[Kiwi]

Hi

I'm a salesman by trade with a desire to see the Volt succeed. So I wanted to talk to GM (and other forum people) in this open letter format. Notice that there are not many numbers in the thesis advanced below. This is because I don't have access to the kind of marketing data that would numerically support the thoughts I express below. however, it passes my test of reason - does it pass yours?

Typically a sale or marketing campaign (they not exactly the same) goes through a process:

- Identify the key selling points
- Define a market
- Define a price point
- Create a go to market strategy

So the first item to determine is what are the key selling points of the Volt? What is the Volt good at? I think it is good at the following:

- cost reduction for frequent short commuter trips (under 20m)
- feeling good about reducing environmental impact (air quality) over those frequent short trips
- noise reduction and having a more pleasant driving experience
- people who have garages and who can refuel with electricity overnight

So having determined what the Volt is good for we now need to think about what the Volt is bad for:

- load carrying (turns short trips into long trips and means early use of gasoline)
- rough terrain (as per SUV - requires too heavy a vehicle)
- people who do not have garages or similar facility to plug in

Market

Bearing the above in mind, we now need to think about the market. I think there are two markets for the Volt, with quite different characteristics.

- people without families who live in large cities who are environmentally aware and who undertake commuting trips. These people have a reasonable amount of disposable income, are not overly price sensitive and who can afford to buy for emotional as opposed to cost reasons. They look at environment first and price second. A key issue with this group may be that they do not have garages. Another key issue is that there may not be that many of them.

- The second category of people are those who already own a large car that is used for load carrying, holidays, rough terrain (such as an SUV, stationwagon or people mover) - it then becomes the second car commuter for people who already own another car. This is your classic dual income family - where people buy a car after the price is right; this category look at price first and then the environment second. And this I think is the bigger market - and I suspect it is the "Prius" market.

Price Point
Price is a critical point of every sale. It represents both actual cost and opportunity cost. For example, if I pay a premium of 7k for a Prius over a Corolla I am effectively forgoing, for example, a very upmarket home entertainment system. Enthusiasts, such as the people reading this forum, tend to underestimate the importance of price, but it is core to decision-making for the bulk of people.

In the section above I talked about the price elasticity of market segments. But here I would like to talk about price models and then bring the two of these together.

There are two ways to look at price - competitive or actual cost saving

Competitive
A competitive price would be the Prius plus Hymotion plus installation = 23k + 12k for a very comparable vehicle with a slightly smaller battery = 35k. I've rounded the Hymotion price point up slightly because I think it will be more expensive than they advertise.

Actual Cost Savings
I've done a rough calculation indicates that at current fuel prices for a 20mile round trip for the working days of the year you could expect to save between 1k-1.8k per annum. This is inline with the more thoughtful posts on this subject on this site.

Now we need to determine how much we would pay for a Volt on purely economic grounds. The logic here is the cost of a petrol car plus petrol over a period of time versus the Volt over the same period of time. In this case I'm going to take an arbitrary 5 year period for no better reason than it corresponds to the standard depreciation figure for equipment. I'm also going to take a Corolla as a comparable car at a cost 15k new (list price). As mentioned above, the savings per annum are $1k - $1.8k per annum. Because I like the Volt, I'm going to take the higher figure - $1.8k. So over the 5 year period the maximum economic price for a Volt is 15k plus (1.8*5) = 24k. Any amount over that is the emotional factor - the "feel-good".

Now I do not discount feel-good. Feel good is why the Prius has been so spectacularly and justifiably successful. But it has a limit. The Prius is 23k. The Prius + Hymotion is 35k - and hasn't had many buyers to date.

Go to market
So finally GM need a go to market strategy. This needs to be based on message and price. The message is clean and green. If there is a tax credit associated with being provably green so much the better - but I wouldn't count on it outside California and probably not even there. The price then needs to be at a point where:

- it can reach across both the market segments mentioned above
- it supports a profit by GM

How high can the price go? I suspect to reach the first group the price could go as high as the early 30s. But for the second group, I suspect (without evidence) that the price needs to be mid to high 20s. Food for thought for GM, especially if the second group is truly the larger group and is the "Prius" group.

