Anatomy of a Failure: The Demographic Mistargeting That Doomed Scion
Toyota created Scion to cash in on youth culture. Older people loved it.
Targeting youthful dollars has been a sound strategy for dozens of industries, with the marketing creation of the American teenager in the 1950s giving birth to a kaleidoscope of entertainment, fashion, food and lifestyle brands catering exclusively to the country’s newest consumers.
In the automotive world, things have always been a little different. New cars are expensive, often well beyond the budgets of even the hardest working high schooler or college student, which means advertising campaigns that skewed towards entry-level buyers traditionally took into account a wider demographic. It was easier, and more profitable, to make older folks feel young by feeding them a line or two about the rejuvenating effects of a vehicle than it was to build something exclusively for the sub-25 set.
In the early 2000s, Toyota turned this conventional wisdom on its ear by launching not just a sales campaign, but an entire brand built on a perceived gap in youth-oriented automobiles. Dubbed Scion, it was intended to sop up dollars from teens and twenty-somethings, who had given the Japanese manufacturer the cold shoulder due to its apparent frumpiness, by importing quirkier fare from the motherland. The effort even went so far as to target preteens before they had a chance to form their auto-brand affiliations.
Miraculously, for a very short period of time, the gambit worked. A few years after its debut, however, it became clear that Toyota had seriously miscalculated Scion’s appeal.
Once the initial surge of youth energy had been absorbed, a new demographic infiltrated showrooms, intent on rewarding themselves with a funky-looking, affordable automobile that would counter some of the salt-and-pepper streaking their once-full heads of hair.
Toyota was completely unprepared for the invasion of elders who suddenly appeared at dealerships, AARP membership cards in hand, eager to cash in on Scion’s no-haggle pricing model. Always wary of being told what they should find cool in the first place, and detecting the distinct odor of Werther’s Originals wafting from the lot, the younger generations Toyota had once courted with Scion evaporated quickly, leaving behind leadership too stunned to steer into the skid.
Scion’s Promising Start
At the outset, it appeared as though Toyota was making all the right moves with Scion’s market position. The quirky, toaster-shaped xB hatchback was an immediate success, followed closely by the flat-roofed tC coupe. After a soft launch in limited U.S. markets, by 2004 the company was selling 100,000 units total, a number that crested 173,000 sales by 2006.
So what if Scion’s full lineup numbers didn’t match half a good year for the Toyota Camry? And pay no attention to the fact that the utilitarian xA subcompact trailed its more attractive siblings by as much as 75% on the sales sheet. There was plenty of time to convince Scion’s fresh-blooded customers to merge into Toyota’s lane down the road and upgrade to something a little more “adult” (and more profitable). Until that day, Scion’s momentum seemed to be trending ever upward.
Then, the unthinkable. The brand’s sales began to plummet. In 2007, the company bled a quarter of its customers, and the following year’s global recession took most of the rest. By 2010, the company was down nearly 70% from where its tumble began, with a mere 45,678 units heading out the door.
Beating a Retreat
What happened? On the outside, it appeared as though the combination of an unpopular redesign of the standard-bearing xB (puffing it out past its previously cute proportions) plus the financial chaos of 2008-2009 were the primary culprits for Scion’s tumble. A closer look reveals a company that was unwilling to confront an uncomfortable truth about who its buyers actually were.
While it was accurate that back in 2004, the average age of its customer was roughly 35 years old (considerably younger than both Toyota and industry averages at the time), the crossover appeal of both the xB and the tC were already starting to dilute that figure. Media reports at the time were happy to turn the lens towards the drivers in their 40s, 50s, and 60s who were drawn in by Scion, a process that created a feedback loop that attracted the curiosity of an increasingly middle-aged clientele. In the space of just three years, Scion’s average customer was pushing 43, with some models skewing closer to 50.
At the same time as Scion was attracting a more experienced crowd, the initial groundswell of support from the younger set was fading as its occasionally bare-bones sales model failed to catch on. Instead of options, Toyota had counted on its extensive accessory program to fill coffers, figuring that a more energetic and engaged buyer base would want to soup up or otherwise customize their vehicles to reflect their individual tastes.
