It sounds like a crazy way to market a new brand. But ask Mark Templin, vice-president of Toyota's funky, youth-chasing Scion brand what his strategy is and he will respond with the half-joking refrain, "We're doing everything we can to not sell cars."
He's speaking in hyperbole, of course. But it's easy to see why Templin describes his marketing strategy that way. Toyota (TM) wants Scion to stand for low-priced exclusivity. Consequently, blowing millions on mass-market advertising would not only be expensive, it would drag in the hoi polloi, not the young trendsetters Scion wants.
If that's not quirky enough, Scion avoids rural markets and gives women the bum's rush, as most of its marketing targets men. And while going after those under-35 males, Scion does very little with sports. As Scion launches two new models—an all-new xB and the new xD—Templin says he will spend even less on traditional advertising but thinks he can increase sales anyway.
Less Is More
For all of its quirkiness and contradictions, the strategy is working. Scion sales shot up 11% last year, to 170,000 cars, in a market that was down 3%. The average age of a Scion buyer is 36, the youngest in the industry, and 80% of those buyers came from the hide of some other car company. Scion also is developing hard-core fans who spend $1,000 each on average to add accessories to their cars. "What they're doing is working," says James Hall, vice-president of AutoPacific, a consultancy based in Tustin, Calif. "Product advocates have a value beyond cash. It's very real."
Let's keep one thing about Scion in focus, however. Its viral marketing methods work because the brand doesn't want to be huge. The company is targeting an absolute maximum of 200,000 sales a year in an industry that will sell about 16.5 million vehicles. Toyota sells twice as many Camrys as it does Scion's three models combined. Says Templin: "If I had to sell 1 million vehicles a year, I'd be doing more mass market stuff."
But by keeping it small, cult status is exactly what Scion is trying to achieve. One reason is practical: Toyota dealers sell Scion cars in a showroom that's often tucked inside their Toyota showroom. One Toyota insider says that if sales reached 300,000—up from 170,000 last year—Toyota may have to break Scion out as a completely separate brand on the dealer level.
A bigger reason is that Toyota wants the brand to connect with young trendsetters—who Templin says account for 7% to 8% of car buyers—so that Toyota as a company can stay in tune with the latest trends in fashion, culture, and music.
Scion's Artistic Side
Like BMW's Mini brand, Toyota limits production of the cars so it can get better pricing, pushes bold designs, and uses buzz marketing like going to nightclubs to find buyers and promote the brand. Says Hall: "They aren't doing anything Mini didn't do" (see BusinessWeek.com, 11/10/06, "BMW's Mini Evolution").
Scion does some of it in a different way, though. Scion has reached out to the creative crowd by sponsoring art shows for unknown artists. Toyota rents a small warehouse in Los Angeles that was converted into an art studio. Last Friday, the studio sold six paintings for the young artists, says Lisa Materazzo, Scion's national manager for marketing communications.
The goal, she says, is to reach the hip crowds in L.A. and New York and generate word-of-mouth buzz for the brand. Scion also holds DJ contests and film screenings. In Midwestern cities, it's more music than art and film. Says Materazzo: "It's about who we sell to and not how much we sell."
That's not to say that Scion's buyers are solely young hipsters. Art Spinella, president of CNW Marketing Research in Bandon, Ore., says that about a third of Scion owners are over 65. The reason: The new xD compact and the boxy xB sell for less than $17,000.
Even at $16,600 for the new xB, which hits showroom this week, safety features such as antilock brakes and stability control are standard. So are creature comforts including a top-line stereo system, multicolored interior lighting for mood effect, and electronic tire-pressure monitor systems. With so much content and a low price, older buyers who went shopping for a Toyota Corolla compact end up driving home in a Scion, Spinella says.
Even though those buyers are attracted to Scion, Templin says there won't be marketing that tries to grab them. In fact, when he became vice-president of Scion in 2005, an East Coast dealer told him, "you should love me. I just took out a full-page Sunday ad. It cost me $50,000." Rather than thank the dealer for flogging Scion with big media, he turned the tables on him.
"I told him I didn't ever want to see him spend that kind of money on traditional media," Templin recalls. "Instead, he should use that $50,000 to hire someone to do the kind of marketing events I want him doing."
Here's an example of cheap marketing: A Scion dealer in Elk Grove, Calif., has an event every November that starts with 50 to 60 Scion cars at the dealership. They drive en masse on Highway 50 to an apple festival. Sales manager John Park says the event dominates the highway with Scion cars, and its costs him about $250 for the apple festival afterward.
Scion wants dealers to find new buyers with events or to cultivate enthusiast groups of existing owners. Every year, Scion of Santa Monica, Calif., hosts Summerfest, to which Scion owners bring their cars and compete for trophies for best exterior custom work, coolest interior design, and the like, says Andy Carlson, sales manager at the dealership. Carlson says the event costs him just $22,000, and Scion pays for half of it.
That helps push Scion's key strategy. That extra $1,000 that Toyota gets from Scion buyers in accessories—stuff like rear spoilers, custom-colored parts and upholstery in the cabin, cool steering wheels—is high-margin business. Some of those items are sold at a 50% profit, and the dealers get a cut for doing some of the labor.
The Scion customer's quest for individuality is another reason that Toyota wants to keep the brand small but spunky. That's why Templin is cutting the budget for national advertising even with niche magazines and late-night cable TV every year. Says Templin: "We were concerned in the beginning that if we got too big, Scion wouldn't be special."
This Is Only a Test
That's the brand's priority right now. Scion has become Toyota's test lab for marketing. The viral marketing strategy has been employed with the launch of the FJ Cruiser SUV and, more recently, the Tundra pickup. Toyota marketers canvassed the heartland, holding events at bass fishing shows and livestock events the way Scion staff would go to nightclubs.
Even in Templin's 20-year plan for Scion (yes, he has a 20-year plan), Scion will remain a niche brand. Many have speculated that if the Toyota brand ages, gets stodgy, and becomes the next Buick, Scion could become a full-line brand and rise up to save the day. "It could," says Templin. "But that's not the plan. Even 20 years from now, it'll be a lab for experimentation." And if Scion had to rescue Toyota's brand, Hall says, that would be a big failure for the company.
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