Finally, if I were GM I would be reluctant to break the pricing identified by my market research. They would be far better stripping the car back than making it too expensive.

So what do other people think? I've advanced some views here that I've seen in other posts, but more from an engineering or finance modelling perspective than a sales perspective. I look forward to the commentary

 

[efusco]

Nice write up, but I think most people, including me, would say that the "prius+Hymotion" is not "very comparable" to the Volt. They share some characteristics, but are not in the same category at all.

 

[frankyB]

- cost reduction for frequent short commuter trips (under 20m)
- feeling good about reducing environmental impact (air quality) over those frequent short trips
- noise reduction and having a more pleasant driving experience
- people who have garages and who can refuel with electricity overnight

It's not just about feeling good, it's about doing the right thing. Also expect more states and country to push for more aggressive laws against gas emition, this will either come with penalities for gas gusler or taxe break for energy efficient car.

On what we have seen, this car will offer performance equal to existing car, that a plus as well, you are not making compromised like you are doing for most hybrid currently in the market.

So having determined what the Volt is good for we now need to think about what the Volt is bad for:

- load carrying (turns short trips into long trips and means early use of gasoline)
- rough terrain (as per SUV - requires too heavy a vehicle)
- people who do not have garages or similar facility to plug in
- long trips

Load carrying still remain to be confirm and GM position this car as a "sporty sedan". But It's no SUV, it's for any sedan, so for me you are making the mistake of comparing with a different class of car.

As for your point for the garage, it only true for big city where you park your car in the street, of you have you own parking you can still plug car, at least in Canada we are able to plug our car to warm them up in winter time.

Why are you saying it's bad for long trip, with the range extender it does same range as any car, again bad point.

Market

Bearing the above in mind, we now need to think about the market. I think there are two markets for the Volt, with quite different characteristics.

- people without families who live in large cities who are environmentally aware and who undertake commuting trips. These people have a reasonable amount of disposable income, are not overly price sensitive and who can afford to buy for emotional as opposed to cost reasons. They look at environment first and price second. A key issue with this group may be that they do not have garages. Another key issue is that there may not be that many of them.

- The second category of people are those who already own a large car that is used for load carrying, holidays, rough terrain (such as an SUV, stationwagon or people mover) - it then becomes the second car commuter for people who already own another car. This is your classic dual income family - where people buy a car after the price is right; this category look at price first and then the environment second. And this I think is the bigger market - and I suspect it is the "Prius" market.

Why without families? In most eastern country we make 1.1 kids, it's 4 seat car, this car is good for family and single people. You also make the assumption that only people with a garage can have a Volt, this is so wrong again. When you think that most people that do have a garage use it for storing everything but their car, should we eliminate them as well?

Sure existing Prius user will be interested in this car, but I'm not a Prius user, simple because I always felt their was too much compromise to make and I was better off with a small sub-compact car then a Prius in pure mpg terms.

The Volt will attrack more people then what you are saying, because it's a good looking car, it's good value for the money and it's does everything other car in the same category do and better in some area, that's what you should have looked at. For a salesman you are in hurry to look at the what could be a negative (in most cases it's not), I wouldn't hire you as one of my salesman.

Price Point
Price is a critical point of every sale. It represents both actual cost and opportunity cost. For example, if I pay a premium of 7k for a Prius over a Corolla I am effectively forgoing, for example, a very upmarket home entertainment system. Enthusiasts, such as the people reading this forum, tend to underestimate the importance of price, but it is core to decision-making for the bulk of people.

In the section above I talked about the price elasticity of market segments. But here I would like to talk about price models and then bring the two of these together.

There are two ways to look at price - competitive or actual cost saving

Competitive
A competitive price would be the Prius plus Hymotion plus installation = 23k + 12k for a very comparable vehicle with a slightly smaller battery = 35k. I've rounded the Hymotion price point up slightly because I think it will be more expensive than they advertise.

Actual Cost Savings
I've done a rough calculation indicates that at current fuel prices for a 20mile round trip for the working days of the year you could expect to save between 1k-1.8k per annum. This is inline with the more thoughtful posts on this subject on this site.