This revenue stream failed to materialize, as Toyota didn’t understand that its original batch of Scion customers were attracted to bargain basement pricing and didn’t necessarily have the means to explore fancy exhaust kits or decal sets. That went double for the increasingly silver-haired clientele elbowing out Scion’s disenchanted youth.
The Turning Point That Wasn’t
By 2007, it should have been clear that Scion’s initial pitch to the under-30 crowd had failed in two crucial aspects.
Rather than seeing these vehicles as a blank canvas for self-expression via accessorizing, college grads and minimum-wage workers alike perceived the Scion badge as the mark of basic transportation, a budget-conscious sub-brand of Toyota rather than anything new or exciting. Toyota conflated youth spending on CDs and clothes in malls across America as an indication that maybe there was enough left under their mattresses for anything other than a reliable ride to work in the morning.
At the same time, Scion’s appeal to more experienced drivers should have made it abundantly clear that it was time to shift gears and start outfitting its automobiles with the kind of features that could keep this momentum going. The older crowd appreciated the easy-to-get-into xB’s ride height and practicality, as well as the tC’s comfortable ride matched with sporty looks that recalled their glory days without requiring them to open their wallets too wide. Packing more features into these models, including modern infotainment, and eliminating the accessory catalog in favor of a traditional options sheet could have helped squeeze lemonade from the increasingly sour sales reports.
Staying the Uncomfortable Course
As history has shown, Toyota made almost no effort to deviate from its youthful focus/senior results dichotomy. As late as 2011 it was introducing a (legitimately fun to drive) sports coupe in the form of the FR-S, followed by the curious iQ hatchback (a pint-size vehicle outshone by the more capable, and cheaper, Toyota Yaris), two vehicles that couldn’t have been more different. The former was designed to tackle Japan’s mountain roads, while the latter seemed destined to be towed behind an RV being driven by a retired couple “discovering America” on a fixed income.
The message inside Scion showrooms was likewise confusing at best, as also-rans like the iA were sourced from Mazda’s entry-level dregs and the iM did its best Corolla impression in the company’s final years. The tC and the xB languished, each receiving only a single redesign during nearly a decade of existence. Young buyers had by that point defected almost entirely to Toyota, which had rehabbed its image and the lower limits of its lineup to compete harder for first-timers. Scion was dragged down-market in the eyes of potential shoppers even as the mothership accrued greater respect, with the net effect of Toyota stealing sales from itself.
Golden-agers continued to power Scion’s sales throughout this period, but the returns were clearly diminishing; sales climbed briefly to 73,000 for 2012, yet as of the 2016 date of execution they had once again tumbled to just over 56,000 units. By the time younger buyers began to circle back to Scion’s rock-bottom pricing and claw the average customer age down from its mid-century crisis, it was too little, too late. With little money to be made from its unusual combination of skinflint Boomer devotees and blood-from-a-stone entry-level kids, Toyota shuttered Scion at the end of that year.
The End of Automotive Youth Brands
Corporate inertia is a powerful force, none more so than when it’s backed up by an unrealistic appraisal of how a market perceives a product. Unlike Amazon’s same-era Kindle, which wholeheartedly embraced the unexpected boon of elderly readers drawn by the device’s promise of easy access to endless Danielle Steel ebooks, Toyota was unwilling to concede that it had missed the boat on who was really buying Scions.
How much did this single-minded focus hurt Toyota? In the long run, the effects were likely minimal. Scion’s portfolio was either based on JDM models or farmed out to corporate partners, which kept production costs minimal — especially considering that only a million or so models were sold over the course of its entire existence. What few popular models were left after the shutdown were shunted off to other areas of the Toyota lineup, and with dealers sharing space on the Toyota lot the American investment was also far from onerous, making this an embarrassing, but not altogether financially painful experience for the automaker overall.
The true impact of Scion’s legacy is likely to be a kibosh on any future attempts to harness the alleged spending power of Millennials/Gen Z/whoever’s next in line to bear the brunt of the generational hype. A sticker package here, an outdoorsy trim level there — why not? An entire brand dedicated to scooping up dollars that simply don’t exist?
Can we instead interest you in this fine, uh, Toyota?
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