Lexus Marketing
Content
MKT203 MARKETING MIX MANAGEMENT END-OF-COURSE ASSESSMENT
TABLE OF CONTENTS
Question 1.........................................................................................………..…01 Question 2..........................................................................................……...…..03 Question 3.............................................................................................……......05
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Question 1 In marketing, there are several product levels that company need to look at before setting out to market their products. These levels can be broken down into the following, the core benefits, the basic product, expected product and augmented product. Using Lexus as an example, we will look its product level definitions. Core Benefits When customers want to buy a Lexus branded car, they are essentially buying a transportation device. Lexus, being designed and manufactured by Japanese car maker Toyota who had started car manufacturing in 1936, with their years of experiences would have no problem fulfilling this core benefit, which is to provide a transportation device to the buyer. This is often refer to as the core benefit, or the first level of the product. Basic Product On the next level, Lexus will need to look at the basic benefits that its customers would look at while buying their products. At this level, basic features of the product, like the engine, car seats, storage space, navigational systems, sound systems and interior cabin are taken into account. Lexus, being a premium brand, places a lot of emphasis on these features to differentiate themselves from other brands of automotives. Expected Product At the third level, Lexus would need to prepare attributes and conditions that the customers choosing a car would normally expect from Lexus. Customers would expect high quality leather seats, quiet engine operation, superior sound system among others from the Lexus branded car that they buy. Lexus on the other hand, spends a lot of time designing the outlook of the car, tuning the engines that go into their car, ensuring that the safety of their cars exceeds the requirements during accidents, fuel economy, as well as tying up with various company to provide premium products that are incorporated into their cars. Augmented Product At this fourth level, marketers will need to prepare a product that will need to exceed a customer’s expectation. It is also at this stage that Lexus is able to differentiate itself from its competitors in the premium cars market. Lexus has done the differentiation on two fronts, by product differentiation and by service differentiation.
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On the “product differentiation “ front, Lexus has tried to stand out from the rest of its competitors by concentrating on a several factors. One of the main product differentiation that Lexus used was the reliability of its cars. Lexus cars are manufactured by Toyota, aimed at the luxury car market, hence they leveraged on the image of reliability of cars manufactured by the Japanese car manufacturer, Toyota. This also helped to boost the confidence of customers, although this has being slightly affected by the recent recall of more than 9 million cars by Toyota. To further enhanced its reliability image, Lexus is also one of the few auto manufacturer to provide 5 years warranty on some of the car models offered. Another product differentiation that Lexus has used is the product features that is different from its competitors. Lexus has always been on the fore-front of safety features incorporated into its automotive. It was among the first manufacturers to incorporate something called the “Lexus PreCollision System (PCS)” that integrates multiple safety systems like lane keep assist, driver monitoring system, infrared and pedestrian detection systems, as well as backup cameras, swivel headlights into the cars it designed and produced. The third product differentiation that Lexus has used is the different form, or range of products models that customers can choose from. Lexus manufactured models from compact, midsized, full sized, convertible, sports utility vehicles to limited edition sports model, and customers can choose the model based on their needs, and wants. Lexus is banking on once the customer buys into the Lexus branding, when it’s time to change to another vehicles, they will upgrade to another model within the same brand. The fourth product differentiation that Lexus used is the conformance quality its cars. Lexus, has developed close to 500 specific product standards known as “Lexus Must”, that each Lexus designed vehicles must conformed to during development and production. This is to ensure that each and every vehicles that rolled out from the plant are uniform in outlook, design as well as performance standards. Another differentiation that Lexus has always emphasised on the level of customer service to its Lexus customers. Borneo Motors in Singapore, has showrooms, service centres, body-care centre as well as parts centre dedicated entirely to Lexus brands only. This helps to project exclusiveness of the brand for its customers. The ability of Lexus customers to book car servicing online is another point of service differentiation that Lexus and Borneo Motors hopes to achieve. In addition, Borneo Motors also has a Lexus Club for Lexus drivers to interact with other Lexus drivers.
