In the realm of marketing, some brands own and control a particular narrative better than others. Coca Cola equates to soft drinks and Rolex to luxury timepieces.
BMW is best known for driving pleasure while Mercedes-Benz still commands luxury cachet but nobody does quality and customer care better than Lexus, and that’s not a claim made by Lexus or us, but by virtue of its unbroken record of 14 years of top honours across 31 years of J.D. Power Initial Quality Study (IQS) USA survey.
However IQS is not the most reliable indicator as it only considers a customer’s experience in the first 3 months of vehicle ownership. Results may vary greatly from one year to another as the survey’s methodology doesn’t make a clear distinction between complaints about something that’s actually broken versus complaints about a feature that customers don’t like.
The more reliable indicator is the J.D. Power Vehicle Dependability Study (VDS), which measures ownership experience at the third year. Lexus has since grabbed seven consecutive years of top honours at VDS surveys.
Whichever survey one choose to refer to, no other automotive brand has had a better track record for producing top quality cars with better customer service, year after year.
So how did Lexus go from an unknown brand that was launched only in 1989 to usurping Mercedes-Benz, an over 130-year old brand which, prior to Lexus, was the industry’s benchmark in quality?
Yes, few ever doubted the quality of Lexus cars in the first place. Even as a newbie to the premium car segment in 1989, everyone knew that this was a luxury brand from Toyota, the company that taught everyone – not just car companies, but even manufacturers of highly critical products like medical equipment – on how to ensure quality on a series production line. Toyota’s former engineer Taiichi Ohno’s philosophy on the Toyota Production System has been adopted by nearly everyone in the manufacturing world.
But it is one thing to build a defect-free Toyota Camry and quite another to challenge a Mercedes-Benz S-Class or a BMW 7 Series. What nobody saw coming was how Lexus was able to redefine the meaning of luxury, and took ownership of the words ‘quality’ and ‘customer service.’
The German brands operated under the ‘German engineering-first’ mindset, that their supposedly superior engineering trumps all and demands tolerance from their owners. If something in the car broke, it was because the car was very sophisticated and the customer needed to understand that and adapt to it. Customers were conditioned to accept that minor niggles with the car’s high-end technology was a necessity and small price to pay to be part of this elite club.
The German philosophy towards building the best car – of putting the ideals of engineering ahead of the needs of the driver – was unacceptable to the Japanese, who operate on a completely different philosophy called omotenashi, or Japanese hospitality.
For Lexus, the feeling of omotenashi must be present throughout – not just when sitting inside a Lexus but also outside of one; from the moment a customer drives into a Lexus showroom, how he/she is greeted, guided to a car park and to the entrance, served and attended to – it’s an all-encompassing philosophy.
Omotenashi was certainly put to the test from the moment the first batch of Lexus LS 400 were delivered to customers in the US, Lexus’ first market.
Dealers were reporting problems with the car’s cruise control, third brake light and battery clamp. The established German brands were observing with glee. For a brand that prided itself on quality, the problems were embarrassing.
Shortly after its birth, Lexus was already being put through a coming of age test.
The late Eiji Toyoda, the then Chairman of Toyota who pushed for the creation of Lexus, ordered an immediate announcement of a recall even though US regulations didn’t require a recall until deemed necessary by the regulators at National Highway Traffic Safety Administration.
On the 1st of December, 1989, nearing Christmas and Lexus had to contact roughly 8,000 owners telling them that their new Lexus required some parts replacement. Lexus was particularly adamant for dealers to personally contact each owner before the recall letter reaches them. The company didn’t want them to hear the news from an impersonal letter.
An emergency conference call was held with all Lexus dealers, because the company believed that as front-liners, it was extremely important that the dealers were kept informed.
As they spoke, an unprecedented action plan was underway in Japan. Technical staff from Lexus’ headquarters in USA were already on their way to the dealers to explain the parts-replacement procedures. Over in Japan, plants were running at maximum capacity to produce the replacement parts. Lexus chartered special air freight carriers to fly the parts to the US, with planes leaving every hour.
Instead of requiring owners to drive to the service centres for repairs, Lexus dealers personally picked-up their cars, and left them with a loaner car, at no cost. There were also several owners living in Alaska and Lexus flew out a technician there to carry out the repairs on site. In some other less remote areas, Lexus technicians conducted the repairs at the owner’s house.
Once all the repairs were completed, Lexus dealers returned the cars washed, filled with a tank of petrol, and in some cases, even left a small gift on the passenger seat, apologising for the inconvenience.
In the end, Lexus managed to replace the parts for 95 per cent of the cars involved in the recall. The only reason Lexus couldn’t reach the remaining 5 per cent was because those cars were bought by competitor brands and had already been shipped out of the US or were already disassembled. It was later revealed that Mercedes-Benz had purchased several units of the Lexus and had it shipped to Germany for their own study.
Lexus’ response shocked its competitors. Far from being ammunition against them, Lexus turned the tables around and used the recall to elevate itself to an almost cult-like status in the annals of customer care. Time magazine ran a story with the title, “Zen and the Art of Automobile Maintenance.”
Lexus also understood the psychographics of its customers well. As a new luxury brand, the early buyers of Lexus were a very different group of people. Author Malcolm Gladwell, who would retell the story in his book ‘The Tipping Point,’ described early Lexus adopters as ‘mavens,’ car guys who understood cars very well and could see beyond the unproven brand. These wealthy and learned early adopters were often influencers in their own social circle, which were also likely to be from the high income crowd.
These ‘mavens’ would later serve as Lexus ambassadors, retelling their positive experience with Lexus customer service, and were instrumental in making Lexus the fastest growing luxury brand of that decade in USA.
The cost of the replacement was never made public, but whatever it was, it would’ve repaid itself many times over, as that response was pivotal in differentiating Lexus from its peers, living up to the Lexus Covenant.
Hung on the wall of every Lexus showroom is the Lexus covenant, a promise by Lexus that reads:
Keyword: How Lexus Owned Customer Service, And Redefined Quality