One of the central parts of Toyota’s lasting success is its methodical approach to business. The company studies markets, seeks to understand fundamental consumer needs and carefully examines competitors’ products and business strategies. Toyota then synthesizes that knowledge to create a satisfying experience for its customers. As Toyota sought to increase its presence in the coveted U.S. market, it applied these principals to drive sales and market share. Just like the Toyota cars themselves, the approach wasn’t flashy or revolutionary, just impressively effective. In July 1968 Road Test dedicated an issue to Toyota, and covered in depth the company and its philosophy. The articles provide an early look at Toyota’s approach, as they laid the groundwork for becoming a powerhouse in the U.S.
In its push to enter the U.S. market, Toyota had to carefully examine one competitor that had done phenomenally well in attracting American economy car buyers. That company of course was Volkswagen. Without a doubt, the U.S. market was hungry for a small, economical, affordable car, even as postwar prosperity took hold and Detroit made its chariots ever bigger and fancier. VW took its “people’s car” to the U.S. to fill that void.
One of VW’s best decisions was to hire Doyle Dane Bernbach, the New York City-based Ad Agency. The advertising that was created was arguably some of the most effective ever produced. Imagine the creative brief the Agency received: “ we need to sell a car developed in the 1930s at Hitler’s behest, which is underpowered, ill handling and lacking in basic creature comforts like effective heat. But, hey, at least it is well built!” Talk about a tough challenge…
The resulting campaign brilliantly positioned the VW’s weaknesses as strengths, and in the process gave a counter-cultural middle finger to Detroit and its “bourgeois values.” It was the perfect brand positioning as America entered the culturally turbulent 1960s and the first of the Baby Boomers started getting cars. VW’s sales went through the roof, and soon the distinctive flatulent engine sound emanating from the back of Bugs was common from coast to coast.
VW was able to build a comprehensive dealer network to handle these sales and service needs, and thus VW became the “establishment” import. No other import brand—and there were many in the U.S. by the late 1950s—could even come close to matching VW’s strength.
So how would Toyota’s story be different than the other importers who had tried and failed to emulate VW’s success? Simple. By carefully exploiting consumer needs that were still unmet, Toyota brought in a range of cars designed to offer Americans the features and styling that they had come to expect, effectively packaged into a smaller car, with build quality that was every bit as good as anything on offer from Volkswagen.
“When in America, make cars that sell to Americans.” This was a critical part of Toyota’s strategy, and one they learned through trial and error. When cars like the Tiara did not meet market needs, Toyota adjusted, since their belief was that the “market was always right.” This was in sharp contrast to European import rivals, who felt that if a product was acceptable in their home market, then it should be acceptable anywhere.
Once Toyota mastered the formula for success in the U.S. market with the Corona, they were then able to begin a deeper expansion, both by adding models like the Corolla as well as adding a significant number of dealers.
Arguably, U.S. manufacturers were not applying the right approach to the American small car market in 1968. The economy offerings from Big Three plus AMC were too large and/or too pricey to effectively target a broad base of frugal shoppers. Even when the size and price of the product offerings were right, as in the case of the Cortina and Opel, the distribution strategy was flawed. These small cars were seen as “second fiddles” at Ford and Buick dealers, many of whom disregarded the economy car buyer and preferred instead to concentrate on steering customers into bigger domestic cars.
Due to the gap in effective domestic dealer coverage for the small car buyer, coupled with careful study of the dealer strategy used by European imports including VW, Toyota was able to craft a methodical—and effective—distribution strategy for the U.S.
Toyota set comprehensive standards for dealer performance, and instituted measurements on sales and service satisfaction to ensure that customers would likely be pleased with their Toyota experience. As part of the Japanese continuous improvement mantra, the dealers were given plenty of feedback on their performance and thoughts on how to improve their service and operations.
One key element to ensuring that dealers would listen to feedback was targeting “younger and hungrier” dealers. These businesspeople may not have been as well established in a marketplace, but Toyota felt they would work harder than a wealthy absentee owner to please customers and gain success. Thanks to this approach, Toyota dealerships were soon seen as a ticket to the American dream.
For aficionados of classic American Literature, John Updike captured this phenomenon in his “Rabbit” series, where Harry Angstrom’s father-in-law became rich by opening up a Toyota dealership in Pennsylvania. It was a fantastic way for Toyota to rapidly become integrated in local markets around the country. They had no trouble rapidly opening dealerships in all 50 states (by 1968, for example, my hometown of New Orleans had 3 Toyota dealers serving the metro area), though each dealer did have to meet Toyota’s relatively high standards.
In return for demanding focused performance from dealers, Toyota provided extremely high quality cars. As part of Japan’s emergence from WWII and into the global economy, Japanese companies (and the Japanese government) had decreed that high quality products, across all industries, was the best way to overcome the then-present stigma of “made in Japan” meaning cheap, inferior goods. For motor vehicles, Toyota’s motto became “quality products based on good ideas.” Seems obvious today, but that’s not likely a saying you would have heard in Wolfsburg or Detroit in 1968…
No matter how good the product quality, however, there would always be a need for service. Training was seen as an essential ingredient, and Toyota focused on teaching people to be “service technicians” rather than just being “mechanics.” While the training program started small, with just one instructor, it was geared to flexibly meet the needs of students. Like Toyota itself, the goal was to start small, do things right, and grow from there.
So how did Toyota actually perform as far as the service technicians were concerned? To find out, Road Test interviewed George Wagner, the Service Manager for Len Sheridan Toyota in Santa Monica, CA. Wagner had previously worked for a domestic brand, so he was well positioned to compare Toyota with what he had experienced previously. His feedback was positive: he had ample praise for the quality of the products, the ease of servicing components as well as the speed in getting needed parts. For Toyota, even in 1968, the ‘back of the house” experience and how the customer felt after the sale, were just as important as the initial sale.
With a philosophy of product excellence, an ear for hearing market/consumer needs and an eye for detail, it is little wonder Toyota did so well so fast. While it all seems like common sense, it is actually rather rare even today. But Toyota still practices what they preach, though they have now grown into being a central part of America’s automotive landscape. Thanks to this long-term strategic thinking and customer-centric business approach, what started as big dreams in 1968 is a pleasant reality for Toyota today.