Toyota Prius – Marketing Plan

Executive summary

The Toyota Prius is Toyota’s benchmark hybrid vehicle and one of the first few hybrid cars to be available for mass production and affordability. The Prius will be exceptionally successful in the face of extensive competition but has managed to become a market leader in the hybrid car category with its unique marketing strategy aligned towards an environment friendly outlook.

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Introduction

This paper will attempt to present a marketing plan for the Toyota Prius. The Toyota Prius was launched a few years ago and has seen a significant degree of success in the consumer market. This paper will consider the Toyota Prius in the context of its current progress in the market and will attempt to develop a marketing plan for the future of the Toyota Prius while developing an understanding of the marketing strategy that Toyota has been exercising in the marketing of the Toyota Prius to date.

The marketing plan will give special consideration to the current market situation that persists for the Toyota Prius after providing a review of the product. This will be followed by a competitive review of the product in which key competitors to the Toyota Prius shall be analyzed. The paper will then proceed towards a channels and logistics review and then establish a brief overview of the strengths, weaknesses, opportunities and threats of the Toyota Prius.

The paper will shed light on the objectives and issues of the Toyota Prius and will then move on to present the marketing strategy. The marketing strategy will then provide an elaboration of the positioning strategy, the product strategy, the pricing strategy, distribution strategy and the marketing Communication Strategy. The paper will then shed light on the action programs that are potentially viable and can be expected to have implications on the sales figures of the Toyota Prius in the future. The paper will present a projected budget for the Toyota Prius and will provide an elaboration of the control mechanisms that will be brought into use during the marketing campaign. The will then be brought to a concluding note with remarks. The paper will make use of reviews of the Toyota Prius for the purpose of data collection and analysis for the purpose of the development of this paper.

Product review

The development for the car that will be to become the world’s first mass production hybrid electric car began in 1995. The care first became available for purchase in 1997 in north western Asian regions. The car is mainly known for the fact that it qualified for the certification of the most fuel efficient gasoline car in accordance to US standards dictated by the EPA. The car is available in four door and five door models and a total of four models of the Toyota Prius will been released to date. The highlight of the Toyota Prius and the reason for all the attention that the vehicle has acquired over time is the electric engine that makes the car give a mileage that falls cheaper than that given by regular gas as well as an environment friendly engine which gives out almost no carbon emissions. The car is a hybrid vehicle because it relies heavily on software to ensure that engine performance remains optimal. In addition, the car has seen a growing rate of sales over time in light of its fuel economy and environment friendly nature.

Over the last few years, the car, in terms of technology, has reached global recognition and only slight modifications are being made. The car is being lauded as the first of many more generations of hybrid cars to come that will be based on the engine that the Toyota Prius runs on. It will be purchase by celebrities as well as by political leaders as sign of an environment friendly approach and is one of the few cars that will manage to take on the relevance of a status symbol while remaining in the reach of the common man.

“A California public relations agency asked Toyota to provide five Priuses for the 2003 Academy Awards. Toyota says no money changed hands, but the value of seeing Harrison Ford and Calista Flockhart step out of a chauffeur- driven Prius will be, as they say, priceless” (Taylor).

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Current market situation

“Several vehicle manufacturers are currently producing hybrid vehicles and others are testing them. Hybrid cars are manufactured by Toyota, Honda, Nissan and Mitsubishi are used by fleet operators in Japan while the Toyota Prius, Honda Civic IMA and Honda Insight are available commercially”(Carle, Keller and Wokaun). However, as car manufacturers such as Ford, Chrysler and General Motors continue to struggle in the face of the recent global recession, Toyota has had a relatively less turbulent time with the Prius providing a slow but steady inflow of revenue.

“The 2010 Prius gets an estimated 50 miles per gallon.The Prius has an official capacity of 11.9 gallons, and according to the above estimate, the car has a maximum range of about 595 miles” (Gutsa).

Toyota holds nearly one fifth of the market share in the United States alone and this is expected to increase in light of the Prius’s success in the American market. The car is packed with all the modern day requirements of the modern day consumer and comes across as a highly appealing package in the current age of increasing economic and environmental awareness.

If one will be to consider the Toyota Prius in the context of the four C’s of Marketing, then it can be observed that the Prius will be brought forth as a solution to increasing customer concern over rapidly increasing price of fuel. As the hype and demand for alternative fuel acquires momentum, consumers find the Toyota Prius as the ideal solution (Gutsa). Secondly, the Prius has the advantage of Toyota’s vast umbrella of distributors around the globe. Toyota’s distribution network is well known and well developed and provides the Prius with a competitive edge in this regard. The Toyota Prius will be priced so that it is significantly low in terms of cost.

