Business Strategy and the Environment Bus. Strat. Env.

10, 53 65 (2001)

MARKETING OF ELECTRIC VEHICLES

Anita Ga rling1 and John Thgersen2,*

1 2

Chalmers University of Technology, Sweden, Aarhus School of Business, Denmark

INTRODUCTION
oday the worlds automobile population is growing at a much faster rate than the human population. In 1950, there were about 50 million vehicles on Earth. By 1994 the vehicle population had grown to almost 600 million, and if the present trend continue there will be over 3 billion vehicles on Earth by the year 2050 (Sperling, 1995). Besides granting vehicle users freedom, privacy and convenience, usage of the automobile also threatens our environment. Particularly, by dumping increasing amounts of carbon dioxide and other climate-altering greenhouse emissions into the atmosphere, internal combustion engine vehicles (ICVs) cause severe harm to both environment and humans. To reduce the harms of automobile usage, cleaner fuels have been developed and fuel catalysts have been implemented. However, these measures do not affect the emission of carbon dioxide, the major contributor to the greenhouse effect. Dealing with the problems associated with the increasing number of vehicles worldwide without curtailing peoples freedom of movement and choice a basic value of a democratic society is one of the greatest challenges of our time. Substituting current automobiles with an environmentally sounder fleet seems to be an unavoidable element in a realistic solution. This could either be done by increasing the efficiency and reducing the emissions of ICVs, switching

Substituting electric vehicles for traditional ones could reduce local pollution and greenhouse emissions from the transportation system. However, these societal benefits come at high costs to the owner of the EV in terms of price, driving range, availability, loading capacity, speed and acceleration. In addition, the usability of an EV is hampered by the lack of an infrastructure for recharging. Such a product hardly sells itself to potential customers. Besides supportive national policies, skillful marketing is needed to get it accepted and diffused throughout society. This paper outlines a two-phase strategy for the marketing of EVs based on a discussion of current and expected future characteristics of EVs and on a review of research on early adopters. Copyright 2001 John Wiley & Sons, Ltd and ERP Environment.
Received 24 February 1999 Revised 29 October 1999 Accepted 5 November 1999
* Correspondence to: Dr. John Thgersen, Associate Professor, Department of Marketing, Aarhus School of Business, Haslegaardsvej 10, DK-8210 Aarhus V, Denmark.

Copyright 2001 John Wiley & Sons, Ltd and ERP Environment.

8 RLING AND J. THGERSEN A. GA to less noxious fuels or by finding less polluting propulsion systems (e.g., Sperling, 1995). The first two alternatives seem most obvious and closest at hand, but in practice disappointingly little has happened in terms of achieving environmental benefits along these routes. This is one of the reasons why increasing interest gathers around developing vehicles with a less polluting propulsion system, which could reduce local pollution as well as greenhouse emissions from the transportation system. However, compared to ICVs, current electric vehicles (EVs) still have disadvantages that make them less attractive. Current battery technology, not allowing unlimited driving ranges, relatively long recharging times and high initial purchase prices are some of the EVs major disadvantages. On the other hand, fuel for EVs is inexpensive, electric motors last significantly longer than internal combustion engines and motor maintenance is minimal. If the full costs of current environmental pollution were taken into account, EVs would compare more favourably to ICVs. Hence, an important challenge for marketers and policy-makers wanting to create a global market for EVs is to assure that the market is adequately informed, not only about the disadvantages, but also about the advantages of this new technology. Seen with the eyes of a potential customer, the EV technology is a new (and unknown) propulsion system, which mainly removes one of the many non-market disadvantages of traditional ICVs (local emissions) and reduces significantly a second (greenhouse gas emissions)1. However, these societal benefits come at high costs to the individual owner/user of the EV: higher price, limited driving range, shorter availability on a daily basis (due to re-charge time), less loading capacity (because of the batteries) and lower speed and acceleration. In addition, the usability of an EV is hampered by the lack of an infrastructure for refueling (recharging). On top of this, the EV does not solve other social ills connected with private transportation: congestion, traffic accidents and the need for a dense lattice of paved roads.
1

A product like this hardly sells itself to potential customers. Hence, in addition to regulation backing the EV, skillful marketing is needed in order for it to be accepted and diffused throughout society. A number of researchers have published thorough studies of national EV policies in Europe and North America in recent years (Schot et al., 1994; Kemp et al., 1998; Weber and Hoogma, 1998; Truffer et al., in press). Studies facilitating the development of appropriate national and international policy for this area fulfill an obvious and urgent need. However, even if appropriate policy suggestions aiming at supporting the market acceptance of EVs are developed and implemented, the effort is in vain if a skilled and committed marketing effort by EV producers is lacking. Still, studies aiming to stimulate and support policy development by companies in this area are largely absent. Designing a marketing plan that can make the market accept the new product and takeoff (Tigert and Farivar, 1981; Link, 1997) requires knowledge and understanding of both the characteristics of the earliest potential adopters, and of the new product itself (Goldsmith and Hofacker, 1991; Hawkins et al., 1998). In this paper, an outline of a twophase strategy for the targeted marketing of EVs is developed, based, first, on a discussion of the current and expected future characteristics of EVs and, second, on a review of research on the characteristics of early adopters of new products. In this endeavour, we focus solely on general issues that we judge to be indiscriminately relevant for the marketing of EVs in (at least) all developed countries. EV producers, of course, have to adjust their marketing strategies to the special characteristics of the national markets where they operate.

THE ELECTRIC VEHICLE

The worlds first EV was built as early as 1842 in Scotland. In this vehicle a rechargeable lead battery served as energy source. In the years around the turn of the century, EVs were in their heyday. Of some 4000 automobiles
Bus. Strat. Env. 10, 53 65 (2001)

Depending on how the electricity is produced.

