Toyota parts ways with marketing agency in cost-cutting drive

21 August 2018

Toyota is reducing costs across its sales and marketing campaigns, shifting funds into research and development projects.

The Japanese manufacturer has cancelled contracts with the Chinese unit of its long-term communication and advertising agency Dentsu, according to people familiar with the matter. The move is to ensure that the carmaker can keep up with new competitors across a broad range of technologies.

Toyota  President Akio Toyoda and Chief Financial Officer Koji Kobayashi wants to follow the example of Tesla, Google and Tencent, all of which rely heavily on cheaper, often more innovative non-traditional marketing.

They say the savings should be ploughed into investment in emerging technologies such as autonomous vehicles.

′We may be posting record profits, but we don’t think we are keeping up with their pace of investments,’ one of the sources, a senior Toyota official, told Reuters.

Toyota was frustrated with the cost of at least two events Dentsu organised in China: a ride-and-drive for Toyota’s premium Lexus brand in March, which infuriated Toyoda and Kobayashi due to the unnecessary extravagance of the event, and the Beijing motor show display stand for Toyota in April.

Toyota had attempted to cut the cost of its stand at the Chinese event, removing ceilings and furniture. According to sources, the company only managed to shave a fraction off the overall price and was not happy at the expense on a stand that would only ever be used once.

A review by the automaker showed ′out-of-control extravagance in how it executed those events, not over-billing,’ another one of the sources said.

It was not the first time Toyota had clashed with Dentsu; in 2016, the marketing company admitted to billing for services it did not perform.

Moving money to other developments would keep the Japanese manufacturer in line with other automotive giants, such as BMW and Ford, who are looking at cutting the number of options offered, or diverting funds from powertrain development, to focus more on electrification and autonomous research.

Toyota’s bosses want to move in-house much of the work that was initially outsourced by the company’s marketing departments, in order to take more control of spending and develop new ideas that would allow the company to publicise itself more efficiently.

Various manufacturers are looking at ways of engaging with consumers more effectively, and many are choosing not to attend big automotive shows. Instead, they are looking at building their online presence, or opening showrooms in more public locations such as shopping centres. As a result of these new ideas, the Detroit automotive show recently announced a change in dates and layout of the traditional event to entice both carmakers and consumers back.