers whose vehicle Lower and possibly fixed income
outweigh actual environmental needs outweigh environmental households, the Simpsons are
benefits in this segment. concerns. They demand high primarily motivated by financial
performance on features such as torque concerns.
and hauling capacity.
69
Market Strategy
Figure 8D.2: Final Set of Market Segments
In addition to the previously
identified consumer segments
we have added Fleet as a
segment here.
Fleet
Fleet represents companies
who purchase large numbers 1. Kermits 6. Wannabes
of vehicles for use in their
operations. The Fleet segment
includes rental car companies.
2. Pioneers 7. Showboats
Reducing operating costs is
critical to these companies.
They also gain some value
from reducing their 3. Opportunists The Simpsons
environmental footprint.

Lizards
Hard-working Joes

Laggers
The Affluentials

Fleet (not a consumer segment)
70
Market Strategy
Figure 8E.1: The Market Segmentation Matrix
Pioneers Ker Opp Lagge Lizar Wanna Showb Affluent Hard- T h e Fleet
Segments mits ortu rs ds bes oats ials workin Simpso
nist g Joes ns
s
Hybrid Owner? Yes Yes Yes No No No No No No No N/A
Income? High Low High High Low Low High High Med Low High
Importance of High High Low High High Med Med Low Low Low Med
“Green”
Customer Benefits
Desire to appear 3 3 2 2 3 1 1 2 3 3 2
green –
conspicuous
environmentalism
Desire to be less 2 1 4 1 1 4 3 3 4 2 3
of a burden on
the
environment
Desire to save 4 2 1 3 2 2 4 4 1 1 1
money or at least
breakeven on
gas/car
Desire to drive a 1 4 3 4 4 3 2 1 2 4 4
cutting-edge car
(technology is
cool!)
71
Market Strategy
Figure 8G.1: Brainstorming Market Segment Attractiveness Factors
1. Early technology adopters 7. Positive regulatory environment (state by

state regulations/mandates) Example –
California has special rules/privileges/tax
2. Opportunity for growth benefits for electric vehicles
3. Market size (# of potential vehicle sales)

Geographic areas with poor air quality
4. Market Influence (trend-setting)

Identifiability
5. Market Wealth
Receptiveness to environmental pitch
6. Electricity reliability
Urban vs Rural
72
Market Strategy
Figure 8G.2: Selected Market Attractiveness Factors and Reason to Include
Market Segment Attractiveness Factor Reason to Include

Market size (# vehicles)
Important to justify costs of development and to generate profits after breakeven.
Represents future growth opportunity.

Market growth opportunity
Some segments influence others and represent an opportunity to build your business in two
Market Influence
segments.
Although a market may be quite large, it needs to have sufficient wealth to allow us to
Market wealth
breakeven and then profit.
Identifiability
Creates marketing efficiencies
73
Market Strategy
Figure 8G.3a: Analysis of Market Segment Attractiveness
Factor Weight Pioneers Kermits Opportunists Lizards
Rate Total Rate Total Rate Total Rate Total

Market size 40 3 120 4 160 1 40 7 240
Market Growth 5 2 10 8 40 1 5 4 20
Market Influence 25 10 250 7 175 1 25 5 125
Market Wealth 25 8 200 3 75 10 250 5 125
Identifiability 5 10 50 10 50 2 10 7 35
TOTAL 100 630 500 330 545
Note: Best possible score is 1000.
74
Market Strategy
Figure 8G.3b: Analysis of Market Segment Attractiveness
Factor Weight Laggers Showboats Wannabes The Simpsons
Rate Total Rate Total Rate Total Rate Total

Market size 40 6 240 3 120 3 120 10 400
Market Growth 5 4 20 3 15 1 5 1 5
Market Influence 25 3 75 10 250 6 150 8 200
Market Wealth 25 10 250 10 250 5 125 5 125
Identifiability 5 6 30 10 50 6 30 9 45
TOTAL 100 615 685 430 775
75
Market Strategy
Figure 8G.3a: Analysis of Market Segment Attractiveness
Factor Weight Hard-working Joes The Affluentials Fleet
Rate Total Rate Total Rate Total

Market Segment size 40 4 160 3 120 9 360
Market Segment Growth 5 1 5 1 5 2 10
Market Segment 25 2 50 4 100 3 75

Influence
Market Segment Wealth 25 7 175 10 250 10 250
Market Segment 5 6 30 7 35 10 50
Identifiability
TOTAL 100 420 510 745
76
Market Strategy
Figure 8G.4: Brainstorming Business Strengths Factors
Business Strengths

Quality (TQM)

Marketing
Customer segmentation
Strong brand management

Supply chain management

Timely delivery

Minimize Standard Costs

Environmental image/brand

Environmental benefit

Very strong engineering and technology development

Fast development process EX: Re-engineers in 18 months or less

Excellent customer service

Affordable and accessible financial services
77
Market Strategy
Figure 8G.5: Selected Business Strengths Factors and Reason to Include
Segment: Kermits
Business Strengths Reason to Include Weight Rate Total

Factor
Environmental Benefit A core value of this segment is reducing 20 7 140
their environmental footprint.
Supply Chain Kermits don’t have much money so it’s 20 8 160

Management important that a company can deliver
the lowest cost possible while helping
the environment.
Financial Services Higher upfront costs will make financing 15 5 75

options more critical to success.
Quality Quality is an important factor in terms of 15 8 120

value and provides Kermits with
peace of mind.
Customer service Good customer service makes Kermits 5 6 30

feel valued.
E n v i r o n m e n t a l The ability to let others know they are 25 10 250

Image/Brand environmentally conscious is a key
reason Kermits buy.
Total 775
78
Market Strategy
Segment: Pioneers

Factor
Cutting-edge Technology The first core value of the segment is 30 10 300

interest in new technologies.
Environmental Benefit Second defining value that these 30 7 210

customers are looking for
Fast time to market If you don’t get there quickly, someone 30 9 270
else will.
Customer responsiveness Pioneers want to know that their 10 8 80

related to design suggestions are heard and incorporated
into provider decision-making.
Total 860
79
Market Strategy
Segment: Opportunists

Factor
Convenience Opportunists love convenience – always 65 5 325
being able to use HOV lanes when
driving special vehicles is one good
example
Environmental Image/Brand The ability to let others know they are 35 10 350
environmentally conscious helps
opportunists justify their decisions to
others. It makes them look good.
Total 625
80
Market Strategy
Figure 8G.6: Business Strengths Analysis - Lizards
Segment : Lizards

Factor
Supply Chain Management Lizards don’t have much money so it’s 20 8 160
important that a company can deliver the
lowest cost possible while helping the
environment.

Environmental Benefit Second core value that these customers 35 7 245

evaluate against
Quality These customers will wait for the product 15 8 120

to mature Quality is an important “peace of
mind” factor
Customer Service An important factor toward building strong 10 6 60

brand loyalty
Total 100 685
81
Market Strategy
Segment: Laggers

Factor
Environmental Benefit A core value of this segment is reducing 30 7 210
their environmental footprint.
environmentally conscious will be a key
reason Laggers buy.
Quality Quality provides peace of mind. 20 8 160
Customer service Good customer service makes Laggers feel 5 6 30

valued.
Supply Chain Management Laggers are more cautious than Kermits 15 8 120
and Pioneers and must be able to
validate the overall financial benefit of
vehicle ownership. They are likely to
have many financing options however
Total 820
82
Market Strategy
Figure 8G.6: Business Strengths Analysis - Wannabes
Segment: Wannabes

Factor
environmentally conscious will be a key
reason Wannabes buy.
Supply Chain Management The Wannabes are price conscious so 30 8 240

lower costs will help access this segment

Total 100 740
83
Market Strategy
Figure 8G.6: Business Strengths Analysis – The Simpsons
Segment: The Simpsons

Factor
Supply Chain Management The Simpsons are smart purchasers and 30 8 240
will “shop around” before making their
purchase decision

Environmental Benefit 10 7 70
Quality Quality is an important “peace of mind” 20 8 160

factor for this risk averse segment.

brand loyalty.
Total 690
84
Market Strategy
Figure 8G.6: Business Strengths Analysis – The Affluentials
Segment: The Affluentials

Factor
Luxury Image This segment prefers the finer things and 50 7 350
are big on making a “status” statement
with their vehicles.
Performance Numbers such as 0-60, horsepower, etc 20 7 140

matter a lot to this segment.
Customer Service The experience of purchasing a green 25 6 150

vehicle is more important to this segment
than the actual purchase decision.
Cutting edge technology 15 6 90
Total 730
85
Market Strategy
Segment: Showboat