Now we need to determine how much we would pay for a Volt on purely economic grounds. The logic here is the cost of a petrol car plus petrol over a period of time versus the Volt over the same period of time. In this case I'm going to take an arbitrary 5 year period for no better reason than it corresponds to the standard depreciation figure for equipment. I'm also going to take a Corolla as a comparable car at a cost 15k new (list price). As mentioned above, the savings per annum are $1k - $1.8k per annum. Because I like the Volt, I'm going to take the higher figure - $1.8k. So over the 5 year period the maximum economic price for a Volt is 15k plus (1.8*5) = 24k. Any amount over that is the emotional factor - the "feel-good".

Now I do not discount feel-good. Feel good is why the Prius has been so spectacularly and justifiably successful. But it has a limit. The Prius is 23k. The Prius + Hymotion is 35k - and hasn't had many buyers to date.

Go to market
So finally GM need a go to market strategy. This needs to be based on message and price. The message is clean and green. If there is a tax credit associated with being provably green so much the better - but I wouldn't count on it outside California and probably not even there. The price then needs to be at a point where:

- it can reach across both the market segments mentioned above
- it supports a profit by GM

How high can the price go? I suspect to reach the first group the price could go as high as the early 30s. But for the second group, I suspect (without evidence) that the price needs to be mid to high 20s. Food for thought for GM, especially if the second group is truly the larger group and is the "Prius" group.

Finally, if I were GM I would be reluctant to break the pricing identified by my market research. They would be far better stripping the car back than making it too expensive.

So what do other people think? I've advanced some views here that I've seen in other posts, but more from an engineering or finance modelling perspective than a sales perspective. Notice that there are not many numbers in the thesis advanced below. This is because I don't have access to the kind of marketing data that would numerically support the thoughts I express below. However, it passes my test of reason - does it pass yours?

Again I think you can shuffle the number as much as you want, but this car will not be price as a sub-compact car or a compact car. GM already plans EV for those market, so they can't go too low on pricing for that car, it's basic market segmentation, you should get that Mr. Salesman. So look at the car segment and put a premium on the price because you pay for something that is unique for the moment (same for the Prius BTW, since you like to refer to this car a lot).

 

[MetrologyFirst]

I brought some of this up in another thread. I think GM needs to be careful how they follow the analytical approach to marketing this car. There is more going on here than just another car. This is a paradigm shift. And other manufacturers are going to throw as much sand in the gears as possible, until their copy of the Volt is ready, of course.

There are three key emotions to address here. 1) People who are FED UP with gas prices and oil companies, and want to thumb their noses at them. 2) People who want a U.S. solution to our electric car desires brought on by emotion #1. 3) People who want to "do the right thing" but do not want to give up car style or have to drive a 'rolling ugly' to go electric. 4) Those who have already chosen their solution and will not accept the Volt approach or the fact that GM is building it.

Addressing these groups of people are critical. A lot of people discount the role emotion has on people about their cars. At least it used to, before many companies convinced folks that they are nothing but appliances.

The Volt needs to be marketed as the anti-appliance. Something to get your juices flowing again but still be a new generation, environmentally appropriate car. Something really DIFFERENT. They CANNOT under emphasize how different the Volt is to anything else out there.

I think for GM to succeed in the overall auto market, they must take back the IDEA of the car and recreate the PASSION for owning it from those who have worked to convince us the car nothing more than an expensive toaster.

If they can do this well, the world may truely turn to electric cars in a way and for the reasons we may not have expected.

 

[Statik]

I think this car will and should be marketed strictly based off the impulse to buy a novelty...a electric car, a rare car, a cool car.

It has to be north of 30K (more likely north of 40K)...because honestly, (even for all my own griping about price) GM can't afford to sell it that cheap, whether it is viable (to GM...not the concept) at any price is debateable.

Forget trying to massage the numbers, it doesn't work. Your Corolla example...in real world numbers:
http://www.fueleconomy.gov/feg/2008car1tablef.jsp?id=24321_
$1749 for 15,000 miles travelled.

 

[Jason M. Hendler]

Statik is right, that if you just go by the numbers, you are better off buying a used Honda Civic. If people understand that the Volt is our stepping stone to petroleum independence, then they will pay more to travel using no gas at all.

 

[zzyzzx]

All they really need to do is show them driving by all those sad people at the gas stations.