Will the Kids Buy It? Toyota hopes that hip young car buyers will flock to Scion, its first new division in 14 years. But Generation Y is one tough market to crack.
(Business 2.0) – Today is Media Day at the L.A. Auto Show, and hundreds of journalists are piling into the Toyota booth at the cavernous Los Angeles Convention Center. There's hip-hop music thumping in the background, a row of video screens framing the stage, and theatrical fog wafting across the floor. Over in the corner, a table is piled with stacks of messenger bags that will be given away to members of the automotive press. Each is stuffed with a dance-music CD and a press kit announcing the launch of Scion, the first all-new automotive brand to come along from Toyota since Lexus wowed luxury drivers 14 years ago.
Scion vice president Jim Farley takes the stage in front of billowing silvery curtains. "We're about providing Generation Y with ... concepts that stand out from the crowd!" Farley proclaims, pumping his words with energetic thrusts of his hands. "Ladies and gentlemen, it's my pleasure to introduce the first two production models of the newest lineup in the auto industry!"
And with that the curtains rise to reveal two oddly shaped microminivans. One is a tiny four-door that looks like a cross between a skateboard and a toaster oven: The Scion xB is 6 inches shorter than Volkswagen's New Beetle, but it's tall and angular, so it manages to convey an aura of utilitarian toughness. The other Scion, the xA, shares the xB's 108-horsepower engine, but it comes wrapped in a more rounded, egg-shaped body. Neither looks like any other vehicle sold on these shores, least of all a staid Camry or Corolla. That's all part of Toyota's plan.
One floor below the curtain-raising, in another convention-center meeting hall, Scion's 34-year-old sales-promotions manager, Jeri Yoshizu, is hard at work on another element of Toyota's plan. Dressed in jeans, camouflage Puma sneakers, and a T-shirt from a Tokyo clothing store, Yoshizu is helping a DJ set up Scion's postshow press party. "Some things change for the youth market," she says. "But some things remain the same. Like music." On Scion's tiny 14-person management team, Yoshizu has an absolutely critical job. She is the brand's bridge to its intended customers, the "Millennials"--the generation of Americans between the ages of 9 and 23, who may be the most marketing-savvy, advertising-saturated, skeptical, and unpredictable audience that business has ever tried to romance. Also called Generation Y or echo boomers, the Millennials number more than 71 million in the United States, and 63 million of them will either have or be eligible for a driver's license by 2010. Because of their population size and as-yet-unformed brand loyalties, they are marketing's next gold mine.
Yet it's safe to say that no one in Toyota's U.S. management--let alone the corporate leaders back in Toyota City, Japan--has a feel for this audience. Toyota built its brand on reliability, not excitement. Industry insiders joke that Toyota's Avalon sedan is the "best Buick not built by General Motors." The average Toyota buyer is 48, one of the oldest for Japanese autos in the United States. Without Scion, the $121 billion company risks going the way of aging brands like Mercury and the soon-to-be-defunct Oldsmobile. But the youth car market is already jammed with low-priced Hyundais and Kias, as well as bottom-of-the-line Nissans, Hondas, Chevrolets, and Fords. To avoid simply disappearing into the low-margin econobox segment, Scion needs to capture the imagination of the Millennials. Which is where Jeri Yoshizu comes in. "From a corporate standpoint, I measure success by the number of cars we sell to the target audience," she says. "But personally, I want kids talking about how cool Scion is."
Forty-eight hours after Scion's media unveiling, some of those kids get their first chance to decide for themselves. As the general public comes pouring into the L.A. Convention Center, Scion's brushed-metal display area quickly fills up with members of Scion's target audience.
"Looks like a toy," one 20-something complains, scrutinizing the xB.
"It's too boxy," his girlfriend adds.
A 22-year-old with way-baggy jeans and a wispy beard disagrees. "I love the whole boxy look," he says. "There's nothing ugly on it."
"I'd prefer something sleeker," a college student declares.
"Let's go," his friend snaps. "If you're gonna spend the money, you might as well get something that you really like."
For Toyota, it seems, this isn't going to be another Lexus slam dunk.
