As Prepared for:



As Prepared for:

Jim Farley

Vice President, Marketing

Toyota Motor Sales, U.S.A., Inc.

Automotive News Marketing Seminar

June 1, 2005

Century City, CA

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Good afternoon! …

This is my first speech

since becoming head of marketing

for Toyota…

and I’m a bit nervous…

kind of like how I felt recently

when I was interviewed by “60 Minutes”

on the success of Scion.

I’ll never forget telling my Mom

that I was going to be on “60 Minutes”.

Instead of being thrilled,

she said, “Oh Jim…

I thought things were going so well

at Toyota…

did you do something wrong

with Dr. Toyoda’s money?”

The interview went very well…

and was positive…

but sometimes it’s easy

to jump to the wrong conclusions…isn’t it.

In fact, we’re going through a little of that

right now

on incentives.

Several recent news stories have pointed out

that Toyota has been spending

more on incentives this year

than ever before.

And that’s true…

but it’s not the whole story.

We’re spending more on incentives now

because several of our key vehicles

are in their final product cycle

and we need to stay competitive.

While that seems like a lot more

than normal,

you shouldn’t jump to any conclusions.

According to Autodata…

Toyota’s incentive spending is still

one of the lowest of any automaker…

and significantly below spending

by the Big 3.

People are also jumping to conclusions

about the future of

Toyota marketing.

Since I came from Scion,

some think I’m going to

radically change everything

and drop TV.

Not at all.

We have some great things

going on in Toyota marketing

and I plan to stay the course.

But my message to my people…

and to all of you today…

is that our customers ARE changing

and we have to be ready

because we’ve entered

the age of “specialization”.

And that’s what I want

to talk about today…

the changing face of our industry

and our customers

and how we need

to adjust our marketing

to be successful in the future.

(Pause)

Let’s start with the changing face

of our industry.

There’s a new automotive order

emerging in the U.S.

According to a recent study

by the Michigan-based

Center for Automotive Research,

new American automakers like…Toyota…Nissan…and Honda…

represent the fastest growing segment

of our industry

and created ALL of the growth in our business

during the past decade.

In fact…as a group…

these companies are the “fuel injector”

for our economy,

investing nearly $27 billion

in new factories here

and creating more than

55,000 high-paying American jobs

over the past two decades.

In addition,

Southern California is fast becoming

the new hub of our industry.

Greater Los Angeles is now home

to 9 international automakers…

including Toyota…

and 20 auto design studios

for nearly every make.

So, what’s the result of this new order?

Well…for one…

an explosion in new product introductions.

This model year alone,

a record 63 new products

are being launched…

or…an average of more than

one new vehicle every week!

So,

how can you stand out

in the tidal wave of new introductions?

Differentiation is king.

Think about it…

the biggest winners in today’s market

are “personality” vehicles…

cars like the Prius…

the Chrysler 300…

and the Mini.

To be highly successful…

cars…

and their marketing campaigns…

must be bold…distinctive…

and have benefits beyond those

offered by the 240 other nameplates

already in the marketplace.

(Transitional Pause)

Like the industry and vehicles…

our customers are rapidly changing too.

In fact, we are on the cusp

of a new boom in business

that will create

an exciting new Golden Era

for our industry.

Just take a look at some key trends

emerging right now.

First, people are living longer

and are more affluent…

so they’ll buy more cars

and drive longer

than previous generations.

Second, the U.S. growth rate…

our birth rate, plus immigration...

will be FIVE times that of China…

on a percentage basis…

over the next 50 years.

That means we are adding

one new person every 12 seconds

to our economy.

In addition, four million young people

of Generation Y

are reaching driving age…

each year…for the next five years.

That’s 20 million new drivers

delivered to our doorstep by 2010…

and most haven’t made a brand choice yet.

Fourth…the number of multi-car families

is growing steadily.

Today more than a third

of American households

own three or more vehicles.

Now, that’s my kind of country!

These trends are a golden opportunity for us…

but we have to prepare

because the expectations

of our customers

are radically changing.

I’ve spent the last two years

launching Scion

and learning about Gen Y customers…

and let me tell you…

they are very different

from the boomers…

and even Gen X.

