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CASE STUDY ENTIRELY COMFORTABLE WITH ITS ORIENTATION: SUBARU’S SUCCESSFUL HISTORY OF GAY/LESBIAN INTEGRATED MARKETING COMMUNICATIONS 01/05/2010 ABSTRACT: This case study examines an integrated marketing communications success story: Subaru’s 14-year unwavering, authentic relationship with the gay and lesbian communities during which sales have doubled. Subaru reached out to the gay and lesbian consumers in 1995, beginning with corporate sponsorship of the Rainbow Card, followed by gay and lesbian-specific advertising campaigns and numerous strategic sponsorships. Subaru’s corporate communication efforts were and continue to be revolutionary considering U.S. public opinion of gays and lesbians at the time, the potential for consumer backlash, and the media landscape. Subaru’s activities are compared with outreach from the Ford Motor Co., including the latter’s mishandling of a boycott by the American Family Association (AFA). TABLE OF CONTENTS Overview…………………………………………………………………………………………..4 The U.S. Automotive Industry…………………………………………………………………….5 Industry Marketing Expenditures…………………………………………………………6 Brief History of Gay and Lesbian Marketing………….………………………………………….7 Providing Context: Gay Marketing, Circa 1996…………………………………………..9 IKEA, AT&T, and John Hancock Receive Conservative Backlash………….………….10 Gay and Lesbian Automotive Ads…………………………….…………………………10 Subaru…………...……………………………………………………………………………….11 Company History…………………………………………………………………….......11 Sales Figures……………...……………………………………….……………………..12 2010 Product Lineup……………...…………………………………………….………..13 Market Research Reveals Lesbian Niche Market………...…………………………..….13 External Communication Efforts………………………………………………………...14 Profile of a Subaru Owner: Brand Loyalty……………………………………………....14 Brief History of Subaru’s Gay and Lesbian IMC Efforts……………….……….……....15 Founding Sponsor Card……………………………………….…….15 of Rainbow Progressive Advertising in Gay Media……………………………………….….15 Sponsoring Gay and Lesbian Events……………………….……………………17 TV Brand Integration: Team Eco-Subaru and The L Word……………..…….....17 Partnering for AIDS Research…………………………………………………...18 Founding Sponsor of Sirius OutQ and Logo…………………………….………18 Gay Organizations Recognize Subaru’s Efforts……………………………………..…..19 Consumer Feedback for Gay and Lesbian Outreach……………………………....…….20 Increased Sales Due to Outreach……………………………………………………..….21 Ford Motor Company……………………………………………………………………………21 Ford’s Gay-Friendly History………………………………………………………….….21 2 Gay Organizations Recognize Ford’s Efforts…………………………………………....22 Jaguar, Volvo, and Land Rover Begin Advertising in Gay Media……………………...23 AFA Boycotts Ford for “Homosexual Agenda”………………………………………...24 Contrasting Subaru and Ford Motor Company…………………………………………………..26 Subaru’s Current Dilemma: IMC Sustainability…………………………………………………27 Appendix I……………………………………………………………………………………….28 Appendix II………………………………………………………………………………………29 Appendix III………………………………………………………………………………….…..30 Appendix IV……………………………………….……………………………………………..31 Appendix V………………………………………………………………………………………32 Appendix VI……………………………………………………………………………………...34 References……………………………………………………………………………………......35 3 ENTIRELY COMFORTABLE WITH ITS ORIENTATIONa: SUBARU’S SUCCESSFUL HISTORY OF GAY/LESBIAN INTEGRATED MARKETING COMMUNICATIONS Companies can’t just throw one ad at gay consumers and think they’re done. – Mike Wilke, Founder and former Executive Director of the Commercial Closet Association1 OVERVIEW In 1994, Subaru’s market research team discovered a core consumer base they had not previously identified: lesbians. Market research indicated that lesbian Subaru owners had a high socioeconomic status and an active lifestyle, complimenting Subaru’s four existing consumer bases,2 and were four times as likely as their heterosexual counterparts to own a Subaru.3 Armed with this knowledge, in 1995 Subaru embarked on a new integrated marketing communication strategy designed to reach lesbians and gay men. The first step was corporate sponsorship of the Rainbow Card, followed by gay and lesbian-specific advertising executions and numerous strategic sponsorships. Despite the myriad industries advertising in gay media circa 1996, relatively few companies overall were willing to risk potential consumer backlash, particularly traditionally conservative automotive companies. IKEA, AT&T, and John Hancock all received intense consumer backlash for their gay and lesbian marketing efforts and pulled their campaigns immediately, causing other companies to avoid the market altogether. To understand the risk involved in Subaru’s decision, a brief history of gay and lesbian marketing is included, with special emphasis placed on the automotive industry. During Subaru’s 14-year history with the gay and lesbian communities, the company has cultivated an unwavering, authentic relationship with key external