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Question 2 The pricing objective that Lexus and Borneo Motors in Singapore has chosen for their cars is the “Product-Quality Leadership”. The objective of Lexus is to be portray as a product quality leader with perceived high product quality and status whilst maintaining prices that are affordable to its customers. Lexus branded vehicles, has always been marketed by Toyota to its global customers as the company’s luxury counterpart to its Toyota branded vehicles. From the design process, to the manufacturing of the vehicle, the method is which the vehicles are sold and serviced has always been done to showcase that the brand is as luxurious when compared to the German or Continental car manufacturers. Lexus engineers has also refine the manufacturing process to match what their customers look for when selecting luxury vehicles, which is the quality of build, the ergonomics of the various features in the car, the interior cabin spaces. These helps to enhance image the Lexus cars are top-notch in build quality and worth the premium that customers are paying for. Despite the higher price that customer would be paying for when compared to typical Japanese manufactured car, it is still low compare to German or Continental luxury cars. This would enticed the customer towards Lexus, as they are paying less, while getting higher quality products. In addition to the physical aspect, the level of customers service offered to a Lexus customers, be it booking of servicing appointments, car servicing and other related service are often at a higher level when compared to other brands of vehicles. Borneo Motors in Singapore adapted two different pricing strategies, one being “Promotional Pricing” and the other being “Differentiated Pricing”. Promotional pricing are often used when a new product is introduced to the market. This is a typical strategies used to stimulate demand for a product or services. This could be in the form of special event pricing, low-cost interest financing, extended payment terms or warranties program. For example, when Borneo Motors introduces the Lexus RX350 to the Singapore market, they had a promotion of 6 months free instalment to its customers, in addition to free gifts with the purchase. They also tried to attract potential customers by offering low interest loan for car purchase, longer loan period of 10 years, extended warranties and servicing for vehicles that are bought within the promotion period. 3
Differentiated pricing refers to the price adjustment to accommodate difference in product, customers and location. This could be in the form of price discrimination, where is a difference in pricing based on customer type, sales channel, sales volume and even time of sales. Another method of differentiated pricing would be yield pricing, where discounts are given for limited early purchases, while later purchase price could be higher, or unsold product nearing expiry would be sold at the lowest rate. Lexus practises location pricing, where they priced their car price according to the country where it is being sold. For example, the same Lexus IS model would retail at between $167,000 to $175,000 in Singapore, whereas it would retail around $44,000 to $52,000 in USA, according to price check conducted online. In addition, Borneo Motors, regularly adjust their pricing in accordance with the festive period within the year, for example, in the leading up to the Chinese New Year or Christmas, the pricing of the car could be lower when compared to normal period so as to entice customers to make their vehicles purchase before the festive seasons. They may also throw in additional free gifts to attract more customers as well. However, as the festive season draws closer, the pricing of the same model may begin to go up, as the demand for new cars would be higher. Furthermore, before new Lexus models are launched locally, the pricing of older car models will be significantly lowered so as to attract customers looking for a better deal. Whilst this may seems like a good deal for the customers, Lexus, or its local distributors, Borneo Motors, could be effectively clearing their inventory of older car models to make way for new models.
