What's Next for Subaru
A few weeks ago when looking over the advance press schedule for the New York International Automobile Show, thought I'd caught a typo. Subaru was going to hold two press conferences, one each day for the two day event.
That's odd. Interesting buzz about the company founded by Malcom Bricklin was being heard from various auto writers that need confirmation. Now, I don't mean to be critical or negative, but two press events? What could be that crucial to Subaru?
The mystery was solved when I attended both presentations: one complete refresh and two new vehicles. The powers that be at NYIAS only allow for a 20-minute conference. Pitching three vehicles in such a short time is difficult, if not impossible.
Both were impressive reveals and indicated a company with plans that were not timid. So, an interview was arranged with Tim Colbeck, vice president of sales for Subaru of America, Inc., and the official presenter in NYC. Tim's a longtime "Subaru-er"—having been with the company in a variety of jobs from accounting (he has an MBA from Drexel University) to most recently regional vice president of Subaru's Mid-Atlantic region.
Mr. Mori's (President and CEO of Subaru of America) brief remarks were certainly upbeat for Subaru's future growth and expansion, weren't they?
TC:Over the past four years Subaru has set consecutive sales records. So, we've been growing at a healthy pace. Over the past two days we've launched two critical vehicles for us: the redesigned Impreza and WRX, as well as the Tribeca.
How important are they for the company's prospects?
When you look at those cars there's upside potential. In the past, there were some great things about Subaru that people like. We have a loyal and enthusiastic crowd of owners (even when Malcolm was here). It's almost like a cult.
But Mori also mentioned a need for stronger communication...
In one of the press conference we said, "It's the best kept secret," and part of our job is to get out the secret of Subaru more to more people.
So you're combining new or refreshed product with improved marketing communications, right?
That's the direction we are taking. When you look at what we want to do this year—it's to keep on growing. Through the year 2010, we have some significant growth goals with a 4.2 percent annual growth target. Which, as you know, in this industry it's not easy to come by. But we also have new products every year. So, we have the two we just launched, we just refreshed our Legacy and there are products in the pipeline coming each year to help us continue the growth.
Let's start with the cars. How do you intend to accomplish this?
These redesigns keep true to what everybody loves about a Subaru, but widen the appeal. I've heard for the first time from auto writers like yourself, "It's a little more mainstream." We have been more unique than other brands, but I don't think these new designs depart from our design cues. As a matter of fact, it's tying in some design from car lines. That's our new direction.
How have these new cues been implemented?
When looking specifically at Impreza, it's gotten bigger: a little more stylish, the interior has been upgraded, but the true core concept of the car—the performance, all-wheel drive and the safety features—all remain. Those three items make up our DNA—the attributes that appeal to Subaru enthusiasts.
Might the styling change impact Subaru customers?
Every time a car is changed some of our more vocal customers have a reluctance to the change, but then they love it. We hope we are true enough to our values and DNA so that our core customer will still love the car and we will also attract new customers too.
I've driven the Tribeca and really enjoyed it. Why the changes?
Tribeca is a great example, the changes that we've made will only widen the appeal of it. The front end was a little polarizing; the new front end is more universal. This should add to the appeal to a wider group for their consideration.
Functionally, the changes that have been done to the rear seat, with better access, and the increased engine size have made it a much better car. It takes our core Tribeca and opens it up to a lot more people and increases our potential sales.
What has been Subaru's sales growth over the past few years?
Let's see... in 1992, we sold under a 100,000 vehicles; now, were selling over 200,000. So, we have doubled our sales.
When will other aspects be put in place?
Directionally, on the product side, we are pretty strong. From a branding perspective we have some changes in marketing—a new CMO, Tim Mahoney. So, our direction will become more solidified. We are focusing on our strengths.
That's a difficult task for most brands...
We've gone through a period where we've been introspective and have attempted to figure out what we want to say, and with the new launch advertising we are going to really be focused in how we approach the brand.
What are the other elements?
The other piece is our customers—we are doing a lot of things in conjunction with our dealers to build our customers' experience, which is the number one driver of the brand, anyway. Word of mouth for anyone is big, but it's huge for us.