Like its intended audience, Scion was born during a period of prosperity. Toyota began working on the new line in the late 1990s, when it was selling near-record numbers of Toyotas and Lexuses. The company, however, was finding it tough to reach younger buyers. The entry-level Echo, introduced in 1999 at a base price of about $10,000, was supposed to appeal to young adults. Yet today the median age of an Echo purchaser is 45, just seven years younger than that of a Camry buyer. Sure, kids want economical transportation. But they also want to look good--and the Echo resembles a turtle. "It isn't going to appeal on style," admits Jim Lentz, VP for marketing at Toyota USA. "The Echo is all about price."
In February 2000, Yoshizu was one of six U.S. employees Toyota tapped to figure out what it takes to sell cars to young adults. Focus groups and product clinics revealed that Millennials liked the idea of a brand that was distinct from Toyota, and researchers in Japan eyed Toyota's Japan-only bB minivan as a possible candidate for sale in the States. The bB's surprising upright look distinguished it nicely from its parent's mainline U.S. offerings. Even more important, the car had developed a cult following among young Japanese hot-rodders, who customized the cars with trick wheels, high-performance suspensions, racing exhausts, booming sound systems, and aerodynamic body parts.
A bB was shipped stateside and parked at a Southern California rave. Dehydrated from hours of dancing, partygoers filled out marketing surveys in exchange for free bottles of water. When the music stopped at 4 a.m., Toyota had a stack of mostly positive responses about the bB from a crowd of 18-to 24-year-old consumers. The respondents liked the vehicle's price and quirky look, its spaciousness, the Toyota build quality, and the option of a big stereo. Toyota decided to rebadge the bB as the Scion xB. ("Scion," of course, means "descendant," and is supposed to describe both the new brand and its customer.) Another Japanese-market Toyota, the more rounded Ist (pronounced "east"), later became the xA.
Naturally there's more to relaunching Japanese cars in the United States than simply changing their names. "Just because something works across the pond doesn't mean it'll be a hit in the U.S.," says David Morrison, author of Capture the $200 Billion Campus Crowd and president of Twentysomething Inc., a young-adult research-consulting firm in Philadelphia. Some 70 percent of American college kids have cell phones, for example, but they have resisted text messaging. Likewise, American skateboarders have embraced Japanese cartoon art, but nobody seems to want the combination camera/wristwatches that are considered cool in Japan.
It was important, therefore, to make sure that when Scion reaches American shores in June, it makes the right impression on the right Millennials. The brand will establish a beachhead in California and then expand to Florida, New York, and Texas--other states with sizable youth markets--in February. Scion identifies its ideal customers as "leaders" and "influencers"--a group that gravitates toward music, sports, and socializing and represents just 15 percent of the Millennial population, according to Toyota's estimates. "We want the earliest adopters," Farley says. "The first ones that want a new style." If the trendy vanguard buys Scions, the logic goes, the wannabes will follow. And if more timid buyers wander into a dealership to see the Scion, it will be just fine if a few end up going home with, say, a new Echo.
Yoshizu serves as Scion's eyes and ears among these all-important young trendsetters. An eight-year veteran of Toyota, she's a pop culture junkie who also happens to have a talent for crunching data. (She earned a degree from California State University at Long Beach in management information systems.) With her girlish figure and prom queen complexion, Yoshizu can blend in with the crowds and, like a field anthropologist, observe her targets in their natural habitats: high school football games, record-release parties, and custom-car shows known as Hot Import Nights. "They're the next raves," she predicts.
So what do these kids want in a car?
Cheap transportation is part of it. Both Scion models will sell for less than $15,000, well equipped. Like their baby-boomer parents at the same age, the Millennials aspire to the nicer things in life, even though they don't have a lot of disposable income.
But they certainly don't aspire to the same nicer things as their parents--most notably, Toyotas. As a result, while Toyota dealers who want to open a Scion franchise don't have to build a separate lot (as did Lexus dealers), they must clearly partition off the Scion area of their showroom and decorate it in a modern, industrial style that will seem familiar to anyone who's ever watched an episode of MTV's Real World. What's more controversial, Scion dealers must also agree to sell cars at fixed instead of negotiated prices. No-haggle policies made GM's Saturn division a magnet for customer satisfaction awards, but Toyota dealers are accustomed to earning 13 percent margins on the cars they sell. Scions will fetch about half that--one reason nearly 25 percent of California Toyota dealers said no thanks to Scion, despite a low franchise fee of $170,000, compared with $15 million for a regular Toyota dealership.
