Session11 Nissan Leaf Launch in Germany Case

MK1-140-I
LAUNCHING THE NISSAN LEAF IN GERMANY *
ing
Original written by Professor Ramon Diaz-Bernardo, at IE Business School, and Megan C. Goldin,
IE Business School MBA 2010.
Original version, 16 June 2010. Last revised, 9 June 2011.
Published by IE Business Publishing. María de Molina 13, 28006 – Madrid, Spain.
©2010 IE. Total or partial publication of this document without the express, written consent of IE is prohibited.
This document is authorized for use only in Master in Management SEP-2014 by IE Business School.
It was June 2010, The Marketing Director of Nissan Germany looked out at the night-time city
skyline from his office window at Nissan Motor’s main offices in Nuess, Germany, and rubbed his
weary eyes. He was still jetlagged from his trip to Nissan’s headquarters in Yokohama, Japan and
the weight of responsibility of the project he had been charged with weighed heavily on him.
sh
Nissan was about to launch the world’s first mass market electric car in only a few months time in
Japan and the United States. The car was called the Nissan LEAF, which stood for Leading,
Environmentally Friendly, Affordable, Family car. It was a fully electric vehicle, not a hybrid, with
five doors and five seats. Auto magazine reviewers had described the car as being almost a mid-
sized vehicle. Unlike other electric car models with futuristic designs, the LEAF looked like most
other family cars on the market.
At his meetings in Japan, Nissan’s senior management told The Marketing Director of Nissan
bli
Germany that Germany would be the springboard for the LEAF’s European launch. A successful
launch in Germany would give a firm foundation for Nissan to dominate the electric car market in
Europe. While the electric car market was still emerging, some auto analysts believed that in the
not too distant future, most cars would be electric. The Marketing Director’s job was to devise a
strategic marketing plan to launch the LEAF in Germany, which was Europe’s largest car market
but also its most challenging. The objective was to sell 2,000 units of the car in Germany in the first
year of operation. His authorized marketing budget was 2.5 million Euros.
Nissan’s senior management believed that if its electric vehicle was successful in Germany then
Pu
the car could easily conquer the rest of Europe. The Marketing Director of Nissan Germany was
given two months to prepare a marketing plan for the launch of the Nissan LEAF in Germany in
mid-2011. As the Marketing Director of Nissan Germany began to collect his thoughts about how
best to introduce the car into the German market, he started jotting down some of the obstacles in
Nissan’s path. He wondered about the best marketing strategy and the best marketing mix to
circumvent these obstacles in order to successfully launch the LEAF in one of the world’s toughest
auto markets.
COMPANY BACKGROUND
Nissan Motors was a multinational automotive company with its headquarters in Nishi-ku,
IE
Yokohama, Japan. In 1999, a financially troubled Nissan, almost $20 billion in debt, entered into an
alliance with French carmaker Renault S.A. which owned about 44% of Nissan as of 1998. Renault
*
The case is based on public sources of information, the characters, situations and opinions presented in the case are
fictional and the information presented reflects the authors’ interpretation of events and public information and serves
merely to provide opportunities for class discussion.
1
IE Business School
LAUNCHING THE NISSAN LEAF IN GERMANY MK1-140-I
appointed its own CEO Carlos Ghosn as the head of Nissan Motors and Ghosn immediately
embarked on a campaign to turn the company around with what he termed the “Nissan Revival
Plan”. It was based on findings that had concluded that part of Nissan’s monetary woes were the
results of a lack of sense of urgency and a lack of customer orientation.
The plan worked. By 2005, Ghosn announced that Nissan had enjoyed a record year in terms of
revenues, operating profit, net income, sales volume, and production. Brazilian-born Ghosn, who
started his career as an engineer with Michelin, took on near legendary status within the company
for turning Nissan around.
ing
In, 2008 Nissan sold around 600,000 vehicles in 40 markets in Western and Eastern Europe.
Nissan’s biggest market in Europe was the UK, followed by Germany and Italy. Germany was a
fast growing market, and Nissan sold 209% more cars in Germany in the first month of 2010 than it
12
did in the same month in 2009.
NISSAN LEAF
The zero carbon emissions LEAF car was intended to be the first in a range of mass market electric
vehicles produced by Nissan. It was a key part of what some industry experts perceived as a high
sh
risk gamble by Nissan whose CEO Carlos Ghosn was betting that electric vehicles would become a
dominant auto technology in the future. He believed electric vehicles would displace ordinary
combustion cars due to rising oil prices, which experts predicted would reach the $200 a barrel
mark in the next few years, as well as growing awareness of climate change and the need to cut
carbon emissions.
While Toyota and other car firms focused on developing lines of hybrid vehicles that ran on a
combination of electric and fuel engines, Ghosn put Nissan’s resources into developing pure
electric cars. If his gamble succeeded, then Nissan could achieve a first mover advantage in
bli
electric vehicles and dominate the automotive industry after years of struggling against competitors
such as Toyota, Honda and Volkswagen.
Some industry analysts predicted that electric vehicles would revolutionize the auto industry and
3
bring the era of internal combustion engine cars to an end. Other experts were not so sure,
pointing to the fact that after years in the market hybrid cars, which were a combination of fuel and
battery powered cars, still only captured about 1-2% of the car market.
Nevertheless, Ghosn pushed ahead with his vision. He has pledged to spend $6 billion on electric
Pu
vehicle technology from 2007 to 2011. The amount was equal to the combined annual research
4
and development budgets at Nissan and Renault. He said he expected that electric vehicles would
make up 10% of total car sales by 2020 which would work out to be about 7 million cars a year.
