Toyota is killing off Scion and folding it into the Toyota brand. Toyota is dropping the youth brand after 13 years. With the 2017 model year, most of the brand’s existing products will be rebadged under the Toyota brand.
This ends a brand that was not successful in building a visual brand identity or product personality. Toyota originally created Scion brand to attract younger buyers and explore different ways to sell to younger buyers, as well as creating an outlet to offer products differentiated from the rest of the US Toyota brand. Toyota could not have foreseen the economic collapse or the changing demographics working against its success.
Scion should have learned from GM’s failed Saturn experiment that a brand would not be successful without consistent, sustained, long-term support. And it cannot be successful on a long-term basis if its strongest differentiation is its approach to sales and service, rather than from a vibrant product range.
Pioneering Marketing Strategies
Scion’s remarkable sales and marketing strategies included set pricing where the customer didn’t need to negotiate a price, mono-spec cars where you only picked the color and transmission choice, and an extensive array of accessories that allow owners to personalize their cars.
Scion pioneered the Service Boost prepaid maintenance plan, Release Series special edition models, and grassroots marketing through unique events. The brand’s Pure Process Plus program was notable because it enables buyers to complete much of the purchase process online.
Scion’s biggest failure was its lack of new, vibrant products to appeal to its young buyers. Without new products between the FR-S launch in 2012 and the iA and iM in late third quarter of 2015, young buyers gravitated towards other brands.
Initial Strong Sales Sputter
Scion started strong, but its sales during the recession fell disproportionately compared with the rest of the market. “Scion didn’t get the support it needed to recover from the 2008 recession,” said Stephanie Brinley, an analyst at IHS Automotive. Sales started in 2006 at 173,034 units, but dwindled to 56,167 units by 2015.
Toyota’s original Scion strategy of attracting young buyers with a low entry priced vehicle and moving them up the value chain to Toyota and ultimately a Lexus may have been working. Toyota says that buyers new to Toyota purchased 70 percent of Scions. Furthermore, IHS Automotive loyalty data shows that 33.7 percent of Scion owners selected Toyota for their next purchase. The brand was a good feeder for Toyota. To put this into perspective, however, these figures represent fewer than 21,000 units.
Jim Lentz, head of Toyota North America said, “This isn’t a step backward for Scion; it’s a leap forward for Toyota. Scion has allowed us to fast track ideas that would have been challenging to test through the Toyota network.”
Dropping the Scion brand will enable Toyota to cut the marketing and support costs for a weak third brand and better deploy those resources throughout the company. It makes sense to incorporate the best of those practices for a stronger Toyota.
Where does this leave Scion owners and dealers?
Scion’s death will see three of its cars move to the Toyota lineup. The FR-S, iM, and iA will continue under the Toyota brand, while the tC will be discontinued after August 2016.
Owners of Scion vehicles will continue to go to Toyota dealers when their cars need service or repairs.
Toyota didn’t specify how the company would support the 1,004 dealers selling Scion vehicles. Resolving franchise agreements with dealers of discontinued brands can be costly: Ford Motor Co. reported a $339 million charge related to dropping Mercury in 2010. There is some question, too, whether or how to reimburse dealers for their costs while building up the brand
In hindsight, Toyota’s plans for Scion were doomed from the start. A brand targeted at young people in an era when those young people are buying fewer and fewer cars occupies an extremely narrow niche.
“Millennials have gone mainstream,” Michelle Krebs, a senior analyst at Autotrader.com said. “They aspire to well-established, highly respected global brands like Toyota and luxury brands like Audi and BMW.”