Executive summary
Automated aerial vehicles (AAV), also known as drones that were previously used only in military operations, gained increased popularity worldwide in civic life. EHang, located in Guangzhou, China, is one of the first and most successful intelligence technology companies that has been producing AAVs for various purposes since 2014 (EHang, n.d.a). The firm’s mission is to provide safe, eco-friendly, and autonomous drones for city logistics, product delivery, traffic control, firefighting, ambulance, policing, pollution control, and passenger transportation (Khan et al., 2018).
The most promising innovation of EHang is the passenger-grade AAV which was manufactured as part of urban air mobility (UAM) system development to ensure efficient air trafficking in the cities (EHang, 2020). UAM is a revolutionary technology that can be a better substitute for such existing transportation methods as cars, buses, and trains. Indeed, it is expected that the market of passenger drones will reach $1.5 trillion in the next twenty years (EHang, 2020, p. 1). The product that will be described in this marketing plan is EHang 216 AAV.
EHang 216 is a taxi drone with tremendous potential to shorten travel time for passengers. The main advantages of this AAV are low operating costs and autonomous control, which removes the need for pilots. However, consumers are still concerned with its privacy and the high price of this vehicle, making passenger AAV inaccessible and less desirable for many people (Beninger and Robson, 2020). The primary problem is that not many individuals and organizations are prepared to purchase these products. Therefore, this marketing plan aims to propose the solution for increasing EHang 216 sales by adjusting pricing and improving promotion campaigns.
Current Marketing Situation
The new market created by the innovation of drones for civilians’ utilization changed the understanding of metropolitan transportation. Indeed, AAVs seem to provide the solution for such problems as air pollution, traffic congestion, and vehicle accidents in urban areas (EHang, 2020). For example, an average car emits approximately five metric tons of carbon dioxide to the atmosphere, and 1.25 million lives are lost in traffic accidents caused by human error annually (EHang, 2020, p. 16, 19).
Hence, the need for passenger drones is growing across the globe. According to Beninger and Robson (2020), “commercial drones currently operate under varying degrees of regulation, with opportunities for organizations and policymakers alike to make drones safer and more acceptable for consumers and communities” (p. 318). Thus, companies like Google, Amazon, Alibaba, Facebook, and 7-Eleven have already introduced AAVs for product delivery and public promotion (Beninger and Robson, 2020). Although passenger drones are already functioning and can transport humans, UAM system is not fully implemented yet. Still, it attracted the interests of governments, investors, and research institutions.
EHang 216 is a two-place passenger drone that has superior functions compared to the previous versions. This AAV has autonomous control, precise navigation, a user-friendly interface, an electrically-powered battery with a 20-hour daily operating capacity, and travel distance of up to 100km (EHang, 2020). The average cost of EHang 216 is approximately $300,000, and the depreciation period is ten years (EHang, 2020). Because the electric battery can reduce running costs, the annual operating profit can be more than $130,000 per year (EHang, 2020). However, there is an existing and future rivalry in this market.
The current competitors are ride-sharing platforms like Uber and Lyft, while the future rivals are other intelligence technology firms that work on similar projects. Specifically, Airbus Vahana, Lilium Jet, Kitty Hawk Cora, and Volocopter have been developed by other companies in Europe and the United States (EHang, 2020). Although there are no distribution channels for passenger drones in China and worldwide, the government’s liberal policy towards UAM system may significantly increase the market share for these vehicles in the next decade.
Threats and Opportunities Analysis
Like any new product on the market, passenger drones will have opportunities and may face some threats. EHang 216 AAV has an advantage of an upgraded pioneer because no other taxi drones went beyond the testing phase. In contrast, EHang received International Aerospace and Aviation Quality System Standard certificate (EHang, n.d.b). Moreover, many private organizations and countries are interested in investing in the development of drones because of their applicability in different spheres. Indeed, EHang can take advantage of its product flexibility, offering AAVs for use not only in citizens’ transport but also in emergency medicine, logistics, and police.
