Critical task: Keep post-boomer consumer in the Toyota fold
But what happens when the boomers die off? What will Toyota do to convince future generations that it is as relevant to them as it was to their parents?
Toyota partly addressed that question when it created the Scion brand. But for now, Scion's growth has been limited to 175,000 units annually, a far cry from Toyota's Division's 2 million-plus sales. That's a narrow feeder straw.
Also, Scion was created to attract young trendsetters, not mainstream members of Generation Y.
NO MAINSTREAM FOR SCION
Might Scion have to go mainstream? Toyota executives think not. They say Toyota's brand is strong enough that mainstream Gen Y consumers will discover it anyway.
That could be seen as hubris, akin to the arrogance that knocked the Detroit 3 from the lofty position they held three decades ago. But the folks at Toyota think they have it figured out.
Jim Lentz, 52, executive vice president of Toyota Motor Sales U.S.A., doesn't want Scion to grow beyond its current self-imposed limitations.
"Scion could be mass-market, but I hope not," Lentz says. "If Scion starts selling between 500,000 and 700,000 units, it probably means that Toyota as a brand was not able to evolve and chase a new market. If Scion becomes that successful, it will be at the expense of the Toyota brand."
Lentz is comforted by market research that shows the Toyota brand tops nearly all competitors in every age category. Because Toyota is the No. 1 intended brand for consumers under age 25, that eases fears that Toyota could become the next Buick. Thank Scion for that.
When young trendsetters spread the Scion gospel and made the connection that Scions were made by Toyota, the mainstream buyer gave Toyota another look.
Young mainstream buyers wouldn't necessarily buy a boxy Scion xB. But, the thinking went, they might buy a Toyota Matrix or Tacoma pickup instead, because it was made by the same company that made Scion.
Meanwhile, Scion buyers have shown a strong loyalty to the Toyota family, migrating to the FJ Cruiser SUV, Lexus IS sedans and even to the Camry as their interests move from rock 'n' rollers to baby strollers.
"The Toyota brand has become much more relevant to young people today, and it won't have to rely on Scion to do the heavy lifting," Lentz says.
Yoshimi Inaba, 61, the retired former CEO of Toyota Motor Sales, says Scion conceivably could grow into its own franchise, although there are no plans now.
"The initial idea is that as their life stage changes, they migrate over to Toyota," Inaba says. "If it's happening in a meaningful volume or ratio, then the initial objective is achieved.
"If not, then the question arises, what do we do next? On the horizon, there may be an idea of separating the Scion brand as a separate franchise to grow those customers into a separate brand."
SCIONIZING THE MOTHER SHIP
In an interview soon before he left Toyota for a job at Ford Motor Co., former Scion boss Jim Farley said Scion's lessons are being incorporated into the way Toyota does business, which is helping Toyota's marketing message.
In launching Scion, managers and executives learned the inside workings of grass-roots marketing, something Toyota had shunned. But those lessons have been applied successfully to the launches of the Tundra pickup and FJ Cruiser, Farley said.
Tundra street teams staff booths at NASCAR races and bass fishing tournaments, giving product demonstrations.
The FJ Cruiser was launched with no advertising. Instead, a few Toyota reps would hang out at hard-core off-road sites with an FJ Cruiser, showing off what it can do. That lack of marketing blitz actually gave the FJ Cruiser more credibility, Farley said.
"The exportation of the Scion experience into the rest of Toyota was shocking," Farley said. "The whole Tundra marketing paradigm came from Scion. The style guide carried through for color, voice and tone."
But Dave Illingworth, 64, chief planning and administrative officer for Toyota Motor Sales, cautions about taking Scion too far, especially because of how dealers will handle the change.
"If we expand the model mix, dealers have to move Scion into a separate building, which increases overhead, while the margins aren't really that big," Illingworth says. "We still also have the youth-oriented products we are selling in the Toyota dealerships. We have to think carefully about how many Scions we can sell and still be a part of a Toyota facility."
In the end, the customer will decide how large Toyota, Lexus and Scion will become, said Jim Press, 61, who until his recent departure for Chrysler was president of Toyota Motor North America Inc.
Scion is now "a counterculture urban machine," Press said. "If Scion went high-volume, we give away the unique product and marketing proposition, unless the market moves to where we are."
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