Introduction
Market segmentation represents a marketing strategy that implies dividing consumers into a set of groups in a way to make certain products or product lines appeal to their interests. Different consumers’ perception of the value contained in specific products and services allows companies to strategically target consumer groups in order to maximize sales and profit (Grover, 2018). Based on homogeneity, distinction, and reaction, companies usually divide the market into the following segments: geographic, psychographic, demographic, and behavioral.
Geographic segmentation considers the information regarding consumers’ physical location, population density, and growth. Therefore, this segmentation type divides the market according to features, such as states, regions, cities, or neighborhoods (Grover, 2018). The company then decides on the number of areas to operate in with respect to local peculiarities. In doing so, it can devise marketing programs to meet the needs of local consumer groups in the chosen areas.
Psychographics refers to the science of using demographics and psychology to better understand consumers. Thus, psychographic segmentation attempts to classify customers regarding their personality, lifestyle, interests, and opinions (Grover, 2018). The main dimensions of this segmentation are consumer motivation and available resources (Kotler & Keller, 2016). In the former case, consumers are motivated by three primary motivations: self-expression, ideals, and achievement. In turn, different levels of available resources enhance or constrain a person’s ability to express their primary motivation.
Demographic segmentation assumes that individuals with the same demographic have similar needs and defines consumer groups by age, gender, race, income, education, or occupation. Apart from providing information on needs and wants, these variables prove to be easy to measure (Kotler & Keller, 2016). Even when the target market is described in non-demographic terms, it might require the link back to demographic characteristics to calculate the market size and the media required to reach it efficiently.
Finally, behavioral segmentation focuses on customers’ previous interactions with particular products or services based on market data and customers’ decision-making. Kotler and Keller (2016) classify possible behavior variables as needs or benefits, decision roles, and user and usage. Firstly, based on differences in individual product perception, segmentation can define distinct market segments with clear marketing implications. Secondly, different people play unique roles crucial in the decision-making process, which reflects on resulting consumer satisfaction. Thirdly, factors that influence the appearance of needs, such as occasions, buyer readiness, usage rate, and user and loyalty statuses, can also serve as reference points in market segment construction.
Product and Industry
To apply this theoretical market segmentation framework to the case of Rivian company, one needs to understand the industry to which their product belongs. The Rivian R1S model is an all-electric, full-size off-road sport utility vehicle (Rivian, 2022a). Consequently, it belongs to the subsegment of the automobile industry. At the moment, the strongest external determinants affecting the industry include greenism or environmentalism. It aims to raise awareness of the importance of the human impact on Earth in the face of growing CO2 emissions (Zhao, 2021). As a result, the EV market is expanding with the population’s help. Apart from the public, governments are also putting pressure on carmakers to change the industry drastically. They implement programs to foster the development and research of new clean technologies and use financial incentives and tax benefits (McConnell & Leard, 2021; Ovaere & Proost, 2022). In other words, they are also working on the demand side to foster the purchase of EV cars.
Recommended Approach to Target Audience Identification
Based on the evidence presented above, Rivian can make several conclusions regarding the target audience for their R1S EV. Namely, environmental concerns are the main driving force affecting the industry and consumers. In this context, geographic segmentation would not be as efficient as possible due to the worldwide alignment of trends in the automobile industry, implying that geographical units have relatively the same needs. Apart from that, environmentalism can be considered both a motivation and a lifestyle. These features are not particularly tied to demographic values, as environmental concerns can be attributed to a broad scope of people worldwide. Thus, they primarily affect the behavioral and psychographic variables of consumers, which provide the most relevant information for consequent market segmentation in this case.
Customer Profile
The resulting customer profile for potential market segments or groups interested in buying the Rivian R1S model implies individuals and households concerned with the Earth’s environmental problems and with the following additional characteristics:
- they have middle-to-high average income
- they are open to innovations and early adoption
- they possess broad technical knowledge
- they appreciate incentives such as safety and design
- they are displeased with oil prices dynamics
- they are socially active and well-known
- they are subjective to social opinion in their decision-making
Levels of Segmentation
Full Market Coverage
Full market coverage implies that a company attempts to meet the needs of all customer groups with its products. In other words, the company will attempt to sell different products to all the segments present in the market (Kotler & Keller, 2016). Full market coverage typically allows for more total sales; however, it also increases business costs. Since such a situation leads to both higher costs and higher sales, no generalizations are possible regarding its profitability.
Such a level of segmentation would not be an appropriate decision for the Rivian company. In particular, an automobile market’s diversity already speaks against the full market coverage due to Rivian’s specialization on EVs. Despite the growth of EVs’ share in the industry, they are not able to satisfy all the customer needs yet. For instance, the company will require to invent models of electric vehicles of all possible types, which would require massive investments without any confidence in their return.
