Toyota's $1 Billion Marketing Push: Will It Drive Sales?

Toyota (TM) recently announced an aggressive plan to drive US sales after losing ground to rivals. The plan includes $1 billion in marketing in Q4 2009, which AutomotiveNews reported would rank as Toyota’s largest Q4 spend ever.

We reviewed Toyota’s Share of Market Interest (SMI) to reveal one element of the plan’s baseline: demand relative to the market. Brand SMI is the share of all in-market new vehicle shoppers that shopped one or more models within a given brand; shares across all brands total over 100% because most consumers shop more than one brand.

Toyota has been largely on the sidelines since August 2008 while key rivals made moves and its SMI lifts coincided with market factors beyond its control. Toyota’s SMI hump in summer 2008 came on gas prices increasing quickly to an all-time high, which in general helped Toyota and Honda (HMC) demand and SMI (benefiting from years of promoting fuel-efficiency). Its recent hint of SMI recovery was also gas-related, given that the government's Cash for Clunkers (CARS) program ran in July and August. Given that CARS has expired, it is likely Toyota’s SMI will contract in September.

Rivals have been on the move. Those shown may also have enjoyed a clunker bump, but most were showing improvements that predated CARS. Ford SMI in August was up 8 points year-over-year, and has been tracking lock-step with Toyota’s for three months, even edging ahead in August. Ford (F), Kia, Nissan (NSANY), and Hyundai (HYMLF.PK) all had period peak SMIs in August. Volkswagen (VLKAY.PK), at 6.5%, was just below its period best. Honda’s SMI pattern is eerily similar to Toyota’s: relatively flat in 2009 as other brands gain. Will it be next for a big Q4 push?

Toyota’s Q4 marketing push covers Toyota brands Lexus, and Scion. Scion SMI in 2009 has been off pace, with a small clunkers-coincident lift in July and August lifting its SMI from a period low. Lexus SMI has trended steadier, with its 2009 average to date only slightly below its 2008 average.

So what metrics will we use to evaluate the success of this historic $1 billion spend? Better SMI to start. And better SMIs for the Toyota brands coupled with lower SMIs for key rivals (meaning Toyota conquers shoppers rather than just sharing them). That would also mean more focused shoppers (i.e., less cross-shopping of rivals among Toyota, Lexus and Scion shoppers). More focused shoppers typically drive more efficient conversion (more sales from a given amount of shoppers) and make incentives more cost-effective (even more success measures). And more cost-effective generation of sales than a pure incentive-based approach. And sustained success into 2010 even as the Q4 ad effort concludes. And all working in tandem to drive sales.

A heady list? For sure, but with an ante of a billion dollars, Toyota should expect success across multiple measures. And while $1 billion sounds is a lot, keep in mind that if Toyota spent $2,000 of incentives per model and sold 200,000 units per month, over a quarter that equals $1.2 billion.

Comments

[sethmcs:]

Toyota cannot make money in the USA with yen below 100. They seem to be using GM's play book of trying to hold market share to the detriment of profitablity. Look for GM sized losses and failure to scale their production to demand. Plus their cars are ugly and boring. Look what the competition is doing. Their niche small cars is going to get more competitive.

Oct 09 10:29 PM

[a. palmer jr.:]

In my opinion, Toyota should do what they do best, and that is to build small, fuel efficient cars of high quality and at a reasonable price. I, personally do not even consider Honda when I'm shopping for a car because of their high relative prices. Toyota is appearing to be lulled into the the American way of "bigger is better" especially with their pickup trucks. They should have stuck to the small, efficient pickups they used to sell instead of playing in Ford and Chevrolet's ballpark.

Oct 10 09:30 AM

[Fordgirl:]

Toyota should continue to market their vehicles overseas. United States is for Americans. I will not support their government with one nickel of my hard earned money to a government who supports and mandates abortions. Pearl Harbor has not been that long ago.

Oct 11 06:02 AM