Gen Y is smart…more diverse…

and far less tolerant

of the way we currently do business

than any consumer group in history.

This is a generation

that has grown up

with almost unlimited choice…

and demands options

in everything they do

from morning to late night.

In their “cherry pick” world,

the best products and services

come with a menu of options

that they can choose and configure

to fit their mood and lifestyle.

Gen Y is already having

a profound impact

on key industries like

beverages, fashion and music.

Take Coke, for instance.

When this group was born…

there were only two kinds available…

regular and diet.

Now there’s Coke…Diet Coke…

Caffeine-free Coke…

C2…Vanilla…Cherry…

Coke with Lime… Coke with Lemon…

Coke with Salsa…Coke wi…

OK…

you caught me…

I made up that last one.

But you never know.

There seems to be a Coke now

for every personality.

Gen Y consumers demand…

and generally get…

EXACTLY what they want.

It’s the age of “specialization”.

At Scion…for instance…

we are successfully using

specialized marketing methods

like urban consumer test-drives…

nightclub events…

and tuner car shows…

to take our products

where young consumers are

spending their time.

That way,

they can “discover” our brand

and see how it fits into their lives.

We’re still learning

how to work with this

marvelous new generation of customers …

and you should too.

In five short years,

Gen Y will rival the boomers

in sheer size

and vehicle purchasing power…

accounting for 1 out of every 4 buyers.

We ALL need to be ready.

(Transitional Pause)

Now that we know something

about our changing customers,

let’s talk about how our marketing

can better connect with them.

Let’s face it…

the days of displaying vehicles

and handing out brochures

at an auto show or a special event

have gone the way of the 8-track tape player.

Instead, we need to find ways

to “engage” our customers.

By “engage”,

I mean that we have to

use our creativity

to gain the discretionary attention

of consumers…

then help them focus on our products.

Let me give you an example

using a typical Spring Break promotion.

In the old world,

we might sponsor a big, fancy party

at night

to get exposure for our cars.

It might have done some good,

but the sights and sounds of the party

would divert much of the attention

away from our vehicles.

In the new world,

we might sponsor a breakfast

at Denny’s the next day,

exposing people to our products

when they least expect it…

and have the time to consider them.

The impact is more direct…positive…

and memorable.

In fact, I firmly believe

consumers will richly reward companies

that sweat the details like that

and engage them in surprising ways.

Unfortunately…it’s much easier

to talk about customer engagement

than to do it.

We don’t have all the answers

and neither does anyone else…

so we need to experiment together.

So…….

does that mean TV is dead?

No…not at all.

In fact…with apologies to Mark Twain…

I think stories about TV’s death

are greatly exaggerated.

The question in TV

is not “if” but “what” to buy.

You have to buy programming

based on psychographics.

Why?

Because today’s consumers are

slicing and dicing TV

with tools like TiVo

to fit their specific interests.

So matching your programming

to the passions of viewers

is absolutely paramount.

That’s why “one size fits all” programming

of the past is fading…

and “narrow-cast”

specialty shows on cable

are taking off.

Now…I must admit

however

that it’s a little hard explaining to my Mom

why we advertise on shows like

“Pimp My Ride…

but it works for us…

and I think you will see

more specialized programs and tie-ins.

That’s where

a lot of you come in.

We’re counting on you

to help us adjust the dials just right

and to develop tie-ins

that are smooth and genuine.

There are also

two other important marketing areas

where we can use your help…

promotions…and grass root dealer events.

In many ways,

our dealers are more creative

and more “local” than we are

and we need to better support those efforts.

In fact…the best way to engage customers

most of the time

is really on their home turf…

not on national television.

(Transition Pause)

So,

when you put it all together,

what do all the changes

we talked about

mean?

It means

the challenging industry

and customer revolutions

we’re experiencing now

are not negative trends,

but rather positive signs

of better days to come.

It means there are

TREMENDOUS opportunities

ahead

for marketers willing to try

new approaches.

And it means we can’t look back…

but must boldly move forward

to meet the potential

of this new world order.

Once we realize that…

and respond to it…

there’s nothing that can stop us

from reaching the new Golden Era

of this industry.

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