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Question 3 Marketing communication mix consisted of a broad range of ways to communicate with your customers. They can be grouped into 6 major modes, namely advertising, sales promotion, events and experiences, public relations, direct marketing and personal selling. Borneo Motors has used advertising, which is a form of paid non-personal form of communication to the mass market. They post regular advertisement in the local newspapers, magazines and even local TV spots to let customers that are interested to purchase a car know of car models that is available, or are going to be available soon. In addition, they have billboards and brochures showcasing some specifications and features of car models readily available. I think this method of communication is very effective, as it present most of the relevant information to the customers, and allows the customer to consume and digest the information at their own pace. For example, when a customer is in the market to buy a new car, and he happens to see the advertisement in the Saturday newspapers, he can take a look at the various features that the car has, and make a comparison between the several models that he has in mind. Borneo Motors has also made use of various sales promotion to draw in customers looking for a new car. They have low-interest financing that can be processed in-house, reducing the hassles potential customers may have to go through in order to make a purchase. Borneo Motors also provided extended payment terms for purchase of new vehicles for their customers. The ability to book testdrive of customer’s desired car model effortlessly through the company’s online portal provided an additional avenue to attracts customers towards the purchase of a Lexus car. Although this method of communication is suitable for the automotive market, it has been noticed that most car manufacturer has already started adopting these kind of in-house financing, or via tie-up with commercial banks. In addition, booking of test drive appointment does not really stands out as most interested customers are able to go to various car showroom and opt for a test drive without any prior bookings or appointment. Another communication mix that Borneo Motors has used, is personal selling. They have a showroom that is dedicated solely to Lexus car models, where customers can see and feel the cars physically. When customers comes into the showroom to view the cars, this will give the sales staff the opportunity to have face to face interaction with the customers. The sales staff can also make use of this time to make their sales pitch to customers, answering questions that customers may have regarding different cars, showing the various features of the cars, and generally, persuade the customers to make the purchase. In addition, Borneo Motors has also setup dedicated Lexus customer service centre and new vehicles delivery centre that caters only to their Lexus customers. The use of 5
personal selling is very effective method that companies can employ. If the sales and support staffs are very well trained, they will able to interact with the customers, will be knowledgeable enough to answer any questions that are related to the product, and they will be able to persuade their customers to make a purchase. For example, when the customer visits the showroom, and has several questions regarding the features of several cars, the sale staff should be able to explain to the customers, and help to select a car that is best suited for the customer. Although Lexus and Borneo Motors has been using the printed media and TV ads regularly locally, they have not really been actively using the online media for their advertisement except just showcasing their products and posting their showroom address and arranging test driving appointments. I would recommend that Lexus and Borneo make-over their website. The new website should integrate more interactive contents like model guide, comparison between various models that would be attract and hold customers attention. The addition of a forum that is related to Lexus cars could also enhance interaction between Lexus car owners, which may in turn build up the brand loyalty, which could in turn translate to more sales when the current car owner decide to upgrade to another new car down the road. In addition, Lexus or Borneo Motors could also explore featuring the experiences of new and current Lexus car owner, letting them highlight what made them chose to purchase Lexus instead of other brands. This could drum up interest in the various models that Lexus offer, or give an insight to a car model that potential customers could be trying to find out more information about. Another recommendation would be to improve on the techniques of personal selling. Very often, companies are more focus on the bottom line, that is, to bring in the dollars. Although this is important for a revenue generating company, they should also note that a satisfied customer would most likely come back to them if they are going to make another purchase, and more importantly, customers would recommend the same company to their social network based on their past experiences with the company, and this could assist to bring in more customers. In addition, a knowledgeable sales staff would be able to anticipate his or her customer’s needs more accurately, and recommend the correct product to his or her customers. Providing training for their front line staff on how to interact and engage their customers, how to conduct sales would help to project a more professional image of the company to the customers as well. Implementing all this recommendation, should be able to enhance the communication between Lexus and Borneo Motors with its customers.
