Marketing Mix Plan of Toyota Tarago - Case Study Example

1.0 Executive Summary There has been a funny story about Toyota Tarago as the year it has been released also saw the coining of the word people mover as the car fit that bill well. The first time it hit the Australian roads has seen that it has been a van with windows and gradually it has moved from van status to the status of passenger car. The car has been the undisputed leader for so many years when it came to take seven or more members.The alternatives that can be found in the modern era can be said as Honda's Odyssey, Kia's Grand Carnival and the Mitsubishi Grandis. Toyota Tarago was launched in March 2006 in Australia as eight seat family wagon. People mover is niche market segment in Australia, with annual sales of 7,027 vehicle units, with year-on-year decline of 21% (2008-2009)1. The company is second largest people mover car2 manufacturer in Australia with flagship brand “Toyota Tarago” and in 2005, Toyota had a 25 per cent share of people mover market with two models (Tarago and Avensis), while Kia's Carnival captured more than 28 per cent (Motoring Channel Staff,2006). Toyota Tarago marketing mix recommendations are: Product design: Enhancement of presentation & features. Pricing: Focus on offering competitive pricing with market leader (Kia). Distribution: Best practice of multi brand distribution network to be carried forward. Promotion: online advertising formats to enhance operating margins and brand equity 2.0 Situational Analysis Toyota Motor Corporation Australia (Toyota Australia) has been part of Toyota Japan and it had been committed to domestic markets (http://www.toyota.com.au/about/company). The head office of the company in Australia has been in Melbourne (http://www.toyota.com.au/about/company). There has been sales and marketing department that has been based in Sydney. Toyota had been having distribution and sales offices throughout Australia and it has been seen that the company has been employing approximately 4500 people. The locally build brands has been the Camry and Aurion.The company has been importing commercial vehicles like Kluger, Yaris, Corolla, Tarago, RAV4, LandCruiser, Prado, HiLux and HiAce, and Prius (http://www.toyota.com.au/about/company). Toyota has been the largest vehicle exporter in the year 2008 and it had been seen that they had exported approximately 101,668 cars to over 20 countries worldwide. That had seen as a contribution of high revenue like $ 1.9 billion dollars (http://www.toyota.com.au/about/company). Australia is one of the core marketspaces for Toyota Corporation, with market share of 20.9% (July 2008: 23.8%) in July 2009. It has strong brand positioning in all car segments in Australia including people mover. People mover is niche market segment in Australia, with annual sales of 7,027 vehicle units, with year-on-year decline of 21% (2008-2009)3. Toyota Tarago was launched in March 2006 in Australia as eight seat family wagon. In the next section we would be looking at the situational analysis of the brand “Toyota Tarago” to improve understanding and provide recommendations in finale outline of research note. Toyota Tarago brand will be subjected to Kotler (2006) 4P’s of marketing framework. 2.1 Pricing In 2006, Toyota Tarago launched two core models GLi and GLx 4 cylinder with 2.4 litres priced at A$48,990 and A$51,990 respectively (www.goauto.com.au)4. The core Toyota Tarago model GLi pricing stood at A$51,750, with CAGR of 1.8% (2006-2009). On the other hand, GLx model pricing in 2009 is A$54,150, with year-on-year growth of 2.1% (2008-2009)5. The company has launched into three models in people mover segment above A$55,000 range: GLi V6 (2009 pricing: A$56,390), GLx V6 (2009 pricing: A$58,390) and Ultima (2009 pricing: A$74,000)6. The average price increase of people mover models of Toyota Tarago above A$55,000 range stood at 1.8% on year-on-year basis (2008-2009). 2.2 Product Specifications Toyota Tarago has body rigidity (20% better than closest competitor Kia Carnival) along with VVT-i, balance-shaft-equipped engine, ABS anti-skid brakes, Electronic Brakeforce Distribution (EBD) and Brake Assist (BA) as standard equipment aerodynamics (www.toyota.com.au). The customer value propositions are: The Pre-Crash Seatbelt System uses information from the electronic BA system and/or vehicle stability control system to prepare the front seatbelts in anticipation of a collision (www.toyota.com.au). Engine is matched to an intelligent electronically controlled automatic transmission (www.toyota.com.au). ADR 81/01 fuel economy figures of 9.5 litres/100 kilometres and meets the requirements of Euro IV emission standards and finally 125kW of power at 6000rpm and 224Nm of torque at 4000rpm (www.toyota.com.au). As per product specification the brand is ranked second best in Australian marketspace after Mitsubishi Grandis. The product competitive matrix is as follows7: comparison Toyota Tarago Honda Odyssey Luxury (Neil Dowling,2009) Engine 4-cylinder 2.4 litre engine 2.4 litre 4 cylinder Power 125 kW of power 132kW @ 6500rpm Torque 224 Nm of torque 218Nm @ 4500rpm 2.3 Distribution Toyota Tarago has dealership network of 289 (2008: 285) in Australia (March 2009)8. In 2009, the company signed long-term franchise agreements with majority of dealer network to expand regional brand penetration in Australia (Egan, 2009). The company imports Toyota Tarago instead of manufacturing it at local facilities (Altona plant and Port Melbourne). TOYOTA and its dealers have struck an industry-leading franchise agreement that will give dealers a decade of certainty and a say in the company’s use of dealer customer data (IAN PORTER,2009). The company operates parts distribution centre in Sydney and Melbourne and a storage distribution complex situated at Woolooware. 