Toyota: Chasing Boomers' Babies

With its buyers well into middle age, it needs a Gen-Y edge

When Marie Stevenson, 30, went car shopping recently, she thought about a Toyota. After all, she works for an auto insurer, so she knows all about Toyota's reputation for quality. The impulse, however, passed quickly. Stevenson says the new ECHO subcompact "looks kind of goofy." Eventually, she bought a white Nissan Xterra SUV, the perfect stablemate for her husband Brian's dark green Volkswagen Jetta.

That's hitting Toyota Motor Corp. where it hurts. The Japanese auto maker built its fortunes in the U.S. catering to the tastes of baby boomers, starting back when they were buying their first cars. But so far it's been unable to build a similar connection with the next generation. With a median age of 46, according to researcher AutoPacific Inc, in Tustin, Calif., Toyota buyers tend to be older than those of any other Japanese car company. Even though Toyota's sales will be up a healthy 10% this year, the company is worried about what happens when its core customers hit retirement.

Now, Toyota has set a goal of lowering its customers' age by a decade. A year ago, it gathered eight twenty- and thirtysomethings from around the company into a new, ethnically diverse marketing group called "genesis." Their first assignment was to launch three cars meant to pull in younger buyers: the entry-level ECHO subcompact, a sporty new two-door Celica, and the MR2 Spyder, a racy convertible roadster. Under Mark Del Rosso, then a 34-year-old Lexus field manager, genesis began by coming up with a marketing campaign for the ECHO that would speak to people like Stevenson.

FIRST-TIME DRIVERS. The group has an estimated $30 million to spend to get the three cars off the ground. Ads from the new campaign hit TV screens in September, just ahead of the October arrival of the ECHO and the Celica in showrooms. (The Spyder isn't due until spring.) Toyota executives say they're pleased with the results so far. Both the ECHO, a replacement for the Tercel, and the Celica, now in its seventh generation, zipped past their sales targets. More important, the median age of buyers dropped, from 42 to 33 for Celica and to 38 for the ECHO, down from 43 for the Tercel. "We're beginning to see single, young, adult, first-time drivers in our stores," says Steven P. Sturm, marketing vice-president for the Toyota brand. "It's a younger buyer that we haven't seen for a while."

But Toyota is still a long way from its goal. It wants nothing less than a reprise of the strategy that proved so successful with boomers. When that generation was young, Toyota pulled first-time car buyers in with low-priced models such as the Corolla, then moved them into bigger, more expensive models as they aged.

To do the same with the children of the boomers, Toyota needs a car that draws raves from Generation Y. But critics say the ECHO, with its stubby, quirky looks, is the wrong car. Toyota will sell a lot of the model, says George Peterson, president of AutoPacific, "but to older, less-affluent people rather than to younger ones."

To be sure, the built-in-Japan car was designed before the U.S. unit decided to make it the centerpiece of its effort to reach young consumers. Short from back to front but with a high roof, the ECHO isn't winning much applause for its styling. Toyota's advertising, in fact, tacitly acknowledges the shortcomings, using language such as "designed from the inside out" and "funky." Says Peterson: "It's a funny-looking car. That's definitely a problem."

It's not as if Toyota's in trouble yet. Unlike other powerful boomer brands, such as Levi's and Nike, which woke up one day to discover that "relaxed fit" jeans weren't phat, or that teenagers would rather "just do it" in hiking boots than athletic shoes, Toyota is on a roll. The company will sell about 1.5 million vehicles this year, almost 9% of the U.S. market. The Camry family sedan will be the country's best-selling passenger car for the third year in a row. The luxury Lexus brand roared past Cadillac and Lincoln this year and outsold market leader Mercedes until last month. But the competition does better with young buyers. The median age of customers for the Corolla is 45, compared with 38 for the Honda Civic and a mere 31 for the Jetta.

That's where Del Rosso's group comes in. Toyota gave the team its own space in a building across the parking lot from the company's Torrance, Calif., headquarters. To visitors, it could almost be the digs of a startup, with its wide-open feel and big computer screens. "They gave me the latitude to organize and structure the group the way I wanted it," Del Rosso says, "with the idea of differentiating the Toyota brand and making it relevant to the post-baby-boom consumer."

Right now, Volkswagen is the company to beat when it comes to appealing to younger buyers. "We use advertising to go after the emotional side of the target, with humor, real people in real-life vignettes, and innovative music," says Elisabeth K. Vanzura, director of marketing for Volkswagen of America Inc. in Auburn Hills, Mich. "We let them discover the rational side of the brand--styling, engineering, product, and features--on their own."

Toyota's attempt to replicate Volkswagen's formula was launched on Sept. 22 with a 45-second spot called "Revolution" that's a virtual remake of the legendary "1984" spot that introduced the Apple Macintosh computer. A casually-dressed youth races against the flow of somber-suited business types and hurls the jack of his boom box cable into the building's sound system. Glass shatters, and the three new cars appear on pedestals. Del Rosso professes not to have gotten the Apple connection until he read it in reviews later. The more recent spots for the Celica employ the all-too-familiar metaphor of sports car as jet plane, photographed on a stark desert road. Only ads for the ECHO are closer to the mark, centered on lifestyle and fun rather than features and specifications.

PRICE IS RIGHT. If the ad campaigns are still a work in progress, however, Toyota has gotten the pricing right. The ECHO starts at $10,000, the least-expensive Japanese subcompact on the market and a full $2,200 less than the new Focus, Ford Motor Co.'s similar attempt to lure post-boomers to an aging franchise. The new Celica, at $17,000, is slightly smaller and edgier--and $4,700 cheaper--than its predecessor. And, with the launch of next spring's Spyder, Toyota hopes to recreate the success of its 1984-model MR2, a two-seater sports car. The Spyder will go for around $25,000, well beneath such other premium roadsters as the BMW Z3 and Porsche Boxster.

Genesis has turned Toyota's traditional media buys upside down. Instead of network TV, most of the ads appear on such cable TV venues as MTV, VH1, and Comedy Central. When Take My Picture, the new music video of the band Filter, premiered on MTV on Oct. 15, Toyota's "Revolution" was right behind it. Spliced to the commercial was a 15-second plug for the hot group's first Web-cast--exclusively on Toyota's Web site.

Toyota's new Web site, that is. The genesis bunch pulled out all the stops to create a flashy no-text site full of 360-degree video, edgy music, and what boomers would call "irritating noise." And, in a gentle poke at the corporate higher-ups, they gave it an irresistible address: Even the suits across the parking lot are hoping that the answer will someday be "yes."