If municipal governments or private companies decide to purchase this product to reduce traffic load and air pollution in cities, this drone will not have competitive alternatives at the initial stages. However, some risks associated with using this technology still exist. Specifically, the primary threat for EHang 216 is its vulnerability to hacking by malicious software that can damage navigation systems or use drone’s cameras for surveillance, which can affect users’ security and privacy (Khan et al., 2018). Still, EHang’s UAM system can bring tremendous benefit to humanity and the environment.
Marketing Objectives and Issues
The ultimate goal of EHang with this AAV is to provide safe, fast, and autonomous air transportation for people to reduce road traffic and diminish environmental pollution. To make this goal realistic, the company’s marketing objective is to establish agreements with the Chinese and Japanese governments about purchasing EHang 216 drones for the two countries’ major cities within the next 24 months. However, the issues that may arise and affect the attainment of the objective are the reluctance of the potential buyers due to the relatively high cost per one item and security concerns. These issues can be overcome with proper marketing strategies and actions.
Marketing Strategy
EHang’s corporate culture is the most effective way to demonstrate the company’s work ethic to build trustworthy relationships with the customers. The first step in the strategy is market segmentation to organize buyers into specific target groups. The two main market segments for this product are governments and private organizations (EHang, 2020). Secondly, market targeting should be performed by thoroughly evaluating the target groups to determine their values, needs, and incentives. Thirdly, EHang needs to differentiate the passenger drones as unique products for the selected segments and position the distinct role for these vehicles on the market that can be done through specific promotion campaigns. The fourth step is marketing planning, during which advertisement strategies will be developed and fulfilled during the fifth implementation stage.
Notably, an advertisement should show to the audience the superiority of the product to the traditional vehicles, its benefits to the city infrastructure and environment. Moreover, the marketing team should mention profitability and return on investments for AAVs due to electric batteries. Lastly, the entire campaign needs to be controlled and adjusted based on the feedback from potential clients and other external market changes.
Action Programs for the Marketing Strategy
The marketing strategy will be implemented during the action program. The plan is to build affiliations with the press and television to ensure product presentation in the mass media. Furthermore, telling engaging stories about drones’ benefits for people and the planet on such social media platforms as WeChat, YouTube, Instagram, Twitter, and Facebook is essential to target Chinese audiences and international consumers. The critical part of the program will be presentations for governments and private organizations or investors. Since the objective is to establish contracts with the target groups within two years, the marketing campaign should be started in the next two months. If the chosen strategy appears to be ineffective within that period, it should be changed. The main executors of this program will be EHang’s marketing team that will need to cooperate with other departments to ensure that accurate information about the product is delivered to the potential customers. Finally, the estimated costs of this program will be approximately $15,000 to cover high-quality video creation and product demonstration.
Budgets
Calculating profit and loss is critical because it will determine the production scale and the program’s performance. However, passenger drones are expensive to produce due to their batteries, resulting in a relatively high average cost per one vehicle. Still, according to EHang’s estimates, the 216 AAV can make $350,000 annual revenue with an operating profit of almost $140,000 (EHang, 2020, p. 27). Notably, this profit will be obtained with the price per ride twice as low as in a conventional taxi in a megapolis (EHang, 2020). Moreover, investing in the marketing campaign is crucial because if it succeeds, the outcome will be billion-dollar contracts with governments and organizations that will become the basis for purchasing materials to produce more AAVs and modify the current models.
Controls
Continuous assessment of the plan during its implementation is essential to evaluate its effectiveness and make necessary corrections. The team will assess each promotional post, video, or presentation before the release and after receiving feedback from the audience to improve future marketing pieces. Furthermore, the suggestion from potential customers will be considered to modify drones for their specific needs. Overall, these control measures will return on marketing investments while making cities’ air cleaner and people’s lives safer, more comfortable, and dynamic.
Reference List
Beninger, S. and Robson, K. (2020) ‘The disruptive potential of drones’, Marketing Letters, 31(4), pp. 315-319. Web.
EHang (2020) The future of transportation: white paper on urban air mobility systems. Web.
EHang (n.d.a) About EHang. Web.
EHang (n.d.b) Passenger transportation. Web.
Khan, M. A., et al. (2018) ‘Drones for good in smart cities: a review’, International Conference on Electrical, Electronics, Computers, Communication, Mechanical and Computing (EECCMC). India.