A New Set of Wheels

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The ad copy on Toyota's Web site for the forthcoming Echo, an entry-level compact sedan, carries a curious line: "It really is all about me." The line could refer to either the car or the reader. Underneath a picture of the car are a couple of short, no-frills sentences: "It comes in two doors or four. It's not a lot of money. And it's innovative." Dull? Maybe. But Toyota's research shows that the target for Echo - people ages 18 to 30 - is highly suspicious of advertisers, the media and flowery pitches.

In more ways than one, Gen X and their younger Gen Y siblings are redefining the first-time car buyer market, whether automakers like it or not. Raised on 100 channels of cable, today's savvy young consumers aren't settling for basic cars at the bottom of the price-ladder. Just 6.6 percent of new, light-vehicle purchases in 1998 were made by people under 25, compared with 11.2 percent a decade earlier, according to J.D. Power and Associates in Agoura Hills, California. The market research firm reports a similar drop among consumers under 35. Ten years ago, the under-35 crowd accounted for 37 percent of all new-car buyers. In 1998, that figure had sunk to 27 percent. Leasing and the growing availability of reliable used cars account for much of the decline. Roughly $12,000 buys a typical new entry-level car, such as the Ford Escort, Dodge Neon, or Mazda Protege. But that 12 grand can also buy a slightly used Jeep Cherokee, Acura Integra, Mazda 626, even a BMW 3 Series. Plus, there's no stigma in buying used, with Consumers Union and National Public Radio's Car Talk guys extolling the virtues of buying late-model used vehicles instead of new ones.

But in the next few months, expect Toyota and several other makers to come racing back into the entry-level new car market to try to recapture the interest of young buyers. Ford is coming out with its Echo-fighter, the Focus, and Nissan has just introduced its first lower-end sport utility, Xterra. Chrysler plans to add the retro-styled PT Cruiser to its under-$20,000 lineup next year, and Jeep has a lower-end sport utility in the pipeline that resuscitates the dormant but much-loved name "Jeepster." Is $15,000 to $20,000 entry-level pricing? It is for a rising number of educated Gen Xers who are entering a robust job market.

So what is Toyota, sometimes referred to as the "Buick of Japan," doing to attract the Gen X and Gen Y crowd? Meet Mark Del Rosso, 35, who heads an in-house marketing team of nine people, all younger than him, known as the Genesis Group. The team was created to influence the planning and development of new vehicles, as well as marketing, in a way that makes Toyota more relevant and appealing to 18-to-34-year-olds, an audience with which the automaker finds itself as top-of-mind these days as Sears, Roebuck and Co.

To develop product enhancements and marketing ideas, Genesis goes beyond the usual focus groups and car clinics, Del Rosso says. The team's mandate is to go anywhere or do anything that might yield hard-to-learn insights about twentysomething buyers. They hang out at venues like the Lilith Fair, mountain-bike events, and Venice Beach to see how young people use and interact with their cars. Sometimes the research involves talking to young car owners or aspiring ones; other times it simply means observing them. Says Del Rosso of today's young consumers: "It's all about choices."

The Echo will be the first visible fruit of Genesis. Backed by an expected ad budget of $60 million to $70 million, the Echo is roomier and peppier than just about any other entry-priced car on the market. It also has a higher-than-average seat position, suggesting the commanding view of the road held by SUV drivers. The fuel-efficient sedan will be priced around $12,000. Following Echo will be two concept vehicles touted on Toyota's Web site, the XYR sporty sub-compact and the MR-Spyder roadster.

For marketers, it might be tempting to bypass Gen X sense and sensibilities in new product planning, concentrate on the more predictable and lucrative baby boomer wallets and get ready for the boomlet buyers. After all, Gen X only covers a 12-year bracket, while Gen Y spans 18 years and baby boomers, 19 years. But Gen X tastes aren't far from Gen Y when it comes to cars, marketers say. Moreover, a lot of what's marketed today with a 20-to-30-year-old in mind appeals to graying boomers who would rather be seen driving a Nissan Xterra than a Buick Regal.

So, what are hot buttons for twentysomethings? At press time, the campaign for Echo wasn't out yet, but a recent ad for the Honda Civic offers a clue. It shows a young office worker announcing to his cubicle mates that he is leaving early, only to have motorcycle-riding security guards chase him down. "After four years of college, travel, hanging out, we find that people in this age group are experiencing a fun deficit," says Heidi Vail, vice president of account planning at Honda agency Rubin Postaer and Associates in Santa Monica, California.

Indeed, chasing first-time buyers is not just about product. It's about image and message as well. Psychographic profiles of car buyers show that most people aren't car lovers, reports J.D. Power. They are either indifferent to vehicles, or actually dislike them. But when the profiles are divided by generation, 55 percent of Gen Xers say they love cars. It's the only age group to feature a majority of car lovers.

Volkswagen has a huge penetration into the 20-to-30-year-old segment, though the company won't give exact figures. Before the new Beetle arrived last year, VW was raking in young first-timers with a cool ad campaign and a deal that gave buyers a Golf or Jetta for under $15,000, with a Trek mountain bike or K2 snowboard mounted on the roof.

That may seem like an odd way of capturing young buyers, but it worked because VW already had a hip, if neglected, image as the only European carmaker selling in the under-$20,000 segment. Other companies have pursued similar cross-promotions. For example, Subaru of America doesn't look at its market at all in terms of demographics, but rather according to psychographics and lifestyle, a strategy that more and more companies are embracing.

Marketing that is based on lifestyle rather than age stays truer to the brand strategy, says Tim Bennett, marketing services manager at Subaru. "We don't target younger buyers exactly, but we do know that overt attempts to stereotype this generation can really hurt you," he says. Subaru Impreza is the least expensive Subaru, and its four-wheel drive capability gets it onto the consideration list of many first-time buyers. For model year 1999, 29 percent of Impreza buyers were 34 and under.

One of Subaru's many niche cross-marketing deals is with the American Canoe Association, a relationship that places the maker at 80 events a year with vehicles and educational programs that teach safety and environmentalism. For each ACA member who buys a Subaru, the carmaker kicks money back to the association.

It's programs like Subaru's that resonate with young buyers, says auto analyst Chris Cedergren of Next Trend, a marketing intelligence firm in Thousand Oaks, California. "Younger buyers show a great skepticism of advertising and the media," he says, "so programs that show commitment on the part of the company and the brand are nearly as important as affordability and value."

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