Smart Car : Read this and answer the questions at thebottom please

Tiny car, tiny price tag, tiny gasoline bill. The Smart Car,made by Daimler’s Mercedes Car Group in Hambach, France, firstappeared on U.S. roads in 2008, just as prices at the gas pump werehitting record highs week after week. The timing could not havebeen better. Tired of emptying their wallets every time they filledtheir gas tanks, many U.S. drivers were thinking about downsizingfrom a big sport utility vehicle or pickup truck to a smallervehicle. But were they ready for a 106-inch-long car that seatedonly two people? Daimler was ready to find out.

The Smart Car had a good track record in other parts of theworld. From 1998 to 2008, Daimler sold more than 900,000 Smart Carsin Europe, the Middle East, Asia, Australia, Mexico, and Canada.The car was cute, nimble, and unconventional—a good size forgetting through crowded, narrow city streets and fitting into anytight parking spot. Not only was the purchase price highlyaffordable, but the excellent fuel efficiency made the carespecially popular in countries where gas prices were generallyhigh.

To bring the Smart Car to the United States, Daimler redesignedthe body and engineering to meet U.S. safety standards. It addedsix inches to the car’s length and included four air bags, anantilock braking system, a collapsing steering column, and othersafety features. It also installed a fuel saving 71 horsepowerengine so that the Smart Car would go about 40 highway miles on agallon of gasoline.

Daimler set the list price of the Smart Fortwo Pure model—thebasic version of the two-seater—at $11,590. The list price of theSmart Fortwo Passion Coupe, equipped with more features, was$13,590. The list price of the Smart Fortwo Passion Cabriolet, aconvertible with leather seats and additional features, was$16,590. Buyers had the option of ordering extras, like ametallic-paint finish or an alarm system, for an additional fee.Keeping the list price as tiny as the car allowed Daimler to buildmarket share quickly.

Rather than selling Smart Cars through its regular dealernetwork, Daimler contracted with the Penske Automotive Group tohandle distribution and sales. In another unusual move, Daimler setup a website to let buyers reserve the model of their choice andchoose from six interior colors and six exterior colors on the carbody’s removable panels. Three of the exterior colors were offeredas part of the purchase price, while the three metallic exteriorcolors were offered at an extra cost. The $99 reservation fee wasapplied to the buyer’s purchase price once the ordered model becameavailable. By the time Smart Cars arrived in U.S. showrooms, 30,000people had paid for reservations.

To build customer interest prior to the U.S. launch, Daimlersent a number of Smart Cars on a 50-city U.S. tour. Nearly 50,000members 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”), theyall noted its high fuel efficiency and low purchase price. Initialdemand was so strong that even buyers who had reserved their carswell 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 forEuropean Smart Cars adapted to meet U.S. safety and emissionsstandards.

Then gasoline prices fell from their record-high levels and theglobal economy plunged into recession. By 2009, the downturn was sosevere that car sales plummeted across the board as U.S. consumersand businesses clamped down on buying. The combination ofsignificantly lower gas prices and a sluggish economy put a seriousdent into U.S. sales of the Smart Car. To reignite customerinterest, Daimler offered low-interest financing and, for the firsttime, its U.S. dealers discounted the car’s retail price. In 2010,the company also introduced a limited edition electric Smart Car toappeal to buyers interested in ecofriendly alternatives totraditional gas-driven cars.

Today, Daimler continues to face intense competition in thesmall-car segment. Looking ahead, what else can it do to acceleratepurchases of its stylish Smart Car without depending on constantdiscounts, rebates, and other price-cutting measures?

What methods did smart USA to test market the smart fortwo caramong prospective customers? What trends are influencing the marketpotential of the smart fortwo car? What strategic marketingpractices would you propose?

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