Strategy behind Honda and Toyota
The strategy behind Asian automakers targeting Gen Y as well as other industries is because Gen Y have become relevant consumers in the market place. Also known as Millennials, the Generation Y are comprised of 56 million people, according to the 2010 Census and it is considered the second largest age group behind Baby Boomers. Born between 1946 and 1964 the Baby Boom generation has long been the primary target group that product developers. However, the Baby Boomers are an aging demographic and their financial priorities are shifting, while Millennials sheer numbers alone were appealing. Even knowing Millennials have household incomes below $50,000 (Nickell, 2012) the country's post-war prosperity gave them tremendous buying power, making the growing focus on the Millennials as the next consumer target for many companies’ especially Asian automakers.
Aditionally, a national survey by communications firm Capstrat, shows that more than 20% of young consumers, so-called millennials, age 22 to 30, plan to purchase a car within a year. 64% of female millennials have already bought a vehicle, compared with 44% of males. "Millennials are going to overtake baby boomers in terms of spending power by 2018," says Capstrat President Karen Albritton (cited by Steve, 2011).
Another strategy behind Asian automakers targeting Gen Y is to fulfill Gen Y desire of being part of a community, giving to them what they want in their own way. Additionally, according to digital market research company comScore, Gen Y have a current purchasing power of $170 billion; a purchasing power that most likely will continue to grow as they advance in their careers. Millennials are wealthier than previous generations, which is why it makes sense to target them for new car lines. However, marketers have the challenge of understanding how to market this group. For instance, even knowing they are wealthier than previous generations, they describe themselves as “poor college students”, so marketers should not position their products as a luxury if they want Millennials to buy it (Phillips, 2007). This is a generation is more likely to put off marriage and a family, for financial as well as personal reasons. These are young professionals; career, networking and personal fulfillment come first.
For the most part, having grown up more affluent than prior generations, they have high expectations in life and about spending. They have been more involved than any other generation in the buying decisions made by their parents, and have controlled a significant amount of spending power on their own since they were young. The fact is that they are interconnected through internet and all the media connections which makes them more aware than any generation before them, holding a great power to launch and sustain brands that can impact the Asia automakers, as well as the whole economy.
Asian automakers targeting Gen Y, might believe in the Beirne and Howe, (2008) theory which says that Millennials are brand loyal consumers. In this theory, brands will become bigger than ever, as Millennials identify the idea of a big brand as being a return to community. Therefore, Millennials are loyal to brands whose products not only provide for the individual but also for the community as a whole. DeBard (2004), summarizes Millennial’s actions as being committed to a brand as long as it provides for their needs. Again, marketers face challenge because Millennials value products for their necessity to their lives, they dislike advertising because it often causes them to buy things they do not need. Millennials question the truth in advertising and believe marketing to be misleading. They believe that advertising leads to higher product price, which conflicts with their desire for the lowest price possible (Beard, 2003).
Both companies are trying to hit a key demographic generation, by differentiating their products with new vehicles such as the Element and the Scion that it does not reach with the others vehicle's platform. Through innovation (Keegan& Green, 2011), these new vehicles were created as a potentially rewarding product strategy for reaching Generation Y.
Toyota brand for instance in the early years of the 21st century, was perceived as old-fashioned and was failing to appeal to the country’s youth. In 2002, Toyota launched Scion, a new sub-brand targeted at Millenials. Aware of the Millenial’s characteristics Toyota Scion offered customers a choice of three standardised models ,with a large number of optional accessories giving the youth an opportunity to customise their car digitally. Each model was competitively priced below $20,000. Toyota was prepare to sacrificed margins on the
vehicle in order to profit from accessory sales, whilst simultaneously hoping to establish a relationship and brand loyalty with young buyers.
Honda also believes that by creating a relationship with young buyers can improve the brand name (Rechtin, 2009). Honda’s strategy recognizes the different preferences among the generation Y and has aimed at putting them in new vehicles such as the Element in order to reach them. Even though they stop production of this model in 2011, it is expected that a new model will be introduced to maintain in touch with the generation Y (Automotive Manufacturing Solutions, 2011).
In sum Toyota and Honda used extension and adaption strategies (Keegan& Green, 2011) to approach a global market opportunity. Both of them recognized that Millenials have started to have purchasing power and therefore Honda and Toyota decided to innovate to meet their needs. They designed an entirely new product to address the market opportunity at a price point which was within the reach of the potential customers and improved the brand.
In 2006 Toyota’s top U.S. executive Jim Press told Reuters said that they were going to limit the number of Scion vehicles available because increase sales in this brand would be usefulness to the Japanese automaker (Aziz, 2006). The decision to limit the volume of sales would keep Scion’s essence and they would not lose their cachet. In the same interview Jim Press said that “Scion is as an incubator” for Toyota to understand young people and new buyers (Aziz, 2006). Basically their rationale is that the Scion vehicles have reached their maturity and in order to remain “cool” among the youth buyers Toyota decided to create an exclusivity image around the brand.
In the twenty-first century, with its mass production and information overload, the need for individualism and uniqueness is of ever-increasing importance in everyday life
( Tian et al, 2001 ). For instance Toyota’s decision to limit the number of Scion vehicles available for sale tries to fulfill this need for individualism by being a personal brand preference for Gen Y buying decisions. Individualism and uniqueness lead to a desire for exclusive and limited brands that not only reﬂect welfare (luxury), but also their owner’s speciﬁc status (Mandel et al, 2006 ).
Toyota wants to be that desired brand, however, by just limiting the Scion vehicles for sale is a very dangerous strategy. They might lose customers that they will never recovery again with this rationale. Additionally, they could have achieved brand improvements in many ways by using consumers’ emotions and making emotional appeals in marketing and advertising (Soscia, 2007).
To achieve that brand image of exclusivity Toyota manufacturers would have to work even more with design and imagery and symbolic meaning, instead of merely controlling the supply factors in order to address the loyalty of a consumer to Scion vehicles.
Current strategies that Ford and GM are using to cater to this particular market segment.
While Asia automakers are innovating with modern designs and new cars, GM and Ford’s strategy is to renew the old models adapting to the Gen Y preferences. Ford for example is working on radical makeover of its signature youth-market cars such as Mustang. Ford Motor Co. is betting it is time to hit the brakes on the retro trend, and shift its focus to a younger generation. Ford Mustang today strongly hews to the look of the 1964 original, but they are going to change that as part of the strategy to target Generation Y.
Since most of affluent Millennials use social media to engage with brands, GM has been using this channel in advertising the Chevy Camaro. They believe that heightened online activity means digital information and advertising are more likely to reach this generation. The strategy seems to be working because Chevy Camaro Facebook fan page boasts 1.8 million followers where about 60 percent of these fans are between the ages of 18 and 34 just the target market the company is going for (Ashe, 2011). For a market segment where cars and driving just aren’t that cool in an era of iPads and Facebook, GM brought Camaro to Facebook creating a popular buzz about their product.
In a Global market, companies have identified the Generation Y market segment and now they are targeting this group in many ways. Those companies are now adapting their market mix and innovating in order to best serve those different wants and needs from Gen Y. Right now companies are focused on the demographic and psychographic variables, but once they realized that the Generation Y also has different behavioral characteristics and benefits, they might be able to establish a better approach with the Generation Y.
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