Mass Marketing
Mass marketing implies that a company ignores segment differences and imposes its offer on the whole market. In this situation, it designs a superior image for its product and attempts to sell it to as many buyers as possible, using mass distribution and mass communication practices (Kotler & Keller, 2016). Mass marketing is appropriate when all consumers have the same preferences, whereas the market shows no natural segments. This approach narrows the product line, reducing the costs of processes in product management (Lai et al., 2021). However, it might induce market splintering and proliferate marketing channels and communication.
In the case of Rivian company, mass marketing presents the level of segmentation that might become the most profitable in the future. Since it relies on the alignment of consumer preferences in market segments or the segments’ absence, the eventual oil depletion definitely speaks in its favor. Nevertheless, the current situation of competition with internal combustion cars does not allow EVs to reach the audience coverage required for this segmentation level to be efficient.
Single-Segment Specialization
With single-segment concentration, the company markets to only one particular segment. In this case, it usually works with niches – customer groups that seek certain benefits within a segment (Kotler & Keller, 2016). The niche is relatively small but tends to have a more loyal customer base and the potential to grow in size and profit. Nevertheless, some low-share products may become obscure and disappear before they can justify their existence.
The EV market represents a perfect example of a niche market that has begun to evolve and grow due to increased demand and external factors. However, it still remains a niche – according to Zhao (2021), EVs’ share in total car sales worldwide was roughly 4% in 2020. Thus, single-segment specialization can be considered one of the valid options for Rivian due to the niche’s growth potential, efficiency, and low probability of the disappearance of EV demand.
Multiple-Segment Specialization
With selective specialization, a company targets a set of all attractive and appropriate market segments. According to Kotler and Keller (2016), a company usually attempts to specialize in a specific product or market. With product specialization, the company sells a particular product to several market segments, dividing the product risk among the segments. However, there is a risk of entirely new technology emerging and supplanting the product. In turn, with market specialization, the company focuses on attending to the needs of a particular customer group, building a solid reputation. In this case, there might be a risk of a customer group suffering budget cuts or shrinking in size.
Considering the two discussed specializations, product specialization has the justified risk of new technologies’ appearance that might obscure Rivian’s product. However, the decision to specialize in the market in many ways reflects current Rivian’s approach to the levels of market segmentation. In particular, family EVs are accompanied by cargo EVs, such as R1T (Rivian, 2022b). Apart from that, Rivian is partaking in the construction of a charge stations network in the U.S. and Canada (Rivian, 2022b). Therefore, multiple-segment specialization also provides a valid option for the Rivian company.
Individual Marketing
This segmentation level becomes possible when companies gather enough information about customers and competitors to flexibly adjust their products and production. By doing so, they will be able to provide individually designed products, services, programs, and communications (Taylor-West et al., 2020). It works best for companies that generally collect substantial amounts of customer information and carry many cross-selling products requiring periodic replacement or upgrading while offering high value. For other companies, the required information collection and investments might exceed the profit.
The final level of marketing segmentation might seem appropriate for Rivian at first glance. For instance, EVs can be considered a product of high value that might require periodic replacement or upgrading. Nevertheless, individual marketing is not a valid option due to the Rivian brand not yet having a solid reputation. According to Irle (2020), it did not manage to secure a separate spot in the graph of total EV sales for 2022 H1, falling into the “others” category. Consequently, Rivian might lack the information and investments required to support this strategy.
Product Life Cycle Stage
Product life cycles can be divided into the stages of introduction, growth, maturity, and decline. In the first stage, sales grow slowly, and profits are nonexistent because of high introductory expenses. The growth stage is a stage of rapid market acceptance and significant profit improvement. In the stage of maturity, sales growth slows due to the product achieving acceptance by most potential buyers, while profits stabilize or decline because of increasing competition. In the last stage, sales go downward, and profits erode. Considering the EV market, EVs are currently in the growth stage of a product life cycle.
Growth Stage
A rapid increase in sales indicates the EV’s growth stage. Early adopters like the product, while additional consumers also start buying it. New competitors enter the market, introducing new features and expanding distribution. Prices stabilize or fall depending on how fast demand increases. Companies maintain their marketing expenditures or raise them to meet competition. Profits increase due to spread marketing costs, whereas unit manufacturing costs decrease faster than price. Companies must watch for a change in growth rates to devise new strategies.
Product
To sustain rapid market share growth, the company must improve product quality, add new features, and improve styling. Another option is to add new models and flanker products to protect the main product. Such is the case with R1S – a second model the Rivian company has presented after their R1T product (Rivian, 2022b). Being the sport utility version of R1T, R1S shares up to 91% of components with R1T due to using the same chassis (Rivian, 2022b). In addition, Rivian has modified the chassis center of gravity, opening modification possibilities for different body types.