stakeholders. While Ford Motor Company has also partnered with the gay and lesbian communities for over a decade, its track record is troubled. Ford was entangled in a 2005-06 battle over gay advertising with two opposing stakeholders: the conservative American Family Association (AFA) and numerous gay organizations. Despite its gay-friendly outreach, Ford handled the boycott in a secretive, indirect manner that led to many questions – from both stakeholder groups. To understand why Ford was the target of a boycott while Subaru was not, four factors should be considered: 1) sizes of the Japanese and American auto manufacturers; 2) sales; 3) target markets; and 4) ad spending. As competition increases and more automotive companies are developing relationships with gay and lesbian stakeholders, Subaru will need to retain its competitive advantage using corporate communication tactics. In the highly competitive automotive industry, it is necessary for Subaru to prove that its IMC strategy is sustainable into the next decade as well. Furthermore, a This phrase is a tagline used in a 1998 Subaru print advertisement. See Appendix I. 4 Subaru needs to grow its consumer base by pursuing other niche markets without damaging the relationships it has cultivated thus far. THE U.S. AUTOMOTIVE INDUSTRY According to JD Power and Associates, there are over 40 automotive makers selling vehicles in the United States today.4 The United States, the largest market for light vehicles in the world, saw sales of over 13.2 million vehicles in 2008. One year prior, sales exceeded 16.1 million vehicles.5 See Table I for a breakdown of 2008 U.S. sales by company: Source: Ward’s Automotive6 The automotive industry, one of the largest manufacturing industries in the United States today, has been in turmoil for the past few years due to factors such as the economic recession, increased oil prices, and poor management decisions. By February 2009, U.S. automotive sales were the lowest they had been in the past 25 years.7 American-owned General Motors and Chrysler received a combined $17.4 billion bailout from the U.S. government in December 2008.8 A few months later, Chrysler filed for Chapter 11 bankruptcy on April 30, 2009;9 General Motors followed suit on June 1, 2009.10 In 2008, Japanese auto manufacturers led U.S. sales, comprising 47.5% of the market. American manufacturers comprised 34.8% of total U.S. sales, followed by other foreign imports (primarily European) at 17.7%.11 To stimulate sales, the U.S. government initiated the car allowance rebate system (CARS) on July 1, 2009,12 commonly referred to as “cash for clunkers.” Under the program, in exchange for trading in a drivable vehicle 25 years old or newer that received 18 miles per gallon or fewer, consumers could receive a credit of between $3,500-$4,500 on the purchase of a new, more fuel efficient vehicle.13 The program lasted until August 25, 2009; 700,000 vehicles were 5 traded in for government rebates totaling $2.9 billion.14 Japanese manufacturers accounted for 7 of the top 10 models purchased under the stimulus program.15 INDUSTRY MARKETING EXPENDITURES Automotive companies typically devote approximately 10% of their total sales revenues to marketing efforts, of which advertising comprises just one portion. However, due to the economic recession and rising fuel costs, both of which have significantly reduced new auto sales in the latter part of the decade, automotive companies have spent an average of 14% of their total sales revenues on marketing efforts.16 The automotive industry is the leader in total ad spending,17 allocating nearly $10.1 billion to advertising in 2008. Despite a decrease of 15.5% over 2007’s expenditures, the industry continues to lead ad spending even in its current economic state.18 Ad spending for the top 10 product categories is shown in Chart I: Chart I: 2007-08 Top 10 Advertiser’s, By Product Category Product Category Automotive (Factory & Dealer Assoc.) Pharmaceuticals Local Auto Dealerships Quick Service Restaurants Department Stores Wireless Telephone Services Motion Pictures Direct Response Products Restaurants Furniture Stores Total: Top 10 Product Categories 2008 (millions) $10,016.1 $4,344.1 $4,198.3 $4,080.5 $3,809.9 $3,431.4 $3,322.1 $2,576.9 $1,618.6 $1,580.8 $39,060.0 2007 (millions) $11,854.4 $5,325.3 $4,604.6 $3,932.8 $3,994.2 $3,731.6 $3,750.6 $2,358.9 $1,619.4 $1,636.2 $42,808.1 Source: The Nielsen Company19 Five automotive companies made it onto Nielsen’s 2008 list of top advertisers, across all industries – GM, Toyota, Ford, Honda, and Chrysler. See Chart II for a complete breakdown of top 10 companies’ 2007-08 ad spending, in millions: 6 Chart II: 2007-08 Top 10 Advertiser’s, By Parent Company Parent Company Proctor & Gamble Co. General Motors Corp. AT&T Inc. Verizon Communications Inc. Toyota Motor Corp. Ford Motor Co. Johnson & Johnson Time Warner