Case Study: Toyota Turns Itself Around

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A new car, they say, is the second-largest purchase you’ll make in your lifetime. ‘They’ (the experts) also say that what you look for is quality, dependability and reliability, or ‘QDR’.

You want an attractive, safe, comfortable vehicle that won’t require much maintenance and will rarely break down. And unless you’re concerned about status and aren’t concerned with cash flow, you will look for a vehicle which offers a high QDR rating at the lowest possible price.

Until two years ago, Toyota was at a disadvantage on the latter point. While its QDR ratings have always been high and while, in BC, Toyota has always been the number-one selling import, Toyota vehicles were a little too pricey for many people.

Then, according to Garth Gilson, Toyota’s Manager of Vehicle Sales for BC, a number of things happened.

“Corporately, the company went through a transition. We re-engineered our way of thinking and we looked at our production and distribution systems to find efficiencies which we could translate into better pricing. We re-designed the Corolla and Camry, we introduced the RAV4 into the sport utility market and we re-introduced the Sienna into the van market. We’ve been able to put added value into our vehicles and offer new, high-value vehicles without an increase in price. That has made us more competitive with the domestics.”

Meanwhile, as Toyota became more efficient and improved quality while holding the line on pricing, the price of domestic vehicles went up. Now, the price spread between the high-quality Toyota imports and the comparable domestics is vastly reduced. As a result, for the first time, Toyota has the number-one selling intermediate car in North America (the Camry has displaced the Ford Taurus). In Canada, Toyota’s 1997 sales rose by 18%. In industry terms, that’s huge—anything over 10% is impressive. But in BC, the 1997 Toyota sales increase was a whopping 23%. This is due, in large part, to effective media communications.

“I’d like to think that the BC sales increase can be credited to communication and strategy,” says George Cruickshank, Account Director for Toyota BC Dealers at Glennie Stamnes Strategy, which has been the dealer association’s AOR for the past eight years. “With all of these developments taking place, we completely re-worked the advertising strategy. We said ‘we’ve now got a quite a horn to blow, so let’s really blow it. We’ve got a great new story for the consumer, terrific new vehicles, all these market advantages…we decided to let the vehicles do the talking and let the advantages dictate. We changed the way we looked at the business.”

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There are 33 Toyota dealers in BC and, when compared with other Toyota zones, the BC zone holds the largest market share within its zone. Toyota’s advertising operates at three levels—corporate, dealer and dealer association. The latter is a voluntary association, overseen by eight director/dealers who approve the association’s annual $4 million advertising expenditure. Gilson says that, while individual dealers are free to advertise whatever and however they like, they have found that the association campaigns are strong enough that it’s in their best interest to stay with the group.

“It makes more sense. It gives them a bigger voice and much more impact. All the players can tell the same story. It’s not an exact science—dealers have different opinions, approaches, budgets. But it’s a lot more effective when dealers work within the association campaigns.”

Dealer communication and participation is essential to the success of Toyota’s marketing efforts. You may think that this is an obvious point, but Gilson says that not all car companies are as conscientious as they could be in this area. At Toyota, paying attention to those who actually sell the vehicles makes good business sense. It makes for happier dealers, more profitable dealerships, and a stronger flow of information from customers.

“We need to know what consumers are saying. This market is very fluid and, as a manufacturer, we have to embrace change. And change is brought about by shifts in consumer tastes. Over the course of a year, consumer tastes in everything from vehicle styles to colours can change significantly. Equipment goes in and out of fashion very quickly. We conduct a lot of market research, but we depend on our dealers to keep us abreast of trends.”

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While Toyota stays in touch with its dealers, Cruickshank says that Glennie Stamnes focuses on the sales managers. “We’ve worked hard at building relationships with the sales managers. They’re at the front line of the business and have to be involved. We need to know what they’re hearing from customers. What consumers compare our vehicles against, what it is about our vehicles that stands out. So we meet with the managers regularly, hold focus groups with them and present creative to them before it goes out. We go to the dealerships to make sure that p.o.p. materials are placed properly—which is unusual because many dealer associations regularly put out campaigns with no dealership execution. This interaction makes a big difference. It also helps that this is the best dealer group I’ve worked with. They respect each other, they agree to a program, they get behind it, they execute it.”

