'Ad Age' Marketer of the Year: Toyota

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DETROIT (AdAge.com) -- That's Toyota in Detroit's rear-view mirror, and it's closing fast with a lineup of vehicle designs, advertising campaigns and promotional strategies that have made it a hit with
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American consumers as well as Advertising Age's 2006 Marketer of the Year.

2006 sales gains
U.S. motorists -- from tuners to tree-huggers to that vast mainstream in between -- pushed Toyota Motor Sales USA's 2006 sales gains far past the incremental increases of previous years. The Toyota line, its youthful Scion and luxury Lexus have all contributed -- without the level of incentives that have become such an addiction for Toyota's rivals.

As General Motors Corp. and Ford Motor Co. scrounged for a rebound strategy and Chrysler Group and Nissan North America stumbled, Toyota purred through 2006. The high point may have been July, which marked the first time Toyota Motor Sales USA outsold Ford Motor in the U.S.

Surpassing Ford
The margin in July was slim, only 826 units. But the Toyota brand had its best month ever, and Lexus its best July. Ford Motor sales dropped 34% to 241,339 units from July 2005, when it had employee deals for all. In September, Toyota Motor's sales of 222,950 were 25% higher than its September 2005 sales, lifting the entire industry to a combined gain of 1.9%. Without Toyota Motor, the industry would have posted a 1.7% decline, Automotive News reported.
Toyota's winning marketing team from top to bottom: Mark Templin VP-Scion Toyota Motor Sales, U.S.A.; Jim Farley, group VP-marketing, Toyota brand; Jim Lentz, exec VP-sales and marketing, Toyota Motor; and Deborah Meyer, VP-marketing, Lexus.
Toyota's winning marketing team from top to bottom: Mark Templin VP-Scion Toyota Motor Sales, U.S.A.; Jim Farley, group VP-marketing, Toyota brand; Jim Lentz, exec VP-sales and marketing, Toyota Motor; and Deborah Meyer, VP-marketing, Lexus. Credit: Jeff Hutchens

On the product side, Toyota made lemonade out of a lemon market in 2006. While rivals were slumping under the weight of soaring gas prices and big-truck-laden lineups, Toyota was expanding its hybrid offerings from the Prius up through the Lexus RX 400h, and launching the gas-sipping Toyota Yaris subcompact.

On the marketing side, the conservative carmaker -- criticized in the past for mediocre advertising -- came out of its shell, encouraged its staffers and agencies to take risks and try innovative programs, and pushed for sharper creative.

Naked owner ad
Who ever would have imagined the automaker would approve a TV commercial that appears to show a naked owner? That's what happened this year for the Toyota Corolla (private parts were blurred in the spot from Saatchi & Saatchi). The spot carries the "Moving forward" tag. Indeed.

Toyota Division used its tag to tie into its sponsorship of NBA TV's "Moving Forward Memories." Vignettes from the program appeared during select NBA halftime programming on ESPN.

Scion, launched in 2004, is teaching its older siblings a thing or two about advertising and media usage. The financially strong automaker is taking lessons learned from that cutting-edge, youth-centric brand and adapting them.

And that means significant activity beyond the $485.8 million in measured media spent in first-half 2006 by Toyota Division, the No. 6 overall U.S. brand. Toyota and sibling Lexus in 2006 dramatically increased their use of events. The company says it has increased funding for its dealers so they, too, can hold owner events.

FJ Cruiser launch
Toyota Division launched the FJ Cruiser this year without TV, relying on events to generate awareness. Toyota had 100-plus teams overseen by vendor George P. Johnson & Co. around the U.S. spending weekend events with off-roaders.

For Yaris, Toyota backed advertiser-sponsored mobile-phone episodes tied to Fox's "Prison Break."

The launch also marked Toyota's entry into video gaming, with Yaris and Microsoft's Xbox 360 teaming up for the first driving game for Xbox Live Arcade. Yaris had a heavy presence at the E3 video-game convention in Los Angeles.

Toyota clearly has the metal that consumers want and is pressing its advantage over American marques. Toyota Division's advertising "is clearly better, and [it is] trying to make an emotional link" to consumers, says Wes Brown, an analyst at consultant Iceology.

"With big-volume vehicles like the Camry, the advertising was like the vehicle, appliance-like, but as they've made their vehicles more stylish, they are breathing some type of soul into the Camry, and the advertising is following suit," he adds.