Copyright 2001 John Wiley & Sons, Ltd and ERP Environment

54

MARKETING OF ELECTRIC VEHICLES produced in the United States in 1900, about 40% were steam powered, 38% electric and the rest were ICVs. After that, however, battery technology stalled, while oil was inexpensive and abundant. The ICV then came to rule the automotive world. However, the invention of semiconductors in the 1950s and the continuing improvements in motors and controllers spurred some interest in EVs in the 1960s (Sperling, 1995). At about the same time the first regulation (the Air Quality Act of 1967) toward vehicle emissions was adopted, first in the state of California, USA, and then in the whole USA. Commercial interests in EVs then initiated some, modest, research and a converted ICV running on silver-zinc batteries was displayed at the 1966 auto shows. However, the implementation of the Air Quality Act of 1967 was not very successful. In the US Clean Air Act Amendment of 1970 a technology forcing strategy was implemented to achieve desired reduction of vehicle emissions. In this act, in contrast to former acts, it was stated that the protection of health of man and nature was the issue, not technological feasibility. Technical solutions simply had to be enforced in order to meet this position. Spurred by the oil crises in the 1970s and the 1980s the investment in EVs took another step forward. However, the major investments in EVs started as a direct response to Californias Zero Emission Mandate in the 1990s. In this mandate, the California Air Resources Board required that a growing percentage of each major automakers sales in California had to be zero emission vehicles. The mandate covered automakers selling over 35000 vehicles a year in California. In 2003, the threshold will drop to 3000 vehicles per year, which will affect most auto companies except specialized companies such as Rolls Royce and Ferrari. The required percentage of zero emission vehicles was set at 2% for 1998, increasing to 5% in 2001 and 10% in 2003. Later, the requirements regarding the make years of 1998 to 2002 were dropped while the 10% requirement for 2003 was kept. It is obvious from this that the current regulatory motivation for interest in EVs is due strictly to one concern air quality. If
Copyright 2001 John Wiley & Sons, Ltd and ERP Environment

EVs were used instead of ICVs, this would reduce urban air pollution, even if coal-fired plants were to generate much of the electricity (Wang et al., 1990). The EVs do, however, offer other benefits that are often ignored. One is the reduction in oil consumption and thereby the dependence on oil exporting countries. There is also a potential for lowered greenhouse gas emissions, particularly if electricity from natural-gas plants, fuel cells or more importantly renewable sources is used (DeLuchi, 1993). The future The EV is, however, still burdened with a major drawback working against an immediate full-scale implementation. The expensive and not fully optimized battery technology does not allow longer driving distances (Sperling, 1995). Current lead acid batteries, although low in cost, are not satisfactory because they last less than two years and 20000 miles and do not store enough energy to power a full-size vehicle very far or fast. Batteries such as nickel cadmium, nickel iron and sodium sulphur are today not among the most promising due to high cost, high operating temperature and high risk of corrosive problems. Nickel metal hydride and lithiumbased batteries, however, appear to be the leading contenders for the 21st century, since they have long life and are nontoxic. Another promising option is fuel cell technology. A fuel cell is a device that transforms hydrogen and oxygen into electricity and water. No pollutants or greenhouse gases are emitted during the transformation, the electricity is produced continuously onboard, the driving range is almost the same as that of an ICV and the technology is almost maintenance free. However, fuel cells are still very expensive and the reformer technology needs more elaboration (DaimlerChrysler, 1999). The future strategies are, however, somewhat worrisome. The goal today seems to be to develop technologies able to compete headon with ICVs, but the question remains as to whether individuals really are willing to pay for this, or whether they would rather prefer an EV with a shorter driving distance and a cheaper price than an ICV.
Bus. Strat. Env. 10, 53 65 (2001)

55

8 RLING AND J. THGERSEN A. GA

INNOVATIVENESS AND THE EARLIEST ADOPTERS

Obtaining a good match between product characteristics and potential customers needs and wants is crucial for gaining market acceptance of a new product. Rarely do all potential customers readily embrace a new product at once. Typically, market penetration starts with a small segment (Hawkins et al., 1998) or niche (Schot et al., 1994; Kemp et al., 1998; Weber and Hoogma, 1998; Truffer et al., in press) consisting of customers with particular characteristics, needs or wants. When a foothold has been established in the market, learning processes related to the core product itself and to supporting technologies and institutions accelerate, and supportive social, political and institutional networks crystallize, which may radically improve the competitive position of the new product (Schot et al., 1994; Kemp et al., 1998; Weber and Hoogma, 1998). Hence, it is of tremendous strategic importance for producers of new products to correctly identify the customer segment(s) that contain(s) the most likely early adopters and to target their marketing effort as effectively as possible towards this (these) segment(s) from the outset (Goldsmith and Hofacker, 1991; Hawkins et al., 1998). In his path-breaking contribution to research on the adoption of innovations, Rogers (1995, first edition in 1962) suggested that innovations can be classified along five dimensions and that the likelihood and rate of adoption is determined by the potential adopters perception of the innovation on these dimensions. The five dimensions are relative advantage (over the entity it supersedes), value compatibility (with the adopters values, needs and experiences), complexity (how difficult it is to understand and use), trialability (can it be tested without or with limited costs) and observability (influences the likelihood that others will adopt). A number of studies have found that potential adopters perceptions of the innovation on these dimensions are better predictors of adoption than personality and demographic
Copyright 2001 John Wiley & Sons, Ltd and ERP Environment