“The gas-electric auto represents only a tiny fraction of the nine million cars and trucks the Japanese company will produce this year. But it is the first vehicle to provide a serious alternative to the internal combustion engine since the Stanley Steamer ran out of steam in 1924. It has become an automotive landmark: a car for the future, designed for a world of scarce oil and surplus greenhouse gases” (Taylor).

Competitive review

According to a publication by the Environmental Resolution Agency of California:

“California will allow hybrid electric vehicles that get at least 45mpg and will Super Ultra Low Emission Vehicle (SULEV) ratings to use HOV lanes without regard to the number of passengers in the vehicle. Current eligible vehicles include the Toyota Prius, Honda Insight and Honda Civic hybrid”(Burris, Catlin and Coit).

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The Toyota Prius has entered an industry that is relatively new in terms of the production of cars for mass production purposes. The immediate competition that the Toyota Prius faces is from the Chevrolet Volt by General Motors (Niedermeyer). The Chevrolet Volt is very much like the Toyota Prius in the fact that it too is a hybrid vehicle and is similar to the Prius in many ways. The vehicle therefore penetrates into the Prius’s market share through these similarities. The essence of the competitive position that exists between the two companies lies in the fact that the Chevrolet Volt is a hybrid vehicle that is primarily electric powered, much like the Toyota Pries. The Pries will be launched with a central concern towards the environment. The extent of this fact can be observed in the presence of a significant degree of greenery in the instructional footage for the Toyota Prius that is available for consumer viewing on the internet. The Chevrolet Volt places Toyota in a position where it has two options (Niedermeyer). Either the Prius can be packed with a technological innovation the kind of which the Chevrolet Volt will not be able to match for the next few years, or Toyota begins to market the Prius for qualities other than the high mileage it provides with increased fuel consumption efficiency.

Channels and logistics review

The Toyota Pries will allow the Toyota structure to experience a significant development. The Toyota model will now function through two divisions (United Nations Environment Programme). The first category will be that of combustion engines while the second category will be of hybrid engines. Combustion engines will further be classified into gasoline engines and diesel engines while hybrid technology will branch out into electric energy and alternate fuel engine technology which is an area that is still under development. With specific regard to the Toyota Pries, the vehicle will serve to bring forth numerous thresholds in the area of hybrid energy technology.

SWOT

Strengths

The Toyota Prius can successfully manage to exploit the market niche that had been created on account of the growing concern for the environment and the need for increased fuel efficiency. The car boasts of fuel efficiency and presents the consumer with a package that not only provides savings but also provides an opportunity to contribute to the preservation of the environment, thereby making the consumer feel that the purchase of the Toyota Prius is a win-win deal.

Weaknesses

The Toyota Prius is undoubtedly one of the most advanced of hybrid cars currently available in the market. As a result, the car brings forth a highly complicated problem in terms of maintenance. In addition, even though the car is one of the fastest selling hybrids in the US market, the availability of spare parts still remains a complicated and pivotal issue. Repair and maintenance costs for the Toyota Prius are significantly high and cause consumers a considerable degree of discomfort.

Opportunities

The demand for the Toyota Prius can be judged to be directly proportionate with the increase in fuel prices and the increase in awareness for the protection of the environment. This is a fairly productive opportunity since both factors are expected to rise in the near future. Toyota Prius’s position as an environment friendly hybrid places it in a position where it early adopters and environment preservation activists can be expected to provide the car with increased support and popularity.

Threats

While the advanced technology decreases the chance of the incidence of any problem in the Toyota Prius, the complexity of the issue still remains just as clear. The software in the Toyota Prius is of a kind that requires a factory-level recall when a Toyota Prius has to be upgraded or a software bug has to be fixed. Only earlier this year, Toyota announced a voluntary recall of its latest Toyota Prius n account of problems with the software that regulated the anti-lock brake system. The recall caused the fixing of millions of cars and caused a significant degree of discomfort to consumers in the US as well as in Europe. A considerable degree of media hype will be created over the problems with the Toyota Prius and it took a few months for Toyota to separate fact from exaggeration regarding the problems with the software. It is evident that even though the car is an exceptional hybrid, the problems are of a highly complicated nature. In this regard, competitors will an edge over the Toyota Prius and if they adequately exploit it, the Toyota Prius may lose considerable market share in the future.