Sounds like a solid direction.
There's focus in how we are approaching the business in the things we are doing, and the programs we have for our dealers and how they approach the business. We are trying to make the customer experience a differentiator for us... something that lines up our product as being great, our experience as being great, our dealers being great—that is what is going to solidify the brand image.
Are your sales still strongest in the Eastern part of the U.S.?
We have high penetration in the Northeast corridor, followed by the Northwest, the Rocky Mountain area, areas within the Snowbelt tend to be strong areas for Subaru, and we've got opportunities in the Sunbelt.
How will you service the left coast area?
We recently opened a satellite office in the Los Angeles area that's a sales and marketing center. The staff is our eyes and ears on the market to help us get our arms around and better understand it. We've got a good dealer body in that area.
So, Subaru has gone from being a Snowbelt vehicle to Sunbelt. That's a rather significant switch...
We've been making big strides and have had huge growth in the Sunbelt region. Despite what you may think, we are up 46 percent since 2000. When we started getting more into performance the Southern California market took off for us. In Florida, it's more of the transplant snowbirds.
How will you expand in the Sunbelt? New dealers?
We're going to take it one piece at a time after dividing the Sunbelt into regions, starting with the LA market area. Performance is a really good inroad into that market, we've got some good dealers in the area and think there's a significant opportunity for us to have real growth there and build on what we've already accomplished.
How many Subaru dealers are there in the U.S.?
600 dealers of which 45 percent or 270 or so are exclusive. If you count separate selling facilities, we are up to about 70 percent or over 400 exclusives. We've made huge progress in the past five years. Our dealers are making investments in the businesses, and everyone knows when there is dedicated representation it dictates positive results, both in sales and profits. Our best dealers are those who are exclusive Subaru dealers. We're very proud of who we have representing us throughout the country. We plan on adding another 25 points of distribution in the next few years in markets where we have no representation now.
What penetration have you made into the large private and public chains of automotive retailers?
AutoNation has several of our stores in their operations and two of their stores are in our Top 25 in the country. We also have Sonic, UAG and other large groups with Subaru stores and are seeing increased representation among the larger groups.
Are you familiar with AutoNation's Smart Choice program that results in shorter transaction times?
Yes, I was at one of their stores where it is being used and was very impressed by the results.
What technical innovations (Colbeck was director of Subaru's e-business for three years) has Subaru made in the sales and service areas?
Everyone is getting initiatives to help dealers become more efficient. We've just gone to a wireless set-up so the control unit reflashes can be done anywhere in the dealership—there's no need to bring the vehicle into a bay. Diagnostics can be done anywhere in the dealer's store. We don't use paper manuals either, everything is now online and is downloaded every night incase there are changes. It's neat to see the efficiencies' that are being built in.
Where does Subaru rank in the drive for better fuel economy?
We're in good shape, but are looking for ways to improve. These new engines are better than their predecessors. The Tribeca engine is amazing—it's 3.6 liter versus a 3.0 liter, but it gets better fuel economy along with higher horsepower and torque. There's the regulatory influence, but there's also customer demand.
Are there other energy saving or environmental components?
Many people equate environmental solely with hybrids, but with Subaru it goes back even further to how the car is made. We have the only zero-landfill waste manufacturing plant in the country, and our Japanese factories are also zero-landfill plants. It's an impressive operation and is a certified natural backyard wildlife habitat. The EPA has a smart-way certification based on fuel economy and emissions—in the small SUV category, Forrester is at the top; in the total SUV category, Outback is the top.
Years ago, Randall Rothenberg wrote a very interesting and entertaining book, "Where The Suckers Moon," describing how Subaru picked its first advertising agency, have you read it?
I reread it recently and feel it should be required reading every three years for all at Subaru to learn where we came from.
Subaru is outgrowing its niche category in the automobile business to become more mainstream and an important brand for consideration by more people. As the corporate slogan says, "People that think, feel and drive." And it's the customers who Subaru is putting first.