1 Case Study: Saturn vs Scion October 8, 2007. 2 Executive Summary.

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Case Study: Saturn vs Scion

October 8, 2007

2

Executive Summary

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Saturn

• GM launched Saturn in 1990 to appeal to the young, educated buyers who had been leaving the brand for imports.

• Saturn was initially successful in attracting these buyers because it differentiated itself from GM as a quality brand with impeccable customer service.

• GM failed to protect the integrity of the Saturn brand, failing to invest in new products and allowing it’s image to blend in with the parent company.

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Scion

• Scion was created in 2003 in an attempt to make Toyota a brand that was as important to young people as it had been to boomers.

• Thus far Scion has attracted the industry’s youngest buyer base without cannibalizing Toyota’s young buyers.

• Toyota is carefully cultivating the Scion brand by separating it from the parent brand and allowing to form corporate culture, and to remain on the cutting edge of pop culture.

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Domestics: 1990 State of the Union

• Domestic brands were seeing steady declines in market share as their youngest and most well-educated buyers defected to imports for value and QDR.

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Domestic Sales as % of Industry

50%

60%

70%

80%

90%

71 73 75 77 79 80 81 82 83 84 85 86 87 88 89 90

Domestics were steadily losing market share to imports…

Source: Ward’s Automotive Data, 1971-1990

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…and the defectors were increasingly young, educated buyers.

Source: CDS 1993

Domestic Defectors

Domestic Owners

Import Owners

Median Age 38 45 38

% College Educated

50% 40% 55%

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Saturn“A different kind of car, a different kind of

company”Goal:• Create a brand that appeals to the young, educated buyers who have been defecting to imports. This brand will focus on the very issues that GM has been struggling with; quality, innovative design, and customer service.

Strategy:• Breed a loyal culture by creating a low-pressure, friendly relationship with the customer. This relationship starts with “no haggle pricing” and continues with customer service that people might expect from a bed and breakfast, not a car manufacturer.

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Saturn: First Generation

• Saturn initially attracted young, educated buyers who were considering defecting to an import or have already.

• These buyers found appeal in Saturn’s innovative engineering and attention to QDR.

10Source: CDS 1993

Saturn immediately attracted buyers that GM had been struggling with; those who had already defected to an import or those who were about to.

Saturn First-Gen Inflow

Additional to HH26%

Replaced Import

24%

Replaced Domestic

(2nd Choice Import)

19%

Replaced Domestic

(2nd Choice

Domestic)31%

43% of

Saturn buyers were either potential domestic defectors (19%) or conquests from imports (24%)

11Source: CDS 1993

Saturn was initially successful in luring young, well-educated domestic defectors back to GM.

SATURNDomestic Defectors

Domestic Owners

Median Age 37 38 44

% College Educated

62% 50% 40%

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Saturn owners viewed it as a smart buy because of its innovative engineering and solid QDR features.

Saturn Owners

• Well Engineered 80%

• Safe 77%

• Value 75%

• Fun to Drive 74%

• Responsive 70%

Domestic Owners

• Safe 58%


• Functional 55%

• Responsive 51%


Domestic Defectors



• Responsive 58%

• Value 55%

• Functional 52%

Source: CDS 1993

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• As GM failed to invest in the brand, Saturn’s sales flattened, and its buyer base began to resemble the buyer bases of GM and the other domestics.

Only a few new models were introduced, and those were GM products repurposed for Saturn, which lacked the quality of the initial Saturn offerings.

• Disappointed in Saturn’s limited lineup and quality problems, the young, educated buyers that had initially formed Saturn’s loyal buyer core migrated to imports.

Saturn Loses Momentum

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1993 2007 (%pts)

Responsive 70% 28% -42

Well Engineered 80% 42% -38

Sporty 59% 37% -21

Safe 77% 57% -20

Fun To Drive 74% 55% -19

Youthful 27% 13% -15

Advanced 20% 10% -10

Good Value 75% 66% -9

As GM failed to invest in the brand, Saturn lost ground on engineering, QDR, and value…

Source: CDS 1993-2007q1-2

Images Among Saturn Owners, 1993 vs. 1997

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…as a result, overall brand opinion suffered.

Total Market Change in Overall Brand Opinion, 2006 vs. 1999

-25.00% -20.00% -15.00% -10.00% -5.00% 0.00% 5.00% 10.00% 15.00%

Saturn

Ford

Chrysler

Chevrolet

Mazda

Dodge

Honda

Toyota

Volkswagen

Nissan

Hyundai

% change in Excellent or Very Good overall opinion

Chevrolet

Chrysler

da

Source: AFI 1999, 2006

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Saturn: Inflow by Country of Manufacturer

0%

25%

50%

75%

100%

93 95 96 97 98 99 00 01 02 03 04 05 06 07

Domestic

Import

Poor quality and a lack of new, innovative products caused Saturn to steadily lose its ability to conquest from imports…


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Saturn: Outflow by Country of Manufacturer

0%

25%

50%

75%

100%

93 95 96 97 98 99 00 01 02 03 04 05 06 07

Domestic

Import

…and Saturn replacers increasingly opted for the QDR and value offered by imports.