Objectives and issues

The objective of the Toyota Prius will be to take advantage of the increasing need for fuel economy and preservation of the environment. The Toyota Prius sought to cash in on the increasing level of awareness in the everyday consumer regarding these elements. Through the Toyota Prius, Toyota managed to exploit the global economic recession to its advantage by making the consumer feel that he/she has contributed to the safekeeping and preservation of the environment by purchasing a hybrid vehicle.

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Marketing strategy

Positioning Strategy

In realistic terms, Toyota will be facing extensive losses as a result of the recent global recession. These losses will come about despite the fact that Toyota vehicles are known for their exceptional quality and adherence to standards (Ayushveda Network). The Toyota Prius is essentially Toyota’s ticket out of this continuous streak of losses and the Prius has managed to pull through for Toyota. It is as a result of the same success that the Toyota Prius is now not only Toyota’s key product but also a high stake risk. This is because of the fact that in order to ensure a high degree of accessibility to the Toyota Prius for the common man, Toyota brought forth the Prius under a significantly low price tag. The objective of doing so will be to position the Prius in competition with the Honda Insight that has acquired widespread popularity amongst Japanese consumers. As a result of this positioning strategy, Toyota Prius has managed to develop a good reputation with consumers very fast but has also lost a significant degree of profitability that the vehicle will been able to acquire had it been launched under a higher price tag.

A positive element that arises from this fact is that as Toyota brought down global production volumes in light of the global economic recession, it will be able to boost up production volumes for the Toyota Prius in light of increasing demand for this specific vehicle (Ayushveda Network). Consumers will see the high affordability and increased fuel efficiency that will allow them a chance to save money and acquire more productivity from their vehicle in the long run.

Product strategy

Hybrid vehicles are rapidly beginning to acquire widespread acceptance in the US. The hybrid will be formally launched in the US in 2000 and the marketing strategy adopted will be one that will be essentially designed to appeal to early adopters(Rodriguez and Page). The fundamental element of the Toyota Prius marketing campaign will be the introduction of Toyota as a company that respects the need to preserve the environment. The campaign brought forth the Toyota Prius as a landmark and indicative success of Toyota’s commitment to innovation and development. Before the actual car will be launched in the US, early adopters will be allowed an opportunity to make use of Toyota’s website to learn about Toyota’s commitment to environment friendly innovation and development. The car will be not simply brought forth as Toyota’s product, but will be brought forth as a Hybrid Vehicle(Rodriguez and Page). The objective will be not to simply introduce Toyota’s Prius, but to introduce Toyota’s exceptional capabilities in developing hybrid vehicles.

Pricing Strategy

Toyota has followed a highly diverse pricing strategy for the Toyota Prius. The price of the latest Toyota Prius starts from $22,750. Having acquired massive customer approval, the car manufacturer has finally taken the initiative of pricing the latest 2010 Prius at a price level higher than the Honda Insight (Edmunds Inside Line). The latest Honda Insight is available for the price of $20,470 excluding destination transportation charges. However, in order to ensure that the Toyota Prius remains within easy consumer accessibility, Toyota has recently also brought forth a version of the Toyota Prius that is without extended accessories.

This particular version is available at a price of $21,750. Toyota’s pricing strategy for the latest Toyota 2010 Prius is in sharp contrast to the pricing strategy under which the first generation Prius will be introduced well below the price of the Honda Insight. It will not be unfair to state that this increase in price signifies the extensive market share that the Prius has succeeded in capturing (Edmunds Inside Line). However, it is apparent that Toyota has chosen to exercise a somewhat cautious approach with regard to the increase in price since the latest Toyota Prius is being offered to consumers with extended cash-back options alongside lease rates that are significantly lower than those available with earlier versions of the Toyota Prius.

Distribution Strategy

Distribution for the Toyota Prius will be just as innovative as the marketing strategy for the car. The car will be not only available through Toyota’s widespread dealer network but consumers will be also given the option of pre-ordering the car before hand. Once the car will be pre-ordered, the lead will be then forwarded to the responsible Toyota sales agent. Toyota made sure that the car’s sales benefited from its distributor network(Rodriguez and Page). This strategy benefited Toyota so much that even before Toyota could deliver the car to dealers, over 1500 units of the vehicle had already been sold. In addition, the distribution of the vehicle will be supplemented with an educational element.