Factor
environmentally conscious makes them
look good. They want to be associated
with the Leonardo Dicapprios of the
world.
Cutting-edge Technology The “cool” factor is very important for this 40 6 240
market segment.

brand loyalty.
Total 800
86
Market Strategy
Segment: Hard Working Joes

Factor
“Tough” image/brand HWJs use their vehicles to haul things. This is 45 2 90
a work hard, play hard group.
Quality Because they require so much from their 40 8 320

vehicles this is mandatory.

brand loyalty.
500
87
Market Strategy
Segment: Fleet

Factor
Quality Fleets need high quality to minimize the 25 8 200
impact of having a company vehicle on
their employees and maximize productivity.
Supply Chain Management Delivering on-time with lower cost will help 40 8 320
secure this segment.
Environmental Benefit Companies with fleets report on their own 10 7 70

environmental impact so their ability to
enhance both their performance and image
has value.
Environmental Image/Brand Companies with fleets report on their own 10 10 100

environmental impact so their ability to
enhance both their performance and image
has value.
Customer Service These are enormous accounts who expect 15 6 90
excellent, preferential treatment
Total 780
88
Market Strategy
Figure 8G.7: The Market Segment Attractiveness/Business Strengths Matrix
1000
Pioneers
Laggers
Showboats
High
Fleet
Kermits
Affluentials
Wannabes
700 Simpsons
Business Strengths
Lizards
Opportunists
Medium
HWJs
400
Low
100
100 Low 400 Medium 700 High 1000
Market Segment Attractiveness
89
Market Strategy
8D.2 Final set of market segments
Market Segment Characteristics
Fleet Fleet represents companies who purchase large numbers of vehicles for use in their
operations. The Fleet segment includes rental car companies. Reducing operating costs
is critical to these companies. They also gain some value from reducing their
environmental footprint.
Pioneers Classic early adopters who love technology. And they love to show-off their new
technology. Hybrid pioneers also care about the environment.
Showboats Showboats follow trends and like to be admired. They are influenced by celebrity and
popular culture. Showboats care more that others view them as environmentally
conscious than about actually being so.
Laggers This is the higher income majority/ late majority. They follow the Pioneers and Kermits.
Substantial value must be demonstrated to get them to move earlier.
Notes:

Kermits will naturally purchase PHEV vehicles based on their core values. The combined strategies used
to target Pioneers and Laggers will naturally include Kermits.
Although the The Simpsons represent a significant opportunity they will only enter late in the product life
cycle. That being said Toyota will target them but NOT in the initial stages of product launch and early
growth.
90
Market Strategy
Figure 9A.1: Objectives for the Market Strategy
Pioneers Showboats Laggers Fleet
Strategic Our primary objective is to gain market Our primary objective is to Our primary objective is to Our primary objective is to
Objectives share for our PHEV products in this gain market share for our gain market share for our gain market share for our
segment. PHEV products in this PHEV products in this PHEV products in this
Our secondary goal will be to earn segment. segment. segment.
profit at a minimum target level that Our secondary goal will be Our secondary goal will be
achieves breakeven. to earn profits significantly Our secondary goal will be to earn profit at a minimum
above breakeven. to earn profits significantly target level that achieves
above breakeven. breakeven.
Operational Market share of Pioneers & Kermits We plan to achieve a 20% We plan to achieve a 10% In the Fleet segment,
Objectives for Toyota is high but only for market share by 2012 and market share by 2012 and Toyota’s goal is to achieve
traditional hybrids. Our goal is to a minimum average a minimum average 50% market share of
achieve a 70% market share of these contribution margin per contribution margin per PHEV fleet vehicles sold
early adopters for our PHEV offering vehicle sold of $5000. vehicle sold of $1000. in 2011. (This is a smaller
by the end of 2011. (This is equivalent percentage of the overall
to 100% retention.) fleet market.)
O v e r a l l Our goal is to achieve a 70% market Toyota plans to achieve a We plan to achieve a 10% In the Fleet segment,
Statement of share of these early adopters for our 20% market share of market share by 2012 and Toyota’s goal is to achieve
Objectives PHEV offering by the end of 2011. Showboats by 2012 (Lexus a minimum average 50% market share of
share comparison needed) contribution margin per PHEV fleet vehicles sold
and a minimum average vehicle sold of $1000. in 2011.
contribution margin per
vehicle sold of $5000.
91
Market Strategy
Figure 9B.1: The Strategic Focus
Pioneers Showboats Laggers Fleet
What you intend to We will retain our existing We intend to increase our Toyota will motivate Toyota will achieve it’s
do Pioneers (70% market share) market share by gaining Laggers to move into market share objectives
new customers from our PHEVs earlier by targeting large fleet
competitors, especially in customers in areas with
luxury classes high environmental
awareness
How you intend to By using our existing community This will be achieved by By demonstrating true Toyota will demonstrate
do it website to build awareness and increasing the profile of economic and true economic and
by maximizing the technological the Lexus hybrid and environmental benefits of environmental benefits of
enhancements in the PHEV. introducing a dedicated the PHEV lines in both it’s PHEV vehicles.
(Examples include instant PHEV Lexus line – code regular and luxury classes
vehicle performance data and name Sparkilicious.
bluetooth mobile phone
integration)
Note: Throughout the document we refer to products such as Prius Plus, Sparky and Sparkilicious. These are internal code names –
not the product names. These products are defined below.
•Prius Plus: First generation PHEV based on the Prius body. It will be easily identifiable as green and distinguishable from the Prius.
•Sparky: Second generation PHEV. This will establish the Toyota PHEV brand.
•Sparkilicious: Lexus luxury PHEV that will only be offered as a PHEV.
92
Market Strategy
Figure 9C.1: Positioning Elements
Segment: Pioneers S e g m e n t : Segment: Laggers Segment: Fleet
Showboats
Customer Targets 1st & 2nd generation Prius Luxury car owners Anyone who has ever PGE, Google, Cisco,
owners, All hybrid owners who primarily concerned with test-driven a hybrid or Public Utilities, Enterprise,
purchased prior to 2004 status and perception. researched them. other car rental
Popular celebrities. companies, Airport fleets,
Taxi companies
Competitor Targets Our competitive targets include BMW, Audi, Mercedes, GM, Honda, Saturn Ford, GM
the Chevy Volt and all other Infiniti, Acura Hybrids and PHEVs will
hybrid and alternative fuel be competing for the
vehicles. Lagger market. Toyota
needs to have offerings of
both technologies to
capture the lion’s share.
Value Proposition Our value proposition for the For Showboats, Lexus will Sparky provides a gas Sparky provides a gas
early hybrid adopters is to offer the an easily mileage benefit that is 3x mileage benefit that is 3x
deliver a new technology that is identifiable PHEV luxury greater than traditional greater than traditional
more fuel efficient, more vehicle. hybrids (Difference of hybrids (Difference of
environmentally friendly and in 48mpg vs 16mpg) 48mpg vs 16mpg)
a vehicle with amenities that
count.
Reason to Believe The Prius Plus will have an all The Sparkilicious will be Toyota is the market Toyota is the market
electric range of 20-40 miles the first PHEV-only leader in hybrid vehicles leader in hybrid vehicles
with very low emissions vehicle from Lexus. Lexus bringing years of bringing years of
combined with other is the first and only luxury experience and experience and
technological amenities such as car company to offer demonstrated quality and demonstrated quality and
iPod & bluetooth phone hybrid vehicles and is value. value.
integration, & real-time vehicle committed to delivering
performance data . Toyota high quality vehicles with
PHEVs have been on the road an environmental brand.
since 2007.
93
Market Strategy
Figure 9C.2A: Positioning Statements
Segment: Pioneers
We will convince… The Pioneers
Chevy Volt and all other hybrid and alternative fuel vehicles.
… that… (in the context
of other alternatives)
New technology that is more fuel efficient, more environmentally friendly and in a vehicle with amenities that count
… that … (they will
receive these benefits)
Toyota PHEVs have been on the road since 2007. The Prius Plus will have an all electric range of 20-40 miles with
… because… (we
have these capabilities)
very low emissions combined with other technological amenities such as iPod & bluetooth phone integration, &
real-time vehicle performance data .
Segment: Showboats
We will convince… The Showboats
BMW, Audi, Mercedes, Infiniti, Acura

Lexus will offer the an easily identifiable PHEV luxury vehicle.

