Assessing the Automakers
When was the last time the auto business was this cutthroat? It's tough out there on the car lots, many of which are choked with acres of sheet metal. This Special Report is devoted to a group of experts' unvarnished appraisals of how six top carmakers are doing, along with a look at two up-and-comers.
Toyota Motor Sales USA received an A- from the panel of auto consultants grading carmakers for Advertising Age. That was the highest grade among the six automakers examined.
Toyota's U.S. sales rose an impressive 12.5% last year to 2.5 million vehicles. For 2007, the carmaker reported that March brought its best-ever monthly sales -- 242,675, up 7.7% from a year ago. Through March, Toyota and Scion unit sales were up 13.6% to 301,501; Lexus was up 4.7% to 73,491 units. Perhaps that gave Toyota executives the luxury of concentrating on other areas.
"Sales have never been the top priority for the brand," says Mark Templin, VP for Toyota's Scion and former VP-marketing for upscale Lexus. "Engaging customers and finding new ways of doing things are more important to our company than selling a lot of cars."
"At Lexus, the philosophy has always been that if we take care of our customers, sales will follow," says Deborah Meyer, Lexus VP-marketing.
Many prefer 'vanilla'
Some of Toyota's products are accused of being bland. But the vanilla Corolla is moving up, not down, selling about 240,000 units yearly. And the staid Camry has been America's fave for six years running.
"Toyota has the highest loyalty rate in the industry, and purchase intenders are very positive about them," says Doug Scott, senior VP at GfK Automotive.
Mr. Scott lauds Toyota Motor Sales for its new products, citing examples such as "the new Rav4 that tops the list for Consumer Reports, as well as all the new hybrids that define a new green space. ... How to keep owners in Scion or move them from Scion to Toyota and then Lexus" is the main challenge.
Toyota continued to lure eco-conscious consumers with the Prius and other vehicles. With plenty of "green" products -- including Lexus' LS600h L and even the fuel-efficient subcompact Toyota Yaris, as well as new models in the pipeline -- there's hardly a chance of going stale.
"Their vehicles are not super-sexy, but they grind it out day after day in segments they compete in," Mr. Scott says. "They don't advertise frivolously."
But advertise they do. Toyota Motor Sales spent $1.2 billion in measured media in 2006, up 9.1% from '05, according to TNS Media Intelligence. Saatchi & Saatchi, Torrance, Calif., is its lead agency. Toyota is spending more than $100 million to launch the redesigned Tundra pickup, a lot by Toyota standards.
When it comes to brand messaging, "Lexus has a strong identity, and Scion has effectively crafted a unique niche [reaching young people]. Toyota has established a reputation for quality and being a risk-free, if bland, purchase," says Jeremy Anwyl, president of Edmunds.com.
No 'market orphans' here
Mr. Scott says Toyota Motor Sales is tops in relating brand and model equity. "They easily connect the dots for consumers between what the parent brand stands for and how that plays out in individual models in each segment," he says. "Many manufacturers lose sight of the critical relationship between a brand and its models, which creates 'market orphans.'" Luxury leader Lexus and high-volume Toyota are taking marketing cues from Scion, the youth magnet.
"Toyota is struggling with it. They know they have a problem there. They need to move the needle on how to get into [Generation Y] markets without alienating existing customers or stepping on Scion's toes," says Wes Brown, partner at Iceology.
"Passion comes when people connect with the brand [emotionally], and that's difficult to get to," Mr. Brown says. "What the Lexus and Toyota brands are missing is a fun-to-drive experience and emotional component."
Consultants say the auto industry, including Toyota, doesn't create enough buzz early on and is not taking full advantage of the growing consumer movement to online media.
But Lexus' Ms. Meyer says, "I don't think you could have a product with as much buzz as the LS, which became known everywhere I went as 'the car that parks itself.'" LS was featured on all major news channels nationally last fall and on "The Apprentice." Even Oprah Winfrey got behind the wheel, she says. There were also nearly 450,000 video viewings on YouTube.
Clicks to sales
Ms. Meyer says Lexus is a leader in online applications and marketing. "Nationally and at a dealer level, we've really looked at ways to be the most efficient. We have the lowest cost per click among luxury automakers, and we're able to convert those clicks to sales."
The task of the Scion brand, created in 2004 as a "laboratory for experimentation," is to grow buyers for Toyota. To date, Scion's median age is 31, hardly the Gen Y that Mr. Brown talks about. But 80% of its buyers are new to Toyota, and 50% are men, both important stats to the carmaker.
"Scion is more concerned about attracting customers who, as their life stages change, will choose Scion or Toyota vehicles that are right for them," Mr. Templin says.
But Toyota Motor Sales must ratchet up its new-media marketing to reach future growth segments. "If not changed, it will lead to Toyota slowing down eventually, but not for at least the next five to 10 years," Mr. Brown says.
Toyota continues to worry about countering anti-Toyota backlash from Detroit. One-third of car buyers are biased against imports, according to some studies. But Iceology's Mr. Brown says: "Our research shows almost no negativity toward Toyota's sales success."
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Car mavens sharpen their pencils
The automakers' grades are based on individual assessments offered by automotive analysts Jeremy Anwyl, president of Edmunds.com; Wes Brown, partner at consultant Iceology; Charlie Hughes, president of Brand Rules; Doug Scott, senior VP at GfK Automotive; Art Spinella, president of CNW Marketing Research; and Todd Turner, president of Car Concepts.
The grades refer to the automotive marketers' 2006 performance. The advertising/communications category includes the effectiveness of traditional, measured-media advertising as well as nontraditional marketing, with particular emphasis on the use of new media. Actual-sales grades are based on percentage change in 2006 vs. 2005, but they also take into account the particular challenges each carmaker faces.