Price
The R1S price has also registered slight changes in comparison to the previous product. According to the Rivan company’s website (2022b), R1S’s cost currently starts at $78,000 in contrast to R1 T’s $73,000. This price change indicates important features of a product’s life cycle growth stage. Firstly, the price registered price change showcases the process of price stabilization in the market due to competition. Secondly, it highlights the cost of product improvement.
Promotion
Not only Rivian modifies its products and adjusts prices, but it also devotes time to promoting its products. For instance, Rivian produced a commercial video for the purpose of reaching a wider audience (Electric Vehicles, 2022). Another example is the company’s reservation of shares for people who pre-ordered Rivian’s EVs (Levy, 2021). Finally, according to Pate (2022), Rivian has offered monetary incentives to its employees who bought either of the EV models. Thus, Rivian’s promotions include the company’s brand reputation as well as its products.
Place
In terms of product availability, Rivian focuses on EV delivery to its clients. Currently, according to Rivian (2022b), it is possible to order EV delivery on territories of the U.S. and Canada. However, the company plans to expand its reach, announcing the service availability in Europe (Loveday, 2021). The service is based on the approach of maximum convenience for their clients, serving as an additional marketing strategy.
Competition
One can follow several approaches when talking about the significant players in the EV market. They can be divided between the pure EV manufacturers and traditional manufacturers of ICE vehicles who recently entered the EV market. In addition, it is also possible to separate the mass manufacturers from the premium and luxury manufacturers. Currently, the major competitors for Rivian that are dedicated to EVs are emerging from China – NIO, Xpeng, or BYD (Zhao, 2021). In addition, some American names, such as Tesla and Lucid, are also present in the market. On the luxury side of the market, the companies such as Daimler, BMW, and Audi22, have already introduced premium models to the EV market (Zhao, 2021). Non-premium brands have built strong positions in the EV market as well. For instance, Volkswagen group held a market share of 13% in 2021, being the second largest after Tesla (Zhao, 2021). Tesla has long been seen as the most promising player in the EV world. However, Rivian’s partnership with Amazon and Ford might begin to question Tesla’s high margins.
Adoption
Many factors indicate the increasing adoption of the company’s products. First of all, Rivian showcases the tendency of rising sales on a quarterly basis. According to the announcement of Rivian’s CEO showcased in the report by Kane (2022), the number of pre-orders and sales in the second quarter of 2022 exceeded the previous quarter by 72%. In addition, Wen (2022) highlights the rise of Rivian’s IPO by 30% on its first day, followed by achieving a market capitalization of a third-world carmaker. In this context, the important notion is a company’s work on the EV charging stations network that would further increase the adoption level of the company’s products.
R1S Adoption
Accelerating Factors
Relative advantage
Relative advantage is the extent to which the innovation seems superior to already existing products. In this case, Rivian has an undeniable point of difference in desirability and differentiability due to its unique body and chassis manufacturing approach (Wen, 2022). Apart from easier manufacturing, research, and development processes beneficial to the company, their EVs prove to be more user-friendly compared to other options in the market.
Compatibility
Compatibility stands for the extent to which the innovation matches consumers’ values and experiences. In this regard, the mentioned separation of the body and chassis of an EV allows for a greater space for the passengers (Wen, 2022). Moreover, R1S has more robust traction, higher passability, and higher load capacity than its market counterparts. Finally, its acceleration rates surpass the standard expectations of an EV.
Communicability
Communicability is the extent to which the user benefits are distinguishable by consumers. In his research, Wen (2022) states that Rivian’s models are able to successfully fulfill the consumers’ expectations and compete in the market precisely due to the choice of EV type and construction. Consequently, the consumers perceive the advantages that only Rivian can provide in the market, such as a niche EV passenger pickup truck with greater control, which leads to increased sales and, therefore, adoption rates.
Hindering Factors
Complexity
Complexity explains the extent to which the innovation is challenging in understanding and application. In the case of Rivian’s EVs, the complexity of use can be generalized as the complexity of the transition from ACIs to EVs attributable to any other EVs in the market. According to Wen (2022), the main issues with EVs in general, and Rivian in particular, are the batteries’ charging time, a lack of charging stations, and different experiences compared to ICEs in the face of the water, collision, and high temperature. Consequently, addressing these issues might significantly improve innovation adoption rates.
Conclusion
Divisibility refers to the extent to which the given innovation can be tested. In this context, the ability to test-drive Rivian’s EVs contributes to the category point of parity with its competitors and provides no competitive advantage. As there is hardly anything to be done in order to differentiate from other companies, it is simply recognized as necessary. Unfortunately, in light of delayed product delivery also invokes a correlational point of parity (Wen, 2022). Namely, the product might seem good in its trial but will not be in actual exploitation.
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