Lexus is the first and only luxury car company to offer hybrid vehicles and is committed to delivering high quality
… because… (we
vehicles with an environmental brand. The Sparkilicious will be a PHEV-only vehicle from Lexus.
94
Market Strategy
Figure 9C.2B: Positioning Statements
Segment: Laggers
We will convince The Laggers
GM, Honda, Saturn

Sparky provides a gas mileage benefit that is 3x greater than traditional hybrids (Difference of 48mpg vs 16mpg)
Toyota is the market leader in hybrid vehicles bringing years of experience and demonstrated quality and value.
… because… (we
Segment: Fleet
Fleet
We will convince ..
Ford, GM
Sparky provides a gas mileage benefit that is 3x greater than traditional hybrids (Difference of 48mpg vs 16mpg)
Toyota is the market leader in hybrid vehicles bringing years of experience and demonstrated quality and value.
… because… (we
95
Market Strategy
Figure 9E.1: Implications for Implementing Action Programs
Segment: Pioneers Segment: Showboats Segment: Laggers Segment: Fleet

Product : Pioneer care more about Product: Showboats care more Product: Laggers will prefer a Product: Fleets prefer function
the actual technology – First about luxury/performance - Lexus distinctive product–Second over form.
generation Prius Plus PHEV generation PHEV – a new product
line.
Promotion: Road & Track, Popular Promotion: Golf magazine run Promotion: A witty Super Bowl Promotion: Direct partnerships
Mechanics and Motor Trend will early reviews and Lexus PHEVs commercial will target the laggers with rental car agencies – early
write early reviews and run will sponsor the US Open Tennis to take the “plunge” .. “trade in discounts on volume pricing, demo
promotional campaigns by online and premier Golf tournaments their yesterday’s car” vehicle program
surveys to its customer base. televised on National TV.
Distribution: Pioneers will do most Distribution: Showboats do like the Distribution: Toyota + Lexus Distribution: Direct Factory sales
research online and may even buy “experience” Lexus showrooms showrooms
from sites like vehix.com or with well trained sales force will
autotrader.com lead this effort.
Service: Pioneers will provide Service: Showboats need the Service: Laggers are not as tech Service: Toyota will need a
significant feedback to Toyota highest level of service possible. If savvy as the pioneers. The Toyota separate service force to train the
during year 1 – need a dedicated there are early recalls of Lexus Sales and Service force will need Fleet service engineers.
service organization to work with PHEV’s the impact to owners need to be trained to answer a wide Maintenance requirements will be
Pioneers in close partnership. to be minimal. Showboats also variety of questions from Li-Ion higher.
Online secure forums batteries to Vehicle 2 Grid
technology to safety concerns.
Price: $25,000 + Price: $40,000 + Price: $25,000 - $40,000. With a Price: $20,000 - $25,000
PHEVs will be priced about $3000- Priced about $3000 - $5000 above $7000 federal tax rebate, PHEV’s Fleets will get volume pricing from
$4000 more than hybrid vehicles. hybrid Lexus vehicles. This will be around the $25,000 price Toyota. Toyota may be willing to
Pioneers pay well over MSRP due segment provides the biggest point. take a margin hit to get market
to pent up demand and anticipation. margins for the dealerships as well share in this segment. Once fleets
Toyota will make decent margins. as Toyota. make investments (either lease or
buy outs), its difficult to switch.
Functional support: National sales Functional support: National sales, Functional support: Toyota Functional support: Toyota Sales
and service, Manufacturing service and Marketing. Financing, Marketing, Service and Service
96
Market Strategy
Figure 10A.1: Strategic Options in the Product Life Cycle
Product Life Cycle Stage Scenarios Selected Strategic Option

Early Growth Early Growth - Leader Lead technological innovation,
market acceptance, and public
perception of the benefits first of
PHEVs, second of Toyota PHEVs
Rationale
Toyota will continue to cultivate play on the positive market perception of Toyota as a technological innovator
providing new ideas first and with exemplary quality. Toyota will seek to achieve first mover advantage and defend
these gains by staying at the vanguard of product performance, strategic alliance, and public relations.
97
Market Strategy
Figure 10A.1.1: Strategic Options in the Product Life Cycle
Sparky
Sparkilicious
Chevy Volt
Legend:
Product Form Life Cycles
Red = Gasoline
Green = Hybrid
Orange = PHEV
4 Blue = Fuel-Cell
Prius Plus
Sales Volume
2
1
2018
1997
Notes:
1. Pioneers are expected at the introduction of the 1rst dedicated commercial Toyota PHEV (Sparky). Some fleets will
also enter here buying the Prius Plus.
2. Some Showboats and some Fleet will enter here.
3. More Showboats and Fleets with the entry of Laggers into the PHEV market.
4. Some Laggers will not enter PHEV but will go to traditional hybrids which are much more mature and therefore less
risky in terms of technology and quality.
98
Market Strategy
Figure 11A.1.1: Brand Identity
“Toyota PHEVs are cutting edge, cool cars for socially and environmentally
responsible drivers. “
Figure 11A.1.2: Brand Image

“Consumers who have viewed the model and concept versions of the Toyota
PHEVs have expressed awe and enthusiasm asking “can I have my Prius
converted” Toyota will strive to parlay the positive associations that exist for
the Prius to suggest that the PHEV is even more of the same.”
99
Market Strategy
Figure 11B.1: Brand Associations
1. I’m part of the solution to the energy problem

2. Environmental responsibility is attractive
3. Easy to get a PHEV (easy financing)
4. Would highly recommend to a friend
5. Great resale value
6. Fewer trips to the gas station
7. Really? Toyota makes an electric car?
8. Dependable and clean
9. Special treatment (HOV, Parking)
10. I’m like a celebrity
11. Yes, Prius
12. Can you believe that people are not driving hybrids?
100
Market Strategy
Figure 11C.1: The Gap between Brand Identity and Brand Image
Branding elements that need to be changed
• Wewill create new brands for Toyota and Lexus PHEV

• We will leverage the Prius and Lexus Brands
Tentative approach for aligning brand Identity and brand image
• Form strategic alliances with environmentally responsible groups such as

calcars.org, Plug in America.
• Create brand ambassadors to promote Toyota and Lexus PHEV brands
101
Market Strategy
Figure 11D.1: Brand Positioning Statement
“Drive a Toyota PHEV and enjoy the benefits of being in a fashionable,

dependable car that makes you part of the world energy and global warming
solution. Toyota is committed to exceeding customer expectations for style,
performance, environmental responsibility, service, and value”
102
IMPLEMENTATION PLAN
103
Implementation Plan
12A.2 Growth/Share matrix
Toyota will focus on
three products initially
in the plug-in hybrid
market. Legend
Prius Plus for fleet PP - Prius Plus – for Fleets
segment. SP
PP SP - Sparky
Long-Run Market Growth Rate
Sparky for Pioneer SL - Sparkilicious
and some percentage High
of the Lagger SL
segment.
Sparklicious (Lexus
Brand) for Showboat STARS WILD CATS
segment. 3.0
The current situation