Nascar Nextel Cup
And now the marketer is poised to run with the big boys at America's favorite Sunday party, as three Toyota Camry-rooted teams take on longtime American marques in Nascar's Nextel Cup main events and Toyota rolls from town to town with its Nascar caravans.

Jim Lentz, exec VP-sales and marketing at Toyota Motor, says it's not important whether experts like Toyota's ads. What's key is that research shows customers like the advertising and understand the marketer's offer.

He dubs this year's 4Runner SUV spot featuring aborigine natives as "fabulous" (a Spanish-language spot from Conill, Torrance, Calif., dubbed to English) and described the Yaris launch from Saatchi & Saatchi Los Angeles, Torrance, as "very much out of the box for us."

Mr. Lentz attributes Toyota's 2006 banner year to a well-balanced portfolio of cars and trucks, the success of major launches, well-engineered products with more emotional styling, and a new formal sharing of best marketing practices among the three brands. Mr. Lentz isn't much for edicts since moving up from group VP-general manager of Toyota Division. His mission, he says, is to "really engage the organization to be more innovative, streamline our operations and rededicate ourselves to a customer experience." He and other executives routinely stop by events to chat with prospects, "so we always have our finger on what's happening. We don't have to wait for the reports."

New directions for marketing
Mr. Lentz is suited to taking Toyota Motor Sales USA in new directions for marketing. As VP, he oversaw and launched Scion, and says his other brands are learning from Scion. He calls it the automaker's "laboratory for experimentation." He says the cross-pollination is also aided by the shuffling or promoting of marketing people from brand to brand. (Historically, executives were moved out of marketing and succeeded by insiders who didn't come up in marketing).

Lexus took a page from Scion by issuing its first free music CD, "Accelerations," which is part of the 2007 LS 460 sedan launch. The CD was sent to recipients of the brand's quarterly magazine and will be given out at its events.

"Our customers are a dynamic group that expressed a desire for insight into up-and-coming artists," says Brian Bolain, national interactive and contextual marketing manager at Lexus. Mr. Bolain joined Lexus in spring 2005 from Scion. He says one key lesson from Scion is the power of connecting with consumers on topics that are of great personal interest, then subtly injecting vehicles in an organic way.

Deborah Meyer, promoted in early 2005 to VP-marketing of Lexus from corporate marketing manager of Toyota, says the luxury brand has more than doubled attendance at its "Taste of Lexus" events to some 50,000 this year. Her group is trying to execute more one-to-one marketing, taking existing ride-and-drive tours to a higher level.

Lexus fashion show
Lexus had done a fashion show during the Pebble Beach Concours d'Elegance each of the past seven years. But for the 2006 event, the marketer teamed with Vogue and brought in hot designers for attendees to meet. That gave the event "a whole new level of design and sophistication," Ms. Meyer says.

She adds she's urged her team this year "to take a lot of risks for more engagement with consumers," which it closely measures.

Lexus kicked off a four-city modern art exhibit in October for the LS 460 launch dubbed the 460 Degrees Gallery, with photography, an architectural installation and video art. The tour includes touch-screen displays with artist interviews and events such as chocolate tastings.

"We wanted to do something that celebrates reinvention and Lexus' heightened focus on design," Ms. Meyer says. Team One, El Segundo, Calif., has created a TV commercial that shows off the LS 460's high-tech self-parking ability.

"It's not enough to just spend more money on events. My philosophy has been to be creative at activating events," says Jim Farley, who succeeded Mr. Lentz at both the Scion and Toyota Division. Promoted to group VP-marketing of Toyota brand in August, Mr. Farley says he's shifted significant dollars in increasing the number of events more than 100% this year on a few key models. "The only way to change people's minds is being in front of customers and presenting your brands directly. You can't change their minds with a 30-second TV commercial." The budget boost for more events mainly came from TV and print, a Toyota spokeswoman says.

Doubled FJ, RAV4 sales
And while some carmakers stagnated on their thirsty SUVs, Toyota Division has been able to split the small-SUV segment with the FJ Cruiser and RAV4 by making a connection with very different buyers, says Tom Libby, senior director of industry analysis at Power Information Network. Toyota says it sold just over 39,500 of the new FJs and 115,684 RAV4s through September -- more than double the first nine months of 2005.

