They snowboard! They carry around stuff they call “gear!” They download MP3s and go to the X Games and have spikey blue hair and piercings!
Meet the youth of today, Generation Y — or at least how they come across to today's marketing executives. The reality, of course, is that this generation — the largest to come of age since the Baby Boomers — is far more complex. And that is what is so vexing for auto insiders.
“You can't pigeon-hole or stereotype, or you'll be crucified,” says Jim Lentz, vice president-Toyota Motor Sales in charge of Scion — the Japanese auto maker's all-out effort to attract the elusive youth market.
Scion, a word meaning descendent or heir, launches next year as Toyota's third brand, serving, as Lexus does to the luxury market, without a separate dealer network. The multi-vehicle effort, which will function as an automotive youth laboratory with dedicated staff and budget, went public this year at the New York Auto Show, with two concepts on display: the boxy bbX, a version of Japan's bB Black Box and due to the U.S. market in a year, and the ccX, a sporty small car.
While virtually every auto maker is bending over backward to attract young buyers, Toyota is perched on the forefront. The auto maker's main customer group is the Baby Boomers, the buying demographic that emerged as drivers after 1970 with enough force to permanently topple the Big Three's market dominance. Rebelling against their fathers' Oldsmobiles, the Boomers gave Japan its ticket to ride in America.
Now, it's the Boomers' kids, a group born between 1980 and 1995 and estimated at 71 million strong, that are commanding attention. They're expected to buy 4 million cars annually by 2010, and one of the few things they have in common with Boomers is the desire for rebellion. Scion is a move to capture this vast market, plus avoid a hellish payback for Toyota, whose average buyer, according to Northville, MI-based automotive generational consultants the Bulin Group, gets one year older every year.
“Those people love Toyotas, while their kids won't be caught dead in them,” says Bulin Group partner John Wolkonowicz.
To be successful, Toyota will have to find the answers to several age-old questions: What makes kids these days tick? What do they really want? And why are they so different than the generation that raised them?
The stakes are high: Most youth marketing efforts have come across as pandering or gimmicky, appealing more to a lifestyle-oriented stereotype — such as snowboarding — than reality.
There have been more spectacular flops than triumphs (think Pontiac Aztek and its clumsy appeal to Generation X, or Saturn — a potentially good idea whose ball was dropped by General Motors Corp.). And since younger generations have the least disposable income, these vehicles generally don't have large profit margins, which means less room for error for the auto makers. Scion vehicles, for example, will cost less than $18,000.
What's more, youth appeal may be more fluke than marketing genius. Wolkonowicz points to Volkswagen AG, which has the youngest average age among auto makers in the U.S., as a prime example. The German auto maker's sales had been on the decline in the U.S. since the Beetle's heyday.
“In '93 they were ready to leave the U.S. market,” Wolkonowicz says. “But without any change in product, volumes started to improve. VW didn't try to get these people.”
Likewise, Honda Motor Co. Ltd. didn't set out to cause an aftermarket-accessorizing fad when it launched its Civic compact car. VW and Civic now face potential backlash: With kids, if it gets too popular or too old, it's no longer cool.
Scion's Lentz readily admits that figuring out the likes and wants of today's kids is risky business. “We can come up with theories, but the rest is luck,” Lentz says. And he concedes that Scion likely will see some failures. “Unless we make mistakes, we're probably not pushing the envelope far enough.”
Says Jim Bulin of the Bulin Group: “Toyota is doing the right thing in creating a new brand,” because every generation wants a brand that is unique, that it can identify with, and that wasn't established before they arrived on the scene.
With the bbX, Toyota has hit on one criterion: Adults don't get it. Whether the boxy, utility crossover appeals to kids remains to be seen. Scion's strategy sees the launch of a bbX-based vehicle and one other car, likely based on Japan's “ist,” in June 2003 with a slow, year-long rollout. By June 2004, a third vehicle will be launched, this product fully developed by Scion. Of the three, one, Lentz says, needs to be “far out on the cutting edge.”
David Cole of the Center for Automotive Research also can't predict whether Scion will be a hit. “Ultimately, it's what kids think is cool,” he says. But the possibilities outweigh the downside. Toyota's capabilities, internal processes and financial reserves are so strong that it can manage to make mistakes, he says.
But the real truck will be connecting with younger buyers. “If they aren't any more insightful than they were with the Echo, it's just going to be a higher visibility flop,” Bulin says.
The Echo was one in a trio of youth products, along with the MR-2 Spyder and most recent-generation Celica, representing phase one of Toyota's youth initiative. The vehicles attracted older-than-expected buyers and have proven to be among Toyota's poorest sellers.
Since predicting the desires and tastes of Generation Y is a near impossibility, it's surprising that auto makers still find it worth the effort.
Yet, Lentz says it is possible to draw parallels among the kids of today. They're more active, with some 25% carrying a full change of clothing in their cars at all times. They've grown up in an economic and political environment that has known no hardship, which has made them more socially balanced, trusting and family oriented — although Lentz says the Sept. 11, 2001, terrorist attacks will impact the psyche of this generation in unknown ways. They're the most educated and diverse generation ever.
How this all translates is that Scion, knowing that these kids are used to luxury but still carry an economy-car budget, will price all vehicles below $18,000 but package the mono-spec models with air conditioning, CD players and power everything.
Generation Y also has what Lentz calls an uncanny ability to tune out advertising, which means a laid-back dealer strategy and a heavy reliance on the Internet.
What makes it all worthwhile is the potential of an early capture of the most significant consumer group of our time. If played correctly, the capture could be for a lifetime, carrying Scion consumers into Toyotas and, later, Lexuses.
“You can conquest after the fact, but the cost of a conquest is much, much more than getting them early,” Lentz says.
Honda and Nissan Motor Co. Ltd., Toyota's main Japanese competitors, have said they won't follow suit with a third brand. Uncertain is whether youth brands will emerge from the Big Three or European makers.
“Whether they create a separate name or not, they'll all go in this direction,” Lentz says.
The direction already is clear — as evidenced by the forthcoming Honda Element utility vehicle, the powerful Mazdaspeed Protege and Dodge Razor, in partnership with the scooter maker.
But which effort will grab the collective attention of a generation is any auto maker's guess.
