Toyota’s sales Strategy

Toyota has hardly needed to do anything to sell its hybrid-electric Prius, which always had more buyers than Toyota had cars, but sales have flattened just as it is able to produce more Priuses.

So Toyota is planning to begin its first national advertising campaign for Prius since it began selling the hybrid in the US in 2000. Ads will begin appearing in local markets before then. Toyota has also started offering the first incentives on the Prius, including some no-interest financing, and lease deals of as little as $219 a month.

The moves by Toyota come amid flat sales last year for Prius, whose first six years in the American market were a carmaker’s dream. Dealer had waiting lists of as long as a year for Prius, which runs on a combination of an electric motor and a gasoline engine. Buyers routinely paid several thousand dollars more than the $22,175 sticker price.

After gasoline prices spiked above $3 a gallon a few months back, Toyota had only a three-hour inventory of Prius cars. It sold 106,971 Prius cars in the US last year, out of about 280,000 Prius cars sold worldwide.

But as gas prices dropped, Prius inventories climbed to a 30-day supply in January ‘07. The situation is of particular concern now that Toyota can build more Priuses, which had been produced in limited numbers in Japan. Speaking at the Chicago Auto Show their Marketing Director said that Toyota might be able to get as many as 170,000 Priuses to sell in the US this year, a potential increase of 70%.

But to reach that level, Toyota needs to do more to generate demand. This is the challenge that keeps the director up at night about Prius. Toyota has chosen a two-pronged approach that focuses on advertising and dealer training.

The company has been frustrated by customers who say they are interested in the Prius, but back away from buying at the last minute. Some buyers are confused about its hybrid technology while others fear that its battery might run dry and leave them stranded. Still others worry that they will not save enough on gasoline purchases to make a Prius worthwhile.

The company may sure come out with more incentives to customer including incorporating and clarifying technical aspects to potential customers so that their apprehensions are taken care.