Segment Decisions in Electric Automobiles (Week 4, Chapter 4/5)

I thought it would be fitting to discuss the electric automobile industry, since that will be the marketing plan focus for the quarter.  The electric vehicle industry provides a fuel-efficient means of transportation.  It is also attractive to those consumers who are green conscious, since the majority of these vehicles are zero-emission vehicles.  The industry is still in its infancy and makes up on about 2% of the market at this point.

Before I dive into talking about company's segment decisions in the electric automobile industry, it would be good to ensure that we're on the same page about market segmentation.  The goal in market segmentation is for the company is to divide up the market into groups of potential customers with distinct characteristics, behaviors, and needs.  The company can then choose which segment to target with their product.

Market Segments in the Electric Automobile Industry
The companies competing in the niche market of electric vehicles have two main segments to choose from.  The first segment is those consumers who are seeking the benefits that electric cars have to offer with regard to fuel efficiency.  These consumers are trying to avoid the high cost of gas and view electric vehicles as a viable alternative.  The second segment is made up of consumers who are green conscious.  These consumers have bought into the green movement and want a vehicle that is not going to negatively impact the ecosystem.
It is tough to break out demographics for each of these categories because age and gender are not good indicators of who will be pursuing an electric vehicle.  Two profiles that do stick out though are lifestyle and income.  The lifestyle is in line with the second benefit category listed above, green conscious consumers.  The income demographic comes into play as we look at the company's target market and differentiation techniques.

Big Auto

The main players in the US electric automobile market from the traditional gas-powered vehicle industry are GM, Nissan, and Ford.  The currently offer the Chevy Volt, Nissan Leaf, and Ford Focus respectively.  Since electric vehicles only make up 2% of the current market, these companies have no real incentive to make a big push into the electric market.  There are no government regulations mandating a move away from gas, so why bother.  What these companies are doing, is providing an electric vehicle to keep the consumers from moving away from their brand to a competitors electric vehicle offering.  There is no massive overhaul to innovate beyond what the current market desires.
Big auto is only going after those consumers on the lower to middle economic categories.  None of the cars shown to the right would be confused with a luxury car offering.  These industry players seem OK with what they are currently offering to the market, since there isn't a massive demand for the vehicles.

The Disruptor
Tesla made a big splash in the electric car market back in 2012 with their two electric vehicles.  In fact, even two years later, they are still experiencing a back-order for their Model S and Model X.  Tesla decided that instead of just satisfying a consumers desire to have an eco-friendly car, they would offer a vehicle that would be viewed as a luxury car.  Tesla founds its current home with consumers that have more disposable income.  They also set themselves apart from big auto because the design of these cars from the start was for electric vehicles.  They didn't turn a gas-powered vehicle into an electric car.
Just providing a luxury electric vehicle alone is not why Tesla is so popular.  It is because they are revolutionizing the ease of use of electric vehicles.  It's easy to operate a gas-operated vehicles today, since there are fuel stations all over.  The problem for the electric vehicles is that a consumer must always be wary of where a charging station is or how much of a charge they have. Tesla is working on setting up charging stations within some select west coast metropolises and creating electric routes up the west coast.  They are breaking the mold of the electric vehicle as most people see them as simple commuter cars.

Market Change
As noted above, some of the actions that Tesla is currently taking could set the stage for a massive shift in the electric car market in the future.  Once Tesla is able to establish the required infrastructure to sustain electric vehicles outside of metropolitan areas, they will start shifting their segment focus.  In the coming years, Tesla has announced it will start offering more economical offerings in the electric car market.  If big auto continues to sit on the sideline of innovation, they will be left behind.  There are dozen of stories about companies who were left behind because they failed to see the change in the market.  The Innovator's Dilemna is a great book on how companies can deal successfully with innovation.