characteristics (e.g., Ostlund, 1974; Labay and Kinnear, 1981). Still, personality and demographic characteristics may offer valuable supplementary segmentation criteria. A number of studies have striven to uncover personality traits associated with how early an individual adopts an innovation (innate innovativeness). For instance, innovativeness has been conceptualized as a latent underlying preference for new and different experiences motivating a search for new stimulation of the mind and/or the senses (Venkatesan, 1973; Carlson and Grossbart, 1985; Venkatraman and Price, 1990). However, Gatignon and Robertson (1985) have questioned that innate innovativeness exists across the board. These authors found that an individuals degree of innovativeness is always dependent on product category and their conclusion is that there is not a generalized innovator across product category or interest domains. Accordingly, Goldsmith and Hofacker (1991) defined domain or product specific innovativeness as a tendency to learn about and to adopt innovations within a specific domain of interest. They also suggest that even if it is possible to construct a measure of a global innovativeness, at least the measure of willingness to pay for adoption should be concretized with respect to a specific product concept. Whether it is referred to as innate or domain specific, innovativeness is conceptualized as a personality trait measurable in, for instance, individual favourable attitude, perceived benefits, willingness to sacrifice and latent need before, or even without, actual adoption. In line with this conceptualization, individuals can be grouped depending on their degree of innovativeness, i.e., on how early in the diffusion process they are likely to adopt an innovation. A third concept, actualized innovativeness, is a measure of how early in the diffusion process an innovation is actually adopted, i.e., it focuses on actual adoption behaviour. Rogers (1995) define (actualized) innovativeness as the degree to which an individual or other unit of adoption is relatively earlier in adopting new products than other members of the system. He proposes a segmentation of the market into innovators, early adopters, early majority, late
Bus. Strat. Env. 10, 53 65 (2001)

56

MARKETING OF ELECTRIC VEHICLES majority and laggards, with typical2 percentages of 2.5, 13.5, 34.0, 34.0 and 16.0, respectively (Rogers, 1995). This relative-time-ofadoption definition focuses more on the dynamics of the diffusion process than on (more static) individual predispositions. Most earlier research has characterized the earliest adopters, or the most innovative individuals, as less price sensitive, primarily because they are relatively high in social status (high income, standard of living, wealth) (Rogers, 1995). However, other studies have questioned this. Link and Malm (1994) found that individuals most willing to pay were not the most prepared to adopt a new product first and Goldsmith and Flynn (1992) as well as Flynn and Goldsmith (1993) found no relationship between innovativeness and income. Thus, if some highly innovative individuals actually pay a high price for adoption, there seem to be factors other than socioeconomic characteristics behind their decision to adopt. Other plausible factors might be a genuine interest in trying new products, blindness to prices or a snob effect (Link, 1997). The hypothesized lower price sensitivity of the earliest adopters also seems at odds with their often found greater knowledge and competence in product comprehension and evaluation (Hirschman, 1980). The earliest adopters are often found to be heavy users of other products within the area of the target product category (Gatignon and Robertson, 1985). Therefore, it cannot be discarded that they in general are competent enough to evaluate even very new products (Link, 1997). Competence is an important determinant in price perception (Rao and Monroe, 1988). Therefore, the earliest adopters also should have well developed internal reference prices based on their knowledge and competence, which might make them more, not less, price sensitive (Link, 1997). In general, products are evaluated in relation to other known products. A new products price and benefits are compared to the
2

prices and benefits of other products within the individuals evoked set, i.e. the alternative products considered by the individual in the adoption decision (Howard and Sheth, 1969). Known alternatives thus serve as reference points in the individuals perception of a new product (Monroe, 1990). The price a potential adopter is willing to pay for a new product is determined by the difference in perceived quality between the focal product and the adopters reference points (salient alternatives).

ADOPTION OF ELECTRIC VEHICLES

Under the conditions outlined earlier, who would be willing to purchase an EV? Vehicle customers basically fall into two types: private individuals and (public or private) organizations (or as they are often referred to in this connection fleet operators). The latter are by far the largest individual customers, but the former make up the large majority of the vehicle market in most countries. As we will return to later, fleet operators form a market segment with many desirable characteristics from the point of view of EV marketing. In various countries, postal companies, electric utilities, public transportation companies, car rental companies and even the military have been among the first to test EVs (Knie et al., 1997; Anonymous, 1998a; ODonnell and Oxfeld, 1998; Schulz, 1998; Morrison, 1999a,b). Private individuals have approached EVs more reluctantly. In 1990 the prediction was that about 1% of the American population would consider purchasing an EV (Buist, 1993). Three years later, Power and Associates (1993) found that 6% of American households could consider purchasing an EV. Kurani et al. (1994) found that 16% of a sample of California households would choose an EV over of an ICV. Ga rling et al. (1998a) found that the percentage of interested households depends on the relative performance and price of the EV compared to ICVs. With the most favourable but in no way unrealistic characteristics included in the study, almost 30% of a sample
Bus. Strat. Env. 10, 53 65 (2001)

These percentages should not be taken to literally. It may be reasonable to operate with more or fewer categories of adopters, depending on the innovation, and the adopter categories may make up different proportions of the market, not forming a nice bell-shaped curve (Hoyer and MacInnis, 1997). Copyright 2001 John Wiley & Sons, Ltd and ERP Environment