Special funding will be channeled towards the development of dealers in order to facilitate them in educating consumers about hybrid vehicles and their advantages. This allowed Toyota to reach the consumers that had been left out, hence providing Toyota with a massive launch pad for its Prius. Furthermore, special rental programs will be introduced that allowed potential consumers to test drive the car for an entire day. Once Toyota’s Prius had caught on the American consumer, Toyota stepped on the gas of its marketing campaign and took it to a higher gear. Television commercials will be increased in frequency(Rodriguez and Page). Toyota introduced followed another unique aspect in the distribution of the Toyota Prius. As highlighted above, the Prius will be initially appealed highly to early adopters. Toyota not only cashed in on the early adopters but also implemented customer relationship management techniques to ensure high sales upon the introduction of the second generation Prius.

Marketing Communication Strategy

The Toyota Prius will be communicated to the market such that consumers find that they are able to contribute to the broader social setup by purchasing and driving a Toyota Prius. Consumers consider the act of purchasing the Toyota Prius to be an act that contributes towards the well being of society and its protection (VanAuken and Daye). The positioning strategy adopted by Toyota for the Toyota Prius is one that invites consumers to make a contribution towards saving the environment by ensuring that their car is environment friendly. Marketing campaigns positioned the Toyota Prius forth as a smart car that served the purpose of preserving the well being of the environment. Some marketing campaigns even positioned the Toyota Prius as a Green Car in contrast to other fuel consuming cars. The stark difference in Carbon emissions will be put forth as being the line that separates the Toyota Prius from other cars. In addition, reports about the purchase of the Toyota Prius will be publicized extensively in the first few years after the launch of the Toyota Prius. The vehicle will be brought forth as a car that allowed the user to acquire all that he/she desires from his/her car while being able to be a part of the conservation of the environment (VanAuken and Daye). It is imperative to realize that all the marketing strategies that the Toyota Prius will be launched through made an effort to associate the vehicle with the broader objective of contributing to the preservation of the environment.

Marketing research

The marketing research behind the launch of the Toyota spanned a period of almost two years. Well before the Prius will be launched, Toyota invited early adopters to its website to provide feedback on a virtual prototype of the Prius. The feedback allowed Toyota to align the car with consumer needs and demands. Special care will be taken to ensure that the customer reviews will be relevant to the development of the Prius. This process continued for a period of two years during which Toyota continued to assess the Prius and to develop it in terms of its attributes. Simultaneously, a significant degree of help will be taken from computer based simulations in the earlier stages of the research for the Prius and how consumers will find it. The marketing research performed proved to be pivotal to the success of the Prius since the first generation Toyota Prius will be launched after improvement in all the areas that the consumers had identified for the Prius.

Action programs

The most notable action program for the Toyota Prius that is to come is the innovation that allows the Toyota Hybrid to be transformed into a plug-in vehicle that a consumer will be able to plug into any electrical socket to charge the batteries of his/her vehicle (The California Cars Initiative). The plug-in action program is not being led directly by Toyota but is still experiencing increased consumer approval. The prime drivers behind the plug-in Toyota Prius action program are car clubs that are essentially motivated towards the promotion of Toyota to bring about wide-spread adoption. The plug-in version of the vehicle is currently only in a prototype form and mass production of this version of the vehicle is still far from taking on an official form, however, car clubs are going to extensive lengths to promote the Toyota Prius through the innovative plug-in option.

It is imperative to realize that Toyota’s Prius does not come with a plug-and-charge option and this innovation is one that has come about as a result of increasing consumer demand to develop such a vehicle in light of the perceived convenience that it provides. It can therefore be projected that the Toyota Prius will continue to be subjected to innovation and will eventually acquire more popularity and consumer approval over time through research and development.

In addition, the success of the Toyota Prius has given Toyota an incredible boost towards hybrid technology. Toyota is currently in the processing of developing new hybrid vehicles as it develops hybrid technology to go along with its existing vehicles (Taylor). Toyota’s objective in this regard is to bring forth the utility that hybrid vehicles provide and to phase out the internal combustion engine in the everyday consumer vehicle category. With increasing support from consumers, there is a good chance that the hybrid Toyota Prius and Toyota’s stake in the hybrid vehicle market will continue to develop and improve over time.

