SILLIMAN UNIVERSITY

College of Business Administration

Hibbard Ave 6200 Dumaguete City

Analysis of Toyota Vios Pricing Strategy and Policies

A Course Paper Presented to Dr. Gloria G. Futalan

In Partial Fulfillment of the Requirements for the Course

BA-OM 31P: Costing and Pricing

Submitted by:
Gatilao, Nicole Anne

Submitted to:
Dr. Gloria G. Futalan

November 21, 2022

Company and Product Background

Toyota Motor Philippines Corporation (TMP) is the largest automotive company in

the country, with the widest vehicle line-up of 20 Toyota models. There are more than 70

dealers for it across the country, including Lexus Manila, Inc., for its sales distribution and

service centers. GT Capital Holdings, Inc., Toyota Motor Corporation, and Mitsui & Co.,

Ltd. formed TMP as a joint venture on August 3, 1988. The best-selling Innova and Vios

are currently produced by TMP. As of the end of December 2020, its manufacturing facility

will be able to operate on two shifts and produce more than 55,000 units annually.

Toyota Vios is the best-selling vehicle in the Philippine auto market because it has

long been one of the most well-known car models. Of all the vehicles that Toyota Motor

Philippines has to offer, this Japanese-built model has contributed the most to sales.

Between January and September of 2021, Vios sold over 24,466 units, saturating the

local market.

Toyota Vios like any other car is mainly used as transportation for day-to-day life

activities. In the Philippines, Toyota Vios is used as a taxi since it has fuel economy, low

maintenance cost, and a low starting price for a sedan, the Toyota Vios offers great value

for capital investment. To add, it is also used as a company car since it only has a starting

price of Php. 686,000. Lastly, it is used as a family car of three to four because of its

safety features. The highest caliber safety features currently available are found in the

Toyota Vios such as more airbags, brake aid, stability control, clearance sonar, side

curtains, and ISOFIX tethers.

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Target Market Description

Customer satisfaction has always been Toyota Philippines' top priority. By going

above and beyond the scope of its core competencies to deliver fast and compassionate

customer service, it strives to be more than just a supplier of high-quality automobiles.

Toyota identified its target market in online platforms and in physical servicescapes. For

online platforms, Toyota approached Appier, a software-as-a-service (SaaS) company

that uses artificial intelligence (AI) to power business decision-making, with a KPI that it

wanted to achieve: 44,073 monthly visitors to the site. Appier tripled website traffic relative

to total site traffic before the campaign by using audience targeting, geo-targeting, topic

targeting, and cross-screen targeting.

Meanwhile, Toyota also identified its target market in physical servicescapes.

According to Toyota Motor Philippines Corporation (TMP), the target market for Toyota

Vios are first-time drivers. To add, the company’s target average age for Toyota Vios

purchasers is between 30 and 39 years old. In terms of sex, the company targets both

men and women. Last 2020 TMP found out that sixty percent of Toyota Vios owners are

men and forty percent are women. Additionally, 68 percent of Toyota Vios owners are

married. Lastly, the company’s segmented target market is also based on income. The

typical Toyota Vios buyer's household net income each month ranges between P80,000

and P85,000.

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Product Life Cycle Stage

Toyota Vios is currently in the growth stage because the demand is still growing,

there is an increase in production, it is becoming popular and recognizable, and with new

product variants. Toyota Vios demand is still growing since Toyota Motor Philippines

Corporation (TMP) sold 63,758 vehicles in the first half of 2021, according to the Chamber

of Automotive Manufacturers Philippines, Inc. The Toyota Vios, TMP's subcompact sedan,

is the main factor in the company's strong sales performance. It has consistently been

one of Toyota's best-selling cars in the Philippine market. The Toyota Vios is the car that

sold the most number in the Philippines last 2019. As the trend shows, Toyota’s

subcompact sedan has been reigning supreme in the Philippine automotive industry.

To add, Toyota Motor Philippines Corporation (TMP) increased the production of

Toyota Vios throughout the years to supply the growing demand. Despite difficulties

during the pandemic, Toyota Motor Philippines (TMP) has produced 119,336 units of

Toyota Vios as of May 2022. With 119,336 units produced locally, the demand in the

country has been satisfied. Sales of Vios have risen to 117,653 units as of May 2022, up

from July 2018.

Furthermore, Toyota Vios is highly popular and recognizable. Filipino automobile

consumers are familiar with Toyota's vehicles, the company has been a top seller in the

nation. The Toyota Vios is one of the models that helps with the claimed accomplishment.

By car consumers of all ages, the Toyota Vios has received acclaim and admiration for

its comfort, affordability, and safety features. It's a great option for active drivers who

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prefer the sporty look, enthusiastic families who enjoy taking family vacations, young

corporate professionals, and business owners looking for a useful and dependable

vehicle for their fleets.