57

8 RLING AND J. THGERSEN A. GA of households from a large Swedish city could consider purchasing an EV over an ICV. Although these percentages are highly uncertain and difficult to compare, the conditions seem to change in favour of EVs. However, the question is how EVs should be marketed in order to attract potential customers. Kurani et al. (1994) suggest that there are many similarities between the introduction of the microwave oven and the EV. Before individuals were made aware (e.g. through special cooking courses) that microwave ovens were complements of, not substitutes for, conventional ovens, acceptance was very low, while it increased dramatically afterwards. A product such as the microwave oven is a high learning product, meaning that to utilize its qualities individuals have to make behavioural adjustments. Although there also are obvious and important differences between the two products, the microwave oven and the EV have a lot in common in this respect (Schot et al., 1994; Truffer et al., in press). We believe that the classification by Rogers, (1995) of innovations along five dimensions offers the most promising starting point for segmenting the potential EV market and particularly for identifying early adopters. Hence, we suggest that the most likely early adopters are among those that perceive the balance between advantages and disadvantages of EVs as compared with ICVs most favourably, perceive the EV as compatible with important values and do not perceive it as difficult to understand and use (i.e., not high in complexity). A plan for marketing of EVs should both target potential adopters holding favourable perceptions and influence the perceptions of these and other potential adopters in a more favourable direction. Further, according to Rogers classification, trialability and observability are two important characteristics of EVs that should be used actively in the marketing campaign. Regarding demographic and personality characteristics, some of the general traits of the earliest adopters, unveiled by previous research, may apply in this domain also (such as being more educated, higher in experimentation, knowledge and competence, being
Copyright 2001 John Wiley & Sons, Ltd and ERP Environment

heavy users of similar products and having the ability to understand the advantages of a new product compared to old ones). Yet, due to its unique combination of high costs and visibility, which makes EVs (like other cars) a high involvement product, we believe that the earliest adopters of this particular new product are best understood in terms of domain or product specific innovativeness (Goldsmith and Hofacker, 1991). It seems reasonable to assume that the most important source of domain specific innovativeness is a favourable perception of the EV along the dimensions suggested by Rogers (1995).

MARKETING STRATEGIES FOR ELECTRIC VEHICLES

The unique selling proposition for an EV is that it has less negative impacts on the welfare of other people and nature than an ICV. However, the prospective buyer is required to pay a high price for his or her good deed. And since there are currently next to no privately owned EVs on the streets there is not even a social norm backing the selling proposition. The marketing of such a deal is an uphill battle indeed. Given the current conditions, there is not much hope that enough EVs can be sold in the short term to cover the manufacturers costs (Thornton, 1999) or to make noticeable environmental or societal difference. Hence, it should be realized that a marketing campaign for an EV is only commercially defensible if a crucial assumption holds true: that conditions will change radically in favour of EVs in the longer run. We believe that this assumption is not too far fetched, but that it cannot be taken for granted either. In order for such a change to happen it is probably necessary that the learning curve for EVs is considerably steeper than that for combustion engine (including catalytic cleaning) technology, leading to a rapid narrowing of the present price/performance relationship gap between the two technologies. It is also necessary that no superior third technology for individual mobility is developed within a
Bus. Strat. Env. 10, 53 65 (2001)

58

MARKETING OF ELECTRIC VEHICLES

Table 1. Technologies promising to improve the environmental performance of cars. Technology Lean burn Gasoline-direct-injectionpetrol and lean burn Variable intake geometry Turbo-direct-injection, diesel Electric cars Down-sizing Best available technology Energy-saving tyres Better diesel Reformulated petrol Bio-fuels Hybrid cars Catolytic retrofit CO2 812% reduction 1525% reduction 1015% reduction 1015% reduction 2060% reduction 25% reduction 1015% reduction 12% reduction 1% increase 1% increase 1050% reduction 1015% reduction 0 Other emissions NOx increase HC and CO reduction, NOx increase Reduction 0 NOx reduction Reduction Reduction 0 Particle and NOx reduction Cost 12% increase 2% increase 24% increase 12% increase 100% increase 3050% reduction 5% increase 05% increase 12% increase Time perspective 03 years 13 years 03 years 02 years Min. 510 years Now Now Now Now (if required by law) Now (if required by law) More than 10 years 5 years 12 years

HC, CO and NOx reduction 12% increase HC, CO, NOx and particle reduction Reduction HC, CO and NOx reduction 35 times ordinary fuels 1020% increase DKK 25000 increase

Source: Transportra det (1997).

foreseeable future. Table 1 shows a recent assessment of the most important of the competing technologies, including EV technology. According to this assessment, EV technology offers the greatest promises for environmental improvement, but also the longest time-lag to cost competitiveness. Governmental support, including subsidies or tax relief for EVs or restrictions on the use of ICVs (Bernard, 1981; Kemp et al., 1998; Weber and Hoogma, 1998), can facilitate the process; it is probably even a prerequisite for a successful marketing of EVs, but it is hardly sufficient (or will hardly be strong enough to suffice). If faith can be had in a technological forecast3 predicting a rapid narrowing of the price/performance relationship gap, it makes sense to plan a long-run marketing strategy where the losses that are inevitably incurred in the initial phase are recovered in the longer run. Economies of scale and learning curve effects depend on the volume of production4. Getting many EVs on the market has the added advantages of demonstrating the vi3

ability of the technology to more reluctant potential customers, creating positive word of mouth (provided that the initial customers are satisfied with what they get), and creating a push for the establishment of the necessary infrastructure. A successful market penetration strategy probably should include a fairly low introduction price5 based on introduction rebates or learning curve pricing (Kotler, 1991), focusing first on achieving market acceptance by a few carefully selected segments (Hawkins et al., 1998). That hardly anyone buys a new car without a test drive demonstrates the importance of trialability for consumer choice in this market. When the car is based on a new technology whose most important limitations only show up in relatively extreme situations, the interested first-time customer is bound to have a desire to try the EV for an extended period before final commitment. Hence, a generous return policy or possibilities for leasing6 an EV for a period before a final decision to purchase it would help in bringing interested
5 This opinion seems to be shared by the large car companies that have made the first serious attempt to build a market for electric (and hybrid) cars (Thornton, 1999). 6 In the USA, GM has decided to only lease out their first EV, the EV1 (Murphy, 1997; Dipert, 1999).

