Smart Takes Second Stab At U.S. Market

By DALE BUSS August 30, 2011

The new team running Smart USA for Daimler AG believes that Americans have been shunning the Smart ForTwomini-car not for what they know about it but for what they don’t know about it. So, launching a major, national, traditional marketing campaign for Smart sometime this fall will be the most important order for business for the new team of executives who have been running the operation since the German automaker took over U.S. responsibilities for its Smart brand from Penske Automotive Group last month. “You very rarely get a second chance to make a first impression, but this is where we have a chance to do that,” said Tracey Matura, the new general manager for Smart USA and a veteran Mercedes-Benz executive.

“We can put the full suite of our marketing efforts behind it,” Matura explained, “and that’s the good thing about having an organization like Mercedes-Benz USA behind [Smart]. They’re known for marketing. And marketing and advertising opportunities will be first and foremost” in attempting to pull Smart out of its swoon. Currently, the Smart brand is moribund. Daimler awarded U.S. distribution of Smart to Penske in 2008 and, as gasoline prices spiked, sales of the two-seater ForTwo soared to nearly 25,000 units that year when enthusiastic Americans anted up sticker prices starting at about $12,500 for a “city” car that could traverse 41mpg. But then gasoline prices fell and recession struck, and Smart’s quirkiness and schizophrenic practicality plunged from favor. Without a real auto-marketing pedigree and an under-established brand, Penske couldn’t bring Smart back. Sales dwindled to fewer than 6,000 last year, and for the first seven months of 2011, ForTwo sales were only 2,883 units.

083011 smart fortwo Sales - AO.jpgIgnorant Of Smart
Matura asserts that a turnaround is still possible, based not only on Daimler’s takeover of the Smart operation in the United States but also on her brand-building plans, the inherent attributes of the ForTwo, an expansion and recommitment of the dealership network, and even the arrival of new competitors in the tiny-car segment including the Fiat 500 and Scion iQ. The biggest reason Smart wasn’t able to build on its quick sales success in 2008, she said, is that Penske didn’t simultaneously establish the brand solidly or even expand awareness of it. Penske’s biggest mistake in that regard, she said, was to stick primarily with social-media and event marketing. “It needed more than just guerilla marketing,” Matura said. “You needed TV ads connected to the social-media venues, for instance. We need to bring it to the next level.”

As a result of the paucity of marketing behind Smart over the last few years, she said, “We’ve realized that not a lot of people actually know what a Smart car is.” That was evidenced by Smart’s poor score in J.D. Power & Associates’ annual brand-avoidance survey. Americans “are not avoiding [Smart] because they don’t like the product or something it stands for,” she said, “but because the awareness of the brand is relatively low.” Thus, soon, Matura said, Smart will be introducing TV and print advertising and competitive financing programs that will be a first for the brand in the United States.

And instead of de-emphasizing event marketing, she said, Smart will try to be savvier about it. Smart is likely to ride on Mercedes-Benz’s coattails into marketing around Fashion Week in New York City, in early September, for example. “Smart lends itself to that,” Matura explained. “We’re focused on design, so we fit into Fashion Week differently than Mercedes-Benz does.” At the same time, Smart will launch events in areas new to Daimler, such as music. “The artistic side of the Smart brand lends itself to arts in general and music specifically,” she said.

Acquired Taste
With its iconoclastic design and basic proposition – a fuel-sipping, tiny car that nevertheless is safe for conventional driving — such psychographic appeal should already be a strength for Smart, but it’s not. And with its breathtakingly small and convenient footprint, just under nine feet long and about five feet wide, Smart should be a big hit with young urbanites – but, so far, it’s not. Instead, most Smart buyers are 45- to 50-year-old men living in the suburbs. “There’s been more awareness in the suburbs, but we think there are lots of opportunities in urban areas,” Matura said.

“It’s the easiest car in the world to park,” she noted. So some New York City ramps discount parking fees for Smart, for instance, “but I’m not sure everyone knows that,” Matura said. “And that’s the kind of thing we should be able to do across the country.” Smart is a popular choice of fledgling urban car-sharing programs such as Car2Go, which is using a fleet of ForTwos in Austin, Texas. Matura also wants to engage more Millennial consumers with special financing for first-time buyers that Mercedes-Benz USA will be in a position to offer – and Penske wasn’t.

Still, raising awareness of Smart and making it easier for Americans to buy the ForTwo is only half the battle for the brand’s new hopefuls. The vehicle definitely can be an acquired taste.’s evaluation of the ForTwo complains, for example, that the car has a “rough-shifting transmission” and an “awkward floor-pivot brake pedal” as well as “an unpleasant highway ride.” And there’s more than a dubious comfort level that keeps many consumers from purchasing Smart for anything other than surface-street driving: Many of them simply can’t see themselves getting behind the wheel of something that is so small, and joining traffic comprised of vehicles that are almost all significantly bigger, even though the ForTwo meets U.S. crashworthiness standards.

Competitors Welcome
Matura acknowledged such hesitance but compared it to consumer reluctance to purchase, say, an SUV for various reasons. “They have a perception about that kind of vehicle; and [the ForTwo] isn’t for everyone,” she said. “The key here is that when you get someone in a Smart, a lot of those perceptions go away. I tell people to close their eyes, get in, and then open their eyes. And people always say it doesn’t feel like a small car inside. And as we give people more opportunities to experience the vehicle, we’ll eliminate some of that reluctance. We will embrace it being small. That also means it’s fun and addictive.”

Smart will be counting heavily on a beefed-up dealer body to help in selling the ForTwo, with its minuscule shadow and all. Penske had authorized about two-dozen non-Mercedes-Benz dealers to peddle Smart in separate or stand-alone showrooms but then lately took back the franchises from them. Now, while Mercedes-Benz isn’t requiring separate or stand-alone facilities for Smart dealers, the brand does want a special corner within a store. About 75 Mercedes-Benz dealers are still selling Smart, a number that will expand to about 100 by the end of the year, Matura said.

The soon-to-be-launched Scion iQ is about two feet longer than the ForTwo and about $3,000 pricier. The recently introduced Fiat 500 is about three feet longer than Smart and about $3,000 pricier. Yet, Matura welcomed the two vehicles as worthy contributors to the growth of a tiny-vehicle segment that will actually help the ForTwo. “More people talking about that segment can only be good,” she said. Owen Peacock, marketing manager for Toyota’s Scion brand, agreed. “A resurgent interest in Smart could happen, and that would be a positive result,” he said. “It would simply generate more interest in the smallest-car segment.”

Of course, in the long run, Smart has got to create its own unique interest, and a crucial part of the long-term viability of a brand is new products. But a new version of ForTwo isn’t due until 2014. “In a perfect world, absolutely, we’d like that product sooner,” Matura said. A four-seater was always envisioned as part of the master plan for Smart in the United States, but a new four-passenger Smart now is planned only for European markets, she said, although “it is under discussion to bring it here down the road.” However, Matura insisted that the lack of a new ForTwo for a couple of years won’t be a huge handicap for the brand. “We see opportunities to bring more people into the Smart family and get awareness out there,” she said. “We’ll have plenty to do between now and 2014.”

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