Lastly, Toyota Vios is still in the growing stage because it releases new product

variants on a yearly basis. Toyota has added a number of new, reasonably priced

variations to the model portfolio, including the XE which stands for ‘Xtra Economical, Xtra

Efficient, and Xtra Easy to Drive’ and the XLE or Executive Luxury Edition, both of which

come equipped with CVTs (Continuously Variable Transmission) that are essential for

drivers in the country's congested roads. The E and G varieties, which continue to be the

major Vios products, are joined by these variants. In August of 2020, Toyota Philippines

would then give the Vios another refresh, this time giving it a new front end, a price

reduction, and a few new amenities. Additionally, Toyota Motor Philippines added the

Gazoo Racing Sport, or GR-S, as a new trim level to the variation of Toyota Vios.

Current Market Place

For the past quarters of 2022, Toyota Motor Philippines Corporation (TMP) led the

market with a 50.99% market share. Toyota Motor Philippines Corporation (TMP) is the

market leader in the automotive industry in the Philippines. Toyota continues to be the

most popular vehicle brand in the Philippines as of April 2022, selling 13,715 units. Toyota

is first in sales of passenger vehicles like the Toyota Vios with 3,680 units sold, followed

by Mitsubishi with 801 and Honda with 712. With 50.99 percent of the market and 50,945

units sold so far this year, Toyota has the highest market share. Mitsubishi is second with

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13.28 percent and 13,270 units sold, Nissan is third with 7.59 percent and 7,586 units

sold, and Suzuki Phils., Inc. is fourth with 6.30 percent and 6,294 units sold. Last 2021,

the Vios (+38.8%) increased to 11.9% share vs. 10.2% in 2020, the Hilux (+39.1%)

increased to 6.4%, and the Wigo (+47.6%) increased to 5.9% in third place, Toyota

monopolizes the top 6 for the first time.

Current Pricing Package

Toyota Vios Variants and SRP Price

1.3 Base MT Php. 686,000.00

1.3 J MT Php. 712,000.00

1.3 XE CVT Php. 769,000.00

1.3 XLE MT Php. 811,000.00

1.3 XLE CVT Php. 862,000.00

1.3 E MT Php. 866,000.00

1.3 E CVT Php. 916,000.00

1.5 G MT Php. 926,000.00

1.5 G CVT Php. 985,000.00

GR-S Php. 1,035,000.00

Distribution channel

The distribution channel of Toyota Motors Philippines (TMP) for Toyota Vios

follows an indirect channel that starts with the producer then the retailer, and lastly

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consumer. Toyota produces and retails its own car. Production starts in Toyota’s head

office and manufacturing plant. The 82-hectare Toyota Special Economic Zone (TSEZ),

which is in Santa Rosa City, Laguna, is home to TMP's corporate headquarters and a

production facility. The Innova and Vios, best-selling units, are produced with pride at the

TMP factory. When operating on two shifts, it can produce 35,433 units annually.

Toyota retails through the company’s own dealers. There are 72 dealerships all

over the country whereas 18 are in NCR Region, 30 in Luzon, 13 in Visayas, and 11 in

Mindanao. Toyota distributes its products through a variety of shops and dealerships to

reach as many clients as possible. To add, Toyota uses showrooms, exhibition halls, and

even special events for distribution, which helps with brand promotion.

Finally, retailers need to make sure that the product will reach the customers.

Toyota depends on the dealer to draw in clients, persuade them to buy Toyota cars, and

maintain the vehicles once the sale has been completed. The company additionally

depends on many dealers to provide excellent sales and services that will uphold the

reputation of Toyota and its dealer body. As a matter of fact, each Toyota dealer's success

depends on how successfully the company's entire distribution network competes with

those of other automakers.

Present Marketing Strategy

The present marketing strategy of Toyota Vios is seen in the marketing mix of

Toyota Motors Philippines (TMP). The 4Ps of the marketing mix are product, promotion,

place, and price. Aside from the product variants of Toyota Vios, Toyota offered diverse

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services in its value chain offerings that may be an additional value through services when

purchasing a Vios. One of the value chain offerings is Toyota financial services which

offer a variety of vehicle financing solutions for customers. To add is Toyota insure, an

exclusive insurance service program for those who are buying a new vehicle or renewing

their insurance policies. Also, Toyota quality service that provides maintenance services

and privileges for a worry-free and delightful ownership experience. Lastly, Toyota

genuine parts that offer parts of superior quality, made to fit the exact specifications of a

Toyota vehicle. These are just some of the value chain offerings of Toyota Motors

Philippines that help in marketing the Toyota Vios.

Furthermore, Toyota uses seasonal promos, down payment promos, freebies, and

free test drives to promote its products. In addition, dealers owned individual Facebook

pages to feature the promos of Toyota. In the Toyota Dumaguete City dealership store,

the most recent seasonal promo of Toyota Vios is called a Holiday Sale. The all-in down

payment (DP) for Vios is Php. 49,000.00. This means that a cost of Php. 49,000.00 you

can have your own car. However, last July the same Toyota dealership store had a Rainy

Day Deal, an All-in Low DP promo, that offered a Php. 7,000.00 down payment for Vios.