Electric cars are vehicles that are propelled by electricity either in the form of a battery or other
methods that may come into use in the future such as fuel cells or components that store kinetic
th
energy. They were popular in the early 20 century but fell out of favor by the 1930s once gasoline
cars were introduced. Today’s electric vehicles are powered by onboard batteries and the latest
vehicles use lithium batteries.
IE
1
http://europeanmotornews.com/2010/02/04/nissans-market-share-in-europe-highest-for-12-months/
2
http://www.nissaneurope-
newsbureau.com/nissanmedia/front?controller=SubRubrik&id=nissan_europe_press_room_10772091931250/news_an
d_events_10772871591872/presse_releases_10781508884370/corporate_10781511772180&pubId=nissan_s_market_
share_hits____for_third_time_in___months_125993390627148
3
HSBC Global Autos report 13 October 2009
4
http://www.bloomberg.com/apps/news?pid=20601109&sid=aJEVrzt2t.8o
2
IE Business School
Ghosn said that in order to change the industry, electric vehicles would need to be “affordable,
5
cool, attractive and fun to drive.” After years of research and a large R&D investment the result
was the Nissan LEAF.
The Nissan LEAF was a 5-seat sedan which was about the size of a Volkswagen Golf or a Renault
Megane. It had an 80 kilowatt electric motor with about 110 horsepower that drew its power from a
lithium-ion battery pack. The lithium battery was very expensive to produce and estimates
suggested that its manufacturing costs were as much as half the cost of the car itself. The battery
provided enough power for the LEAF to achieve a top speed of 140 kilometers per hour, and a
ing
range estimated by Nissan at 160 kilometers, that according to Nissan would cover the driving
requirements of 70% of all the drivers.
The battery could be charged with 440 Volt, 220 Volt and 110 Volt sources. With 440 Volts, it could
be charged to 80% capacity in about 30 minutes with a special quick charger that sends 440/480
volt direct current to the battery. With 220 Volt, that is the regular voltage in Europe, it could be
charged in 4 hours, and in North America and Japan, using standard household 110 Volt outlets, it
could be charged in 8 hours. This meant that depending on the price per kWh a full charge of the
car battery done in a household in Europe could cost between 1.74€ and 3.89€.
Since electric cars do not make sounds, the LEAF was fitted with a digital futuristic noise to ensure
sh
that pedestrians heard it coming. It also included an advanced IT system that would be connected
to a global data centre that would provide support, information and even entertainment. A dash-
mounted monitor would display the LEAF's remaining electrical power, in addition to showing a
selection of nearby charging stations. A mobile phone could be used to conduct such functions as
turning on the air conditioner and heater and setting battery charging functions. An on-board
remote-controlled timer could also be pre-programmed to recharge batteries. Indeed drivers would
constantly be told how much battery life they had left and how long and to which destinations they
could drive before the car required a recharge.
bli
The LEAF production was planned to begin in 2010 in a Nissan production plant in Oppama,
Japan, with a second production facility being built in Tennessee, USA. Nissan planned to start
selling the LEAF in Japan and in the USA in early 2011 and Germany would follow shortly after.
THE GERMAN CAR MARKET
Germany was Europe’s largest car market with more than 3.8 Million cars sold in 2009. Germany’s
population was about 82 million of which 60% was aged between 18 and 65. The median age was
Pu
43.8 years. With a per capita GDP of US$39,442 in 2009 and around 32 million households,
Germany had one of the highest per capita incomes in Europe. Its per capita car ownership was
also among the highest in Europe, with 546 cars owned per 1,000 people.
The home of the world’s leading car makers -- BMW, Daimler Benz and Volkswagen -- Germans
were perhaps not surprisingly loyal to German-made cars and technology. German car makers
controlled about 50% of the German car market. According to 2008 figures, Volkswagen was the
biggest selling car brand in Germany, followed by Daimler Benz, and then BMW/Mini. Opel and
th
Audi came next followed by Ford. Nissan’s partner Renault & Dacia came in at 7 place. Nissan
th
was in 16 place with just 1.5% of market share, well below Asian car maker rivals Toyota, Mazda
and Hyundai. Nissan sold 45,746 cars in 2008 in Germany. But preliminary figures from the start of
2010, showed Nissan leaping up with a 3 percent market share following a booming year for car
IE
sales in Germany after the government gave incentives to boost new car sales in a bid to mitigate
the effects of the global financial crisis.
A substantial number of German car owners leased cars either as part of their employment
contracts or through personal financing arrangements. The leasing market in Germany was huge
5
http://www.msnbc.msn.com/id/34131516/ns/business-autos/
3
IE Business School
with the total volume of leasing contracts for vehicles reaching about 11 billion Euros in 2007.
Industry experts said that more than 60% of the value of all investments in new cars was made via
leasing contracts in Germany. This meant about 1 million cars were sold on leasing contracts in
Germany in 2007. Corporate leases for cars were popular also because employees were not taxed
on the benefits. However, company cars were seen as a status symbol and employees were used
to driving large luxury cars that would power along Germany’s Autobahn.
Germany’s government issued a report in August 2009 called the German Federal Government’s
National Electromobility Plan which detailed its commitment towards low or zero emissions
ing
vehicles. The report addressed issues such as the need to set up battery charging infrastructure
and the possibility of subsidies for zero emissions vehicles. The report allocated 500 million Euros
towards promoting low or zero emissions vehicles. The government had already launched a plan to
reduce the country’s carbon dioxide emissions by 40 percent by 2020 compared with 1990 levels.
Electric cars produced zero emissions and with 14% of Germany’s emissions coming from cars, the
possibility of lowering emissions through the widespread use of electric cars was appealing to