Inc. Honda Motor Co. Cerberus Capital Management Average Ad Spending 2008 (millions) $2,848.2 $2,117.7 $1,662.7 $1,614.8 $1,555.0 $1,416.1 $1,211.0 $1,077.4 $1,016.6 $1,002.6 $1,552.2 2007 (millions) $3,531.1 $2,488.6 $1,792.1 $1,636.3 $1,665.0 $1,981.6 $1,280.1 $1,411.4 $1,045.9 $1,456.7 $1,828.8 Source: The Nielsen Company20 BRIEF HISTORY OF GAY AND LESBIAN MARKETING To reach niche markets efficiently and cost-effectively, marketers run ads in niche media and/or sponsor events unique to that market. When companies began reaching out to gay men and lesbians in the 1980s, they ran ads in gay print media and sponsored gay/lesbian pride events.21 Later, “gay marketing” expanded into mainstream media by including gay and/or lesbian spokespersons in ads,b without necessarily targeting the niche markets.22 As will be discussed later in the study, while Subaru has largely tailored its efforts to gay and lesbian media, Subaru has crossed over into mainstream media, most notably by using a lesbian spokeswoman: tennis champion Martina Navratilova.23 Financial data about ads featured in gay and lesbian media was first collected in 1994, through the joint efforts of New York-based multicultural advertising agency Prime Access and New Jersey-based media placement firm Rivendell Media, Inc. Titled The Gay Press Report, the firms jointly publish an annual “state of the industry” report with breakdowns of ad spending in gay media. As illustrated in Table II, ad spending more than tripled between 1994 and 2007 from $53 million to $182 million, respectively. As with mainstream media, gay and lesbian media felt the financial impact of September 11, 2001, as companies poured less money into advertising, and again from 2007 to the present, as the U.S. battles an economic recession. Prior to the recession, 2006 saw record-breaking revenues of $223.3 million, no doubt impacted by MTV Networks’ introduction of Logo, a cable television channel that provided marketers with direct access to b An example of this type of mainstream advertising is the 2009 CoverGirl Simply Ageless campaign; Ellen, an out lesbian, is featured in the campaign, but lesbians are not the primary market. 7 millions of gay men and lesbians. See Table II for a historical overview of ad spending in gay and lesbian media: Source: Prime Access, Inc.24 Table III illustrates the percentage change in ad revenue between each year. 1997 and 2000 both saw large increases, upwards of 36%, illustrating the pre-9/11 boom: Source: Prime Access, Inc.25 8 PROVIDING CONTEXT: GAY MARKETING, CIRCA 1996 Around 1996, when Subaru began advertising to the gay and lesbian communities, companies in several industries were targeting gay and lesbian consumers, namely: • Alcohol: o Absolut Vodka (1987)26 o Miller Brewing (1987)27 o Tuaca (1995)28 o Bud Light (1996)29 o Sauza Tequila (1998)30 o Beefeater Gin (1998)31 o Johnnie Walker Red Label Scotch (1999)32 • Financial: o Wells Fargo (1980s)33 o AMEX (1992)34 o Aetna (1998)35 o Chase Manhattan Corporation (1998)36 o Citibank (1998)37 o Merrill Lynch & Company (1998)38 • Furniture: o IKEA (1994)39 • Telecommunications: o AT&T (1994)40 • Apparel: o Diesel jeans (1995)41 o 2(x)ist underwear (1996)42 o Levi’s (1999)43 • Airline: o Virgin Atlantic (1995)44 9 o United Airlines (1997)45 • Tobacco: o R.J. Reynolds Tobacco Co. (1996)46 o Philip Morris (1999)47 • Computer: o IBM (1997)48 • Pharmaceuticals: o Merck (1997)49 o SmithKline Beecham and Abbott Laboratories (1997)50 o Bristol-Myers Squibb Co. (1997)51 • Insurance: o The Hartford (1998)52 o John Hancock (2000)53 Despite the wide array of industries advertising in gay media, relatively few companies overall were willing to risk potential consumer backlash, particularly automotive companies. Harry Taylor, publisher of leading gay magazine Out, explained that automotive companies “politely declined” Out’s request for ads in 1996.54 IKEA, AT&T, AND JOHN HANCOCK RECEIVE CONSERVATIVE BACKLASH Marketers may have been reluctant to advertise in gay media based on the backlash experienced by IKEA, AT&T, and John Hancock. After running a mainstream television commercial featuring a gay couple in 1994, IKEA received a bomb threat at one of its stores. Kathy Delaney, President/Chief Creative Officer of Deutsch (IKEA’s ad agency) explained, “We knew it was going to be a polarizing decision but we thought it was the right one.” IKEA ceased using same-sex couples in its television advertising until 2006 when the company debuted a second commercial featuring a gay couple, this time with a child in tow.55 Also in 1994, AT&T sent direct mail pieces with tailored messaging to gay and lesbian consumers for the first time. Conservative organizations learned of the telecom company’s marketing activities and protested. AT&T pulled the campaign after mailing one piece of collateral,56 steering clear of the market until 1999.57 10