Which a responsible management would need to perform much more rigorously. 4 For instance, nickelmetal hydride battery producer Panasonic EV Energy Co. estimates that if it could increase production fivefold it could slash its prices in half (Thornton, 1999). Copyright 2001 John Wiley & Sons, Ltd and ERP Environment

Bus. Strat. Env. 10, 53 65 (2001)

59

8 RLING AND J. THGERSEN A. GA

Figure 1. Distribution of car stock on major owner groups in Denmark and Sweden: percentages

potential customers the last step from interest to actually buying an EV. The primary advantage of the EV is its environment-friendliness compared to the ICV. Hence, an EV is bound to appeal more to potential adopters the more they value environment-friendliness (see Truffer et al., in press). However, it is also evident that the private car is perceived as an important lifestyle item in many other respects (Jensen, 1997), as reflected in the wide variation in price, style, size and many other characteristics of cars. Current EVs share most characteristics with small, relatively fuel-economical cars. Hence, car drivers who for various lifestyle reasons prefer prestigious, sporty or off-road cars are less likely to perceive an EV as a satisfactory substitute. Technology policy researchers have suggested that the early phase of innovation diffusion depends primarily on niche-specific factors, while systemic factors are more influential in later phases (Weber and Hoogma, 1998). Consistent with this view, but from a marketing perspective, we suggest a twophase strategy for the marketing of an EV. We suggest that the following organizations and private consumers (with some qualifications which we will return to shortly) represent particularly promising segments to be
Copyright 2001 John Wiley & Sons, Ltd and ERP Environment

targeted in phase 1 of the marketing plan7: (i) public sector organizations, (ii) green companies and (iii) multi-car households whose transportation need regarding the second car is within the present generation of EVs technical capabilities and whose values and lifestyle are compatible with owning an EV. Evidently these segments all represent small fractions of the (huge) total car market, but we are confident that together they offer a potential market well above the 2.5% of the potential adopters that are typically assumed to be innovators (Rogers, 1995). As an illustration, Figure 1 presents a rough estimate of the relative size of various car customer segments in Denmark and Sweden (based on Bilindustrifo reningen, Bilstatistik, Gamlin and Zeipel Kommunikation, 1998, and Transportra det 1997). Clearly, not all cars in any of the three segments can be substituted with current generation EVs. For instance, public sector cars include police cars and company cars include executive luxury cars. The reason multi-car families are considered a promising segment is that some of the most important disadvantages of current EVs are reduced if the owner also has an ICV. Hence, the number of cars owned by multi-car
7 On this issue we are in broad agreement with at least some of the front-runners in the EV industry (Anonymous, 1998b).

Bus. Strat. Env. 10, 53 65 (2001)

60

MARKETING OF ELECTRIC VEHICLES families strongly overestimates the potential market for EVs in this segment. The proportion of households owning more than one car (12% in both Sweden and Denmark) tells more about the potential size of this market (but still is an overestimation due to the value-compatibility problem). Single-car households are of course the most attractive segment in the car-market. A larger proportion of these households than usually assumed can cover their transportation needs with current generation EVs (Ga rling et al., 1998b; Truffer et al., in press). Still, except maybe for a few people that perceive environment-friendliness as the most important selfdefining concept, these households are likely to perceive relying on an EV as too risky under current conditions. Hence, the overall marketing strategy for EVs should include a marketing campaign targeted at the most promising single-car households in phase 2, when the technology has improved more and demonstration effects from the successful adoption by the segments targeted in phase 1 can be reaped. The public sector The public sector is a large fleet operator and vehicle customer in most countries, both concerning freight and person transportation. For instance, the public sector owns about 3% of the family-sized cars in Denmark and 2% in Sweden (see Figure 1). A number of countries also have official green purchase policies for public sector purchases (value compatibility). The green purchase policies are now extending also to vehicles (CARB Mobile Source Division, 1995), and if specific acquisition policies for ZEVs (zero emission vehicles) are decided, not only in California, but worldwide, a large market for EVs will emerge. Most vehicles owned by public sector organizations are used for short trips and during normal working hours, which makes this market less sensitive to the technical limitations of current EVs (relative advantage) (Schot et al., 1994; Nesbitt and Sperling, 1998). Many public sector organizations, though, live within a tight budget constraint, which makes it unlikely that they will voluntarily
Copyright 2001 John Wiley & Sons, Ltd and ERP Environment

pay a substantially higher price for an EV than for a similar ICV. Hence, success in this market segment depends heavily on it either becoming mandatory for such organizations to buy a certain percentage of ZEVs or that EVs become price competitive (due to promotional pricing or subsidies). Green companies This segment consists of private companies with (a desire for) a high environmental profile (value compatibility). There are no good estimates of the share of companies that perceive themselves as green. However, there is much documentation that an increasing number of firms use green arguments in their marketing and even larger numbers are keen to build a green corporate image (Peattie, 1995). For companies wanting to bolster a green corporate image, a non-polluting EV has at least potentially a substantially higher value than it has for the average person (or company) (relative advantage) (Schot et al., 1994). Like cars owned by public sector organizations, many corporate cars are used only for fairly short trips and only within normal working hours. Hence, this segment is likely to be less sensitive than private households to the functional deficits of EVs (relative advantage) are. Of course, not all green companies perceive the promotional value of an EV to be high enough to compensate for their functional deficits and premium price. The proportion of such companies finding the deal attractive (and the share of their vehicle fleet that they find it attractive for) depends on the EV manufacturers price policies as well as governmental support in the form of subsidies and/or tax relief. As with the other segments, the proportion will increase with further improvements in EV technology. Multi -car households The main reason why multi-car households are considered a particularly promising market segment is that EVs functional disadvan tages are assumed to be much less important if the household has an additional ICV at its disposal (relative advantage). Consistent with
Bus. Strat. Env. 10, 53 65 (2001)