Germany which had ambitious targets to lower its national carbon emissions.
This was a good sign for Nissan as it showed there was government support. On the other hand,
The Marketing Director of Nissan Germany worried that perhaps the government’s assistance
towards car battery technology might prompt German car makers, who had so far been slow to
THE COMPETITION
sh
recognize the potential of this technology, to launch their own lines of electric vehicles.
Nissan was not alone in developing its electric vehicles, although it was the first to develop a fully
electric car that looks like a regular family hatchback and that was aimed at the mass market with
an affordable price tag. Other companies were either developing hybrid cars or small, futuristic
vehicles with price tags well above that of ordinary cars and unsuitable for use by a family.
bli
BMW: Planed to launch its electric car called the MiniE by 2012. The car would be a premium
electric vehicle that will sell for 34,000 Euros. It was planned to be a small and sporty car targeted
to the high end consumer category.
Opel: GM-owned German car-maker Opel was planning to launch its own electric car by 2012.
Volkswagen: Planning to launch an electric car by 2013. Volkswagen had not revealed its plans,
but it is perceived as the main competitor to Nissan-Renault in Germany. Some industry experts
Pu
describe Volkswagen as the most conservative player in the car industry.
Mitsubishi: The Japanese car maker which had a very small presence in the German car market
plans to release its own electric car called i-MiEV in Japan in 2010. It was expected to retail at
around 30,000 Euros and its size was quite small compared to the LEAF.
Peugeot: The French car maker had announced plans to launch its small electric car called
Peugeot iOn in 2010. The iON was a version of the Mitsubitshi i-MiEV for the European market.
Citroen: Plans to launch a mini electric car called the C1 which could seat 4 people at a squeeze. It
was being offered in the UK market, mainly in London, and it could be fully charged for about 2
Euros. It had a 100 km range and costs about 19,000 Euros.
IE
Chevrolet: The American car maker was releasing the all electric Chevrolet Volt in 2010 in the
USA. The price was expected to be around US$27,000.
Mercedes Benz: Working on a luxury electric car which would be a mid to large sized luxury car
with a lithium battery that could be charged in two ways. First, it could be charged from an electric
4
IE Business School
plug and secondly it could be charged with a device that charged the car as it drives. The car had a
range of about 170 km.
Tesla Motors: This U.S. made electric car manufacturer sells high priced electric sports cars in the
U.S. and Germany. With price tags ranging from $49,000 for its model S to over $100,000 for its
sports cars, it was an expensive car but with plenty of brand cachet for early adopter green drivers
with money.
Hybrids: Hybrid cars are perceived as substitutes for electric vehicles and any competitor with a
ing
strong range of hybrids could be a threat. The prices of hybrids were significantly higher than the
price of regular cars. The main hybrid players are Toyota with the Prius and Honda with the Honda
Civic Hybrid. Together they have 97% of the U.S. market of hybrids, but hybrids made only about
6
2% of the total U.S. car market.
Hybrids sell for around 25,450 Euros (Toyota Prius entry level price in Germany) in Europe and
buyers can get back rebates that may add up to as much as 2,000 Euros plus benefit from lower
taxes, tariffs and charges. Toyota reported selling more than 200,000 Prius cars in Japan where
the Toyota Prius was the best selling car in 2009. In Europe Toyota reported selling more than
44,000 Prius cars in 2009. In Germany, 4,500 Prius cars were sold in 2009, according to a Toyota
spokesman.
sh
Nevertheless, studies found that hybrid cars cost a premium of about 2,700 Euros compared to
regular cars, yet the annual fuel costs savings were around 150 Euros, meaning that consumers
would rarely make up for the premium they were paying in the car’s lifetime. But industry experts
believed that hybrid cars had helped break the consumer psychological barrier away from all-
gasoline cars and paved the way for electric vehicles which were expected to have greater cost
savings in terms of fuel use and were zero emissions cars.
bli
NISSAN’S LEAF CHALLENGES IN GERMANY
One of the biggest challenges for electric vehicles was the development of infrastructure to charge
the cars. In the future, electric car charging stations in the form of vending machines could be
stationed in parking lots in shopping malls, airports, hotels and offices. They could also be along
the sides of main roads and at other venues so that people could charge their cars while they were
inside going about their business. In addition, company’s such as Project Better Place, a private
equity funded company, were planning to set up charging stations in which leased batteries could
be swapped by an automated system in less time than it would take to fill up a car with petrol. But
Pu
the fact was that in 2010 battery charging infrastructure was non-existent in Germany which meant
car owners would have to plan ahead to ensure their cars were fully charged before their trips. The
Marketing Director of Nissan Germany wondered: “Would enough German consumers choose to
purchase a car that did not have a readymade charging system available?”
Another major problem was that German car owners were fervently loyal towards German-made
cars: Germans bought German, and that had always been a challenge for foreign brands. The
preference for German brands by drivers was especially clear among those with leased company
cars which tended to be luxury cars such as BMWs. Would drivers of large, powerful, status-symbol
cars opt for a smaller, less powerful, green company car?
However, The Marketing Director of Nissan Germany thought that the main concern would be the
IE
electric vehicle itself. There was general anxiety among consumers about the range and
technology of electric vehicles. Quite simply, consumers were afraid they would be stranded on the
http://www.solsustainability.org/documents/cultivatingmarkets/A%20comparison%20of%20hybrid%20vehicle%20market
ing%20strategies.pdf
5
IE Business School