Mr. Farley predicts that marketing in the future will be more customized to niches. "We are picking customer groups and the categories they relate to," he says.

At the same time, a study by consultant Harbour-Felax Group issued in October found that Toyota Motor earned $2,000 or more per vehicle sold in the U.S. in the first quarter. That contrasts with General Motors Corp., which the group says posts an operating loss of $326 per unit.

With stats such as these, one wonders when will GM fall behind the Toyota juggernaut?

George Peterson, president of consultant AutoPacific, says Toyota Motor should overtake GM globally in annual sales by the end of 2007, when it celebrates 50 years in the U.S. Toyota said it expects to sell 8.47 million vehicles in the fiscal year ending March 2007.

Fastest movers
Toyota Motor's three brands move off dealer lots here much faster than the industry average, according to Power Information Network. In the most recent quarter, the company's so-called "days to turn" stood at an industry best of 25 days compared with the industry average of 63; DaimlerChrysler was worst at 87 days.

Mr. Libby says the Prius topped the industry in September with six days to turn; eight of the 10 fastest-moving models this year were Toyota Motor's.

Mining consumer loyalty is critical to reaching niches. Toyota's brands have high owner-loyalty levels, so they get a jump-start on sales for new or redone model launches, says Doug Scott, analyst at consultant GFK Automotive.

Toyota also has the financial resources to launch new models, which averages $135 million in the huge midsize-car segment where Camry dominates, Mr. Scott says. And Toyota can only get stronger as the redone Camry debuted with pleasing style improvements-plus its first hybrid version.

Fueling events and loyalty programs is interactive marketing, an area that Mr. Farley has bolstered. This spring's Yaris subcompact launch was backed with a page on MySpace and interactive banner-ad games.

A dozen creative teams
Working with Saatchi & Saatchi Los Angeles, Mr. Farley has changed the way the automaker's volume brand is developing creative. He says the agency now directs a dozen or so creative teams to develop ideas, from which the client and Saatchi pick the best.

David Murphy, who joined the Saatchi office as president late last year, says he reorganized the agency "to a more modern communications model." The media group has been "embedded" within the creative group, and he's built "a very sophisticated digital media group" that works closely with the creative team.

While other marketers "do digital," it's mostly as an adjunct to their ad campaigns, he says. But digital is at the center of the debate for Toyota Division and Saatchi.

Mr. Murphy credits Mr. Lentz with "a legacy within the organization of trying new things," which was accelerated with the arrivals of Mr. Farley and Kim McCullough, corporate manager-marketing communications.

Mr. Murphy says Mr. Farley's marketing mantra is "Provoke the system," so that's how the agency has tried to reinvent itself. He also credits Ms. McCullough for her test-and-learn marketing approach, which encourages faster-to-market programs that can be improved in the second phase.

Case study on launching brand
"Scion has done a brilliant marketing job that will be a pretty good case study on how to launch a brand," AutoPacific's Mr. Peterson says.

Mark Templin took the reins of Scion in spring 2005, moving from VP-marketing at Lexus. Now that Scion has an owner base of 400,000, "We don't want our dealers to use a lot of advertising," he says. Instead, he started fishing for Scion's next wave of buyers this spring on Whyville.net, a virtual community with an average age of between 11 and 14.

The site's citizens can spend or borrow clams, Whyville's currency, to buy virtual Scions to customize and drive around the virtual community. Within three months, Scion had been used nearly 200,000 times in chats on the site, and Whyville citizens had driven their cars more than 140,000 times.

Mr. Templin says about 75% of Scion's real-world buyers are first-time new-car purchasers with a median age of 31.

While Scion hasn't been a major TV advertiser, Mr. Templin is buying more obscure, late-night programming. An animated version of Scion's tC model was integrated into an October episode of Cartoon Network's Adult Swim's "Frisky Dingo" show and website.

Scion is on pace to sell 21,000 more than the 156,000 units it sold in 2005.

Like his compatriots at the automaker's other brands, Mr. Templin is listening to his customers. When Scion owners said they wanted iPod connectivity to be standard equipment, the company added it. "We have tons of opportunities to listen to our owners. This is not brain surgery."

Can anything slow the automaker's explosive growth?

Mr. Peterson says the company has been hurt with its go-fast model expansion by quality glitches in the past year, but that hasn't hurt its image. "You're going to see their cadence slow down a little in the next year or so. But then it will put the pedal to the metal."
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