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List of reference Lexus. (2010, April 26). In Wikipedia, The Free Encyclopaedia. Retrieved 12:22, April 26, 2010, from http://en.wikipedia.org/w/index.php?title=Lexus&oldid=358316118 Hüper Optik (2007). In Case studies, Automotive. Retrieved 21:08, April 26, 2010, from http://www.opulentindia.com/prod_huper_architec-cs.htm#1 Brand Equity and Vertical Product Line Extent. In Marketing Science/Vol. 17, No. 4, 1998. Retrieved 21:27 April 27, 2010 from http://marketing.wharton.upenn.edu/documents/research/688105.pdf 2009–2010 Toyota vehicle recalls. (2010, April 30). In Wikipedia, The Free Encyclopaedia. Retrieved 04:10, May 3, 2010, from http://en.wikipedia.org/w/index.php? title=2009%E2%80%932010_Toyota_vehicle_recalls&oldid=359264220 2010 Lexus IS car pricing. (2010). In MSN Auto. Retrieved 22:33, May 5, 2010 from http://autos.msn.com/research/vip/pricing.aspx?year=2010&make=Lexus&model=IS&trimid=-1 New Lexus IS latest car price (2004 – 2010 sgCarMart) In sgCarMart. Retrieved 22:30, May 5, 2010 from http://www.sgcarmart.com/new_cars/newcars_pricing.php?CarCode=10296
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TABLE OF CONTENTS
Question 1.........................................................................................………..…01 Question 2..........................................................................................……...…..03 Question 3.............................................................................................……......05
i
Question 1 In marketing, there are several product levels that company need to look at before setting out to market their products. These levels can be broken down into the following, the core benefits, the basic product, expected product and augmented product. Using Lexus as an example, we will look its product level definitions. Core Benefits When customers want to buy a Lexus branded car, they are essentially buying a transportation device. Lexus, being designed and manufactured by Japanese car maker Toyota who had started car manufacturing in 1936, with their years of experiences would have no problem fulfilling this core benefit, which is to provide a transportation device to the buyer. This is often refer to as the core benefit, or the first level of the product. Basic Product On the next level, Lexus will need to look at the basic benefits that its customers would look at while buying their products. At this level, basic features of the product, like the engine, car seats, storage space, navigational systems, sound systems and interior cabin are taken into account. Lexus, being a premium brand, places a lot of emphasis on these features to differentiate themselves from other brands of automotives. Expected Product At the third level, Lexus would need to prepare attributes and conditions that the customers choosing a car would normally expect from Lexus. Customers would expect high quality leather seats, quiet engine operation, superior sound system among others from the Lexus branded car that they buy. Lexus on the other hand, spends a lot of time designing the outlook of the car, tuning the engines that go into their car, ensuring that the safety of their cars exceeds the requirements during accidents, fuel economy, as well as tying up with various company to provide premium products that are incorporated into their cars. Augmented Product At this fourth level, marketers will need to prepare a product that will need to exceed a customer’s expectation. It is also at this stage that Lexus is able to differentiate itself from its competitors in the premium cars market. Lexus has done the differentiation on two fronts, by product differentiation and by service differentiation.
1
On the “product differentiation “ front, Lexus has tried to stand out from the rest of its competitors by concentrating on a several factors. One of the main product differentiation that Lexus used was the reliability of its cars. Lexus cars are manufactured by Toyota, aimed at the luxury car market, hence they leveraged on the image of reliability of cars manufactured by the Japanese car manufacturer, Toyota. This also helped to boost the confidence of customers, although this has being slightly affected by the recent recall of more than 9 million cars by Toyota. To further enhanced its reliability image, Lexus is also one of the few auto manufacturer to provide 5 years warranty on some of the car models offered. Another product differentiation that Lexus has used is the product features that is different from its competitors. Lexus has always been on the fore-front of safety features incorporated into its automotive. It was among the first manufacturers to incorporate something called the “Lexus PreCollision System (PCS)” that integrates multiple safety systems like lane keep assist, driver monitoring system, infrared and pedestrian detection systems, as well as backup cameras, swivel headlights into the cars it designed and produced. The third product differentiation that Lexus has used is the different form, or range of products models that customers can choose from. Lexus manufactured models from compact, midsized, full sized, convertible, sports utility vehicles to limited edition sports model, and customers can choose the model based on their needs, and wants. Lexus is banking on once the customer buys into the Lexus branding, when it’s time to change to another vehicles, they will upgrade to another model within the same brand. The fourth product differentiation that Lexus used is the conformance quality its cars. Lexus, has developed close to 500 specific product standards known as “Lexus Must”, that each Lexus designed vehicles must conformed to during development and production. This is to ensure that each and every vehicles that rolled out from the plant are uniform in outlook, design as well as performance standards. Another differentiation that Lexus has always emphasised on the level of customer service to its Lexus customers. Borneo Motors in Singapore, has showrooms, service centres, body-care centre as well as parts centre dedicated entirely to Lexus brands only. This helps to project exclusiveness of the brand for its customers. The ability of Lexus customers to book car servicing online is another point of service differentiation that Lexus and Borneo Motors hopes to achieve. In addition, Borneo Motors also has a Lexus Club for Lexus drivers to interact with other Lexus drivers.