roads if their car battery died. A successful launch would depend on how effective Nissan was at
reassuring potential buyers about the new technology and its battery charging requirements.
DIFFUSION OF INNOVATIONS
As The Marketing Director of Nissan Germany sketched out some ideas for the launch, he thought
to himself “What should be the pillars of our marketing strategy in Germany?” The launch of the
LEAF was what the marketing books called the introduction of a radical innovation. The Marketing
ing
Director of Nissan Germany began to think about the consumer adoption processes and how the
marketing strategy and marketing mix could move consumers through this process.
7
Experts explained that the consumer adoption process moved through five stages that began with
first hearing about an innovation (an electric car) and ended with finally adopting that innovation.
The five stages were called: awareness, interest, evaluation, trial and adoption. The Marketing
Director of Nissan Germany knew that his marketing plan should facilitate movement through these
stages.
The Marketing Director of Nissan Germany also knew that not all the car buyers were the same.
Faced with an innovation like the Nissan LEAF there would be different types of customers
sh
depending on their level of innovativeness. Customers could be classified in five categories
depending on their willingness to try a new product: innovators, early adopters, early majority, late
majority and laggards.
bli
Pu
The key to success was not only identifying the segment of customers that would be more willing to
buy the Nissan LEAF, it was also identifying what characteristics of the LEAF could help in the
customer adoption process. The Marketing Director of Nissan Germany knew that five
characteristics usually influenced the rate of adoption of a radical innovation:
 Advantage: the degree to which the innovation appears superior to existing products.
 Compatibility: the degree to which the innovation matches the values and experiences of the
individuals.
 Complexity: the degree to which the innovation is relatively difficult to understand and use.
 Observability: the degree to which the beneficial results of use are observable and describable
to others
IE
 Risk: the perceived risk and uncertainty associated with the innovation
 Divisibility: the degree to which the innovation can be tried on a limited basis.
7
The concepts and classifications presented here about The Consumer-Adoption Process were taken from P. Kotler and
K. Keller, Marketing Management, 2006, 12th edition, Prentice Hall, pages 658 to 660.
6
IE Business School
The Marketing Director of Nissan Germany reviewed the list of characteristics and began to
analyze how the Nissan LEAF performed on each of these characteristics.
DEVELOPING A MARKETING STRATEGY FOR NISSAN LEAF IN GERMANY
The Marketing Director of Nissan Germany thought that this marketing plan was different from any
other marketing plan he had done before. The LEAF was a very different car because of its
technology and charging requirements. The Marketing Director of Nissan Germany thought that he
ing
needed to target consumers that were not intimidated with the technology and consumers that
would appreciate the cost and green benefits of the LEAF compared with regular cars.
Before going into the details of the marketing mix he needed to clarify what would be the core of his
marketing strategy. He needed to define the best target segment and the best positioning for the
LEAF.
THE TARGET SEGMENT FOR THE NISSAN LEAF
Who would be more willing to buy a Nissan LEAF? That was the question the Marketing Director of
buyers.
sh
Nissan Germany was trying to answer. After many years in the German car industry he knew there
were two basic segmentation criteria when analyzing car buyers: private buyers and company
The private buyer segment was the largest and included all the individuals buying a car for their
personal use. Among the private buyers there was a popular segmentation developed by JD Power
Associates, a research firm, which divided new-car buyers into six groups, according to their
8
attitudes toward cars and the driving experience .
bli
 Gearheads: Are true car enthusiasts who enjoy driving and working on their cars themselves.
They are most likely to believe that a car says a lot about its owner. Mostly men, with many craft
workers and blue-collar workers, Gearheads represent around 17% of buyers.
 Epicures: Prefer to drive fully equipped, comfortable cars that seem stylish or elegant. This
group has the second-highest share of women and the highest household incomes. They go for
luxury and sports cars. Represent 26% of the new car buyers.
 Purists: The youngest group, are not brand loyal and are skeptical about auto manufacturers'
claims. Yet they like automobiles, enjoy driving, and are particularly interested in cars with sport
attributes. Represent 4% of new car buyers.
Pu
 Functionalists: Lean toward sensible, fuel-efficient transportation and are not highly influenced
by sportiness or styling. These conservative, law-abiding drivers are likely to have children at
home. They buy small and mid-sized cars. Represent 12% of the new car buyers.
 Road-Haters: Are the group most concerned about safety. They don't enjoy driving cars, and
they don't rate themselves as being very knowledgeable about cars. This group has the highest
share of women. Represent 26% of the new car buyers.
 Negatives: View cars as necessary evils that they would just as soon do without. They don't
have much interest in upkeep, colors, or options. This is the most educated group. Represent
16% of the new car buyers.
Another customer segmentation in the car industry that The Marketing Director of Nissan Germany
9
had used before was a segmentation of car buyers based on life-style and behavior . This
IE
segmentation classified the car buyers in four different types:
8
The JD Power Car Media Report is an annual survey of 10,000 new-car registrants that is used by advertising agencies,
magazine publishers, and cable and broadcast television companies to target car buyers.
9
The new car buyer Life-Style and Behavior segmentation was adapted from “Ford Ka The Market Research Problem
(B), 2003, INSEAD Case 503-083-1.
7
IE Business School
 Sensible Classics: Described as responsible, risk-averse, and traditionalists. Represent 30%