61

8 RLING AND J. THGERSEN A. GA this assumption, most studies of EV use by private households in various countries have found that a majority of these early adopters own an ICV as well (Kurani et al., 1996; Knie et al., 1997; Harms and Truffer, 1998; Truffer et al., in press). However, the fact that the functional disadvantages of an EV are less problematic for a multi-car household does not change the fact that an EV is currently a functionally inferior product at a higher price. Hence, some sort of promotional pricing is particularly important regarding this segment8. The multi-car segment has the disadvantage that it is likely to contain some of the most enthusiastic car-owners; people who are likely to react strongly and defensively against arguments meant to convince them about the environmental menace of car-driving. Such car-lovers are not likely to go for an EV, even as the second car (value in compatibility). However, this segment also contains households who own more than one car out of need, because current work and living conditions demand it. Some of these people may even feel bad about having more than one car, because they are concerned about the environmental hazards of car-driving, and they may welcome ways of relieving their bad consciousness (value compatibility). However, many in this segment are also bound to experience their transport expenses as a heavy burden. Such families are likely to dismiss further considerations about buying an EV if it is more expensive than a similar ICV. demonstrated by many bankruptcies, without rich and patient investors small companies stand few chances of making it in this business, in spite of high levels of creativity and enthusiasm. Political support in the form of subsidies or preferential tax treatment can reduce the loss and may even be perceived as necessary for being able to reduce prices to a competitive level, even with regard to the mentioned target segments. Governmental or other support for research and development, infrastructure and market development may also greatly influence the speed of maturation of the EV market, particularly at the national level (Mackenzie, 1997; Weber and Hoogma, 1998). Hence, a sensible long run marketing plan for an EV should include tight cooperation with governmental bodies, perhaps even lobbying. Successful marketing towards the target segments of phase 1 is the key to successful marketing of EVs to the wider public, particularly the single-car households. Drivers of EVs, at work or in private, will promote EVs in their social networks (Darley, 1977/78; Bernard, 1981; Darley and Beniger, 1981; Murphy, 1997), provided they are satisfied with the product. Also, by just being in the streets the EV technology is demonstrated for potential customers outside the social networks of initial drivers. This may raise curiosity and interest. In addition, people who feel bad about the negative environmental impact of their car use are more likely to perceive that there exists a social norm about changing to an EV the more EVs they encounter. Given the importance of word of mouth and demonstration effects for long-run success, it is crucial that EVs are not over-marketed, particularly if this result in selling EVs to people who are bound to get trouble with them or in other ways become dissatisfied. This has, at least, two important implications (Murphy, 1997). (i) The selling of an EV in the early phase should be based on thorough scrutiny of the interested customers needs and on information about both the pros and cons of the EV. An interested customer whose needs cannot be properly solved by an EV should explicitly be advised not to buy one. (ii) The EV offer should include measures to
Bus. Strat. Env. 10, 53 65 (2001)

FROM PHASE 1 TO PHASE 2

The initial marketing campaign for an EV could sensibly target these three market segments; the public sector, green companies and multi-car households. Promotional pricing is obviously a necessary part of the strategy in most segments and, as already mentioned, it is important that EV manufacturers realize that it will take a while before they can expect to earn a profit on EVs. As has been amply
8

This was confirmed by the Swiss Mendrisio experiment (Harms and Truffer, 1998). Copyright 2001 John Wiley & Sons, Ltd and ERP Environment

62

MARKETING OF ELECTRIC VEHICLES reduce feelings of uncertainty about whether the driving range of the bought EV actually covers desired driving range. Such measures could be a generous return policy and/or a service package including, for instance, free leasing of an ICV once every second month or so during the first years after purchase. Alternatively, EVs could be leased rather than sold, which is currently GMs preferred solution in the USA (Murphy, 1997; Dipert, 1999). Simulation of own vehicle use pattern by means of a computer program could be cheap way of reducing initial scepticism and might be sufficient to convince the most interested consumers that an EV is a possible solution to their transport needs (Hoyer and MacInnis, 1997). nology is tested in real-life situations and that the further improvement of still immature parts is stimulated. Hence, they should be considered an important element of the marketing programme for an EV, even though they are difficult to plan and control. From a societal point of view, targeting the multi-car household segment is somewhat precarious. The promotion of the EV as a second car could, at least in countries where the large majority of households still are single-car households, result in an increasing percentage of two-car-households with a resulting increase in congestion and other traffic related problems. If they are perceived as promoting a multi-car lifestyle, the credibility of companies marketing EVs as an environment-friendly alternative to the ICV will also suffer. Hence, EV producers should not explicitly advertise the EV as the second car. Instead they should attempt to position the EV based on its differential advantages (documented environment-friendliness9 as well as other advantages10) and rely on those valuecompatible consumers perceiving the relative advantages most favourably (which we believe will disproportionally be multi-car households) to be most receptive to this type of advertising. The next challenge for EV marketers, when the phase 1 segments have been successfully served, is the huge single-car-household market. The marketing campaign directed towards this segment will not be much different from the one targeting multi-car households, but the conditions will be more favourable. Successful marketing depends, also in this phase, on identifying the most likely first adopters (in this segment), and again value compatibility is crucial. No doubt, promotional pricing and tax relief will still be important in this phase, albeit to a decreasing degree, and so is the opportunity of actually trying an EV for a longer period than just a test drive.
9 For ethical, legal and efficiency reasons claims about environment-friendliness should be specific and well documented (Davis, 1992, 1993). 10 For instance, GM has chosen to position its EV1 as the car of the future (Kelly, 1999), perhaps in an attempt to appeal to the innovative personality.