2
Question 2 The pricing objective that Lexus and Borneo Motors in Singapore has chosen for their cars is the “Product-Quality Leadership”. The objective of Lexus is to be portray as a product quality leader with perceived high product quality and status whilst maintaining prices that are affordable to its customers. Lexus branded vehicles, has always been marketed by Toyota to its global customers as the company’s luxury counterpart to its Toyota branded vehicles. From the design process, to the manufacturing of the vehicle, the method is which the vehicles are sold and serviced has always been done to showcase that the brand is as luxurious when compared to the German or Continental car manufacturers. Lexus engineers has also refine the manufacturing process to match what their customers look for when selecting luxury vehicles, which is the quality of build, the ergonomics of the various features in the car, the interior cabin spaces. These helps to enhance image the Lexus cars are top-notch in build quality and worth the premium that customers are paying for. Despite the higher price that customer would be paying for when compared to typical Japanese manufactured car, it is still low compare to German or Continental luxury cars. This would enticed the customer towards Lexus, as they are paying less, while getting higher quality products. In addition to the physical aspect, the level of customers service offered to a Lexus customers, be it booking of servicing appointments, car servicing and other related service are often at a higher level when compared to other brands of vehicles. Borneo Motors in Singapore adapted two different pricing strategies, one being “Promotional Pricing” and the other being “Differentiated Pricing”. Promotional pricing are often used when a new product is introduced to the market. This is a typical strategies used to stimulate demand for a product or services. This could be in the form of special event pricing, low-cost interest financing, extended payment terms or warranties program. For example, when Borneo Motors introduces the Lexus RX350 to the Singapore market, they had a promotion of 6 months free instalment to its customers, in addition to free gifts with the purchase. They also tried to attract potential customers by offering low interest loan for car purchase, longer loan period of 10 years, extended warranties and servicing for vehicles that are bought within the promotion period. 3
Differentiated pricing refers to the price adjustment to accommodate difference in product, customers and location. This could be in the form of price discrimination, where is a difference in pricing based on customer type, sales channel, sales volume and even time of sales. Another method of differentiated pricing would be yield pricing, where discounts are given for limited early purchases, while later purchase price could be higher, or unsold product nearing expiry would be sold at the lowest rate. Lexus practises location pricing, where they priced their car price according to the country where it is being sold. For example, the same Lexus IS model would retail at between $167,000 to $175,000 in Singapore, whereas it would retail around $44,000 to $52,000 in USA, according to price check conducted online. In addition, Borneo Motors, regularly adjust their pricing in accordance with the festive period within the year, for example, in the leading up to the Chinese New Year or Christmas, the pricing of the car could be lower when compared to normal period so as to entice customers to make their vehicles purchase before the festive seasons. They may also throw in additional free gifts to attract more customers as well. However, as the festive season draws closer, the pricing of the same model may begin to go up, as the demand for new cars would be higher. Furthermore, before new Lexus models are launched locally, the pricing of older car models will be significantly lowered so as to attract customers looking for a better deal. Whilst this may seems like a good deal for the customers, Lexus, or its local distributors, Borneo Motors, could be effectively clearing their inventory of older car models to make way for new models.
