Tiny car, tiny
price tag, tiny gasoline bill. The Smart Car, made by Daimler’s Mercedes Car
Group in Hambach, France, first appeared on U.S. roads in 2008, just as prices
at the gas pump were hitting record highs week after week. The timing could not
have been better. Tired of emptying their wallets every time they filled their
gas tanks, many U.S. drivers were thinking about downsizing from a big sport
utility vehicle or pickup truck to a smaller vehicle. But were they ready for a
106-inch-long car that seated only two people? Daimler was ready to find out.
The Smart Car had
a good track record in other parts of the world. From 1998 to 2008, Daimler
sold more than 900,000 Smart Cars in Europe, the Middle East, Asia, Australia,
Mexico, and Canada. The car was cute, nimble, and unconventional—a good size
for getting through crowded, narrow city streets and fitting into any tight
parking spot. Not only was the purchase price highly affordable, but the
excellent fuel efficiency made the car especially popular in countries where
gas prices were generally high.
To bring the
Smart Car to the United States, Daimler redesigned the body and engineering to
meet U.S. safety standards. It added six inches to the car’s length and
included four air bags, an antilock braking system, a collapsing steering
column, and other safety features. It also installed a fuel saving 71
horsepower engine so that the Smart Car would go about 40 highway miles on a
gallon of gasoline.
Daimler set the
list price of the Smart Fortwo Pure model—the basic version of the
two-seater—at $11,590. The list price of the Smart Fortwo Passion Coupe,
equipped with more features, was $13,590. The list price of the Smart Fortwo
Passion Cabriolet, a convertible with leather seats and additional features,
was $16,590. Buyers had the option of ordering extras, like a metallic-paint
finish or an alarm system, for an additional fee. Keeping the list price as
tiny as the car allowed Daimler to build market share quickly.
selling Smart Cars through its regular dealer network, Daimler contracted with
the Penske Automotive Group to handle distribution and sales. In another
unusual move, Daimler set up a website to let buyers reserve the model of their
choice and choose from six interior colors and six exterior colors on the car
body’s removable panels. Three of the exterior colors were offered as part of
the purchase price, while the three metallic exterior colors were offered at an
extra cost. The $99 reservation fee was applied to the buyer’s purchase price
once the ordered model became available. By the time Smart Cars arrived in U.S.
showrooms, 30,000 people had paid for reservations.
To build customer
interest prior to the U.S. launch, Daimler sent a number of Smart Cars on a
50-city U.S. tour. Nearly 50,000 members of the media and prospective car
buyers took test drives. Although many reporters couldn’t resist poking fun at
the tiny car (USA Today called it a
“breadbox on wheels”), they all noted its high fuel efficiency and low purchase
price. Initial demand was so strong that even buyers who had reserved their
cars well in advance had to wait months for delivery. A few U.S. customers who
didn’t want to wait paid as much as $39,000 for European Smart Cars adapted to
meet U.S. safety and emissions standards.
prices fell from their record-high levels and the global economy plunged into
recession. By 2009, the downturn was so severe that car sales plummeted across
the board as U.S. consumers and businesses clamped down on buying. The
combination of significantly lower gas prices and a sluggish economy put a
serious dent into U.S. sales of the Smart Car. To reignite customer interest,
Daimler offered low-interest financing and, for the first time, its U.S.
dealers discounted the car’s retail price. In 2010, the company also introduced
a limited edition electric Smart Car to appeal to buyers interested in
ecofriendly alternatives to traditional gas-driven cars.
continues to face intense competition in the small-car segment. Looking ahead,
what else can it do to accelerate purchases of its stylish Smart Car without
depending on constant discounts, rebates, and other price-cutting measures?
Sources: Chris Reiter, “Smart Car Sputters in
U.S. as Daimler Hunts for Partner,” Toronto
Sun, January 12, 2010, p. B6; Bernard Simon, “Daimler Discounts Smart in
US,” Financial Times, November 13,
2009, p. 21; Steve Miller, “Vroom for Two,” Brandweek,
June 2, 2008, pp. 20+; Bill Marsh, “Welcome, Little Smart Car, to the Big
American Road,” The New York Times, January
6, 2008, sec. 4, p. 3; Chris Woodyard, “America Crazy about Breadbox on Wheels
Called Smart Car,” USA Today,
November 11, 2007, www.usatoday.com; Royal Ford, “Smallest Car, Biggest Market,”
Boston Globe, December 6, 2007, p.
From PRIDE/FERRELL. Marketing 2012, 16E. © 2012
South-Western, a part of Cengage Learning, Inc. Reproduced by permission. www.cengage.com/permissions
This assignment will assess the following competency: 2. Create a strategic
marketing proposal for a product.
After reading the Smart Car case,
and based on your readings from our textbook, write a 300-400 word essay in
which you address the following questions:
The paper must be researched using at least two
scholarly or professional marketing resources, as well as the
textbook. The references must be cited and properly placed on the
reference page using APA formatting.
- What methods
did Smart USA use to test market the Smart Fortwo car among prospective
- What trends
are influencing the market potential of the Smart Fortwo car?
strategic marketing practices would you propose?