The CMO Interview: Bob Carter

How Toyota's Confronting Low Consumer Confidence

Bob Carter Goes Back to Basics: Product Value, Customer Experience

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DETROIT ( -- As the head of Toyota Motor Sales USA's volume Toyota Division, Bob Carter is facing the same headwinds as the rest of the industry in today's turbulent economy. Although Mr. Carter enjoyed Toyota's seemingly endless go-go years in the U.S., Japanese parent Toyota Motor Corp. lost $1.8 billion globally in the period ended Dec. 31, dragged down mainly by North America and the company's first net since 1950.

But Mr. Carter, 49, is well-schooled on the ins and outs of the car business. He's worked his way up the ladder at Toyota Motor Sales USA since he arrived there in 1981 as a warranty processor. The Shippensburg State College (Pa.) business grad held key regional-general-manager posts for both Toyota and Lexus before moving into his current job two years ago from the same job at the smaller luxury Lexus Division, where he conducted the brand's first online chat with customers. He reports to Don Esmond, senior VP-auto operations, and oversees all sales, marketing and customer-satisfaction activities for Toyota and Scion.

He recently sat down with Detroit Bureau Chief Jean Halliday to discuss the state of the car business and how he's navigating different pressures.

Ad Age: How has what's happening in Detroit affected Toyota?

Mr. Carter: It's in everybody's best interest to have a strong, healthy, vibrant automotive industry. No one is isolated. The manufacturers are obviously an important part of the entire industry, and while they tend to be the most visible, the industry is much broader. It's a supplier network. It's a vast dealer network. So the health of the auto industry goes far beyond a few manufacturers. Toyota is not immune to any economic cycles.

Ad Age: What, if any, new responsibilities are falling on you in this economic environment?

Mr. Carter: I wouldn't necessarily categorize any of my responsibilities as new. Rather, my responsibilities reflect a strengthened focus on what I see as the three most important things: our customers, dealers and our product lineup. In many ways, we're going back to the basics and focusing our marketing efforts on bolstering our product value and the overall customer experience.

Ad Age: For years, Toyota had some of the lowest incentives in the industry, but you've dialed them up since 2008. What's your reaction to some industry watchers who say Toyota is exhibiting some of the same behavior as Detroit?

Mr. Carter: We have not changed our view on incentives. They are a tactical way to address the market to meet inventory needs, etc. It's not an embedded part of our marketing strategy. As the industry became tougher in 2008, we did increase our incentive spends. We don't release them publicly. The third-party reports out there indicate our actual incentive spends are not as high as reported. However, what I will acknowledge is there is a consistency in the way they evaluate them from manufacturer to manufacturer, so the relevance is there. We remain among the lowest in the industry, although the industry has migrated up sharply. And it's worth pointing out that our overall incentive spend has remained fairly consistent.

Ad Age: What's your reaction to conventional wisdom that says Toyota doesn't need to spend as much on advertising because you know Detroit has cut back? Will you spend more or less on advertising this year?

Mr. Carter: It's important to continue to promote the products. We are launching two new products, the Venza and [a redone] Prius. Venza is a new nameplate, so we have to establish a new nameplate. We have awareness levels that we need to establish, and we need to spend our advertising and marketing funds to achieve those awareness levels regardless of what the industry is doing. We don't release our advertising dollars. But to gain awareness on a new nameplate takes marketing dollars regardless of what the general economy is. So, like all manufacturers, we are seeking efficiencies, absolutely. We are in this for the long term. Spending for the Venza is similar to our last major launches: the Highlander, Camry and Tundra. I wouldn't want to say it's exactly the same -- maybe a little more or a little less. I have some efficiencies when I launch the new Camry. My goal is to make people aware there's a new Camry. With Venza, I am establishing a new nameplate, so there's a little bit more heavy lifting.

Ad Age: How are you being challenged to prove return on investment?

Mr. Carter: The elasticity of marketing -- in both advertising and incentives -- has changed dramatically, and that has challenged the entire industry. In other words, the sales increase from a certain marketing expense we might have seen in the past no longer works.

We're adapting our marketing efforts by investing in activities that make an immediate difference. From a national perspective, we've shifted our marketing efforts to better balance our upper-, middle- and lower-funnel purchase activities. We've remixed our efforts and temporarily pushed our resources into lower-funnel activities.

However, we still maintain numerous loyalty and brand-building marketing programs specific to individual models designed to build relationships with individual consumers. Right now, these efforts have a lower emphasis overall, though they remain an important aspect of our long-term plans.

Given the severe economic downturn, marketing alone cannot be expected to increase sales or single-handedly see us through a recession with the lowest consumer confidence on record. Auto sales continue to be restrained by low consumer confidence, tight credit conditions and the decline in demand for durable goods.

Until consumer confidence begins to rebound, sales across the industry are expected to remain soft. Through this downturn, building our product value and the overall customer experience will remain central to our overall marketing strategy.

Ad Age: What's working to move the metal?

Mr. Carter: It's a challenge for everyone in the industry. But consumers are looking for confidence in the economy, confidence that now is the correct time to purchase a vehicle, so anything that touches that consumer confidence is certainly needed and supported by the entire industry. Consumers today, when they are in the market, are looking for brands they can trust, that have good value, quality and dependability. They're migrating back to major brands that represent those values, and we believe we are very well-positioned for that.

Ad Age: Ford is saying in ads its quality is comparable to Toyota's. Do you feel the Toyota brand image took a hit in the past year? If so, how do you plan to repair it?

Mr. Carter: We don't believe our image took a hit. Having a competitor indicate that Toyota is the industry benchmark isn't a bad thing. I sorta smile. I enjoy being touted as the benchmark in the industry. Other manufacturers may have closed the gap on initial quality -- how consumers feel about their vehicles in the first 90 days. That's one benchmark. Vehicle dependability -- what a consumer thinks about their vehicle after three years down the road -- is another. The gaps may have narrowed a bit on initial quality, but when you take a look at vehicle dependability, there remains a very substantial gap in the industry, and one we are proud to have a dominant position in.

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