should be seen as an
opportunity as opposed
to a risk, since the
market is still fairly new
and therefore new Low
players can conquer a
significant portion of
the market.
CASH COWS DOGS
Toyota needs to
ensure that High 1.0 Low
investments are made
not cutbacks. They do Relative Market Share
not want Stars to Long-run market growth: Estimate of plug-in hybrids in physical units such as cars
become Dogs. Relative Market Share (RMS) : Firms market share divided by its largest competitor’s market share.
Toyota will have few competitors in the products/segments we are interested in.
Our nearest competitor is GM,
GM is expected to have 30 % market share in 2011 with Chevy Volt
RMS = 70/30 = 2.33
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Implementation Plan
12A.3 Assessment of resource allocation
The table offers some Type of
Level of Allocation Arguments for Change
suggestions for a Resource
different allocation of
the company resources
to focus on the Prius
Plus and Sparky. Toyota should allocate enough marketing resources to address Showboat,
Marketing Need for a specific time
Pioneer and Laggers segments in the early growth years since this is a new
Effort allocation
In particular, the product.
Marketing effort, the
advertisement and the
Sales Force time
allocation should be
modified to focus more
on the higher growth
products. All the three segments While it’s important to ensure that all the products offered align to the Plug-in
(Showboats, Pioneer, brand, Toyota should differentiate its three segments to ensure the customers
Advertisement Laggers) will be advertised perceive the difference among the products. High end customers should feel
differently royal about driving the car while Pioneers should feel proud about having a cool
appeal driving the car.
Since many companies start adopting ‘go-green’ strategy and are displaying
Current sales force is right environmentally conscious behavior to the society, we feel there is a good
Sales Force sized. Toyota must increase opportunity for Toyota to tap into the Corporate/Fleet segment. We are
its fleet sales force by 10%. recommending increasing the fleet sales force to a maximum of 10% from its
current level.
105
Implementation Plan
12A.3.1 Improving the product offering
Several tactical actions Increase Value to the Customers
can be taken by Toyota • Toyota can create information packages instructing consumers about the details of and the steps to apply for plug-in
to offer greater value to hybrid tax credits and employer subsidies. Toyota can assist consumers in completing application documents as a
the customers and at step in the closing / financing customer service process.
the same time increase
revenues and sales for • It would be useful for Toyota to emplace PHEVs at rental agencies and shared car pools such that customers can rent
the company in the the PHEV as an “extended test drive”.
long term.
• Toyota should actively support lobbying groups (I.e. CALCARS) to encourage the continued lobbying of tax credits, to
encourage the public awareness campaigns, and to encourage the creation of a community of right thinking hybrid
owners.
Improve the Business
• Toyota should invest in improvements in battery, charging, and metering technologies. Patenting these technological
improvements will serve to create competitive advantages.
• Toyota should experiment with and conspicuously utilize low weight, high efficiency materials carbon fiber, aluminum,
and high performance plastic vehicle components.
• Toyota should actively engage municipalities, employers, and power companies to arrange for the emplacement of
charging station facilities throughout the community to allow for the full utilization of the PHEV functionality.
• Toyota should invest in high performance solar components to allow for electricity generation and capture while cars
are operated and parked mid-day.
106
Implementation Plan
Figure 13A.1: Innovation Focus
Firm or Business Unit Classification: Interactor

Why I classified my firm or business unit this way.
Toyota PHEV division is classified as an interactor, with high customer focus and high innovation focus.
Following in the footsteps of the highly successful Prius product, Toyota has demonstrated both a knack for innovation and for anticipating and
satisfying customer needs. Remaining true to Toyota’s organizational strengths will be the stated goal of the newly developed product division.
With a razor sharp market segmentation and a product and marketing effort, Toyota PHEV will strive to create and maintain the lead in the
development of the product class.
Toyota PHEV will constantly innovate with each model year bringing new features to the product. Customer feedback, new product development,
and technological investment will drive the product to consistently innovate and provide functionality as soon as technology allows. From Lithium
Ion batteries to Cobalt to the next generation batteries as the technology becomes safe and available. Newer and more efficient battery
technology will be paired with the latest and most effective engine technologies including fuel cell, hydrogen, and bio-diesel as the technology
becomes viable.
Because of Toyota PHEV’s focus on the customer, and because of the legacy of constant innovation, they are classified as an interactor.
107
Implementation Plan
Figure 13B.1: The Idea Generator
Innovation New Ideas Best Why Resource

Template Idea Best Idea Implications?
Subtraction Remove all energy wasting accessories (air conditioning, Most Will require
navigation, high output audio). Market as “Most efficient car practical developing
available” partnerships with
& appealing Electric utilities,
to potential municipalities and
Multiplication Add secondary (solar) charging system to capture additional large employers
Customers
electricity when plugging in is not possible.
Division Cross market Plug In Hybrid golf carts, lawnmowers and

motorcycles.
Task Unification Add solar panels to all exterior surfaces of the car
A t t r i b u t e Offer tax Credit “anticipation” loans, similar to H&R Block tax

Dependency refund loans. Facilitates the purchase and allows for additional
Change revenue streams from the new and popular product.
Create “vehicle to grid” functionality to allow PHEV owners to sell

electricity back to the grid, subsidizing the operating cost of the
vehicle and providing societal benefits Yes
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Implementation Plan
Figure 14A.1: The Communications Strategy
Target 1:Pioneers Target 2: Showboats Target 3:Laggers Target 4: Toyota Fleet

Sales Force
Objectives Retention (prevent defection to Generate market awareness Generate market awareness Training/Education
GM) Increase Sales Increase Sales
Create brand advocates
Generate market awareness
Tools Dedicated area in Print advertising campaign in Print advertising campaign in In-house training seminar
toyotareasons.com. Links from higher-end lifestyle magazines lifestyle magazines such as InStyle, with printed “launch books”
toyota.com. Extensive exposure such as Vogue, GQ, Vanity Maxim, O etc. Test-drives with course
on green car congress, calcars Fair, Robb Report etc TV commercials
etc. BUZZ approach including Web-based training
TV commercials ideally with
PR & Investor Relations Internet campaign
celebrity endorsement
Releases Prominent car show presence
Public Relations
Print Ads:Road&Track, Pop Product Placements
Mechanic etc Internet campaign
Prominent car show presence Prominent car show

presence
Product Placements
Product Placements
Some direct mail
Outdoor
First year $1M $6M launch year $6M $1M