CONCLUDING REMARKS
The first two segments suggested in phase 1, the public sector and green companies, are already targeted to some extent in some European countries, but much more intensive and systematic marketing targeted at these segments is needed. An example of what could have been (part of) a marketing campaign targeted at government organizations (but is rather a customer initiative) is demonstration projects including personal vehicles, light duty vehicles and buses that are currently running in the three major cities in Sweden. Similar projects have been run in many other countries in Europe (Knie et al., 1997) and North America (Morrison, 1999a). In most cases based on their own and NGO rather than on producers initiative, governments of many countries also support EVs in different ways, such as subsidies and/or tax relief, preferential treatment of EVs in cities, demonstration projects, research projects focusing on private use of EVs and battery exchange programmes (in which changing instead of recharging empty batteries is tested) (Knie et al., 1997; Mackenzie, 1997). Many of these programmes have the added advantage that the EV at least to some extent is made visible to the general public. Furthermore, initiatives such as these mean that the new techCopyright 2001 John Wiley & Sons, Ltd and ERP Environment

Bus. Strat. Env. 10, 53 65 (2001)

63

8 RLING AND J. THGERSEN A. GA The most serious barriers to take-off for the EV market are the current uncertainty regarding the development of the EV technology, car manufacturers and oil companies pushing of technologies to reduce the environmental impacts of the ICV and insufficient governmental support. Lack of consensus about which EV technology to enhance may extend the uncertainty and the same may attempts by car manufacturers and oil companies do to defend ICVs market dominance. More certainty about governments commitment to support implementation of EVs on a larger scale would surely help, as would more restrictions for using ICVs in cities.
DaimlerChrysler. 1999. Driving the first viable fuel cell car. Advanced Vehicle Review 51: 20 23. Darley JM. 1977/78. Energy conservation techniques as innovations and their diffusion. Energy and Buildings 1: 339 343. Darley JM, Beniger JR. 1981. Diffusion of energy-conserving innovations. Journal of Social Issues 37: 150 171. Davis JJ. 1992. Ethics and environmental marketing. Journal of Business Ethics 11: 81 87. Davis JJ. 1993. Strategies for environmental advertising. Journal of Consumer Marketing 10: 223 225. DeLuchi M. 1993. Greenhouse-gas emissions from the use of new fuels for transportation and electricity. Transportation Research A 27: 187 191. Dipert B. 1999. Green challenger takes on gas guzzlers. EDN 3: 36 38. Flynn LR, Goldsmith RE. 1993. A validation of the Goldsmith and Hofacker innovativeness scale. Educa tional and Psychological Measurement 53: 1105 1116. Ga rling A, Johansson A, Ga rling T. 1998a. Determinants of attitudes toward and choice of EVs. Unpublished manuscript. Chalmers University of Technology: Gothenburg. Ga rling A, Johansson A, Ga rling T. 1998b. A visibility and field study of households choices of EV. Unpublished manuscript. Chalmers University of Technology: Gothenburg. Gatignon H, Robertson TS. 1985. A propositional inventory for new diffusion research. Journal of Consumer Research 11: 849 867. Goldsmith RE, Flynn LR. 1992. Identifying innovators in consumer product markets. European Journal of Mar keting 26: 42 55. Goldsmith RE, Hofacker CF. 1991. Measuring consumer innovativeness. Journal of the Academy of Marketing Science 19: 209 221. Harms S, Truffer B. 1998. Stimulating the Market for Lightweight Electric Vehicles. The Experience of the Swiss Mendriso Project. EAWAG: Switzerland. Hawkins DI, Best RJ, Coney KA. 1998. Consumer Behav ior. Building Marketing Strategy (7th edn). McGrawHill: Boston. Hirschman EC. 1980. Innovativeness, novelty seeking, and consumer creativity. Journal of Consumer Research 7: 283 295. Howard JA, Sheth JN. 1969. The Theory of Buyer Behavior. Wiley: New York. Hoyer WD, MacInnis DJ. 1997. Consumer Behavior. Houghton Mifflin: Boston. Jensen M. 1997. Benzin i blodet. Kvantitative del, Faglig rapport fra DMU (200). Hvidovre Milj- og energiministeriet: Danmarks miljundersgelser. Kelly JI. 1999. Riney charges up GMs EV1 car. Adweek 8 March: 8. Kemp R, Schot J, Hoogma R. 1998. Regime shifts to sustainability through processes of niche formation: the approach of strategic niche management. Technol ogy Analysis and Strategic Management 10: 176 195. Knie A, Berthold O, Ha rd M, Buland T, Gjen H, Truffer B, Harms S. 1997. Consumer user patterns of electric
Bus. Strat. Env. 10, 53 65 (2001)

ACKNOWLEDGEMENTS
The research was financially supported by a grant from the Swedish Communications and Transport Research Board (No. 93-315-22). An earlier version of this paper was presented at the 5th Workshop of the Nordic Business Environmental Management Network: The Role of Theory, Gothenburg Research Institute, Go teborg, 14 16 January 1999. We are grateful for helpful suggestions from Sylvia Harms, Daniel Sperling and two anonymous reviewers.