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Median Age

35

40

45

50

55

93 95 96 97 98 99 00 01 02 03 04 05 06 07

SaturnDomestic Non-Lux

Import Non-Lux

Overall, Saturn lost its edge with the young, educated buyers, and began to look like GM and other domestics.


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% College Educated

25%

35%

45%

55%

65%

75%

93 95 96 97 98 99 00 01 02 03 04 05 06 07

SaturnDomestic Non-Lux

Import Non-Lux

Overall, Saturn lost its edge with the young, educated buyers, and began to look like GM and other domestics.


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Toyota: 2003 State of the Union

• Toyota’s sales were at all-time highs, but it was attracting an increasingly older buyer base.

• Young, cool buyers viewed Toyota as a brand for their parents or grandparents, but not for them.

• The youngest buyers in 2003 were only the tip of the Gen Y iceberg; the generation eventually will dominate the automotive landscape.

“Kids saw Toyota as a Japanese equivalent of General Motors, with uninspired design, ordinary performance, and staid marketing.” – Automotive News, Oct. 29, 2007

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Median Age Data

35

40

45

50

1993 1995 1996 1997 1998 1999 2000 2001 2002 2003

Toyota Honda Nissan Import Non-Lux

Toyota was having trouble attracting young people to the brand; it’s owner base was aging more rapidly than

the competition…

Source: CDS 1993-2003

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…and Toyota’s young buyers scored lower on cool, exciting imagery than the typical young buyer.

Source: CDS 2000-2003

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Scion“WHAT MOVES YOU”

Source: Automotive News, October 29, 2007 (Toyota’s 50th Anniversary Commemorative Edition)

Goal• Create a cool, exciting youth brand whose culture is completely separate from Toyota’s, and whose sales do not cannibalize Toyota’s.

Strategy• Offer small, stylish, single-trim cars that come fully loaded at a reasonable, non-negotiable price.

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Scion

• Scion attracted the youngest buyer base in the industry without cannibalizing from Toyota.

• Scion made Toyota an important and relevant brand to young people.

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Scion attracted the industry’s highest mix of young buyers…

Source: CDS 2006

% 18-34

Volume: 18-34

Scion 48.3% 82,208

Mazda 38.9% 88,058

VW 37.0% 83,740

Mini 34.6% 12,776

Nissan 29.0% 234,707

Acura 28.0% 53,085

Mitsubishi 27.6% 25,849

Honda 25.3% 324,943

Audi 24.7% 19,035

Infiniti 24.6% 27,271

Memo: Toyota 19.0% 338,774

26Source: CDS 2003-2006

…and Scion buyers were more likely than typical young buyers to think of their vehicles as cool and exciting.

Youth Image Gap Analysis: Scion vs Non Luxury

-15%

-15%

-12%

14%

17%

19%

21%

23%

23%

31%

44%

-24%

-30% -20% -10% 0% 10% 20% 30% 40% 50%

Family Oriented

Rugged

Powerful

Safe

Sleek

Sporty

Good Value

Distinctive

Economical

Fun To Drive

Cute

Youthful

Among Buyers Aged 18-34

Non-Luxury Scion

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Scion bred a completely different culture from Toyota. Far from cannibalizing Toyota’s young

buyers, Scion instead attracted a younger buyer who was likely to be single and still in college…

Demos Scion Toyota

Average Age 24.5 27.5

% Singles 68% 44%

Median Income $54,540 $66,119

Education

Some College 41% 22%

College Grad 29% 44%

Demographics Among Buyers 18-34

Source: CDS 2006

28Source: CDS 2006

…Scion’s young buyers viewed their vehicles with much cooler, more exciting images than young Toyota buyers.

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Scion intercepted these buyers most often from Honda, which is Toyota’s biggest competitor in the youth

market.

Purchased Scion, 2nd Choice:

Honda 28.1%

Toyota 22.6%

Ford 6.7%

Mazda 6.0%

Chevrolet 4.5%

VW 3.6%

Acura 3.1%

Nissan 2.8%

Subaru 2.6%

Chrysler 2.5%Source: CDS 2003-2006

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Appendix

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Sales: Saturn vs Scion

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06

Saturn

Scion

Source: Ward’s automotive yearbook

1 Case Study: Saturn vs Scion October 8, 2007. 2 Executive Summary.

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Transcript of 1 Case Study: Saturn vs Scion October 8, 2007. 2 Executive Summary.