1. 1 Case Study: Saturn vs Scion November 19, 2007

2. 2 Executive Summary

3. 3 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.

4. 4 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 it to form a corporate culture, and to remain on the cutting edge of pop culture.

5. 5 GM: 1990 State of the Union GM was seeing steady declines in market share as its youngest and most well-educated buyers defected to imports for value and QDR.

6. 6 GM was steadily losing sales to imports; its market share declined 22% from 1980 to 1990… Source: Ward’s Automotive Data, 1971-1990

7. 7 …and GM’s defectors were increasingly young, educated buyers. Source: CDS 1993 Domestic Defectors Domestic Owners Import Owners Median Age384538 % College Educated 50%40%55%

8. 8 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.

9. 9 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.

10. 10 Source: 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. 43% of Saturn buyers were either potential domestic defectors (19%) or conquests from imports (24%)

11. 11 Source: CDS 1993 Saturn was initially successful in luring young, well- educated domestic defectors back to GM. SATURN Domestic Defectors Domestic Owners Median Age373844 % College Educated 62%50%40%

12. 12 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% Fun to Drive 57% Functional 55% Responsive 51% Well Engineered 50% Domestic Defectors Well Engineered 65% Fun to Drive 64% Responsive 58% Value 55% Functional 52% Source: CDS 1993

13. 13 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

14. 14 19932007 (%pts) Responsive70%28%-42 Well Engineered80%42%-38 Sporty59%37%-21 Safe77%57%-20 Fun To Drive74%55%-19 Youthful27%13%-15 Advanced20%10%-10 Good Value75%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. 2007

15. 15 The brand also lost ground on high-energy, emotional imagery often associated with youth. Source: CDS 1993-2007q1-2 Emotional Images Among Saturn Owners, 1993 vs. 2007 19932007(%pts) Sporty59%37%-21 Fun To Drive74%55%-19 Youthful27%13%-15 Cute26%15%-11 Aggressive9%8% Sleek26%25%

16. 16 As a result, overall brand opinion suffered. Chevrolet Chrysler da Source: AFI 1999, 2006

17. 17 Poor quality and a lack of new, innovative products caused Saturn to steadily lose its ability to conquest from imports… Source: CDS 1993-2007q1-2

18. 18 …and Saturn replacers increasingly opted for the QDR and value offered by imports. Source: CDS 1993-2007q1-2

19. 19 Overall, Saturn lost its edge with the young, educated buyers, and began to look like GM and other domestics. Source: CDS 1993-2007q1-2

20. 20 Overall, Saturn lost its edge with the young, educated buyers, and began to look like GM and other domestics. Source: CDS 1993-2007q1-2

21. 21 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

22. 22 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

23. 23 …and Toyota’s young buyers scored lower on cool, exciting imagery than the typical young buyer. Source: CDS 2000-2003

24. 24 Scion “WHAT MOVES YOU” Source: Automotive News, October 29, 2007 (Toyota’s 50 th 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.

25. 25 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.

26. 26 Scion attracted the industry’s highest mix of young buyers… Source: CDS 2006 % 18-34 Volume: 18-34 Scion48.3% 82,208 Mazda38.9% 88,058 VW37.0% 83,740 Mini34.6% 12,776 Nissan29.0% 234,707 Acura28.0% 53,085 Mitsubishi27.6% 25,849 Honda25.3% 324,943 Audi24.7% 19,035 Infiniti24.6% 27,271 Memo: Toyota19.0% 338,774

27. 27 Source: CDS 2003-2006 …and Scion buyers were more likely than typical young buyers to think of their vehicles as cool and exciting.

28. 28 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 ScionToyota Average Age24.527.5 % Singles68%44% Median Income$54,540$66,119 Education Some College41%22% College Grad29%44% Demographics Among Buyers 18-34 Source: CDS 2006

29. 29 Source: CDS 2006 …Scion’s young buyers viewed their vehicles with much cooler, more exciting images than young Toyota buyers.

30. 30 Scion intercepted these buyers most often from Honda, which is Toyota’s biggest competitor in the youth market. Purchased Scion, 2nd Choice: Honda28.1% Toyota22.6% Ford6.7% Mazda6.0% Chevrolet4.5% VW3.6% Acura3.1% Nissan2.8% Subaru2.6% Chrysler2.5% Source: CDS 2003-2006

31. 31 Appendix

32. 32 Source: Ward’s Automotive Yearbook, 1990-2006

33. 33 Domestics as a whole were steadily losing market share to imports. Source: Ward’s Automotive Data, 1971-1990