3.28.2008

Understanding Customers Predicts the Future of the Auto Industry

When people, myself included, sing the praises of Toyota, we tend to focus on how its lean approach has enabled the company to streamline its processes.

In everything from auto assembly to marketing to logistics, Toyota has found ways to eliminate waste and focus with laser-like intensity on providing value for its customers.

But we tend to spend too little time on the fact that a successful lean strategy first involves understanding your customers. You can’t create value for them unless you have a solid grasp of what value means to them. To do that, you need to know who they are and what they care about.

And is that is perhaps where Toyota excels the most.

This thought was reinforced during the recent Automotive News World Congress as I listened to a presentation by Mark Templin, group vice president and general manager for Lexus. Templin spent more time than any other speaker discussing customers (which has generally been the case almost every time I have heard a conference speaker from Toyota).

The automaker invests considerable time and effort in learning about its customers, both by speaking with them and by researching demographic trends. Templin used this knowledge to lay out a clear and compelling picture of the trends Toyota believes will shape American auto sales in the future.

One trend Templin discussed is what he called the “new urbanization” – people moving back into major cities, and the creation of “new” downtown, mixed-use areas in suburbs. As a result, he said, vehicles are “morphing into multifunctional tools.” On the daily commute (which averages 50 minutes), he explained, “some people use the time to make calls, have their email read or dictate messages… Others use built-in DVD players as entertainment hubs for children… Commuters… want features that increase comfort and safety, save time and keep them in touch with their work, home and family. And those living in urban areas must deal with smaller parking areas as well as narrow and crowded streets. As a result, many residents will want personal use vehicles and new transportation options, like shared-use car programs.”

Templin also talked about the changing age demographics of car buyers. While more than half of Toyota’s customers have been, and will continue to be, Baby Boomers, generations X and Y – a total of 124 million people born between 1965 and 1994 – are becoming more important. They already represent more than one-third of the driving population.

The skepticism these buyers have for traditional advertising and marketing requires changes – launching vehicles by going to the consumers in their communities, at NASCAR events for Toyota truck buyers, Hot Import Nights for Scion buyers, and a race track test drive for Lexus buyers. It also means making it far easier for buyers to research cars online, offering 24/7 service centers and shorter sales negotiations. Some Lexus dealers are picking up and delivering cars from their customers’ homes or offices for servicing.

Toyota doesn’t have a monopoly on understanding customers. They just seem to be better at it than everyone else.

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