Budget

The budget for the Toyota Prius will to be developed such that the degree of investment is highest at the moment when the Prius is launched. Consumer educational programs shall will to be at their maximum activity level and Toyota will to be prepared for an initial loss. Furthermore, since the category is that of the hybrid vehicle industry and this vehicle category is relatively new for consumers, Toyota must anticipate a considerable degree of reluctance from consumers in the adoption of its new vehicle. While there is little doubt that the vehicle will experience increased acceptance in its initial stages and there will be a massive degree of publicity created by environment friendly groups, the car will not be able to completely replace the combustion engine on account of the difference in acceleration levels between the hybrid and the combustion engine based car.

Toyota will therefore will to exploit the fact that the hybrid vehicle is primarily environment friendly as much as it can. This will require extensive funding. In light of this, it will be reasonable to expect Toyota’s Prius to yield a loss in the first few months. Short term returns may be somewhat devastating and will require Toyota to cushion the loss with more funds. However, as consumers are steadily educated about the advantages of the hybrid vehicle, Toyota can expect increased returns that will increase exponentially by the time the third generation of the car is brought into the market. At this point, Toyota can reduce its investment into the Toyota Prius’s marketing strategy and can consider the Prius to be a success.

The graph below roughly shows the projected differences between the investments that Toyota will experience with the passage of time. It is clear that the immediate losses will require Toyota to channel increased funding towards the project while later stages will provide swift returns on the budget.

 Projected Budget & Return on Toyota Prius
Figure 1. Projected Budget & Return on Toyota Prius

Controls

Control mechanisms for the launching and marketing of the Toyota Pries shall be driven mainly by feedback acquired from customers, distributors and potential customers invited to test drive the Toyota Pries. Fundamental control mechanisms that will be brought into use include factors that pertain to the technical attributes of the Toyota Pries as well as factors that pertain to the customer-experience attributes of the vehicle. These control mechanisms will be recorded over time and the later versions of the Toyota pries will be developed in accordance with this feedback. The control mechanisms will also be brought into use to regulate production volumes for the Toyota pries. Control mechanisms will have a special relevance for the marketing and launching of the Toyota Prius because the vehicle is the first hybrid vehicle to be launched by Toyota. Toyota will have to be essentially careful with regard to the launching and marketing of the Prius since the vehicle will be riding on a significant degree of social, political and environmental appeal. The vehicle sales will be highly sensitive to external factors and Toyota will therefore have to be highly agile in responding to the feedback and data it receives from the control mechanisms.

Remarks

Toyota’s Prius has come across as a major hybrid vehicle in the hybrid vehicle category. The marketing plan shows that the Prius holds a considerable degree of potential for success in the future. The marketing plan shown above shows that the Toyota Prius can be expected to be a considerably successful hybrid vehicle in the next few years to come. The Toyota Prius needs to be launched in simultaneous unison with an educational program designed to educate consumers about the need for the development and increase of hybrid vehicles on the road. However, in order to avoid cannibalization, it is necessary for Toyota to ensure that this educational program is launched in those regions where sales for combustion engine based vehicles will already fallen.

Works Cited

  1. Ayushveda Network. Product Positioning and Industry Dynamics – Toyota Prius. 2010.
  2. Burris, Mark, et al. “Integrated Marketing Communications Plan for Challenge X.” Environmental Resolution Agency (2007).
  3. Carle, Gian, et al. “Fuel cells for cars – a competitive analysis.” Conference paper WCTR 2004 (2004).
  4. Edmunds Inside Line. Toyota Announces 2010 Prius Pricing. 2009.
  5. Gutsa, Nyasha-Harmony. Marketing Mix in Action:Toyota Prius. 2009.
  6. Niedermeyer, Paul. The Great Hybrid Showdown: Chevrolet Volt vs. Toyota Prius. 2008.
  7. Rodriguez, Ann and Chris Page. “A Comparison of Toyota and Honda Hybrid Vehicle Marketing Strategies.” Rocky Mountain Institute (2004): 1-5.
  8. Taylor, Alex. The world’s most admired automaker had to overcome punishing deadlines, skeptical dealers, finicky batteries, and its own risk-averse culture to bring its hybrid to market. 2006.
  9. The California Cars Initiative. Big Picture: From Demo to Adoption – The Prius+ Strategy. 2004. Web.
  10. United Nations Environment Programme. UNEP Climate Neutral Network – Companies – Toyota Motor Europe. 2009.
  11. VanAuken, Brad and Derrick Daye. Toyota Prius – Vehicular Self-expression. 2007.
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