Budget ($) Building to about $6M at launch
of Sparky in 2010.
Timing Starting in 2008. Toyota needs Starting in late 2010 with Starting in 2011. Budget will be split Q4 2007 (to allow for 1 year
the Sparky to catch up to the launch of Sparkilicious between Sparky and Sparkilicious. sales cycle with fleet)
Volt in the minds of the
Pioneers. Initial spend will be on
internet, PR and IR.
109
Implementation Plan
Figure 15A.1: Creative Brief for Campaign Idea
This slide briefly
Target Audience: Showboats Secondary: Laggers
describes a creative
brief targeted
Communications Generate market awareness and increase sales
specifically to the Objective
Showboat segment.
In this section, we are
Assignment Magazines: Higher-end
focusing specifically Examples: Vogue, GQ, Vanity Fair, Robb Report, Golf etc
on the Showboat
section since we plan Customer Insight Showboats want to stand out in the crowd and be recognized. They also want
to replicate the to be admired and even envied.
basics of the original
Prius Competitive Insight Chevy Luxury or Status
communications
strategy for Sparky. There is a big gap in terms of luxury green cars between our traditional Lexus
The first three years hybrids and the all-electric Tesla. Sparkilicious will compete with non-hybrids
of that campaign will and existing Lexus hybrids for sales. The idea is to position the luxury and
deal primarily with status of the Sparkilicious as at least equivalent to the major luxury brands (in
Pioneers and have
other words – exactly what you expect a Lexus to be!) and then use the
Laggers as a
secondary target. environmental benefits to differentiate the Sparkilicious.
Marketing
Key Benefit Admiration and Envy of others
communications Reason to Believe Lexus will deliver the first and only LUXURY PHEV
related to fleet will
take an entirely Desired Brand Luxury and status.
different track Identity
including more PR Sexy and powerful.
and a very intensive
direct sales effort. Mandates Ad must include a view or partial view of the vehicle that shows brand plate
Much of the and/or most recognizable (defining) part of vehicle design. Do not show or
marketing discuss the plug.
communication will
be directed at the Must include Lexus brand
fleet sales force in
fact.
Must disclose average mpg and average emissions data
Must include call to action at local dealership/website
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Implementation Plan
Figure 15A.2: Top Two Issues in the Creative Brief for a Campaign Idea
1. It’s actually a little difficult to try to reconcile the brand identity of luxury, status, sexy and powerful with the mandate
for posting the environmental data. If presented as a sort of “glorified fine print” or possibly even the privilege of the
wealthy (to support the environment when people of less means can not) it can be integrated effectively.
2. Sparkilicious is in an EV space of its own between the Volt/Sparky and the Tesla as a combination of
price/admiration/features. This makes it harder to define a specific competitor to highlight (or lowlight) in the creative
brief. Instead our competitive position would be that of a sole provider or a sort of “we stand alone”
111
Implementation Plan
Figure 15A.3: Two Campaign Ideas
Campaign Idea 1: Treat Yourself and the Planet Like Campaign Idea 2: Passing the Pump
Royalty This campaign focuses on the luxury aspect of the brand and deals
This campaign focuses on the STATUS aspect of the brand and uses mainly with luxury lifestyle but with a twist. Each ad would include a
“royalty” spokespeople from a variety of arenas. Sports royalty, moment where the luxury is getting to skip that trip to the gas station.
Hollywood royalty, Music royalty, American royalty, Business royalty
The campaign could start with several different ads all showing the
Specific celebrity targets might include: Andre Agassi & Steffie Graf, same successful attractive person running late for something.
Joe Montana, Drew Barrymore, Martin Sheen, Tom Hanks, Priscilla Examples might include the ballet, opera, polo match, spa date, dinner
Presley, Queen Latifah, Prince, Maria Shriver, Larry Ellison date etc. On the drive to the event, there is a moment where the driver
checks the gas as they are passing a station and it’s always full (or
gradually goes down over say a year of the campaign) This could be
Ads would include spokespersons in different settings, not necessarily varied by introducing a second person (spouse) late for different things
related to their dominant area but focused on key brand message. For but always the moment where they see the station and pass it with a
example, we do not need to see the Agassis with tennis rackets. full tank. Further extension of the idea includes expanding the idea of
Instead, the campaign would place these royals in the same kinds of time you don’t want interrupted as a luxury. For example, a heart-felt
luxurious surroundings the target customers enjoy or aspire to enjoy. talk with a child or spouse, a sleeping baby etc. Again, each of these
(Each celebrity endorsement would offer a new opportunity to would feature the pass the pump moment. In the print ads, the pass
associate with various luxury images. Ideally all ads would be set the pump message could be conveyed with a gas station in the
outdoors or include some reference to nature and the environment.) rearview mirror. Each ad would also need to feature the plush interiors
and conveniences of the Sparklicious and of course the famous tail-
shot.
For example, the Larry Ellison television ad would start with a man
getting out of his Sparkilicious, opening the trunk and grabbing his
sailing gear. Then we cut to Larry on his yacht (the Sayonara) The mandatory mpg and emissions data would be disclosed at the end
directing the crew, sipping a cocktail in the amazing cabin and finally right before the dealership and website information.
we see him back at the marina and understand he was the man in
THE car. Final shot is the same back of the car after the trunk is
closed, with your tagline, and finally the mandatory mpg and emissions
disclosures and dealership and website information. There is an
excellent opportunity here to partner with the America’s Cup as their
official car and do some additional work around that. Using sailing not
only identifies the brand with luxury but also builds in subtle messages
about preserving the environment. There would also be companion
print ads.
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Implementation Plan
Figure 15A.4: Assessing the Campaign Ideas
Clearly of the two Treat Yourself and the Planet Like Royalty Passing the Pump
options, the Royalty
campaign is the proper Accomplishes the Yes. And repetition of the call to action across Would probably create awareness but is not likely to
choice for Showboats. objective media should be effective. provide a big boost to sales as the message is a little off for
this segment.
Our main concerns
Communicates the Definitely. There is a strong focus on luxury while No. We do not believe that the time as luxury message can
related to this campaign
product and brand still communicating the corporate mandates. We be communicated effectively in this segment – at least not
are finding the right positioning especially like the idea of incorporating a subtle as described.
leading spokesperson environmental message as well.
and cost, especially the
Is believable, Mostly. It’s not totally unique but we believe it will Everything but competitive. This campaign does not
cost associated with unique, competitive, be effective in establishing the Sparkilicious position us strongly enough in the luxury category.
celebrities. There is also ownable brand.
a reticence on the part
of elite American stars
Is effective for the Yes. All Americans love celebrity but especially No. There’s not much here for Showboats.
to do ad campaigns in i n t e n d e d Showboats. This campaign will resonate with the
the US. We may have communications target.
target
greater success
approaching foreign Is provocative - the Yes. The Ellison ad as described sounds fantastic No.
stars with major appeal target will pay especially with the air of mystery/anticipation at
attention the start – landing him is another story entirely. It
in the US. (Helen Mirren,
is unclear if the intrigue at the beginning would be
Kate Winslet, Daniel a defining feature of the campaign.
Craig etc)
Has “legs” – is Very campaignable since the idea of royalty can Yes. You can see how a series could develop.
campaignable be easily expanded into additional demo and
psychographics. Jay-Z as a spokesman takes the
campaign to another section of Showboats.
Passing the Pump,
while inappropriate for Doesn’t alienate any Pioneers will likely be annoyed by this campaign This campaign would not alienate any of our target
Showboats, is an o t h e r but mostly due to annoyance with the segment segments.
communications itself and not specific to Toyota.
excellent campaign for
target
Laggers and would
work well for the Sparky
product.
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Implementation Plan
15B.1 Allocating the communications budget
Communications Targets: Showboats Communications Budget: $3M
Although the first year

budget is $6M only Media Class Media Class Budget Media Vehicle Vehicle Budget
$4.08M is allocated
here. The additional
$1.92M will be spent Motor Trend $400K
across the following International Auto Show
communications tools:
$900K Los Angeles $270K
Auto Shows International Auto Show
PR, internet, outdoor,
dealerships, product Chicago International $230K
placement and Auto Show
additional print
GQ $300K
vehicles.
Vanity Fair $300K

Print Ads $1.2m
The TV ads/product
placements will be Robb Report $180K
concentrated in
Showboat appropriate
HBO & Showtime $550K
programs. Examples
from 2007 would
include Entourage, $2.4M Major public networks $1.25M
TV Ads/Product
Weeds, and Grey’s
Placement
Anatomy Other cable channels $600K
(Travel, History, etc)
114
Implementation Plan
15B.2 Example monthly media schedule
Media Class: Print Budget for Class = $1.2
Media -7 -6 -5 -4 -3 -2 -1 Launch +1 +2 +3 +4 Total

Vehicle p e r
Vehicle
GQ $15K $15K $15K $15K $15K $15K $30K $30K $30K $30K $15K $225K
Vanity $15K $15K $15K $15K $15K $15K $30K $30K $30K $30K $15K $225K
Fair
R o b b $10K $10K $10K $10K $20K $20K $20K $20K $10K $130K
Report
Although the total Print budget is $1.2M for the first year, only $580K has been allocated here. There are several local high-
end magazines which will get a majority of the remainder of the first year budget. These magazines target specific urban
areas with high concentrations of Showboats. Examples Include:
•The New Yorker

•San Francisco magazine
•Sunset magazine
•Other local and regional magazine outlets targeting the aforementioned cities as well as Chicago, Miami, Atlanta,
Dallas, Houston, Seattle, Los Angeles and San Diego.
•Local newspapers (In coordination with dealerships as this level of local advertisement is normally managed at the
dealer level.)
•The print budget will also have some crossover with PR. The actual amount of crossover has yet to be determined.
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Implementation Plan
15C.1 Evaluating the communications program
Evaluation Measures Evaluation Method
Test Market Awareness Effectiveness Laboratory measures of print ad effectiveness in specific magazine vehicles. Perform lab-
of print ads based study assessing awareness pre and post viewing of target magazine with appropriate
ad inserted. Initial responses will be without prompting but prompting will be used if Lexus
PHEV not mentioned on first pass. Testing will be performed 8 months prior to the Lexus
PHEV launch or as soon as technically feasible.
Perform field survey 2 months prior to launch to assess pre-launch effectiveness and
Measure Market Awareness determine if the size of the planned launch media blitz is appropriate.
Effectiveness of print ads
Laboratory measures of TV ad effectiveness in specific geographic markets – particularly San
Francisco and New York. Perform lab-based study assessing awareness pre and post viewing
of target programs with appropriate ad or product placement inserted. Initial responses will be
Test Market Awareness Effectiveness without prompting but prompting will be used if Lexus PHEV not mentioned on first pass.
of TV ads & Product Placement
Perform field survey 2 months prior to launch to assess pre-launch effectiveness and
determine if the size of the planned launch media blitz is appropriate.
Measure Market Awareness
Effectiveness of TV ads & Product
Placement
116
Implementation Plan
16A.1 Sales objectives
Toyota Motor Sales Sales Objectives
provides sales and
distribution services for
Toyota Motor • The Toyota PHEV product line must be able to gain a 70% market share of Pioneers within a year from
Corporation.
launch. The Lexus PHEV product line must be able to gain 20% market share by 2012.
The Sales Objectives One Year Objectives

are derived from the
marketing strategy Achieve a 70% market share of early adopters for PHEV offering by the end of 2011. (This is equivalent to
defined for Toyota. 100% retention.)
The objective is not Achieve 50% market share of PHEV fleet vehicles sold in 2011. (This is a smaller percentage of the overall
necessarily to gain the fleet market.)
first mover’s
advantage, but to be a Create a strong brand awareness backed by Toyota quality and reliability – create a compelling reason to
fast second and then buy – target the Laggers.
gain market share with
a superior line of Create an interactive online community for first generation PHEV owners and drive internet traffic to this
products that have a site.
real economic and
Continue sales force training to empower the salesperson as educator.
environmental value for
the customer. Build strong relationships with fleet customers.
Provide pioneer/fleet feedback/response up the management chain.
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Implementation Plan
16B.1 Estimate of required selling time
The accounts at Toyota Selling time per
Account Number of Accounts Required hours per
can be divided among: Sales Potential/Sale* account (hours/year)
Type “a” year “a x b = c”
“b”
(A) Dealerships –
assumes 1 dedicated 50% of Toyota
salesperson per dealerships 40 hours per week * 50
A MSRP - $25,000 1,200,000
dealership for purposes weeks = 2000 hours
of calculation Roughly 600 dealers
(B) E-commerce
Vehix.com
Customers (Vehix.com, B MSRP - $25,000 500 hours 500
autotrader.com) Autotrader.com
Hour assignment
based on Toyota’s
hours spent dealing
with the website 40 hours per week * 50
companies. Additional C $20,000 - $25,000 50 100,000
weeks = 2000 hours
time required by the
dealership is included
in Account Type A.
Total 1,300,500
(C) Direct sales to
Corporate Fleets/
Rental Car companies
*MSRP shown is for