In addition, free test drives of Vios may encourage the customer to buy by experiencing

the value and comfort of the car before buying. Toyota is making its promotional offerings

dynamic to encourage the customer to buy and target various market segments.

Meanwhile, the place is also important because it must be appropriate and

convenient for the customers. Toyota invests in building the dealership stores thus it

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considers the location, building design, and land area. In terms of the location, it must be

urbanized where there is foot traffic. Customers are going in and out of the establishments.

It is important to choose this location because it can be considered the center of trade for

a specific region e.g. Dumaguete City. Despite that Negros Oriental has other cities like

Guihulngan, there is no dealership store because it can’t be considered as the center of

trade. One can tell a location is the center of trade when this is where most malls,

restaurants, hotels, etc. are located and with a high number of buyers from other areas.

Choosing such will enable Toyota dealers to target various customers from different

segments. In addition, Toyota dealership stores have uniformity in design to impose to

the minds of the customers that such a store is an official dealership store. Uniformity can

be seen in the interior and exterior design of the building. Also, one can observe that the

dealership store is full of windows. It encourages potential customers to check the

products displayed and may capture one’s interest in considering the product. Lastly, land

area is also considered. It is cost-efficient for Toyota to have the company’s casa in one

location with the dealership store. The office for both departments can be situated in one

location hence it is favorable for customer transactions.

Lastly, Toyota’s pricing strategy is based on its policies whereas it is leading an

industry-wide increase and economic-based. In terms of policies for leading an industry-

wide increase, Toyota Motor Philippines (TMP) implemented a nationwide one-price

policy. From March 16, 2020 onward, provincial dealers will no longer be able to charge

various pricing based on various freight expenses. This means that buyers can purchase

a Toyota from any authorized dealer outlet at the intended standard suggested retail price

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(SRP), regardless of where they are located—in the National Capital Region, Luzon,

Visayas, or Mindanao. For economic-based policies, due to the weakening peso, the

company needs to increase its prices. Toyota Motor Philippines has just announced a

series of price increases affecting its vehicles starting this month. The company blames

the depreciation of the Philippine Peso as well as the increasing cost of supplies and

freight (including gasoline expenses). The Raize, Avanza, Veloz, Alphard, Hiace, Coaster,

and the two cars built in Santa Rosa, the Innova, and Vios, are also affected by this round

of price rises. In the case of the Innova and Vios, the sticker price increase may only be

small (adding Php. 5,000), but it may also rise to Php. 80,000 for Alphard and Coaster.

Overall, the marketing strategy through 4Ps or marketing mix of Toyota Motors

Philippines (TMP) is effective in attaining the customer’s demand and satisfaction. The

value proposition of Toyota Vios and other TMP units is delivered through this, and it was

able to successfully target various market segments because of product variants, uniform

building design, one-price policy, etc. In addition, its marketing strategy of Toyota added

attributes in terms of service which can increase customer patronage. With an effective

marketing strategy, for the past years, Toyota is the market leader of the automobile

industry in the Philippines.

Recommendation: Policies for Managing the Price Increases

Due to variables outside the company's control, price increases are unavoidable.

Economic issues including inflation, dollar depreciation, and supply shortages are

examples of external influences. It is expected that Toyota Motors Philippines (TMP)

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implemented a price increase. For the past months starting after the election, the inflation

rate continues to increase, and the peso continues to be weak against the dollar. In

addition, a geopolitical factor also added to the reasons for the increase since it affected

gas prices. Some parts and units of Toyota are imported into the Philippines hence there

are freight costs. To protect the business and generate income prices must increase.

Toyota must prepare a tactical strategy in its pricing strategy through pricing

policies so that the company can protect itself from unpredictable and dynamic market

changes. Last 2020, Toyota implemented a one-price policy which is effective because

there will be no outliers in their consumers which are the outlaws and at-risks. Toyota

does not have the implement additional promo or pricing to cater to these outliers which

can lessen costs. The tactical strategy of Toyota must prepare them with consistent price

ceilings and price floors on their down payment. Due to the seasonal promo, one can

have a car for Php. 7,000 as a down payment. In order to sustain the operations of the

business, Toyota must set an acceptable range on the down payment because if it is too

low it might not able to sustain the operations for that certain dealership store and if

otherwise, it might discourage the customers to buy the car.

In addition, Toyota must institutionalize its seasonal promo in such a way that all

dealership stores in all regions have the same promo such as BerMonth Promo. This will

lessen comparison to other stores that might be asked by the customers. For each dealer

store, there is a quota implemented by the company, and to help them reach their quota

the seasonal promo must be the same in all stores because the customer might prefer

the other store due to better offerings. It is also the duty of Toyota to support the

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dealership stores. Hence, it must be implemented in the pricing strategy and policy of

Toyota.

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References:

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Cahiles-Magkilat, B. (2022, June 28). TMP's Vios production hit 119,336 units to date.
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