A change in execution was a large part of the strategic shift made over the last two years. The traditional media mix of TV, radio and newspaper has been heavily augmented by outdoor buys—mainly exterior bus kings, which are now a key element of Toyota’s sales events.

Those sales events also last longer. “Traditionally, automobile advertising was done through one-month promotions,” says Cruickshank. “Last year, we drew our promotions to two and three months. With one-month promotions, by the time consumers heard about them, and then arrived to take advantage of them, the promotions were over. Consumers were getting fed up. Now, the media has time to kick in and consumers have time to get to the offer. From the acceptance stand-point, it’s better for the dealer and the consumer. There are also no breaks between sales events any more—Toyota doesn’t want to take a break from selling cars, why should there be time between financing and leasing offers?”

Two other consumer annoyances were dispensed with. Toyota buyers can now get 60-month financing on new vehicles—48 months used to be the limit. And Toyota BC Dealers now advertise only what they have on the ground, as opposed to advertising vehicles which are scheduled to come in.

“There are two reasons for this,” continues Cruickshank. “We have to help dealers move what they have on their lots. But it often happens that a car company launches a new car, it promotes it, customers come in to buy and the cars aren’t there yet. That makes people angry. There is no point in spending advertising dollars if you haven’t got the goods to sell and you’re going to tick off your customers.”

Glennie Stamnes also did away with another auto industry practice—the adherence to seasonality. “Traditionally, the belief was that no one bought cars in January, February or March, what with Christmas bills and tax time coming up. In fact, business may be slower during these months, but people are still buying cars. So we’ve advertising aggressively during those months, and that’s where we saw growth last year.”

Creatively, dealer testimonials were replaced by light humour mixed with an increase in the provision of factual information about pricing, quality and financing. And, for the first time, notes Cruickshank, all creative was adapted for the Asian community.

“BC has a large Asian population which is incredibly important to Toyota, which is the number-one name plate in that ethnic group. So all of our creative is reflected in the Asian community. We’ve become involved with the Chinese New Year celebrations and the International Dragon Boat Festival. We buy Asian media and tailor the creative for it. We also tailor the offers. The Asian community tends to buy cars—they’re less likely to lease. So where we’ll offer the general public a leasing program, we’ll offer the Asian community a purchase program.

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“The goal of all advertising over the last two years has been to build on QDR and wrap it up with value and affordability. Price has always been the biggest hurdle for us. But now we can find a better balance. Instead of trying to get people to buy an expensive product, we can now come out and say that, in addition to their excellent QDR ratings, Toyota vehicles are more affordable than ever. We’ve had a lot of information to communicate, but we’ve done it. And our sales increases are strong and our dealers are happy.”

And Toyota’s happy. In BC, its market share is 8%. Nationally, its share is 7% (as compared to Ford’s, which is 21.6%). But The Big Three is now The Big Five—General Motors, Ford, Toyota, Honda, Chrysler. In 1997, for the first time, Toyota sold over 100,000 cars in a calendar year (106,000, including Lexus). Demand is up. The company has taken an aggressive attitude, setting the goal of a 10% market share by the year 2000.

“Toyota already had a lot of loyal, satisfied customers,” concludes Cruickshank. “But with the new price points and new vehicles, it has opened itself to a whole new consumer segment. It has never been in a stronger position to make a serious impact on its marketplace.”

Gilson is a little more cautious. “The industry itself can only grow so big. In our effort to reach our 10% market share, we realize that we have to retain our existing customers, while looking at ‘conquest customers’—those who are driving something else. We’re dealing with educated consumers in a highly-competitive market and we can’t afford to get lost.

“But our advertising has been very effective. The strategy has worked, and I think our sales show that you can’t under-estimate the value of strong advertising.”

Blitz Magazine, March 1998

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