Toyota's Scion

Haag, speaking to members of the Motor Press Guild (MPG), the largest automotive press group in the United States said, "It is clear that future generations of Americans will be the key to Toyota's continued success in the U.S. market. There are currently 142 million people under the age of 35 in the U.S. and Generation-Y is where the growth is going to occur. In 2001, only 5 percent of the U.S. automobile market was Gen-Y; by 2010, they will become 25 percent of the market and by 2020, those Gen-Y buyers will comprise 40 percent of the U.S. auto buying market. Clearly we need to be able to speak to this market.

"Toyota created Project Genesis, and from that we learned that simply marketing to the youth is not enough. What we needed were new processes, new products, new operation and then tailored marketing.

"Scion's objectives are to understand youthful buyers, attract new customers to the Toyota brand, explore new ways of marketing and operating, and then to transfer those things to the Toyota," said Haag.

"It all starts with the way they shop. Gen-Y is the online generation. They use the Internet to shop, so we need to have all the information they need available on the Internet. We need to make it easy to shop and to gather information on the vehicles and on the brand. Buying a Scion must be a no-hassle, no-haggle experience.

"For inventory management, we reversed the way it usually works. In the case of Scion, what the customer wants drives what the dealer has in stock and what the dealer has in stock drives what is built and imported," he said.

"It was also necessary to create the Scion Pure Price structure at the dealership. By having the advertised price and the actual transaction price the same, it develops trust with buyers who are skeptical to start with. Therefore, the dealer-advertised price at all levels – in-store, online and in other advertising — matches the actual dealer transaction price, including the actual vehicle selling price, the accessory prices and the finance and insurance [F&I] experience. The Pure Price structure also saves time and eliminates an uncomfortable part of the sales process.

"We also plan to capitalize on the new vehicles: the revised xB, all-new xD and the minor changes to the tC. All of this is designed to enhance Scion's overall brand image.

"We know that young males spend up to 50 percent of their spare time on the Internet rather than reading or watching television, so we had to change the way we reached them. We used the configurator, events and the culture. For the new vehicle introduction we will use some television – most likely cable, because that's where our audience is – and some traditional print and follow it up with the new xB teaser campaign. In April we began our retail and consumer education. We did something car distributors rarely do – we trained our sales staffs alongside current owners of Scion products. Usually these sessions are limited to sales staff only.

"The new xB uses a new chassis that is longer and nearly 3 inches wider than the previous version and has a larger, more powerful 2.4-liter four-cylinder engine in place of the previous 1.5-liter engine. One comment we heard from our Scion owners was that they wanted more power. So we gave it to them. The new engine delivers 55 more horsepower than the previous engine. We will, of course, continue with our mono spec program where the vehicles support the use of personalized accessories. They will have lots of standard equipment and will have a large number of aftermarket parts available as well.

"The new xB is set to launch in May along with a slightly revised tC. Again, we listened to our customers. The tC gets small upgrades, but they wanted side-curtain airbags, so they are now part of the package. In June, the xD teaser campaign begins with a schedule of owner events conducted by dealers at their stores. In August, we launch the xD and begin the retail education on that vehicle. The xD is all-new. It's an entry-level subcompact and it's fitted with a 1.8-liter four-cylinder engine rated at 128 horsepower. I can't say what the price will be since it will not be priced until just before it goes on sale, but most vehicles in the size category have an MSRP around $13,000.

"Here's how the xB teaser campaign was set up: The marketing was designed to drive traffic to a microsite with links to www.scion.com. From the microsite the customers could see the cinema, viral videos, wildpostings, static clings, street teams, art shows, in-store giveaways and event giveaways. Also at the microsite customers could find broadband, represent, the xB microsite, an events calendar and the vehicle configurator.

"There is one big question: Is the Scion strategy working? So far, things are moving in the right direction. We have a 71 percent awareness of the brand; 78 percent of our customers are new to the Toyota brand; half of our customers are under 31 years old; our gross profits are higher than the target; and most customers spend $800 to personalize their vehicle. Sales have been strong. In 2006, we sold 173,000 Scion vehicles which put us at number six in sales behind Mercedes-Benz, VW, Saturn, Acura and Subaru. All of those facts are to the good," he said.

CHALLENGES

"The Scion brand is new, and some Toyota dealers are not fully engaged. We currently have 930 of the 1,200 Toyota dealers signed on as Scion dealers. Eventually all 1,200 will be onboard. Is that good? Having 1,200 dealers is both good and bad; it creates a negative and creates a positive. We want a dedicated Scion sales force in each dealership and we don't have that yet. We may never get it with every Toyota dealer. Right now, we maybe have only 5 percent. We need to increase that percentage. We want salespeople who are passionate about the brand.

"We need to improve the salesperson's knowledge level. Since the customers do so much online research, they already know a lot about the brand and the vehicles. We need to encourage the salespeople to act as consultants and help the customers select the best vehicle for their needs, not just 'move what the dealer has on the lot.'

" We have to balance the need to have every color and trim level available with the need to keep inventory at a reasonable level. We also need to increase the speed of the sales transactions at the dealerships. Scion buyers do not want to spend a long time with the sale process. They do their research online and come to the dealership with a good idea of what they want to buy," Haag said.

"We also need to keep our marketing fresh and authentic. We need to engage passionate Scion owners and Scion customers. The future for Scion means we have to continue to make a positive difference in our customers' lives.

"Scion is about marketing a brand. Our customers are buying into a brand; we are not selling a product. Customers think it's an exclusive brand. Forty percent of our marketing budget is spent on promotion.

"Toyota is all about efficiency. Scion is not about efficiency so there is an ongoing struggle between Scion and the parent Toyota. Personalizing and optimizing the Scion have created some internal problems at Toyota. The company doesn't want to develop aftermarket parts until the market is there, so we use brand-name parts to optimize the vehicle. This process has 'enlightened' Toyota somewhat to the aftermarket."