Sparky or Prius Plus in
the case of early fleet
sales.
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Implementation Plan
16B.2 Calculation of required sales force size
The current sales force
for Toyota is right
sized. Maximum Selling Time 1,848 hours/year
The corporate fleet and
per salesperson (365 days – 104 week-ends – 30 days vacation/holiday) * 8 hours/day
rental car fleet direct
sales force will need to
be increased by 10%.
Actual Selling time per 1293 hours/year

salesperson (estimated 70% of actual selling time)
Number of Salespeople 1019 Salespeople

Required (1,317,520 / 1293)
Actual Number of 1015 Salespeople*

Salespeople * Approximation
A new proposed sales channel will not require a traditional sales

Proposed Firm Action force but a “virtual”
sales force.
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Implementation Plan
16B.3 Identify the sales force time allocation
The Corporate and Fleet Sales Force

Rental Car fleet Sales
force allocation Salesperson Activity Time Allocation
includes a significant
portion of traveling. Selling 60%
Traveling 30%
Administration 10%
Total 100%
Dealership Sales Force
The local Dealership

Salesperson Activity Time Allocation
sales force has to
focus entirely on the Selling
80%
sales effort (All products)
Administration 20%
Total 100%
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Implementation Plan
16C.1 Sales force organization
The current sales force Selling Organization
organization should be
preserved as it seems • Toyota sets the industry benchmark for its dealerships. With a relatively low number of dealerships compared to the
to be working just fine
for Toyota. competition, Toyota manages to keep its days inventories ratio low.
Toyota should • With the success of Hybrids, Toyota has its foot in the door. PG&E, Google, Enterprise rental cars have been
strengthen its sales incorporating Prius PHEV’s into their corporate fleet.
force in the Direct sales
to corporate channel.
Organizational Proposed New Rationale for Changing

Current Organization
Form Organization or Retaining
The national dealership

network is quite complex
and seems to be working for
Preserve the current
Geographic 1200 nationwide dealerships Toyota. As long as Days
structure
Inventories ratio stays low,
Toyota should not change
the structure.
Given the nature of
Divided among: Preserve the current technology, the Toyota Sales
channel structure; force will have to go the
Dealerships
Distribution strengthen the effort in the extra mile to explain the
Channel E-Commerce Direct sales to economic and environmental
Direct sales to corporate/rental Corporate/rental fleet value of PHEVs to Corporate
fleets segment fleets.
121
Implementation Plan
16D.1 Sales force processes
Sales
Force Current Assessment Proposed Changes
Process
A new sales method, which Tokyo Toyopet Motor Sales

had been using on an experimental basis, spread to
other dealers throughout the country, and became the
Sales decisive factor in bringing about volume sales. Toyota The current approach seems to work well for Toyota and therefore it
planning has successfully adopted up-to-date sales methods, should not be changed.
including a sales territory system and employing
university graduates for its sales force.
Toyota emphasizes "scientific marketing" over older

Getting the pipeline right will be key to create a pent up demand for the
methods. Since 1956 Toyota, shifted focus to demand-
Pipeline new PHEV. This is what happened with the unexpected super success
forecasting techniques and prepared marketing plans
analysis of the Prius. Toyota should leverage that experience to create a strong
accordingly. Toyota uses SAP software for its pipeline
pipeline by controlling supply in the first year of production.
analysis.
Current sales forecasts use the industry analyst Toyota will forecast sales of its PHEVs based on the actual demand
Sales numbers for hybrid vehicles sales. Current numbers are curve for its hybrid vehicles in the years 2008 through 2010 and use a
forecasting more optimistic at 20% of the total hybrid vehicles conservative 10% of the 2011 forecast as its projected PHEV demand
market. for 2011.
We recommend that Toyota analyze the performance numbers from
Chevy Volt and Sparky. Chevy may have an early lead but that should
Performance will be evaluated based on creating even
Evaluation not be the measuring stick. True success will be evaluated by factors
a stronger pipeline for 2012.
such as quality recalls, public perception, Sparky sparking a global
interest.
Bonuses should be awarded based on hitting specific sales volume

Reward Rewards for sales are quota driven Toyota dealerships. targets for PHEV. Profit-driven measures should drive rewards later in
the product life-cycle.
122
Implementation Plan
Figure 16F.1: Staffing the Sales Force with Salespeople
There are 2 recommended changes for the salespeople:
1) Toyota should provide incentives for dealerships to add more women to this traditionally male
dominated arena.
2) The internet channel for sales will be a whole new effort that will require tech savvy sales force.
Toyota should provide computer and internet training opportunities for their existing sales force.
123
Implementation Plan
Figure 17A.1: Diagram the Firm’s Current Distribution System
Target Segments Pioneers, Showboats, Laggers Fleet
Tupelo, MS vehicle assembly plant Tupelo, MS vehicle assembly plant

Distribution
system for
reaching
target
Segments**
National Dealership network Corporate Fleet customers
Pioneers, Laggers, Showboats
** Assumption – Plug in hybrid vehicles will be manufactured at its new vehicle assembly plant in Blue Springs, Mississippi, near Tupelo
by 2010.
124
Implementation Plan
Figure 17.A.1.2: Current flow of Products and Services
This diagram shows

the global flow of
products and services
for Toyota Motor
corporation.
Toyota is the very top

long bar and their
Customers are
represented by the
long bar at the bottom
of the diagram. The
process for the US is
contained on the right-
hand side of the
diagram. It is important
to note the position of
financial services as
very close to the
customer.
125
Implementation Plan
Figure 17B.1: Distribution Channel Functions and Where They Are Conducted
Toyota will use two Segment: Pioneers, Laggers, Showboats, Fleet
channels for sales but
nearly all vehicles will
be physically
distributed though the
dealerships. Channel Entity Functions Fulfilled
Although Fleet
customers often deal
•Inventory of vehicle line up
directly with the internal
Toyota sales force, the •Distribution from larger
distribution of vehicles
Dealerships dealerships to smaller ones
is handled by local
•Customer relationship
dealerships. These
dealerships also •Maintenance/Service
provide service to Fleet
customers.
•Inventory of vehicle line up
E-Commerce •Relationship with Toyota dealers
126
Implementation Plan
17B.2 Quality of channel function performance
Segment: Pioneers, Laggers, Showboats, Fleet
Channel Channel Functions Improvement Channel Functions Improvement

Functions Needing Moderate Options Needing Major Options
Performed Well Improvement Improvement
•Distribution from •Customer •E-Commerce •Tight integration

larger dealerships relationship with partner E-
to smaller ones management – in Commerce sites
our interviews with or a new Toyota
Toyota dealerships, •Technical training PHEV web site
•Maintenance and we noticed that the of the sales force. dedicated to
Service sales force knew •Direct-to-fleet sales over the
less about Toyota •A younger more customer sales internet (follow
Prius than the hip sales force the success
customer. This model of
cannot be the case •More women in the teslamotors.com
for a game sales force
changing
technology such as •Increased
Plug in Hybrids. investment in
supporting direct
to fleet customer
sales.
127
Implementation Plan
17C.1 Proposed new distribution channel design
Segment: “Pioneers, Laggers, Showboats & Fleet”
Proposed Design – One stop shop to Functions Filled Critical Issues to Watch
customize Toyota PHEVs
Customer builds his/her own PHEV at Sales Dilution of focus:

ToyotaPHEV.com - Too many channels can
lead to diluted focus.
Financing
The website helps customer locate a Dealership sales volume
dealership with that vehicle – if not the need not be impacted –
vehicle is built within certain specifications. Insurance since vehicles will be
picked up from the
dealerships, and the
Toyota Financing/ Auto Insurance can be Customer relationship management MSRP will be the same as
bought for the dealers, a conflict
of interest should not
Customers who prefer not to haggle with arise.
dealerships can pick up their vehicles
when notified.
128
Implementation Plan
Figure 18A.1: Service Delivery Resources
Service Description Quality of Service Options for Improvement

Resource Resource
Facilities: on- Dealer Showroom, Auto Shows Showrooms are not owned Can focus certain dealerships based on local demographics
stage by Toyota, but are held to a to appeal more to one or another of the targeted segments
high standard through (I.e.bring in entertainment and animals to make certain
licensing agreements dealerships more family friendly during promotions.
Facilities: off- Service departments of Service departments are Improvements in the training of the service departments and
stage dealerships, financing offices, held to the same standards conspicuous posting of technicians’ certifications on the Plug
salesperson’s offices as the showrooms In Hybrid models will increase consumer confidence.
Equipment Dealerships and service Dealerships are maintained Promotional sprucing of certain facilities in selected
departments in excellent condition geographies can be performed to increase appeal to target
customers
People Toyota agents interact with people Toyota customer facing staff Product training on the specific benefits of the Plug in Hybrid
on the sales floor, in the financing are world class and are can increase the professionalism of the sales presentations.
offices, and in the service maintained at a high
departments standard
Guarantees Toyota warrantees the battery, This warrantee should allay Warranty should become a focal point of some of the
charging system for 100,000 miles some consumer discomfort “familiarization” advertising.
about the battery technology
129
Implementation Plan
Figure 18B.1: Charting the Service Blueprint
130
Implementation Plan
Figure 18B.2: Assessing the Service Blueprint
Service Description Assessment Improvement Options
Delivery Item
Visit Toyota.com Customer visits web site to either The website can either direct them to Website should have sub-section
gather information about products, the 800 number, locate a local specifically for plug in customers to help
seek immediate assistance, or dealership, or immediately connect to them to get to plug in hybrid information
schedule appointment agent via chat efficiently.
Call 800 number Customer calls 800 number to 800 number is efficiently organizes Plug in Hybrid specialists should be
gather information or schedule with voice response call routing. trained and should be available to assist
assistance Agents are well trained. customer service agents.
Call Local
Dealership Customer calls local dealership Local dealerships will have customer Local dealership should have plug in
either to schedule an appointment or service agents trained to handle hybrid specific knowledge to quickly assist
to gather information questions, schedule appointments and customers
solve problems
Drive in to local Customer visits dealership either to
dealership learn more, consider buying, or Sales and service personnel are a Personnel training on the plug in hybrids
repair a plug in hybrid. strength of Toyota. High standards must be continuously updated
and continuous improvement maintain
this strength.
131
Implementation Plan
Figure 18C.2: The Service Quality Chart
N/A – Plug in Hybrids are a future product, and there is no way to

assess service quality at this time.
132
Implementation Plan
19A.1 Perceived value analysis
Relative GM Volt Honda

Toyota PHEV
Importance (Competitor A) (Competitor B)
Rating 1 2 3
Benefits Required
Desire to drive a car that is consistent with genuine 25 10 250 6 150 8 200
Desire to reduce dependence on oil imports 10 6 60 10 100 8 80
Desire to be more attractive and “cool” by driving the “in” 20 10 200 8 160 10 200
technology
Desire to set an example for others in family, peer 15 10 150 6 90 8 120

Desire to appear to be “green” “Conspicuous 10 10 100 6 60 8 80

environmentalism”
Desire to spend less money on gasoline 20 6 120 10 200 8 160
Total 100 880 760 840
133
Implementation Plan
Figure 19B.1: Customer Value Map
Toyota is able to
provide better
customer value through
it’s market dominating 100
position as the leader High
in green cars. Toyota
has the most
recognizably green Worse Customer Value Fair Value Line
brand in the automotive 1
industry and it is a key
source of value for
3
2
potential PHEV Relative Price
customers.
Better Customer Value
Fair Value Line
Low
10
Inferior Superior
(700) Relative Customer Value (900)
134
Implementation Plan
Figure 19C.1: Anticipating Competitive Response and Reaching the Firm’s Objectives
Proposed Price Anticipated Competitive Response Likelihood of Reaching Firm’s Objective

Set price near to the price of the current Competition will match (set price near the price of Very good. Toyota enjoys a leadership position
hybrid models their hybrid models) by virtue of the success of the Prius.
Offer incentives to entice selected market Competition will match, possibly for different Excellent. Early objective to increase PHEV
segments segments awareness will be contributed to by Toyota and
competition’s incentives
135
Implementation Plan
Figure: 19.D.2: Pricing Toolkit
•Acceptable currency •Guarantees and Warranties

•Allowances •Inventory carrying costs
•Barter •Leasing
•Buybacks •List price
•Credit availability •“Markdown money”
•Credit terms •Price stability
•Discounts •Returns
•Equity •Slotting fees
•Freight •Unbundling and Bundling
136
Implementation Plan
Figure 19D.1: Making Pricing Decisions
Enter
Am I
No happy with Yes
our pricing
strategy?
Review pricing Am I
Revise pricing Yes
strategy in light happy with
strategy as
of objectives our pricing
required
tactics?
No
Revise pricing
tactics as
required
Exit
137
Implementation Plan
19D.3 Pricing strategy and tactics
Current Proposed (Future)
Increase brand awareness Market share growth
Objectives Market share growth Profitable revenue
Maintain quality (cutting edge) image Revenue growth
Encourage visibility of PHEV by broad

placements, while preserving the image of Maintain a higher price than competition where
Pricing cutting edge and environmentally conscious value enables us to do so.
Strategy with price and image as indicators of quality Use price as an indicator of value to the
Incentives if necessary for placement in key customer (for certain market segments)
accounts, but only until penetration is achieved
Lower price for an initial period until customer Advertise the economic benefits of the PHEV as
awareness of the benefits of the PHEV become well as rationale for higher initial price.
Pricing more widely known. Set price higher than market price such that the
Tactics Return to higher price once initial market benefits of the increased fuel economy and of the
penetration and customer awareness is tax credits are shared between the consumer and
achieved. Toyota.
138
Implementation Plan
20C.2 Examining the marketing organization
Positive Features Negative Features
Firm is externally oriented - focused on customers Central Management Structure from Research to
Firm has a consistent advertising dollar budget at all distribution. Mandates the need for top people with
times international savvy.
Firm is focused on quality and examines the way
marketing processes work and constantly challenges
itself, "is there a better/faster/cheaper/less wasteful way
to get the same task or goal accomplished “
Firm is environmentally conscious and adopted a “Go
Green strategy”
Casual observers quote TQM as Toyota Quality
Management
Recommendations Why the Recommendations will work
Enhance the overall marketing function to be a “think Additional resources in key positions responsible for key
global, act local” entity. objectives and measurable goals will aid the company as
it grows into a larger global enterprise.
139
Implementation plan
20D.1 Systems and processes
Type of system Description Pros and Cons Proposed changes
Hard System: Toyota currently has a Pros: effective for today’s size and Update ERP, BEA and CRM system
Current robust ERP (Main SAP ERP operations. Integrated R&D, as needed to support growth
Automotive Suit and Manufacturing and Dealer
Kanban Supply Chain) , Management/Customer Service
BEA and Lean CRM system systems
as part of its IT portfolio. Cons: limitations on scalability and
functionality
Hard System: Additional systems and N/A Improved co-ordination within and
New configuration needed to between various participants in the
support plug-in hybrid plug-in hybrid supply chain. For
powertrain. example, on the supply-chain side,
battery suppliers must be integrated.
Soft System: Toyota’s top management N/A Toyota’s management (US and
Current priority is to steadily Japan) is well positioned today to
increase shareholder value take on the plug-in hybrid market. No
over the long term through changes required.
open and fair business
activities that honor the
language and spirit of the
law of every nation.
Soft System: Need to internally align the Pros: leveraged for growth Need to create a focused sales and
New organization to support the this is not a concern if the correct marketing team to handle the plug-in
plug-in hybrid market – US systems, controls and processes hybrid market. Need to align the
and international. are in place internal organization and processes
to support the hybrid market.
140
Implementation Plan
20F.1 Sustaining an external orientation
Dimension of Impediment Current situation Suggestions for improvement
A functional view of marketing Permeates entire organization and everything Plug-in Hybrid brand need to be carefully marketed and
Toyota does should be aligned with mainline Prius brand or the Lexus
brand as appropriate.
Bureaucracy Bureaucracy reported in North American Promote old Toyota culture of having debates with bosses
manufacturing
Excessive centralization Run by Toyoda family. Introduced a unique Encourage local senior officials to become managing
management system focused on prompt decision officers while performing as heads of local companies
making for developing global strategy and
speeding up of operations.
Functional divisions Well established manufacturing, procurement, Further build out of functional lines with growth of plug-in
finance, sales and marketing divisions hybrids
Misaligned incentives N/A N/A
Social fabric of the institution One of the best corporate citizens in the US. N/A
Socially aware of its responsibilities – focus on
environment and minority groups etc., Toyota has
a range of long-standing in house committees
and councils responsible for monitoring and
discussing management and corporate activities
from the view points of various stakeholders to
ensure heightened transparency and the
fulfillment of social obligations.
Internal politics Mid-level bureaucratization in North American NA