of the new car buyers, 57% are male and 43% female.
 No-nonsense Neutrals: Described as brand wary, TV watchers, unenthusiastic consumers.
Represented 26% of the new car buyers, 38% are male and 62% are female.
 Attention Seekers: Described as innovators, opinion leaders, and flashy. Represented 31% of
the new car buyers, 59% are male and 41% are female.
 Freedom Lovers: Described as outgoing, social and active. Represented 13% of the new car
buyers, 50% are male and 50% are female.
ing
The Marketing Director of Nissan Germany was also considering a market segmentation based on
gender. Women, the Marketing Director of Nissan Germany thought, might be deterred by the new
technology but might enjoy the fact that an electric car was cleaner to operate with no gasoline
changes involved. The charging process was not much different from plugging in an electrical
appliance in the house. They also might have a shorter range to drive as they would use their cars
for shopping and collecting their kids from school. He thought that there were very good reasons for
a gender segmentation of the German car market and he recalled a series of facts about female
10
car buyers :
 Women purchased more than 52% of all new vehicles and influenced in more than 80% of all
automobile sales.


sh
Female buyers were the fastest growing segment of new and used car buyers. Female buyers
purchased lower priced cars and were more likely to finance their purchase.
More than 68% of all women used the Internet to research product information and resources
online, compared to only one-third of female buyers reading print auto magazines.
Female buyers placed more importance on safety, dependability, functionality and economic
factors. Style and performance ranked last in consideration.
 The number one complaint women had with dealerships is how they're treated as customers.
Online anonymity is the preferred method of new car research until it's time to test drive.
bli
One additional segmentation criteria for the Marketing Director of Nissan Germany was dividing the
market into Nissan buyers / non-buyers. There was a common understanding in the car industry
that having a positive previous experience with the brand would make a customer more willing to
buy the same brand again.
In fact, German consumers showed a high degree of brand loyalty with more than 55% of new car
buyers purchasing the same make of car as their current primary vehicle (defined as the car used
most). But German car buyer brand loyalty dropped for secondary vehicle purchases where only
14% of the car buyers would buy the same brand as their current secondary vehicle. The Marketing
Pu
Director of Nissan Germany was wondering whether these statistics of brand loyalty where actually
positive or negative for the prospects of the new Nissan LEAF.
Finally The Marketing Director of Nissan Germany was also considering a geographic
segmentation of the German car market. He knew he had to assign his limited marketing resources
to those geographic target segments where he had the best chances of selling this new car, so he
also came up with a list of potential cities in Germany where he believed the LEAF would sell best
and some general data about those cities:
IE
10
Based on Road Travel Magazine Demographics Women Trend Study, 2004.
8
IE Business School
11
City Population Median disposable annual
household income(€)
Berlin 3,387,828 €17,400
Leipzig 498,491 €16,000
€21,700
Munich 1,200,000
ing
Dusseldorf 572,663 €19,700
Frankfurt 646,889 €20,700
Stuttgart 590,657 €22,000
€ 17,500
Freiburg 215,000
Nuremburg 495,302 €19,400
Dresden 487,421 €16,900
Hanover 515,841 €17,900
sh
The other big segment was the corporate buyer. In Germany more than 1 million cars were sold via
leasing contracts every year and many of them were bought by companies for corporate fleets. The
Marketing Director of Nissan Germany thought that targeting companies would provide the visibility
the LEAF needed: Companies that bought the LEAF for their fleets would get to show off their
green/corporate responsibility credentials and companies would be able to set up charging stations
in their parking lots which would lead to cost savings and allow employees to charge their vehicles
while they worked. But the Marketing Director of Nissan Germany knew that employees at
corporations often specifically chose luxury cars for their company vehicles due to the prestige
factor and they might baulk at the possibility of driving a regular family car. Also, Germans liked to
bli
drive fast and even though the LEAF was a very powerful car for its size, would corporate car
drivers settle for a LEAF’s engine power when they were used to driving a BMW?
Government fleets would fit into the same category, but the Marketing Director of Nissan Germany
wondered if German government agencies would be willing to put a Japanese car in their fleets?
The Marketing Director of Nissan Germany wondered whether the green credentials of the car
would overcome any loyalty towards German auto brands and whether it was possible that
consumers could come to see the LEAF as a global car and not a Japanese car. After all, climate
change was borderless.
Pu
The Marketing Director of Nissan Germany felt that he needed to figure out what the target
segment should be; who the innovators and early adopters might be; and also how to create an
early majority.
THE POSITIONING FOR THE NISSAN LEAF
The next dilemma for The Marketing Director of Nissan Germany was defining a positioning for the
Nissan LEAF. The question was how should the LEAF be positioned in Germany? And more
specifically, what benefit or benefits of the LEAF should be emphasized for the chosen target
segment? In order to clarify his ideas, the Marketing Director of Nissan Germany developed a list of
IE
the possible benefits of the Nissan LEAF
 Green: A zero emissions vehicle, the LEAF didn’t pollute or make noise. It reduced carbon
emissions that cause climate change.
11
Source: http://www.urbanaudit.org/CityCountryPDFLongList.aspx
9
IE Business School
 Economical: The initial purchase price should not be much higher than a similar regular car
and expected government subsidies of zero emissions cars might help lower the price. Once
purchased, the car was cheaper to run and maintain, especially if fuel prices increased in the
future.
 Convenient: The vehicle was comfortable, reliable and fun to drive. Its performance (160 km
range) was convenient for most car drivers and better than the competitors. The government
and private enterprises were planning to install facilities to charge the battery, but that would
ing
likely not happen in the initial phases of the launch.
 Easy to use: The vehicle was easy to maintain and recharge. Refueling could be done with a
regular electric socket in the driver’s garage overnight or at recharging stations, much like
petrol stations, once they were set up.
 Performance: The LEAF performed better than many regular cars with a much larger engine.
The ride was very smooth and the car had lots of zip, according to auto reviewers.
 Reliable: A team of the world’s leading engineers had helped design a vehicle and electronic
systems that included updates on fuel consumption to reduce the risk of running out of battery