2.4 Promotion Toyota Tarago has dual promotional strategy in Australia. The brand is marketed via traditional print media and television channels across the region (2008-2009). The advertisement concept is developed by Saatchi & Saatchi. The promotion tag line states “The Ultimate support Vehicle” (http://www.toyota.com.au/tarago)9. The 2007 total advertising spend was A$2.33 billion, with A$654 million (28%) on television advertising and A$826 million (35.4%) on newspaper advertising). Magazines have 11% share, and radio 11.7%. Online advertising is the strongest growth sector, but was only 5.8% in 2007 (AC Nielsen, 2008)10. On the other hand, Toyota Tarago features consistently in Top Gear Australia television shows to enhance customer retention and brand value on long-term basis (www.au.nielsen.com). In 2008, the company was ninth largest advertiser with spend of A$85 million (2007: A$80 million) across Australia (www.au.nielsen.com). Toyota Tarago advertising expenditure stood at 5% (2007: 4.3%) of total annual expenditure by Toyota Australian operations (Annual Investor Presentation, May 2009). 3.0 Target customer segmentation The core target customer of Toyota Tarago has been the individuals who has been aged between 30-54 with importance given to females and households with 3 plus kids and income base of A$80,000 plus has also been another main target. The population that would be between the age of 30 and 54 could be found from the www.abs.gov.au website. From this the details of persons having an estimated income of A$80,000 could be also found out. Source: www.abs.gov.au 3.0 Recommended Marketing Initiatives The following marketing recommendations for Toyota Tarago to enhance volume share and brand penetration across Australia in 2009-2010 are as follows: Product design: Enhancement of presentation & features. Pricing: Focus on offering competitive pricing with market leader (Kia). Distribution: Best practice of multi brand distribution network to be carried forward. Promotion: online advertising formats to enhance operating margins and brand equity 5.0 Product Recommendations Toyota Tarago lacks in equipment, presentation and braking product specifications with respect to Mitsubishi Grandis. On the other hand, the Toyota’s flagship people mover brand over powers Honda Odyssey in fuel economy and acceleration. Mitsubishi Grandis is seven seat family wagon and thus it provides better option for presentation & features along with enhancement of handling capabilities. One of the core recommendations related to product specification of Toyota Tarago is to enhance presentation & features to improve volume share on long-term basis. There has been specification of Toyota Tarago Acceleration 0-60 km/h 5.3 seconds 0-80 8.7 0-100 13.2 0-400 m 18.8 Flexibility 60-100 km/h 8.5 (3rd gear) 80-120 10.1 Fuel Consumption Overall 11.3 L/100km Variation 10.9 to 11.8 Fuel Tank Capacity 75 litres Pricing & Equipment Presentation & Features Comfort & Space Noise Performance Economy Handling & Braking Parts Pricing http://www.racv.com.au/wps/wcm/connect/racv/internet/primary/my+car/advice+_+information/car+road+tests/new+car+reports/people+movers/new+car+report+-+toyota+tarago+(1990-) 6.0 Pricing Recommendations As per pricing review Toyota Tarago is rated second best by industry experts. Honda Odyssey is the most popular people mover with respect to pricing. This is mainly attributed to retention of excellent resale value on long-term basis (Top Gear Australia, 2009). On the other hand, Toyota Tarago brand has increased average price (across all five models) by 2.1% on year-on-year basis in 2008-2009 (www.pressportal.com.au). Kia’s flagship people mover brand “Carnival” is market leader with volume share of 28.3% (2008: 33.9%) in 2009 (www.pressportal.com.au). The price of Kia Carnival CRDi model is A$38,890. On the other hand premium people mover brand of Kia “Carnival Platinum” diesel format is priced at A$53,990 (www.pressportal.com.au). Australia is facing economic downturn with Toyota Corporation increasing price of Tarago brand will hamper volume share in 2009-2010. Kia’s lowest brand is priced 33% lesser than Toyota Tarago’s GLi 4 cylinder model. Declining average consumer expenditure and price difference of 33% than market leader “Kia” will hamper long-term sustainability. The company should focus on offering competitive pricing with market leader in order to enhance volume share in 2009-2010 in Australia. 