24 • MAY 30, 2011

“There are so many more entries, so manymore people investigating that small-carmarket,” Hollis said. “But because of all thatattention being given, some people will wantto separate themselves from that.”

Toyota Division GeneralManager Bob Carter saidthat the Toyota branddoes best when it sells ve-hicles in volumes largerthan 100,000 units. Thatcould mean Scion be-comes the repository formany Toyota niche vehi-cles, so long as they couldfeasibly be marketed toyounger buyers.

No more gatekeepersScion also is taking a new look at how it ap-

proaches social media. When the brand waslaunched in 2003, blogging was expensive,Facebook was a nonentity, and not every kidhad a smart phone.

Because anyone can be an influential per-son online today, Scion’s idea of using “trendgatekeepers” to spread the gospel is outdat-ed, said Jeri Yoshizu, who oversees Scion’ssales promotion, social media and lifestylemarketing. Now, she says, the idea is to findinfluential people instead.

“Scion has been ‘When we launch, wetalk,’” Yoshizu said. “But we have stuff goingon daily, whether it’s finance or product oraccessories or advertising. We have not beenaggressive enough with communicating it.”

As part of its initial brand outreach, Scionconnected itself to the urban art, film andmusic communities. That meant a lot of hip-hop music. But recently, Scion has forged anew connection with the death metal musicscene, using the same underground tactics asit did with hip-hop to promote up-and-com-ing thrash bands such as Woe and MunicipalWaste.

“Metal is a digitally active community; theyspread the word fast, and they have not beenaddressed by a major corporation,” saidYoshizu, who is the lone remaining Scion em-ployee from the 2003 startup.

One in fourToyota brass hope those changes mitigate

the effects of some tough trends facing Scion. Scion’s decline in sales and shopper counts

parallels the misfortunes of Gen Y during therecession. A 2010 Pew Research Center studyshows that 37 percent of 18- to 29-year-oldsare underemployed or out of work. That’s theworst for any demographic group in threedecades.

“Every economic factor right now is affect-ing our target consumer, more than anybrand. Nobody is in a worse situation thanwho we’re going after,” Hollis said. “Theyhave double the unemployment rate; theyhave credit challenges. Even if you can getcredit, it’s going to cost you.”

Scion, via Toyota Financial Services, is tryingto take some of the heat off the financiallystrapped kids. Its “Gen-One” program bumpsa first-time buyer with basically no credit up toa Zone 4, which represents a FICO score of 630and a much more tolerable interest rate.

Plenty of Gen Y people still are buying cars,though. This year, one in four of all new-carpurchases will be made by a member of GenY, according to TrueCar research.

The bigger problem is that Scion is strug-gling to get people into the showroom and

keep them there. Not only are sales way off;the number of people shopping Scion hasplummeted.

According to Compete Automotive data, thenumber of shoppers — both among Gen Y andthe general population — looking at Scion hasdropped to one-third the level of 2005.

The drop cannot be blamed entirely on therecession. In fact, the drop-off in shopper in-terest corresponds almost directly to the in-troduction of the second-generation xB andxD in 2007. (See chart on Page 4.)

Many Scion bloggers complained that Toy-ota turned its quirky, plain-wrap box intosomething heavy and clunky, trading lowerfuel economy for not that much more accel-eration. Toyota execs respond that they gavecustomers exactly what they asked for: moreroom, power, safety and accoutrements.

“Scion is having a difficult time standingout in an increasingly crowded market,” saidDennis Bulgarelli, director of Compete’s au-tomotive practice. “Competitive makes andmodels are getting the attention that theyused to get.”

What’s more, all Scions are built in Japan,putting them at the mercy of the strong yen.Scion’s already narrow profits have gone intothe red.

“There’s no denying that the yen at 80 to 85[to the dollar] is not a profit situation,” Hollis

said. “But profit is less a priority than whowe’re talking to and how we’re speaking tothem.”

He added that Toyota is considering NorthAmerican production for future Scion models.

Mystery shoppingWhat’s more, Scion isn’t doing well once it

gets the shoppers in the showroom.According to mystery-shopping consultan-

cy Pied Piper of Monterey, Calif., althoughToyota’s sales practices are near the industryaverage, Scion’s are the third-worst.

Scion trailed other youth-oriented brandssuch as Volkswagen, Kia and Mazda mostlybecause the brand’s low-pressure sales tech-niques don’t give customers a reason to buynow or return for a future visit. Scion sales-people fared well in product knowledge, notoverselling, and having power over negotiat-ing the selling price.

“We are improving the customer experi-ence, the shopping process, the in-dealer-ship, service,” said Dawn Ahmed, Scion cor-porate manager. “There are lots of opportu-nities there.”

On the plus side, Scion’s niche strategy hasallowed it to maintain strong residual values,according to Automotive Lease Guide. WithScion’s low incentive levels, ALG has recalcu-lated residuals since its more pessimistic per-spective at the brand’s launch.

Just the same, Hollis is not bothered if ayoung person goes to a dealership looking fora Scion and leaves in a Toyota Corolla. Hollisis heartened that 70 percent of Scion cus-tomers are new to Toyota, and 60 percent re-tain their loyalty to Toyota for their next vehi-cle after a Scion.

“The customer wins; the dealer wins; Toy-ota wins. Scion was not created for Scion’ssake,” Hollis said. “Scion was created for Toy-ota’s sake. It is an investment in Toyota’s col-lective future.”c

continued from Page 4

SCIONGatekeepers are out;influential people are in

Carter: Toyotabrand does wellwith big volume.

The second-generation Scion xD, whicharrived in 2007, is still on showroom floors.

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