Eye on the Future

For Toyota, the Best is Just Around the Corner

By Marty Bernstein
AIADA Contributing Editor

For Toyota, 2010 brought a slew of recalls and challenges to its previously stellar reputation for quality and depend­ability. Recent months saw Toyota cleared by federal investigators of any electronic flaws in its acceleration system, and the company has worked rather successfully to regain the trust of consumers. Toyota's revitalization is well underway and it has a bevy of new products and strategies to prove it.

Moving Forward

"Reflecting back it [2010] was a challenging year for us, but we feel that we're in a really good position for '11 and moving into '12. Quite frankly we've learned a lot of valuable lessons. We're going to be a better company and an even stronger partner for our dealers because of the last year's events," said Bob Carter, vice president and general manager of the Toyota Division of Toyota Motor Sales, during a recent interview.

Toyota sales for the first two months of 2011 are up 36.3 percent over 2010. Passenger cars are up 32.8 percent, while trucks, minivans, and SUVS are up 41.1 percent. Its best-selling Camry continues to be the best-selling car in America with sales in February of this year up 64.4 percent over February 2010.

Toyota's responses to the recalls have resonated well with con­sumers. Carter made it clear that the crisis only strengthened the company's focus on consumers and dealers. "We are more focused on consumers than we have ever been as a business. And we're more focused on our partnership with our dealers." He emphasized that the focus will be even more apparent as Toyota moves ahead into the coming years with new products.

New Advertising

Toyota's strategy includes making its advertisements more engag­ing. Regional and local ads, as well as social media programs, will use special financial programs available and other methods to bring customers into their dealerships rather than simply increasing brand awareness.

The creative concept for the advertising strategy is based, accord­ing to Toyota's media release, on "The brand's leadership position as the best-selling retail brand in America. The '#1 for a Reason' cam­paign will remind people why Toyota continues to be the top brand consumers turn to when buying a new vehicle."

Future of the Prius

According to Carter, Toyota plans to introduce seven new prod­ucts this year. "Our investment is in future product[s] and technol­ogy . . . Many are new generation vehicles and there are a couple of mid-cycle enhancements, including the 2011 Corolla - which was introduced in January. And the iQ will launch this year with similar timing to the Prius V," he said.

Toyota led the way in alternative energy vehicles with the Prius hybrid in 2002. The vehicle's overwhelming popularity continues today as it occupies 80 percent of the hybrid vehicle market. How­ever, in response to feedback it has received from customers, Toyota is in the process of expanding the Prius lineup.

First up: the Prius V, which, according to Carter stands for "versa­tile." He said, "It's the Prius XL and is family oriented. It's about the size of the many compact SUVs on the market, but a bit larger than the Ford Escape or Chevy Equinox, CR-V, or our own RAV-4." When describing the Prius V, he called it a "RAV-4 in interior packaging on a Prius platform."

Other members of the Prius family are also in the works, including a plug-in model, as well as a smaller version of the traditional Prius, which will be called the Prius C. Carter described it as a "city compact: smaller in terms of packaging, lighter in weight, higher MPG, with a lower price point."

The Changing Retail Sector

In addition to reaching out to consumers, improving its quality image, and bringing plenty of new products to market, Toyota has also been forced - just like its fellow automakers - to respond to the changing landscape of the U.S. auto industry.

When asked what the automaker is doing about leasing, used car sales, store upgrades, and customer retention, Carter explained, "As a company we are leasing between 26 and 30 percent of our volume, and that's a good, healthy level. That's the sweet spot and gives us a base of returning owners. We know the vast majority of leases are 36 months and our dealers do a great job of being able to maintain the relationship with the customer, which gives us another sales or leasing opportunity."

Carter sees the lease market returning in 2013 and 2014 thanks to a decrease in the supply of used cars. "We are anticipating the demand will not go away, but the supply will be shorter. The usual high resale value that Toyota commands will not only be stable, but will go up," he said, pointing to the company's focus on leasing as a "fundamental strategy."

The Role of Dealers

Dealers play a pivotal role in Toyota's overall strategy. Many auto­makers, Toyota has been in the process of upgrading its dealer facili­ties over the past several years. According to Carter, the company implemented its "Image 2" program five years ago, with 500 dealers having completed the required upgrades. He indicated he anticipates the program will be complete by 2013.

Dealer service operations are also getting a makeover under Toy­ota's plan, headlined by its new unprecedented "Toyota Care" plan, which includes a complimentary two-year or 25,000 mile mainte­nance plan with the purchase or lease of every new Toyota.

"Service is our high-growth area and a customer retentions strat­egy. It's one reason why we recently introduced Toyota Care, our two year complimentary maintenance program," Carter said. "When our dealers have an established service relationship with a customer, the propensity of that consumer to return to that dealership triples. When a customer determines they're in the market for a new car, the odds triple in our favor."

Changing Technology Trends

As technology continues to evolve at a faster rate than ever, con­sumers expect their vehicles to keep pace. Automakers are on a quest to incorporate the latest and greatest infotainment trends into their vehicle lineups.

When questioned as to what Toyota plans to do to respond to info­tainment systems like Ford's Sync system, Carter said the company is preparing to introduce one of its own this June - the Entune system. It will first be featured in the Prius family before being included in Toyota's entire model lineup.

Describing the system, Carter said, "Our system is app driven, like an iPhone or iPad or Android; just push the button and it works, so it is very user friendly. Secondly, as new apps or updates become available they can be uploaded wirelessly. And it will be offered at a price point that is an exceptional value."

Sports Sponsorships

Sports and event sponsorships play a big role in the marketing strategy for many automakers. Toyota is no exception. Its atten­tion has primarily been focused on motors­ports, although it has also sponsored a range of other events like the Dew Tour (a winter sports event for professionals and amateurs) and the Lifetime Fitness Triathlon.

For five years, Toyota cars have been part of NASCAR events, a tactic Toyota plans to maintain. Carter cited an uptick in Toyota's favorability. "When we were first thinking about entering NASCAR, I went to several races and walked through the parking lots of the race venues. You never saw a Toyota. Today, after walking through the parking lots last week, there are Toyotas parked everywhere."

Impact of Japan's Natural Disaster

As Toyota prepares to embrace the future, it has been met with a new challenge as it assesses the impact of March's earthquake and tsunami on its operations and works to minimize their impact on its long-term global operations.

Speaking on the issue during a recent speech, Carter said, "The production situation remains extremely fluid and it's impossible to tell how long it will take to resume normal operations. We continue to assess our supply base in Japan following the earthquake/tsunami. We have communicated to team members, associates, and dealers here that some production interruptions in North America are likely. It's too early to predict location or duration."

Conclusion

Toyota has met the challenges of the past several years head on and is now looking for­ward by bringing new leading products to market, listening to its consumer base, and working with its dealers to improve their presence. The future holds plenty of poten­tial, and Toyota is already actively working to meet and exceed it.