7.0 Distribution Recommendations Toyota Corporation operates multi brand distribution network i.e. single distribution centre for Tarago, Lexus, Daihatsu and Hino brands. This enhances resource optimisation and improved operational margins on long-term basis. Standalone distribution network for multi brand further integrates value chain and improved supply chain management productivity on long-term basis. This is the best practice in economic recession for automotive corporations. 8.0 Promotion Recommendations Toyota Corporation is marketing & advertising the brand “Tarago” via traditional media formats such as television broadcasting and print. On the other hand, online advertising is the fastest growing in Australia (Interactive Advertising Bureau Australia, August 2009)11. Online advertising expenditure in Australia for the second-quarter 2009 (3 months ended 30 June 2009) totalled $453 million, the largest second-quarter recorded (Interactive Advertising Bureau Australia, August 2009). This is an increase of $13.5 million (or 3.1%) from the first-quarter 2009 (3 months ended 31 March), and is an increase of $40.5 million (or 9.8%) from the second-quarter 2008 (Interactive Advertising Bureau Australia, August 2009). Motor Vehicles – Manufacturers was the largest subcategory which comprised 9.8% of the General Display spending for the quarter (down from 12.0% in first-quarter 2009). Automobile corporations operational in Australia such as General Motors, Ford Corporation, Tata Motors are aggressively using online advertising formats to expand regional & local brand penetration at lower costs. In 2009, Australian GDP growth is stipulated at 0.45% as compared to 4.05% in 2007. In economic downturn Toyota should brand family wagon brand such as Tarago via online advertising formats to enhance operating margins and brand equity. 9.0 Conclusion Toyota Tarago is core people mover brand for Toyota Corporation in Australia. The company has second largest volume share and is one of the premium priced corporations. The change in macroeconomic elements such as economic downturn in Australia, sharp decline in consumer purchasing power parity has drastically moved marketing mix of Toyota Tarago in negative. The target customer portfolio of Toyota Tarago stood at 1.72 million households in 2009. The people mover brand of Toyota is priced 33% higher than market leader Kia Carnival which is major concern for the corporation due to economic downturn in Australia (GDP growth in 2009 stood at 0.45%). Toyota Taragon has second best product design after Mitsubishi Grandis in Australia. Slight change over of features and looks will enhance brand share on long-term basis. The parent corporation’s multi model distribution network is offering cutting edge. In 2008-2009, the company is primarily promoting Toyota Tarago via biggest media formats i.e. television broadcasting and newspaper. Also there was marginal increase of Toyota Tarago advertising expenditure 5% of total annual expenditure of Australian operations. Thus it could be seen that Toyota Taragon has long-term prospects in Australia due to early mover advantage, strategic distribution network, growing target customer base and aggressive advertising budget. 10.0 References "The company", viewed on September 14,2009,retrieved from http://www.toyota.com.au/about/company Toyota Tarago ,The ultimate support vehicle, viewed on September 13,2009,retrieved from http://www.toyota.com.au/tarago www.toyota.com.au Toyota - Trying Too Hard to be Green - SBS ,2009, viewed on September 13,2009,retrieved from http://www.sbs.com.au/blogarticle/109319/Toyota-Trying-Too-Hard-to-be-Green/blog/The-SBS-brand Viewed on September 13,2009,retrieved from http://www.abs.gov.au/ Neil Dowling,2009,Honda Odyssey Luxury: review, viewed on September 13,2009 ,retrieved from http://www.carsguide.com.au/site/news-and-reviews/story/honda_odyssey_luxury_reivew/ IAN PORTER ,2009,viewed on September 13,2009,retrieved from http://www.goauto.com.au/mellor/mellor.nsf/story2/BDB5E029649F4A02CA25757C000A8893 Kotler, P (2006). Marketing management (12th Edition). Pearson: Prentice-Hall. West Australian Newspapers (2009) viewed on September 13,2009,retrieved from http://www.toyota.com.au/tarago Toyota / Tarago / GLX people- over,2006, viewed on September 13,2009,retrieved fromhttp://www.goauto.com.au/mellor/mellor.nsf/story2/BDD9BA8014072836CA2571C5001549E6 Global Markets Direct,2009,Toyota Motor Corporation - Financial and Strategic Analysis Review, viewed on September 13,2009,retrieved from http://www.globalmarketsdirect.com/Report.aspx?ID=Toyota-Motor-Corporation-Financial-and-Strategic-Analysis-Review&ReportType=Company_Report&coreindustry=ALL&Title=Automotive www.globalmarketsdirect.com. Motoring Channel Staff,2006 viewed on September 12,2009 on http://www.webwombat.com.au/motoring/news_reports/toyota-tarago.htm new car report - toyota tarago (1990-),Comparison test with: Chrysler Voyager (1997-) and Honda Odyssey (1995 -).viewed on September 14,2009,retrieved from http://www.racv.com.au/wps/wcm/connect/racv/internet/primary/my+car/advice+_+information/car+road+tests/new+car+reports/people+movers/new+car+report+-+toyota+tarago+(1990-) Read More