sh
power. There was no reason why LEAF drivers should ever be left stranded on the side of the
road.
Look: The LEAF was a modern design that resembled standard autos of the same size aimed
at the mass market.
 Warranty: An extended warranty of 5 years would be provided with the vehicle (as a
comparison, the typical warranty for traditional cars was 3 years). This would help reduce the
perceived risk by consumers and their technological anxieties.
bli
 Savings: Over a year the driver could save as much as 2,000 Euros driving a LEAF compared
to a regular car so it was cost efficient too if the buyer drove above 12,000 km per year when
the “no petrol” cost benefits start kicking in.
The Marketing Director of Nissan Germany knew that the positioning would depend on how he
defined the target segment for the Nissan LEAF. Traditionally the car industry had identified some
of the major needs of different car buyer groups, for example, middle-aged buyers seek reliability,
safety and value; singles look for individuality and personality; families ask for functionality, space
Pu
and reliability; while women expected a combination of all factors plus value. But the Marketing
Director of Nissan Germany was not sure if this list of customer needs would be helpful when
defining the right positioning for the all electric Nissan LEAF.
DEVELOPING THE MARKETING MIX FOR THE NISSAN LEAF IN GERMANY
After defining the target segment and the positioning for the LEAF, the next step in the marketing
plan would be developing a marketing mix well aligned with the marketing strategy. The Marketing
Director’s sales objective for the first year of the Nissan LEAF in Germany was to sell 2,000 units.
He had to figure out the best marketing mix to achieve that goal.
IE
The Marketing Director of Nissan Germany had been assigned a marketing budget of 2.5 million
Euros for the launching of the Nissan LEAF in Germany. This budget was exceptionally high
considering that the sales objective was 2,000 units. The average weight of the advertising,
marketing / promotion item on any Nissan car was around 2.5% of the sales, but in the case of the
Nissan LEAF this ratio was up to around 5% of the expected sales in the first year of the LEAF in
the German market. The Marketing Director of Nissan Germany had to think carefully how to
10
IE Business School
assign this budget among the different marketing mix tools in order to get the best return on this big
marketing investment.
PRODUCT AND PRICING STRATEGY
Concerning the product strategy, the Marketing Director of Nissan Germany had nothing to say.
The product was designed and manufactured in Japan and Nissan would not do any product
adaptations for the different international markets. The Marketing Director of Nissan Germany had
ing
more freedom with regard to the pricing strategy. In fact, Nissan’s CEO Carlos Ghosn had said that
the traditional business models for cars may need to be radicalized when electric cars were
introduced. Some experts called electric cars the iPhones of the automobile industry and
suggested business models that could be adopted from the telecom industry. The Marketing
Director of Nissan Germany wondered about the various options for selling the car in Germany.
The Nissan LEAF was basically a car with a battery. They could sell the car outright but then the
cost of the battery along with the cost of the car would make it significantly more expensive than
regular cars of similar size. The main elements that The Marketing Director of Nissan Germany had
to consider to develop his pricing structure were