market
Accounting systems Standard industry package using SAP Scale and upgrade the systems as required.
Inward-oriented marketing Toyota is externally aware and focused on its Further expand outward focus including its plug-in hybrid
department customers, suppliers and potential customers line-up, involving every employee in the organization
141
Implementation Plan
21A.2 Assessing performance control measures
Input
Input Intermediate
Intermediate Output
Output
Measures
Measures Measures
Measures Measures
Measures
Type of Measure Input Measures Intermediate Measures Output Measures
# Plug-in Hybrid Cars produced Customer awareness of plug-in hybrids Sales Growth (%)
per year Customer Interest on plug-in Hybrid Profit Margin (%)
Dealer Forecast of Plug-in Hybrid
Competitive financial statements Market Share (%)
car sales
Measures Now COGS Customer Satisfaction
Sales Expenses on Plug-in Hybrid
Used launch Perception of plug-in Hybrid Customer Retention Rate
# Advertising budget and spend Advertising response rate Shareholder Value

per year Employee Satisfaction
Return on Assets (%)
Price elasticity of Plug-in hybrids # of repeat sales / year on average New plug-in hybrid customers per year
(to measure effectiveness of pricing Amount of unsponsored industry press Plug-in Hybrid Brand recognition
strategy) coverage Plug-in Hybrid Customer Satisfaction
Suggested Plug-in Hybrid Sales Growth
additions or
Plug-in Hybrid Profit Margin
changes
Plug-in Hybrid Market Share
Comments about Control Measures:

All of the changes above are in addition to the current measures, not in place of them
142
Implementation Plan
21B.1 Assessing implementation control
Toyota prides itself in

customer service Difficulties Potential Solutions
excellence. To that end,
when we introduce Plug- How can we measure customer service issues of Dealer training and train-the trainers
in hybrids, we have to Plug-in Hybrids? Do a comprehensive marketing audit
make sure that the
Are Plug-in Hybrids succeeding in US market?
dealers are sufficiently Measure marketing productivity through the marketing
trained to take care of a Is Pricing of Plug-in Hybrids versus direct and audit to assess price
plug-in just as they do External indirect competitors competitive? Assess technology/systems and update as necessary
with a regular Toyota. Integration of new suppliers (battery for example)
into Toyota Production System, Hybrid customer
database
Centralized Management Structure (Toyota

Family) Train sales force to be competent on Plug-in Hybrids
Internal Plug-in Hybrid knowledge of the sales force
Comments about Implementation Control:

Important thing for Toyota is to grasp the demands and needs of the marketplace, customers and society and reflect them
in its products
Implement steering control (monitor and control approach) to be more market responsive
143
Implementation Plan
21B.2 Assessing strategy control
Toyota will conduct

periodic reviews after its plug-in Toyota should ensure that Toyota should focus on
hybrid launch and will try to match its
performance with the strategy and
the strategy remains on improving the execution if it
implementation target happens to fall here
In the case of poor performance,

Toyota will strive to isolate the root
causes and act to improve their
delivery of value to their customers.
Good
Having said that, Toyota will not make

hasty changes in response to a poor Strategy
performance but instead will perform
a thorough analysis of the root cause
before recommending any changes. Toyota should watch Toyota should still isolate
whether the strategy is the cause – Poor strategy or
adding value to customers. poor implementation that led
Poor Rarely will a poor strategy to this disaster.
be overcome by a good
implementation plan
Good Poor
Implementation
144
Implementation Plan
21B.3 Assessing managerial process control
Focus Areas Re-engineering Best practice Bench-marking

approach? approach? approach?
Supplier Management for n/a Use Toyota’s existing n/a
Batteries, Low-cost supply chain system to
lightweight materials and integrate battery supplier /
efficient auxiliary systems auxiliary system network
to reduce power and and ensure they are
energy requirements for available for new cars and
new cars and Warranties warranties
Dealer Knowledge and n/a Yes – Implement train the Yes – benchmarking
Incentives for selling plug- trainer programs. against Prius launch and
in hybrids offer special incentives to
the dealers to sell plug-in
hybrids.
Pricing Strategy n/a n/a Benchmark against Prius.
Monitor sales and check
whether the customers are
willing to pay for the initial
investment . Pursue
creating customer value
rather than cutting price
Allocation of Firm’s n/a Use prior knowledge of n/a
resources and ensure Toyota’s launches
they have enough
incentives to support
Plug-ins
Brand Identity for Plug- n/a Leverage lessons from n/a
ins Toyota Prius brand
145
146

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Toyota

Marketing Strategy for

TEAM COCA (GROUP

Ron Berthiaume Customer purchase decision 32

Marketing offer 106

Distribution plan 124

Monitoring the firm’s performance 139

US Market share of the Big

Toyota is # 1 auto maker in

Historical Financial Results for Toyota

Sales Revenues 202,864,000 179,083,000 172,749,000

COGS 162,883,000 144,249,000 138,469,000

Gross Profit 39,981,000 34,834,000 34,280,000

Expenses 21,017,000 18,844,000 18,709,000

Operating Income 18,964,000 15,990,000 15,571,000

Net Income 13,927,000 11,681,000 10,907,000

Stock Price (Average Yearly) $110 $104 $75

Assets 275,941,000 244,587,000 226,604,000

A.2 Planning and budgeting

A.3 Gathering market information

A.4 Sales Forecasting

A.5 Information systems

B. DEFINING THE MARKET ARENA

C.3 Allocation under scarcity

D.2 Response to shortfalls

D.3 Response to recession

E. PRODUCT LINE DECISIONS

E.1 Approach to product development

E.2 Product line breadth

F. COST TO THE CUSTOMER

F.1 Approach to setting prices

F.2 Credit extension

Marketing is one of the functions 6 Marketing is a philosophy as well as a function

Customers are a “necessary evil” 7 Customer are key assets

The supplier chooses options 5 The customer chooses options

Seller power dominates 7 Customer power dominates

The firm accepts all orders 1 The firm selects customers

A department markets 7 The firm markets

Marketing is a one-way process 7 Marketing is an interactive process

Marketing Principles Reason for Importance

Customer Lifetime Value m * r / (1 + d – r) $66,635

Toyota/ Plug In Hybrids

Product Form Life Cycles

Fuel cell Hybrids

Toyota’s Product Life Cycle and Environment Policy

Direct Industry “five forces” analysis

Reduce the price of hybrid technology from $4000

Planning horizon: 3 to 5 years

Overall the Challenges and opportunities from “PESTLE” analysis and

Car Magazines, Reviews,

Other Firm Business Units Direct Customer Environmental Activist

Utility companies (PGE)

Fuel cell proponents

Purchase- Explanation Behavior of Customer Type

Role in the Organization Perceptions of our

Not very authoritative,

F l e e t Influencer/ Moderate ability to Service

Toyota is the leader in

Attributes/Benefits/Values Ladders follow for each major benefit category

Benefit level 3 Means better air quality / less pollution

Benefit level 2 Less gasoline used means less emissions / smog

Benefit level 1 Less gasoline used means less oil exploration /

Desire to reduce dependence on oil imports 5 YN YYY

Desire to reduce dependence on oil imports 5 YN YYY