I recently did an assignment for a marketing course. When I looked at the case study, I could only say – How could anyone kill such a Great product with Terrible Marketing??
The case study was for a company called Local Motors that manufactures custom-cars made completely in America, using parts from American manufacturers only. The company has been featured in auto magazines and even Jay Leno’s show, and seem to have received loads of free PR, so the product quality and design itself is obviously not flawed. Still, after 5 years the company is yet to reach their goal of 2000 cars.
Yes, their asking price of 100k is very high, but not impossible for the off-road or adventure car enthusiasts they should ideally target. After all, similar Toyota Land Cruiser price start with a base price tag of ~83k! This seemed like a classic case of launching a product without researching the customers or buyer profiles. (The book “All in Startup” by Diane Kander stars a similar story and what to do about it! )
The company has achieved modest success as a collaborative design platform for other companies and products, but not much for their original cars! I’ll let you look up the company and videos yourself, but meanwhile here’s my take on what should be their new marketing plan. (The old one obviously is not working out too well!)
I’m listing my opinion in a Q&A format, since the assignment was structured this way and I feel it brings out the essence of the company’s dismal sales while providing some context.
What type of co-creation is Local Motors using?
It is Co-design type of co-creation designers outside the company specified the final car. Also many parts of the car, including outer look can be custom-fit to suit personal tastes. Even for other newer products (shoes, pizza, etc) the company has become more of a design platform, the way FlickR is a platform for photography enthusiasts, both amateurs and professionals.
[Note the options are according to the matrix below:]
What is Local Motors’ value proposition?
From my perspective, the car’s USP and value proposition are as follows:
- Custom-built car crafted to match customer tastes, style and color choices. Even if customers are not designers, they could easily tweak a few non-essential features to the car and still get an original design.
- A car combining the ruggedness of a sports or all-terrain vehicle, but the looks and feel of a sleek luxury automobile. The Rambo-meets-JamesBond type car.
- The made-in-America feature. Again, this is a unique feature, but not necessarily a marketable virtue, due to the price tag attached.
- “build-your-own-car” factory visit. This concept of a visit to the factory not an original one, although the “custom-car” is an interesting spin-off from luxury car manufacturer (BMW). (view BMW link here ) Companies like BMW provide a unique experience to their high-end customers by including a stay in Munich, a visit to the factory , a chance to view cutting-edge tech and auto design prototypes during this visit. Local Motors could brand themselves similarly and couple the fact that customers would also get the hands-on pleasure of building a car! Perhaps even allow to engrave their names onto the chassis or wheel hubs, as a physical symbol.
What do you think of the Rally Fighter? Will this new car be successful? Why or why not?
I think the car looks fantastic, the kind of luxury vehicle I’d buy if I had the money!
Personal tastes aside, I do think the car can and will be a huge success, even though it has to reach even a quarter of its goal of 2000 cars. I think the car’s dismal sales have more to do with an inappropriate marketing plan, than a faulty product.
How can the car be a success?
Only by following a new marketing model along the lines given below:
- Target Luxury vehicle customers: While the designer community they have attracted is great for new product design, they can definitely afford to buy 100k cars. Instead, the company management MUST separately target the right customers i.e the luxury auto customers. These would only include high-income people who either buy cars for status symbols or are luxury car collectors or off-road vehicle enthusiasts. Customers who buy Hummers or Jeep or Lamborghini, for example. For them, the price of the car would be “value”, not just the price of 100k to cover manufacturing costs. So, LocalMotors would be able to charge far more than 100k, for the personal appeal element.
- Adventure Cars Customers : Local motors should also target car dealers and customers interested in adventure vehicles. For example, a new Land Rover Sports Edition easily sells for 70-75k. Google Toyota land cruiser price and you see a base price tag of ~83k. A survey of this focus group would easily show whether these customers would be willing to shell out additional 20k for a more customized model. The company
- Auction “Celebrity” cars: The company could also sell cars on an auction model, say by getting famous personalities to help build a certain model, and then selling it to the highest bidders. For example, if Warren Buffet’s old Cadillac could sell for 122k, imagine how much people would pay to buy one that is built by him! Or even one by Taylor Swift?
- Adventure Sports Segment: Local motors could also sell or lease cars to companies that offer custom adventure sports or thrill car-rides. This would allow them to make a profit by selling/ leasing in bulk. For e.g: Groupons that allow users to ride a Ferrari or Lamborghini are rather popular http://gr.pn/1M7xhB7 . Another example is a company called Alpine sports http://bit.ly/1MXvuSD that allows tourists to travel up a mountain in a Swiss-army type truck. Aloha Buggies http://bit.ly/1GXgsK8 and Las Vegas-based ATV tours http://bit.ly/1kyienI offer tourists a unique dune-buggy type experience. Local Motors could operate on a similar model, by using tie-ups with local tour operators in Arizona and beyond.
My honest opinion is that the company did a great job in designing a great car, reaching car enthusiasts (web users, magazine readers, etc) and building a gigantic and loyal community. Sadly, this group does not represent even 1% of their actual ideal customers – the luxury segment, so the company’s marketing efforts naturally fell flat. If the management changes this focus, they may boost sales dramatically!
Meanwhile, what do you think the company is doing?
They have realized the power of the designer community that they’ve gathered. So they are leveraging this to lead design efforts and contests for multinational brands to and create custom running shoes, a new flavor of pizza, etc. A super-smart move in my humble opinion, but seems a shame to leave out the product they started with…
So what do you think? Would my marketing advice work in the real-world?
Would love your thoughts and honest feedback. Feel free to agree, disagree and criticize in the comments section below.