Cost of the car: 22,998 Euros (without 19% VAT)
sh
Cost of the battery: 4,998 Euros (without 19% VAT)
Total final consumer price including taxes: 33,315 Euros
 Government subsidy and incentives could be around 5,000 Euros
CEO Ghosn felt that hybrid car sales had been affected by their higher price point. But there were
bli
other options afoot. Ghosn had suggested that the battery could be leased. The Marketing Director
of Nissan Germany wondered if people would buy the car and lease the battery. Some consumers
might opt to lease both the car and the battery. But would car owners change the way they bought
cars? The Marketing Director of Nissan Germany felt that he had to be creative when defining and
presenting the pricing strategy of the Nissan LEAF.
DISTRIBUTION STRATEGY
Pu
One of the big issues in Nissan´s LEAF marketing plan was the dealership collaboration in
promoting and selling the LEAF. In 2007, Nissan had around 620 authorized dealers in Germany, a
figure that includes main dealers, secondary dealers and authorized repair stations which did not
12
have authority to make new sales. The LEAF was also new for the dealers, a radical innovation,
and the Marketing Director of Nissan Germany recognized that it was important that the dealers
were involved in promoting the new electric vehicle.
The average dealership sales commission was somewhere around 10% of the final car price. The
Marketing Director of Nissan Germany was wondering whether he should add a special incentive to
entice dealer to push the car to customers, or use that money instead to get customers to demand
the car. “Should I use a push strategy or a pull strategy?” he wondered. A push strategy would
mean allocating a part of his already limited budget to giving dealers incentives, such as a higher
IE
commissions or bonuses, to sell the LEAF. A pull strategy would mean putting the budget into
various promotion channels instead. And if the Marketing Director of Nissan Germany did give an
incentive to dealers then how much of his 2.5 million Euro budget should he allocate?
12
http://www.vdik.de/fileadmin/files/en/gb_2008/vdik-gb_2008_10_marktdaten_engl.pdf
11
IE Business School
COMMUNICATION STRATEGY
Even though the Germany launch was important for Nissan’s plans in Europe, the Marketing
Director of Nissan Germany was not given an open cheque book for the launch. He had to decide
where to focus his money and what communication tools would be better to support the launch of
the Nissan LEAF in Germany.
13
He was in a dilemma. Studies showed that word of mouth was a much more effective medium to
sell cars then expensive TV adverts and billboards. On the other hand, since he was launching a
ing
new technology car in Germany, the Marketing Director of Nissan Germany felt it was important to
get the highest possible visibility to create awareness and interest among potential car buyers.
He thought about a list of possible communication tools that were usually in other new product
introductions: TV ads, billboards, radio ads, magazine and newspaper ads, the Internet and public
relations. Then he called in an independent Media Buying Consultant, for a meeting.
“As we’re talking about a mass market campaign,” said the Media Buying Consultant, “we’re talking
about reaching 14.7 million people, or about 22 percent of the population aged 14 +.” “Now, we
have to decide which tools we need and how much of each,” said the Media Buying Consultant,
who explained that media costs varied based on location for billboards and TV or radio channels
sh
and airing time, as well as various discounts offered for bulk orders.
“To launch a new product you definitely need a big launch campaign to achieve the minimum level
of brand recognition and recall,” said the Media Buying Consultant. But he added that: “Not every
media qualifies in transporting the message of the campaign.”
The Media Buying Consultant suggested a possible breakdown of the investment:
 TV advertising = 40%
bli
 Magazine ad = 10%
 Newspaper ad = 10%
 Online ad = 30%
 Billboard = 10%
 Radio advertising = 0%
The problem was that TV advertisements in particular were expensive. The Media Buying
Consultant estimated that one month of intensive TV adverts would cost 5 million Euros alone and
recommended that for a new product introduction it would be best to have one month of intense TV
Pu
advertising followed by 10 weeks of less intense TV advertising for a total cost of about 11.5 million
Euros. That would mean the Marketing Director of Nissan Germany would need to ask for a big
budget increase to conduct a proper multi-pronged communications campaign. If Nissan
headquarters granted the increase, what the Marketing Director of Nissan Germany doubted, then
this would put the LEAF deeply in the red in its first year in Germany.
After the meeting, The Marketing Director of Nissan Germany thought that given the budget
constraints maybe Nissan should go for a digital, Internet-based communication strategy rather
than traditional media. He knew that studies had shown that the Internet was a very powerful way
of getting product recognition among consumers aged 25 to 35 and even those in the next age
bracket up. “Since only about 5-10% of people in Germany have an interest in buying a fully electric
car,” thought the Marketing Director of Nissan Germany, “classic media will probably create 90-
IE
95% overspill, costing us a lot of wasted money.”
The Marketing Director of Nissan Germany thought that a social media approach was cheaper and
might be more effective at reaching the early adopters. This strategy had worked for Tesla Motors,
13
Source: Cars Online 09/10 Understanding Consumer Buying Behavior in a Volatile Market, Cap Gemini Automotive
Report
12
IE Business School
he noted, which was so successful with its use of social networking tools that it managed to get a
waiting list of orders before its first high-end electric sports car was even released.
The Marketing Director of Nissan Germany felt it was important to get a German website for the
LEAF going as soon as possible and also an effective public relations campaign as the media
would surely be interested in covering electric car related stories. He knew that the Internet had
played an integral role in the marketing of hybrid cars and he felt that it would be crucial for the
LEAF as well as people would go to the website to find out about the car and the concept of
charging their car with electricity. He estimated that setting up and running a dedicated website
ing
would cost at least 200,000 Euros.
The Marketing Director of Nissan Germany realized that he would have to decide between a
conventional and a digital campaign, or some combination of the two. He also wondered if his
budget was enough and whether he should ask Nissan’s global marketing director for more money,
but probably the answer will be no.
After many hours of thinking, writing, and crunching numbers The Marketing Director of Nissan
Germany felt that he had the outlines of a strong launch plan for the LEAF in Germany.
sh
bli
Pu
IE
13
IE Business School
EXHIBIT 1
THE GERMAN CAR MARKET IN 2008
Units sold Market