REFERENCES
Anonymous. 1998a. Delivering cleaner transportation options. Research and Development 13: 9. Anonymous. 1998b. Norway: electric car market: an overview. International Market Insight Trade Inquires September: 30. Bernard MJ. 1981. Problems in predicting market response to new transportation technology. In New Horizons in Travel -Behavior Research, Stopher PR, Meyburg AH, Bro g W (eds). Lexington: Toronto; 465 487. Bilindustrifo reningen AB Bilstatistik and Gamlin and Zeipel Kommunikation. 1998. Bilismen i Sverige 1998. Wallin and Dalholm: Stockholm. Buist DR. 1993. An Automotive Manufacturers Alternative Fuel Perspective. Proceedings from the First Annual World Car 2001 Conference, 5155. CARB Mobile Source Division. 1995. Proposed amendment to the low-emission vehicle regulations to add an equivalent zero-emission vehicle (EZEV) standard and allow zero-emission vehicle credit for hybrid-electric vehicles. Carlson L, Grossbart SL. 1985. Towards a better understanding of inherent innovativeness. In AMA Educa tors Proceedings, Belk R (ed.). American Marketing Association: Chicago, IL; 8891.
Copyright 2001 John Wiley & Sons, Ltd and ERP Environment

64

MARKETING OF ELECTRIC VEHICLES

vehicles (FS II 97-105). Papers. Wissenschaftszentrum Berlin fu r Sozialforschung. Kotler P. 1991. Marketing Management. Analysis, Planning, Implementation, and Control (7th edn). Prentice-Hall: Englewood Cliffs, NJ. Kurani K, Turrentine T, Sperling D. 1994. The Zero Emissions Vehicle Market: a Diary -Based Survey of New Car Buyers in California. Institute of Transportation Studies, University of California. Kurani K, Turrentine T, Sperling D. 1996. Testing electric vehicle demand in hybrid households using a reflexive survey. Transportation Research D 1: 131 149. Labay DG, Kinnear TC. 1981. Exploring the consumer decision process in the adoption of solar energy systems. Journal of Consumer Research 8: 271278. Link F. 1997. Diffusion dynamics and the pricing of innova tions. Unpublished Doctoral Thesis, Lund Studies in Economics and Management, The Institute of Economic Research, Lund University. Link F, Malm. 1994. Future User Groups of Mobile Tele phony Innovativeness and Product Preferences, paper presented at the COST 248 Workshop: The European Telecom User, Lund. Mackenzie JJ. 1997. Driving the road to sustainable ground transportation. In Frontiers of Sustainability, Dower R, Ditz D, Faeth P, Johnson N, Kozloff K, Mackenzie JJ (eds). Island: Washington, DC; 121 190. Monroe KB. 1990. Pricing: Making Profitable Decisions. McGraw-Hill: New York. Morrison G. 1999a. Electricity takes the high road. Me chanical Engineering 3: 112. Morrison G. 1999b. Marines to get hybrid electric hummvee. Mechanical Engineering 3: 16. Murphy IP. 1997. Charged up. Electric cars get jolt of marketing. Marketing News 31: 7, 1, 7, 13. Nesbitt K, Sperling D. 1998. Myths regarding alternative fuel vehicle demand by light-duty vehicle fleets. Transportation Research D 3: 259269. ODonnell P, Oxfeld J. 1998. How to get a green machine. Newsweek 25: 6. Ostlund L. 1974. Perceived innovation attributes as predictors of innovativeness. Journal of Consumer Research 1: 2329. Peattie K. 1995. Environmental Marketing Management: Meeting the Green Challenge. Pitman: London. Power JD. 1993. Automotive Consumer Profile Study. The Power Report. Rao AR, Monroe KB. 1988. The moderating effect of prior knowledge on cue utilization in product evaluations. Journal of Consumer Research 15: 253264. Rogers EM. 1995. Diffusion of Innovations (4th edn). Free Press: New York. Schot JW, Hoogma R, Elzen B. 1994. Strategies for shifting technological systems. The case of the automobile system. Futures 26: 10601076. Schulz JD. 1998. Doing double duty. Traffic World 4: 25 27. Sperling D. 1995. Future Drive: EVs and Sustainable Trans portation. Island: Covelo, CA. Thornton E. 1999. Enviro-cars: the race is on. Business Week 3615: 74. Tigert D, Farivar B. 1981. The Bass new product growth model: a sensitivity analysis for a high technology product. Journal of Marketing 45: 81 90. Transportra det. 1997. Mere Miljvenlige Biler Tekniske Muligheder og Politiske Tiltag, Rapport 97-04. Transportra det: Kbenhavn. Truffer B, Harms S, Wa chter M. In press. Regional experiments and changing consumer behaviour: the emergence of integrated mobility forms. In If Only. . . .Prospects of the Electric Vehicle. Hulte n S, Cowan R (eds). Venkatesan M. 1973. Cognitive consistency and novelty seeking. In Consumer Behavior: Theoretical Sources, Ward S, Robertson TS (eds). Prentice-Hall: Englewood Cliffs, NJ. Venkatraman MP, Price LP. 1990. Differentiating between cognitive and sensory innovativeness: concepts, measurement and their implications. Journal of Busi ness Research 20: 293 315. Wang Q, DeLuchi M, Sperling D. 1990. Emission impacts of EVs. Journal of the Air and Waste Management Association 40: 1275 1284. Weber M, Hoogma R. 1998. Beyond national and technological styles of innovation diffusion: a dynamic perspective on cases from the energy and transport sectors. Technology Analysis and Strategic Management 10: 545 566.

BIOGRAPHY
Dr. Anita Ga rling, Associate Professor, Department of Water, Environment and Transport, Chalmers University of Technology, SE-412 96 Gothenburg, Sweden. Tel + 46 31 772 2397. Fax + 46 31 189 705. E-mail: Anita.Gerling@road.chalmers Dr. John Thgersen, Associate Professor, Department of Marketing, Aarhus School of Business, Haslegaardsvej 10, DK-8210 Aarhus V, Denmark. Tel + 45 8948 6440. Fax + 45 8615 3988. E-mail: John.Thogersen@asb.dk

Copyright 2001 John Wiley & Sons, Ltd and ERP Environment

Bus. Strat. Env. 10, 53 65 (2001)

65