Posted on: Sunday, August 10, 2003
Carmakers turn their attention to Generation Y
By John Porretto
Associated Press
DETROIT — Toyota Motor Corp.'s success at selling reliable cars to baby boomers has a downside: Those customers aren't getting any younger. Now it's targeting their kids and grandkids in a radical move to win over Generation Y.
Toyota has launched a separate line of vehicles called Scion that it hopes will appeal to the picky 20-something crowd seeking value, versatility and products that are cool and different from what their elders buy.
Scion (pronounced sigh-on) features two models that went on sale in California in June: the sleek, five-door xA and the boxy, retro xB, which presents myriad customization options. Nearly 3,000 were sold in the first two months. Both models are priced at less than $15,000. A third model is to debut next June.
Gen Y refers to that segment of the U.S. population born roughly between 1977 and 1994 that's estimated at about 71 million people today — 25 million more than the older Gen-X set.
"This generation has an awareness of all the long-standing brands and what they mean, but they're in a position to demand — whether it be auto or financial services or travel — a customization of what the widget used to be," said John McManus, editor-in-chief of American Demographics magazine.
Other automakers also have their eye on Gen Y. Honda Motor Co. has developed the boxy Element sport utility vehicle, geared to young surfers, skiers and outdoor enthusiasts.
Industry leaders General Motors Corp. and Ford Motor Co. say they have no plans for brands aimed specifically at Gen Y. But they both acknowledge the importance of vehicles in their lineups that attract this younger set, which already influences the way products such as apparel and beverages are designed and marketed.
Gen Y could be a make-or-break proposition for automakers. By 2010, when the youngest Gen Yers will have their driver's licenses, they're expected to account for an estimated 20 percent to 25 percent of U.S. vehicle purchases.
Toyota and Honda are looking to capture as much of the crowd as early as possible and create lifelong customers.
"They'll affect every car company, and I think the biggest challenge is this: Name a brand that's been able to attract parents and kids at the same time," said Scion vice president Jim Farley. "It's pretty tough. That's one of the reasons why Scion is different from Toyota."
Toyota hopes to sell 100,000 Scions a year beginning in 2005, a year after the full national rollout. Japan's No. 1 automaker will expand the Scion brand from California to parts of the South and East Coast in February, then to other regions in June.
The big issue facing Toyota is age. Its typical new-vehicle customer is 47, a year older than the industry average, well above Japanese rivals Honda, Mitsubishi and Nissan and higher even than Ford and Chevrolet.
Farley said the decision to create a new brand instead of trying to mold existing Toyota vehicles was based on market surveys with young consumers, who often labeled the parent brand "mainstream."
"We're not hiding the fact we're Toyota ... But when you look at what they've bought in clothing, beverage, they don't buy mainstream brands," he said.
A new study by NFO Automotive, a division of the marketing research firm NFO WorldGroup, indicates that Toyota's perception of its standing with the younger population is pretty much on target.
The study of teens' first-car buying intentions and brand perceptions showed Honda and Volkswagen at the top of the list with "high" ratings. Ford and Chevrolet were rated as average, and Toyota was among the brands that scored weak among the 672 teenagers surveyed in June.
"Honda and Volkswagen have clearly jelled with the teen psyche, but others, such as the down-to-earth domestic brands, may be trying too hard or not trying hard enough," said Andy Turton, president of NFO Automotive.
To reach younger consumers, advertising for Scion will have an urban feel, including concert-type "postings" and full-motion graphics on the sides of buildings in targeted cities.
Ads will run in alternative youth magazines such as Yellow Rat Bastard. Television accounts for only 10 percent of the entire media budget.
So far, with limited sales and promotion, the efforts seem to be working. Statistics from Power Information Network, an affiliate of J.D. Power and Associates, show the average age of a Scion customer through July 13 was 39 — the lowest in the industry by two years.
Brian DeBruyn of Royal Oak, at 26 an elder of the Gen Y set, said he's often turned off by automotive marketing that "shouts" at him and his friends.
"When a company makes such a blatant attempt to say, 'This is the car for you, but not your older brother,' it's as if I have a bull's eye on my back," said DeBruyn, a bar manager who drives a 2002 Chevy Blazer.
In Detroit, GM and Ford say they're well situated to tap into the Gen Y market.
Ford spokesman George Pipas said the company has successfully marketed the Focus subcompact and small Escape SUV to younger buyers.
At GM, spokesman Jan-Willem Vester said the world's largest automaker constantly is adapting its portfolio to meet market demands, including those from Gen Y. Echoing DeBruyn's sentiments, Vester said there's a risk in pigeonholing a brand or model solely for one audience and turning off another.
