Smart USA
With sales stalling, Smart is reviving efforts to get its tiny fortwo cars in front of resistant American drivers.
By
msnbc.com contributor
updated 8/17/2010 7:02:37 PM ET 2010-08-17T23:02:37

Just 61 inches high and 106 inches long, the two-seater Smart fortwo is not exactly a family car, or the sort of vehicle you’d use to travel across the country. Its diminutive dimensions are designed for the tight squeeze of city driving, and for potential buyers like David Carroll, who is definitely not diminutive, it’s hard to know whether they’ll fit inside comfortably.

“I thought I would look like Fred Flintstone in it,” said Carroll, after taking a first-hand look at a fortwo at a recent sales promotion event in Annapolis, Md. “But sitting inside one has really changed my mind.”

This personifies the problem faced by smart USA, the U.S. distributor of the fortwo minicar. Many potential customers who thought the fortwo was a neat idea as a second city car when the vehicle was first splashed across the media a few years ago feared the car wouldn’t suit them in reality.

Smart’s perception issue has plagued the company and weighed on sales. In 2009, Smart sales plummeted to 14,600 units from 24,600 the previous year. And so far in 2010 sales are off another 60 percent from 2009’s dismal rate.

Now the company, a unit of Penske Automotive Group, is aiming to restart stalled sales with a reinvigorated marketing effort that puts Smart in front of the kinds of consumers who are apt to be interested.

Recognizing the need for Smart to start selling its cars rather than just taking orders from consumers, Smart has hired Jill Lajdziak, formerly general manager of GM’s Saturn division, to boost its marketing effort. With her new vice president of marketing, Kim McGill, Lajdziak has plotted a strategy of focused web and print advertising plus product placement in movies and TV shows.

For the first time, Smart is placing banner ads on car-shopping websites like Edmunds.com, kbb.com, AutoByTel.com and others. Smart is also targeting lifestyle websites that appeal to the kinds of active, environmentally concerned consumers who might be interested in buying a Smart, such as deviantART.com, said McGill. Online advertising has the advantage of making it possible to track results, she said.

“We measure the effectiveness of our marketing not only by how many people we attract but what they do after we attract them,” McGill noted.

Smart has also turned its back on traditional TV ads, instead pursuing a strategy of product placement in appropriate films and shows, such the new Katherine Heigl movie “Life as We Know It.” For the VH1 Do Something award show one winner chose to arrive in a chauffeured Smart car rather than a limo. And two reality shows will feature the car in the fall season.

The thinking behind these promotions is to plant the idea in consumers’ minds that a Smart fortwo, which sells for about $14,000 in a typical configuration, is a fun way to get around town. The same is true of Smart’s decision to reactivate the “Smart Street Team” program, which was first used in 2007 to introduce the brand to U.S. consumers.

This program puts small fleets of cars on the street in markets where consumers might be interested in trying one out for themselves. People can sit in the cars, kick tires and actually drive the fortwo to see whether they fit inside.

“It gives us the opportunity to put that six-foot-four person in the car to demonstrate the headroom,” Lajdziak explained.

It’s not just the ample headroom that’s surprising, noted Carroll at the Annapolis event. The Smart fortwo’s width isn’t radically different from other cars on the market, he added.

“I was pleasantly surprised that there was good room,” Carroll said.

The street tour helps boost perceptions of Smart in other areas, Lajdziak said.  

“The normal consumer has question marks [about the car],” she said. “People say, ‘Can I fit in it? What functionality does it have? What is the safety record? And what is the fuel economy?’”

Another issue is that customers are unfamiliar with the car’s driving dynamics, Lajdziak said.

American consumers are used to traditional automatic transmissions, but the Smart uses an automatically shifted manual transmission. That means that while there is no clutch to manipulate, and the driver doesn’t move the shift between the gears while driving, the car does have the “accelerate, coast-while-shifting, then accelerate” sensation of a car with a regular manual transmission.

If this nuance is explained to customers in advance, so that they understand what to expect, they are more understanding of the sensation. If not, they will expect the smooth acceleration of a regular automatic transmission and find the Smart’s transmission jarring, said Lajdziak.

Distaste for this has led many owners to report that they wouldn’t recommend the car to friends and don’t plan to buy another themselves, according to Art Spinella, president of CNW Research, an automotive market research group. 

Only 8.1 percent of focus group participants in the New York metro area said they would buy the car again, while 19.8 percent of participants in San Francisco said they would.

Installation of a true automatic transmission would surely attract more buyers, but that’s “not in the cards,” said Lajdziak.

One potential outlet for both increased sales and exposure is the use of fortwos by car sharing services, such as Zipcar and car2go.

The nationwide Zipcar service is conducting a pilot program using the tiny cars on college campuses, and the early feedback is positive, according to Zipcar spokesman John Williams. Users say the cars are great value and easy to park, he said.

Car2go is not as widespread as Zipcar, but the company has already bought 300 fortwos for use at its Austin, Texas, location and plans to announce additional cities this year. That’s not only a decent number of sales for a low-volume model like the fortwo, but more importantly it puts the car in the hands of potential future buyers.

“That market is demographically and psychographically perfect,” said Lajdziak.

Smart will address the issues of driving smoothness and environmentalism when it rolls out a battery-powered electric model. American consumers have typically assumed, based on its size and appearance, that the fortwo features an alternative powertrain, so the delivery of an electric model starting later this year will realize that expectation.

Smart will build a pilot run of 250 battery electric fortwos this fall, with full-scale retail production launching in January of 2012, said Lajdziak.

This ramp-up schedule may be slightly behind that of the Nissan Leaf electric car or the Chevrolet Volt extended range electric car, but it is because the Smart will use a more advanced electric drive technology than the ones used in the Leaf or the Volt, according to Lajdziak.

“We are at a different stage than Leaf or Volt,” she said. “Ours will be next generation of electric drive.”

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