4
Question 3 Marketing communication mix consisted of a broad range of ways to communicate with your customers. They can be grouped into 6 major modes, namely advertising, sales promotion, events and experiences, public relations, direct marketing and personal selling. Borneo Motors has used advertising, which is a form of paid non-personal form of communication to the mass market. They post regular advertisement in the local newspapers, magazines and even local TV spots to let customers that are interested to purchase a car know of car models that is available, or are going to be available soon. In addition, they have billboards and brochures showcasing some specifications and features of car models readily available. I think this method of communication is very effective, as it present most of the relevant information to the customers, and allows the customer to consume and digest the information at their own pace. For example, when a customer is in the market to buy a new car, and he happens to see the advertisement in the Saturday newspapers, he can take a look at the various features that the car has, and make a comparison between the several models that he has in mind. Borneo Motors has also made use of various sales promotion to draw in customers looking for a new car. They have low-interest financing that can be processed in-house, reducing the hassles potential customers may have to go through in order to make a purchase. Borneo Motors also provided extended payment terms for purchase of new vehicles for their customers. The ability to book testdrive of customer’s desired car model effortlessly through the company’s online portal provided an additional avenue to attracts customers towards the purchase of a Lexus car. Although this method of communication is suitable for the automotive market, it has been noticed that most car manufacturer has already started adopting these kind of in-house financing, or via tie-up with commercial banks. In addition, booking of test drive appointment does not really stands out as most interested customers are able to go to various car showroom and opt for a test drive without any prior bookings or appointment. Another communication mix that Borneo Motors has used, is personal selling. They have a showroom that is dedicated solely to Lexus car models, where customers can see and feel the cars physically. When customers comes into the showroom to view the cars, this will give the sales staff the opportunity to have face to face interaction with the customers. The sales staff can also make use of this time to make their sales pitch to customers, answering questions that customers may have regarding different cars, showing the various features of the cars, and generally, persuade the customers to make the purchase. In addition, Borneo Motors has also setup dedicated Lexus customer service centre and new vehicles delivery centre that caters only to their Lexus customers. The use of 5
personal selling is very effective method that companies can employ. If the sales and support staffs are very well trained, they will able to interact with the customers, will be knowledgeable enough to answer any questions that are related to the product, and they will be able to persuade their customers to make a purchase. For example, when the customer visits the showroom, and has several questions regarding the features of several cars, the sale staff should be able to explain to the customers, and help to select a car that is best suited for the customer. Although Lexus and Borneo Motors has been using the printed media and TV ads regularly locally, they have not really been actively using the online media for their advertisement except just showcasing their products and posting their showroom address and arranging test driving appointments. I would recommend that Lexus and Borneo make-over their website. The new website should integrate more interactive contents like model guide, comparison between various models that would be attract and hold customers attention. The addition of a forum that is related to Lexus cars could also enhance interaction between Lexus car owners, which may in turn build up the brand loyalty, which could in turn translate to more sales when the current car owner decide to upgrade to another new car down the road. In addition, Lexus or Borneo Motors could also explore featuring the experiences of new and current Lexus car owner, letting them highlight what made them chose to purchase Lexus instead of other brands. This could drum up interest in the various models that Lexus offer, or give an insight to a car model that potential customers could be trying to find out more information about. Another recommendation would be to improve on the techniques of personal selling. Very often, companies are more focus on the bottom line, that is, to bring in the dollars. Although this is important for a revenue generating company, they should also note that a satisfied customer would most likely come back to them if they are going to make another purchase, and more importantly, customers would recommend the same company to their social network based on their past experiences with the company, and this could assist to bring in more customers. In addition, a knowledgeable sales staff would be able to anticipate his or her customer’s needs more accurately, and recommend the correct product to his or her customers. Providing training for their front line staff on how to interact and engage their customers, how to conduct sales would help to project a more professional image of the company to the customers as well. Implementing all this recommendation, should be able to enhance the communication between Lexus and Borneo Motors with its customers.
6
List of reference Lexus. (2010, April 26). In Wikipedia, The Free Encyclopaedia. Retrieved 12:22, April 26, 2010, from http://en.wikipedia.org/w/index.php?title=Lexus&oldid=358316118 Hüper Optik (2007). In Case studies, Automotive. Retrieved 21:08, April 26, 2010, from http://www.opulentindia.com/prod_huper_architec-cs.htm#1 Brand Equity and Vertical Product Line Extent. In Marketing Science/Vol. 17, No. 4, 1998. Retrieved 21:27 April 27, 2010 from http://marketing.wharton.upenn.edu/documents/research/688105.pdf 2009–2010 Toyota vehicle recalls. (2010, April 30). In Wikipedia, The Free Encyclopaedia. Retrieved 04:10, May 3, 2010, from http://en.wikipedia.org/w/index.php? title=2009%E2%80%932010_Toyota_vehicle_recalls&oldid=359264220 2010 Lexus IS car pricing. (2010). In MSN Auto. Retrieved 22:33, May 5, 2010 from http://autos.msn.com/research/vip/pricing.aspx?year=2010&make=Lexus&model=IS&trimid=-1 New Lexus IS latest car price (2004 – 2010 sgCarMart) In sgCarMart. Retrieved 22:30, May 5, 2010 from http://www.sgcarmart.com/new_cars/newcars_pricing.php?CarCode=10296
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