eGO: Reinventing Wheels

eGO Vehicles (www.egovehicles.com), based in Cambridge, Massachusetts, was founded in 1999 by its current president and CEO, Andrew Kallfelz. It produces light, electric vehicles and claims to be the leading manufacturer of "fun, easy-to-ride, eco-friendly personal transportation." eGO cycles do not require gas or oil and produce zero emissions. They run entirely on electricity and have a range of 20 to 25 miles while traveling at 20 to 25 miles per hour. The company is constantly monitoring market condition to find opportunities to expand globally, for example, shifting its production site from the United States to Taiwan.

Based on marketing research in the form of focus groups, surveys, and personal observations, the eGO cycle was conceptualized to perform almost any errand one can think of. Although the concept seemed promising, taking the product from the design to the marketplace presented several challenges and hurdles. The first challenge was the design of the cycle. The team at eGO was very particular about the cycle not having a motorcycle-like look and feel. In addition, the team did not want the technology and the engine to be visible. Andrew Kallfelz described the designing goal as "Make it almost like a magic carpet." The cycles are distinctive looking. The designers sought such distinctiveness. They did not want people to

actually seeing it first hand. eGO's bikes have appeared in Time and on TV programs such as Good Morning America and the Today Show. eGO believes these appearances provide customers with the assurance they need to pay $1,400 on their credit cards to a Web site to buy a product they have never seen. A survey of existing eGO owners revealed that the vehicle is used for commuting, recreation, business, and errands. Finally, research showed these products would also be successful in markets where golf carts are already used for transportation and in resort areas for rentals.

The team at eGO found, to great pleasure, that the cycle was an instant hit, turning heads and fast becoming the topic of hot discussionin effect marketing itself. Jim Hamman, founder and vice president of marketing and sales, recounts, "...it (eGO cycle) would make a discussion everywhere you went. People would be talking out of their cars to you at a stop sign and ask where did you get that? How does it work? How much is it? It created such a buzz that there was certainly something there." Strong customer reaction led to strong demand, and in a short span of 2 years eGO grew its orders from zero to hundreds of products shipped globally each month.

The eGO Cycle2, already in its second version, is eGO's core product. It comes in three models; features vary based on local requirements and market- ing research. For instance, three options are available in the U.S. market: the eGo Cycle 2 classic, SE, and LX. For the European marketplace, the brand name was changed to Helios and three different models are available. The price for an eGO Cycle ranges from $1,399 to $1,999. The price is determined by the model and the country of purchase by applying product and geographic price segmentation. The pricing strategy takes into account not only product costs but also consumer price sensitivity (elasticity of demand) based on marketing research.

The eGO's energy costs do not exceed half a cent per mile. Warranties are provided for the battery (6 months), the chassis (10 years), and all other parts for up to one year. Furthermore, customers are able to individualize their eGO Cycle. Across all models one can customize the cycle and choose from four colors upon request. This customization strategy was adopted after marketing research revealed strong desire of consumers to have a role in configuring the cycle. eGO also offers additional accessories, such as eGO clothing.

With no established marketing or distribution model to follow, eGO had to develop its own model and perfect it as it went along, learning from experience and feedback. The direct marketing and direct distribution model has been the mainstay of eGO's marketing and distribution process, although it is slow and time-consuming and requires a lot of creativity. The eGO Cycle is sold by authorized dealers, and accessories can be purchased online. In cases where there is no authorized dealer available in non-U.S. markets, eGO provides shipping as an exception. In North America, distributors are only found in the United States, but plans for Canadian dealers are in the works. The expansion into the Asia-Pacific (APAC) region only covers Japan, Korea, Taiwan, and Australia. Since 2004, contract dealers have sold eGO cycles in seven European countries, including the Czech Republic, Germany, and the United Kingdom.

Referring to the Electric Bikes Worldwide Reports (2007), the eGO Vehicles Company is on the right track and is likely to succeed and cope with future challenges. This is certainly due to the company's ability to quickly adapt and sense consumer needs as determined by marketing research. First, eGO Vehicle produces a core model of electric bike that can comply with local restrictions as well as local consumer tastes. Second, the manufacturing site has been relocated to Taiwan, where industry concentration takes place. Thus, various location advantages can be exploited because the environment enforces innovation, knowledge, and expertise as well as cheaper production costs.

eGO

think, "Oh, a motorcycle" (bad for the environment) or "Oh, a bike" (you have to pedal). The idea was to have a mode of transportation to make small trips without using three tons of steel to do it. After a year and a half of product testing, the eGO cycle gained the approval of the National Highway and Transportation Safety Agency. With this approval, eGO was able to register the cycle in every state.

The eGO is a new and different concept and its looks shouldand doreflect that. This specific niche provides eGO with its greatest strength and its greatest challenge. Although consumers might want the product, no distribution channels were available. Bike stores did not want a nonbike product taking up floor space, and motorcycle shops did not want a bicycle in their stores.

The solution to this problem was found through marketing research. eGO needed to find how to distribute the product and with whom to distribute the product. Marketing research showed that customers wanted to test the cycle even though it was unavailable in many stores. eGO responded by bringing the bikes to football games, shows, and events for people to test drive. In addition, research showed that articles in trade journals and appearances on popular television shows would help customers become more familiar with the product without

Source: Courtesy of eGo Vehicles, LLC, http://egovehicles.com.

ONLINE VIDEO CASE 5.1

Conclusion

The case presents an engaging example of marketing a new, innovative, and in some ways unconventional, product. The case demonstrates how the marketing effort at eGO overcame challenges such as lack of established media to reach customers and novelty of the product to develop eGO's brand equity and establish its brand image. Strategies and initiatives such as marketing research, customer feedback, direct marketing, and online sales are exemplary for any small start-up trying to establish a strong market image for its product or service.

Questions:

1. EGO would like to increase its U.S. sales. Define the management decision problem.

2. Define the marketing research problem corresponding to the management decision problem you identified.

3. What type of research design do you think the company adopted in conducting marketing research to determine consumer preferences for eGO vehicles?

4. Can eGO make use of a panel? If so, what type of a panel and for what purpose?

5. How would you use the Internet to determine men's preferences for electric vehicles?

6. What sources of syndicated data would be useful to eGO in projecting future demand for its vehicles?

7. Are focus groups or depth interviews better for determining the factors that underlie consumer preferences for eGO?

8. If a survey is to be conducted to determine consumer preferences for eGO, which survey method should be used and why?

9. Illustrate the use of nominal, ordinal, interval, and ratio scales for measuring consumer preferences for eGO.

10. Illustrate the use of Likert, semantic differential, and Stapel scales for measuring consumer preferences for eGO.

References

1. www.egovehicles.com,accessedJanuary8,20011.

2. eGo Vehicles, "Consumer Purchase Criteria for Personal Electric Vehicles,"

http://egovehicles.com/fileadmin/user_upload/PDFs/technical_note_60.pdf,

accessed April 8, 2007.

3. F.E.JamersonandE.Benjamin,"ElectricBikesWorldwideReports,"8thedition,

www.ebwr.com, accessed May 8, 2007.