Other parts of the Scion package were inspired by the kind of field research that Yoshizu does. She's seen, for example, how friendly today's students are toward one another, compared with the cliquishness that prevailed during her own high school days. "They're hugging each other all the time," she says. That's one reason, she explains, that Scion is entering the youth market with a lineup of four-door minivans instead of sporty coupes.
For other elements of Scion's packaging, Yoshizu simply asks her audience. Knowing how important music is to trendsetting Millennials, the company decided to offer an optional stereo that users can customize by choosing any of 10 built-in illumination colors. Yoshizu created an online poll to develop names for the colors. She quickly fired it off to 5,000 potential customers who had registered at Scion.com, and within three days, she'd received responses from more than 10 percent of them. As a result, the colors that Scion's new stereo can display will go by such mind-altering names as lithium (medium blue), blade (grass green), and acid (chartreuse).
Scion marketers realize that jaded Millennials rarely find conventional advertising cool, so the mantra around the company's Torrance, Calif., headquarters is "discovery." Yoshizu hired Raymond Leon Roker, who heads Los Angeles-based Urb, an urban dance culture magazine, to attach Scion's name to compilation CDs, parties, and concerts featuring up-and-coming artists. The underground strategy makes sense: It gives Scion instant access to cultural trendsetters, and as targeted campaigns go, it's a bull's-eye. A 30-second car commercial aired during this year's Oscars cost about $1.5 million and reached some 30 million viewers, most of whom were not in the target audience. A Scion-sponsored event, on the other hand, costs just $175,000 and exposes 3,000 demographically correct partygoers to Scion's branding for five hours.
Toyota's competitors have used similar techniques with mixed success. In 2001, Ford tapped the youth market on behalf of the subcompact Focus by sponsoring the Detroit Electronic Music Festival and aligning itself with cutting-edge fashion designers. An impressive 280,000 Focuses were sold in the debut year, and almost half the buyers were under 35. Last year Chrysler tried to revive sales of its retro-styled PT Cruiser by partnering with Gen Art, a New York-based organization that supports emerging artists. Together the two created PT Studios, a nationwide series of events that combine new-car displays with fashion shows, independent film screenings, and art exhibitions. Yet during 2002, sales of the PT Cruiser declined slightly.
Paradoxically, the big danger is that Scion's youthful marketing may work all too well, attracting aging baby boomers who will buy the cars to recapture the image--if not the reality--of youth. When Chrysler introduced the PT Cruiser in 2000, many analysts saw it as a move to bring down the median age of its customers. But boomers loved the vehicle's retro looks, and today the typical PT Cruiser owner is 52. The median buyer of BMW's Mini, the retro re-creation of the classic British car, is 43. Even Honda's brand-new Element, an SUV-like box that the company bills as a "dorm room on wheels," may be finding a niche among old-timers. According to the earliest owner surveys, just 31 percent of Element buyers are under 35.
"Baby boomers want to think of themselves as 20 years younger than they are," says Willy Hopkins, marketing director at the ad agency Lunch, based in Santa Monica, Calif., who once launched Hyundai's billion-dollar U.S. business. "Cars are mechanical sports jackets. They say who you are and if you're available after the bar closes."
Yoshizu understands that marketers can control only so much. "Look, in the end, there's a product," she says dryly. Yet she doesn't seem to worry that her efforts to woo hip young car buyers might catch the wrong people. After all, worse things could happen. Even Scion's internal buyer profiles predict that most of its customers will be in their early 30s, that 60 percent will be couples or married, and that a third will have kids. It's tough to sell cars to the youth market, but it's hard to lose when you're selling youth itself. "Nobody's going to stop someone from buying a car because they're too old," Hopkins says. "At the end of the day, in the car business, there's no such thing as a bad sale."
The real test will come when Scion's vehicles actually arrive in showrooms. When it's on the road, the xB generates plenty of double takes, rubbernecking, and signs of vigorous approval and disapproval. Strangely, however, it didn't seem to draw much of a reaction when parked just a few feet away from Sproul Plaza, the crowded epicenter of the University of California at Berkeley. Dozens of Millennials walked, pedaled, and skateboarded by on their way to class, but in more than half an hour, no one bothered to give the car a second look.
And then, eventually, one potential customer paused to ogle it. He was gray-haired, heavyset, and old enough to be a grandfather. He was driving a Chrysler minivan.
"I love it!" he declared.
Andrew Tilin is a contributing writer for Business 2.0.