Position Brand 2008 share Change vs 2007
1 Volkswagen (VW) 615.229 19,9% 1,10%
2 Mercedes Benz 327.965 10,6% 0,10%
3 BMW & Mini 284.767 9,2% 0,00%
ing
4 Opel 258.274 8,4% -9,50%
5 Audi 251.393 8,1% 0,80%
6 Ford 217.305 7,0% 1,60%
7 Renault & Dacia 147.167 4,8% 4,90%
8 Skoda 121.277 3,9% 2,20%

9 Toyota 96.781 3,1% -27,00%
10 Peugeot 94.676 3,1% 1,40%
11 Fiat 88.111 2,9% 19,40%
12 Citroen 73.337 2,4% 0,10%
13 Mazda 56.277 1,8% -14,30%
14
15
16
17
Hyundai
Seat
Nissan
Honda
sh 51.677
49.331
45.746
40.133
1,7%
1,6%
1,5%
1,3%
8,70%
-6,70%
10,00%
-3,80%
18 Suzuki 36.840 1,2% 1,30%
19 Kia 34.322 1,1% -15,00%
20 Smart 33.805 1,1% 5,70%
bli
Others 5,3%
100,0%
Pu
IE
14
IE Business School
EXHIBIT 2
INITIAL SPECIFICATIONS OF THE NEW NISSAN LEAF
Dimensions
Length: 4445 mm / 175.0 in.
Width: 1770 mm / 69.7 in.
Height : 1550 mm / 61.0 in.
Wheelbase: 2700 mm / 106.3 in.
ing
Performance
Driving range over: 160km/100miles (US LA4 mode)
Max speed (km/h): over 140km/h (over 87 mph)
Motor
Type: AC motor
Max power (kW): 80kW

Max torque (Nm): 280Nm
Battery
Type: laminated lithium-ion battery
Total capacity (kWh): 24
Power output (kW): over 90
Energy density (Wh/kg): 140
sh Power density (kW/kg): 2.5

Number of modules: 48
Charging times: quick charger DC 50kW (0 to 80%): less tha
charger: less than 8 hrs
Battery layout: Under seat & floor
bli
Pu
IE
15
IE Business School
ing
sh
bli
http://blogs.motortrend.com/6537775/green/zero-emissions-all-green-introducing-the-nissan-leaf-
ev/photo_16.html
Pu
IE
http://blogs.motortrend.com/6537775/green/zero-emissions-all-green-introducing-the-nissan-leaf-
ev/photo_08.html
16
IE Business School
EXHIBIT 3
PROMOTIONAL MEDIA LIKELY TO BE INFLUENTIAL WHEN CHOOSING A VEHICLE: THE PERCEPTION OF THE CONSUMERS,
14
THE DEALERS AND THE CAR BRANDS (OEMS)
ing
sh
bli
Pu
IE
14
Source: Cars Online 09/10 Understanding Consumer Buying Behavior in a Volatile Market, Cap Gemini Automotive
Report
17
IE Business School
EXHIBIT 4
15
MEDIA INFLUENCE ON THE BUYING DECISION BY AGE AND BY GENDER. ()
AGE AND BUYING INFORMATION SOURCES
Car magazine
ing
Brochure
Newspaper ads under 25

25-35
www
35-55
Dealer staff 55+
Car Shows
TV Ads
sh
bli
SEX AND BUYING INFORMATION SOURCES
Car magazine
Brochure
Newspaper ads
Pu
Female
www
Male
Dealer staff
Car Shows
TV Ads
IE
■■■
15
Source: New Car Buyer Behavior Research Survey Report: Quantifying Key Stages & Activities in the Consumer Buying
Process, Cardiff University; http://www.3daycar.com/mainframe/publications/library/newcarbuyer.pdf
18

Session11 Nissan Leaf Launch in Germany Case

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Session11 Nissan Leaf Launch in Germany Case

Uploaded by

Copyright:

Available Formats

MK1-140-I

LAUNCHING THE NISSAN LEAF IN GERMANY *

did in the same month in 2009.

THE GERMAN CAR MARKET

describe Volkswagen as the most conservative player in the car industry.

DEVELOPING A MARKETING STRATEGY FOR NISSAN LEAF IN GERMANY

THE TARGET SEGMENT FOR THE NISSAN LEAF

segmentation classified the car buyers in four different types:

 Sensible Classics: Described as responsible, risk-averse, and traditionalists. Represent 30%

THE POSITIONING FOR THE NISSAN LEAF

the possible benefits of the Nissan LEAF

petrol stations, once they were set up.

DEVELOPING THE MARKETING MIX FOR THE NISSAN LEAF IN GERMANY

PRODUCT AND PRICING STRATEGY

Total final consumer price including taxes: 33,315 Euros

 Government subsidy and incentives could be around 5,000 Euros

The Media Buying Consultant suggested a possible breakdown of the investment:

95% overspill, costing us a lot of wasted money.”

Units sold Market

8 Skoda 121.277 3,9% 2,20%

Max power (kW): 80kW

sh Power density (kW/kg): 2.5

AGE AND BUYING INFORMATION SOURCES

Newspaper ads under 25

You might also like