On August 23rd, Toyota launched the 2012 Toyota Camry. The launch is important to Toyota as since 2007 Camry has accounted for 1 in 5 Toyota US sales, and for many years was the best-selling car in the US. Since the last Camry launch, Toyota has faced a multi-million vehicle recall and the devastating Japan earthquake and tsunami that significantly disrupted production. Furthermore, segment competition has evolved significantly since Camry’s last launch, driven by the Sonata, Fusion, and Passat. So in addition to being important based solely on sales, the industry will be watching the launch of 2012 Camry as a leading indicator of the success of Toyota’s resurgence. As a result of the increased attention Compete assessed current market conditions and developed some post-launch scenarios for the Camry.
To assess the baseline market conditions prior to launch, Compete compared today’s Camry against the Accord, Sonata, and Fusion. The comparison leverages Compete’s proprietary in-market automotive shopper metrics, which are based on unique consumers (i.e., no double-counting of consumers doing the same activity more than once in the same month). Those metrics in turn leverage Compete’s patented normalization technology.
Baseline Shopper Volume: 2011 is an atypical year with the combined effects of the recession and the Japan earthquake. After remaining relatively steady at 65,000 – 75,000 for the 1st quarter of 2011, Camry shopper volume increased substantially through July. The gain may reflect Toyota seeking to prime the awareness pump prior to the launch (as a foundation for ads for the 2012 Camry), but it may also reflect a re-start of Toyota advertising in general to the extent ads were suspended in response to low vehicle stocks. Camry’s key competitor, the Accord, shows a similar pattern. In CY 2011 to date, Camry trails the set at approximately 84,000 shoppers.
Goal: The “healthiest” sales are demand driven rather than conversion-driven, and currently Camry leads sales for the set (see table below) despite having the fewest shoppers. A reasonable goal for the 2012 Camry would be to once again lead the set in shoppers. Assuming substantial ad support, a reasonable shopper volume goal for Camry would be as high as 150,000 shoppers at launch, stabilizing at near 120,000 shoppers. For context, the 2007 Camry had 280,000 shoppers during its launch peak, though that was pre-recession, before the current Sonata, Fusion, and Passat were in the mix, and before the wave of Toyota recalls.
Baseline Conversion: As Camry has had fewer shoppers than key rivals, Toyota has used more aggressive conversion of shoppers to buyers to drive sales. As a result, Camry’s average YTD conversion of 29.7% led the competitive set, which averaged 24.4%. Higher end-of-cycle conversion is common as an automaker works to sell-down outgoing inventory, however higher conversion often requires higher incentives.
Goal: Conversion often temporarily declines at launch: successful ad spend creates a surplus of shoppers and at the same time incentives typically decrease and dealers may be less willing to negotiate. In addition, it may take a few months for supply, mix, and distribution to be optimized. All of this means lower conversion.
- Target 25,000 retail sales per month: Camry conversion could be as low as 17% during launch with 150,000 shoppers to yield 25,000 retail sales. Conversion would need to recover to 21% if Camry shoppers drop to 120,000. Furthermore, it would need to recover to 25% (near the recent rival set average) if shopper volume settles in at 100,000.
- Target 30,000 retail sales per month: Camry conversion could be as low as 20% during launch with 150,000 shoppers to yield 30,000 retail sales. Conversion would need to recover to 25% if Camry shoppers drop to about 120,000 shoppers. Furthermore, it would need to recover to 30% if shopper volume settles in at 100,000.
- For either sales scenario, retail sales goals could be met with lower conversion if shopper volumes are higher.
The following chart (referencing data in the table above) shows combinations of shoppers and conversion more consistent with demand-driven sales that would yield 25,000 monthly retail sales (blue triangle) and 30,000 monthly retail sales (green diamond). The YTD Camry average is shown as the purple circle.
As the Camry launch plays out over the next few months, we will be looking to assess the following:
- A ramp up in shopper volume high enough to meet sales goals
- Cost-effective launch ad spend (based on dollars spent per shopper generated)
- Launch-typical conversion patterns (lower at the onset, but improving over six months or so to set-typical)
- Solid shopper volume resonance once ad spend ends
- Optimized use of any incentives throughout and after the launch period
- The ability of the Camry to capture spillover demand from rivals’ tactics in the months after the launch
While these metrics will help Toyota quickly assess Camry’s launch performance, the best first step is to create Roadmaps to monitor the success of the launch. These are combinations of realistic shopper volumes and conversions that yield retail sales goals. Roadmaps set expectations and allow Toyota to quickly develop focused responses if the launch goes better—or worse— than expected. If worse, they effectively highlight the extent to which a lack of demand or a lack of conversion is the primary culprit.
Tom Lucido is a Sr. Associate at Compete. At Compete, Tom is responsible for client deliverable management for the automotive team. Before Tom joined the Compete Team he worked at J.D. Power and Associates on the production and delivery of Auto Finance and Banking customer satisfaction studies and advisory projects. Connect with Tom on LinkedIn