Electric vehicles (EV; here we focus on automobiles) have reappeared in the market for 7 years, marketers, though, are still perplexed about the positioning of this product, thus, the success factors. The key question that commonly arises is – what do the customers think about EV? Has EV been successful enough to persuade customers so far? The answers to this would shed light on the category’s strengths and weaknesses, whether correctly or wrongly perceived.
Targets to Know
At the moment, the adaptation of EV in the market is deemed as slow. Marketers have to well understand whom to target in order to grasp the great potential to expand the business in this category. By far, we have identified at least three groups:
First movers: they are the first ones to try EV when everyone else is reluctant. They are the trendsetters, for instance, they are often attracted by the perception of environmental-friendly, or being the pioneer of state-of-the-art technology. Of course, most of them have to be at least middle class (or even upper class) due to the price premium over traditional internal combustion engine (ICE) vehicles. Therefore, their behaviours may resemble today’s luxury car market.
Early adopters: they are the followers of the first movers and they will leap in the market once the benefits start to become apparent. Despite their willingness to try, they are more conservative, and therefore, it is very likely that they own more than one vehicle – they would try using EV if they need extra cars. That also implies that reliability is among the key concerns of purchase.
Mainstream consumers: they wait until the market and technology are mature, look for cues from the first movers and early adopters, and require assurance from trusted peers. Being less informed about the EV, though, they are curious about the actual benefits offered. The fact that the fuel price keeps rising is an effective catalyst to their consideration.
Expectation and Reality
We know whom to target, but EV is still not persuasive in the market because there exists a considerably large gap between the consumer’s expectation and what is being offered in reality. Klaus Paur, the Managing Director of Automotive for Ipsos (formerly Synovate), hit the point with this analogy:
“When the automobile entered the market more than 100 years ago, it offered quite a few advantages compared with horse carriages, then common means of transportation. It was faster, more reliable and durable, more comfortable and ‘cleaner’. For a higher purchase price, car buyers were rewarded with an overall better quality. The EV offering today in general is perceived to offer less to car buyers than incumbent conventional vehicle technology: driving range is shorter, recharge is uncertain as recharge stations are scarce and the recharge operation takes longer, maintenance and repair costs are xpected to be more elevated, and, by the way, the purchase price is much higher. Its green proposition alone is not able to make up for its shortcomings.”
Driving range: most consumers actually expect driving ranges much longer than their typical weekday driving distances. They generally expect a daily range of around 300 km for an EV (though most people just travel 80 km daily!), while the technology of recent EV can only reach about 160 km daily – a large expectation gap here. Consumers simply do not want to take the risk of losing mobility on the road, nor do they want to limit their road planning.
Charging convenience: another expectation gap is present here. We know that it takes around eight hours for a complete charge. It is too long for consumers! To them, less than two to three hours is totally a reasonable requirement. In fact, an automotive study last year showed that 53% of Hong Kong consumers had indicated concerns of difficulty to recharge the vehicle (Synovate, 2011).
Purchase cost: the cost for EV is too high and thus hinders consumers from entering the market. They know that in the long run they would have cost benefits on fuel – the total oil/petrol cost is way higher than that for electricity power, since the efficiency for a battery electric vehicle (BEV) is as high as 80-90%, while that for an conventional ICE cars is just around 20%-30%. However, the consumer’s expectation of breaking-even on the high purchase price within three years can hardly be met in reality.
The alternative energy vehicle study in 2011 shed some light on the price perception among Chinese consumers. As figure 1 shows, markets should be acknowledged that car owners would just accept a 4% price increase in direct comparison with their current ICE car (Synovate, 2011). Besides, there is an interesting observation being worth mentioning: consumers tend to accept a more expensive plug-in hybrid electric vehicle (PHEV) than a BEV; that reveals a possibility to introduce PHEV in the market as a transition stage.
Narrow Down the Gap
To persuade consumers switch to BEV, the key is reducing the expectation gap, thus instilling the perception of “not getting less than an ICE vehicle”. Table 2 (Synovate, 2011) reveals that the largest gap, thus hindering consumers from using BEV, lies on the difficulty of recharging the vehicle (53%); also, the parts price exceeds the expectation of more than two-fifths consumers.
Think about that – a battery renting scheme is one effective way out. This shortens the charging time from several hours, to a battery changing time of 10-20 minutes; this also reduces the unreliable risk associated. Not to mention, the standardisation of the charging model can lead to a completely new leasing market of battery.
Regarding the expectation gap over purchase price, strategies such as “early-bird discount schemes” are definitely viewed as attractive. Moreover, retail prices should be set freely by the dealers to widen the brand recognition. A continual leasing scheme could as well be considered. Consumers are guaranteed to have a new EV model every few years, thus keeping them captive and updated with the latest technology.
There is another hint from table 2. 40% of consumers have stated that a major barrier for them was that they have no product experience. Marketers: it’s how easy to close this gap! You can offer test drives, showcase your models in car exhibitions, open an experimental store, or even, provide a certain length of grace period of purchase. We need our consumers to feel and experience the product, and we will rely on them to spread a positive message.
Educate Consumers about the Good
There are several areas where the perception of BEV outperforms ICE. Marketers should educate the consumers all these good things. From figure 3, environmental-friendly is undoubtedly the top of mind association (Synovate, 2011), together with advanced technology, improved fuel efficiency, and owning a BEV being perceived as trendy. Marketers should excite the brand awareness and positive brand image by acquiring and accumulating the reviews of the first movers and early adopters, especially in the areas above. To target them, you often need to emphasize your EV as a functional and green vehicle, in a stylish, unique and prestigious package.
The study also shows that not as many consumers associate reliable after-sales maintenance with BEV; this false perception is best clarified by “word of mouth” from BEV users.
Some International Trends
Emerging trend of smaller cars arises in Japan due to the increase of single-person and two-person households. Even for the same battery technology, theoretically the distance range for a smaller EV should be longer for it being a lighter load. Could this be promoted and possibly narrow down the expectation gap?
Consumers in Korea are interested in home charging instead of public charging stations. Those facilities are indeed not difficult to be integrated into new buildings. Could this be a selling point to shift the consumer focus of long charging hours to the convenience of home charging?
There is a significant increase in wealthy middle-age population of luxury consumers in China. As we have earlier mentioned, the first movers and early adopters are always more wealthy; could this be an opportunity to advertise EV as a trendy, luxury icon? The geography of the Asia Pacific is especially beneficial to the growth of the EV market since driving range required is always shorter than that in the western world. Establishment of the right business model or the launch of the leasing scheme would be stimulating the market effectively. With a lot of catalyzing policy and government subsidies, it is definite that more and more people would like to try EV instead of ICE vehicles. Do not miss the valuable chance of utilizing their word of mouth and personal driving experience to promote the brand image and clarify false concepts. That is, ultimately, to close the expectation gap of the mainstream consumers.
About The Synovate Alternative Energy Vehicle Survey
The survey was conducted online in 2011 among 800 passenger vehicle (PV) owners and purchase intenders 18 years old across Greater China, covering respondents from the major vehicle segments (small-, lower medium-, upper medium-, luxury cars, SUV).