Subaru Success through Knowing Customers Well

At a time when many dealers nationwide are struggling, Subaru of Glendale owner, Sam Ershadi is expanding his store. Ershadi says, “Our customers were not affected by the recession. They have a better financial situation.”

He’s right—the typical Subaru owner is financially sound, with a “taste for the quirky.” The company made it through the horror that was 2009 with solid sales and market share. Last year saw Subaru become the 11th most popular brand in the U.S., placing it eight spots above where it was the previous year. Subaru is the fastest growing mass-market car brand in the U.S. for the last two years.

Subaru, which is the auto arm of Japan’s Fuji Heavy Industries, has long been popular in the Northeast and the Northwest. Recently, however, they’ve been popular well beyond those regions. Rebecca Lindland of HIS Global Insight in Lexington, Massachusetts says, “People have been finding out about them outside of New England. They are quietly successful, and their buyers appreciate that. They haven’t abandoned their core.”

The reason Subaru has been successful even through the recession is that they understand who buys their cars, and they are aggressively reaching out to new potential buyers they feel would fit well with the brand. The average income of Subaru owning households is $88,000, which is roughly the same as Honda and about $10,000 more than Toyota, according to Alexander Edwards, president of Strategic Vision market research firm. Subaru owners are three years younger than the industry average and 25% more likely to have a college education.

Thirty six percent of consumers who buy Subaru vehicles pay cash. They are a frugal bunch, who consistently buy less car than they can afford. As a result, the company cut around $1,200 from the average price of its cars three years ago. It hasn’t lost out in profits, though, because it offers the lowest level of incentives of any major carmaker—approximately $1,333 per car.

The company spends most of its marketing money on strengthening customer connections. People attracted to the brand are eco-friendly and like having the freedom to travel when and where they wish. Chief Marketing Officer Tim Mahoney says they are “customers who are not buying things, but experiences.”

Last year Subaru sold 216,652 cars in the U.S. Production at its plant in Indiana will be increased by 40% this year. The facility is located within an official wildlife preserve and sends no waste to landfills. The company supports a number of environmental groups including the American Canoe Association and the Leave No Trace Center for Outdoor Ethics.

Brand building is a much cheaper way of advertising than the routes taken by many other companies, which is also part of Subaru’s recipe for success. Subaru spends $100 million less than Volkswagen, one fifth of what Hyundai spends and an even smaller percentage of the $2.2 billion spent by General Motors, who is the biggest spender in the industry.

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