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Consumers willingness to pay for innovative technology: Hybrid Vehicles

Consumers willingness to pay for innovative technology: Hybrid Vehicles. Evolution of the Vehicle. Late 19 th and early 20 th century Steam, electricity, and gasoline Problems? Vibration and Friction Weight Power/Fuel/Distance Internal Combustion Engine emerged dominate (early 1900s) .

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Consumers willingness to pay for innovative technology: Hybrid Vehicles

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  1. Consumers willingness to pay for innovative technology: Hybrid Vehicles

  2. Evolution of the Vehicle • Late 19th and early 20th century • Steam, electricity, and gasoline • Problems? • Vibration and Friction • Weight • Power/Fuel/Distance • Internal Combustion Engine emerged dominate (early 1900s) Questions? Theory Case Analysis Conclusion Introduction

  3. Evolution of the Vehicle • Late 20th and early 21st century • Traditional gasoline engine receives criticism • Global warming • Fear of limited oil supply • Rising gasoline prices • Inefficient • Introduction of the hybrid • Combination of gas/electric engine • Late 2000 First mover Toyota releases the Prius Questions? Theory Case Analysis Conclusion Introduction

  4. Evolution of the Vehicle • Expansion of product assortment and growth Questions? Theory Case Analysis Conclusion Introduction

  5. Objectives of Analysis • Consumers willingness to pay for: • New technologies • Vehicles -> Demographics • Exploration through scenario analysis ? Questions? Theory Case Analysis Conclusion Introduction

  6. Innovation Adaption and the Hybrid Kotler (2008) Questions? Theory Case Analysis Conclusion Introduction

  7. Innovation Adaption Diffusion Model (Rogers, 1962) Questions? Theory Case Analysis Conclusion Introduction

  8. Conclusions from Kotler and Rogers Questions? Theory Case Analysis Conclusion Introduction

  9. Demographic Correlation Studies • Economic Logit models • Whether or not to upgrade • Multinomial Logit (Train, 1980) and Nested Logit (Hochermanet. al. 1983) • Mixed Logits integrating combined and stated preferences • Demographic Correlation • “What kind of Person chooses a vehicle type” • Choo and Mohktarian (2004) and Sangkapichai and Saphors (2009) Questions? Theory Case Analysis Conclusion Introduction

  10. Fuel Prices Putting the Theories together • Environmental concern • Government incentives • Different Demographics Questions? Theory Case Analysis Conclusion Introduction

  11. Three Factors that Affect Consumers • Government incentives • Government Tax Credit up to $3500 • Access to High-occupancy Vehicle Lane • Discount on Insurance premiums • Environmental Issues • Moreenvironmentallyfriendly then conventional counterpart • Emit less green house gases and consume less gases • Cost-savings • High fuel efficiency cuts fuel costs • However, due to the high premium takes years to recover the premium in fuel cost savings Questions? Theory Case Analysis Conclusion Introduction

  12. Consumer Segments Questions? Theory Case Analysis Conclusion Introduction

  13. Early Bloomer • Government incentivesare important • Purchase price is a significant factor in a lower income bracket • Although they are environmentally conscious, they are not willing to pay a high premium to drive a hybrid • Fuel Efficiency and Cost-Savings are important • Research finding showed that income has non-linear effect • High interest in hybrids to save fuel costs • However, due to a high premium the cost-saving is not significant Questions? Theory Case Analysis Conclusion Introduction

  14. Wealthy Elite • Government incentives are not as vital • Purchasing price becomes less important • High disposable income • Non-financial incentives may be more important • Access to HOV lanes can be a strong factor • Environmentally conscious • More educated consumers are more environmentally conscious • Ownership of a hybrid goes beyond means of transportation, it’s making a social statement • Long-term cost savings will less likely matter • Only saves cost if driven for a long period of time Questions? Theory Case Analysis Conclusion Introduction

  15. American Dream • Government Incentives • Lower disposable income • High-occupancy Vehicle Lane • Environmental concern • Future for children • Fuel cost • May be seen as an short term incentive for saving Questions? Theory Case Analysis Conclusion Introduction

  16. Conclusion ? Questions? Theory Case Analysis Conclusion Introduction

  17. Thank You for your attention.We will now open the floor to questions Questions? Theory Case Analysis Conclusion Introduction

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