Lexus Case Study by N.K.Malhotra

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Lexus: Imparting Value to Luxury and Luxury to Value: In the 1980s, Toyota developed a concept for a new car that was destined to be a success. The concept of the car, which was to be called Lexus, was based on the observation that there was a large, affluent market for cars that could boast exceptional performance. A significant portion of that market ranked value highly. However, they were unwilling to pay the extraordinarily expensive prices that Mercedes charged for its high-performance vehicles. Toyota planned to target this market by creating a car that matched Mercedes on the performance criteria hut was priced much more reasonably, providing consumers the value they desired, and making them feel that they were smart buyers. Toyota introduced the Lexus ( in 1989 with much fanfare. A clever advertising campaign announced the arrival of this new car. For example, one ad showed the Lexus next to a Mercedes with the headline, “The First Time in History That Trading a $73,000 Car for a $36,000 Car Could Be Considered Trading Up.” Of course, Lexus had all the detail that the Mercedes did: a sculptured form, a quality finish, and a plush interior. The detail was not, however limited to the car. Separate dealerships were created that had the type of atmosphere that affluent consumers expected from a luury carmaker, including a grand showroom, free refresh. ments, and professional salespeople. Toyota placed a strong emphasis on the performance of the new car. A package was sent to potential customers that included a 12-minute video displaying Lexus’ superior engineering. The video showed that when a glass of water was placed on the engine block of a Mercedes and a l.,exus, the water shook on the Mercedes while on the Lexus it was virtu ally still, This visually told the viewer that the stability of Lexus was far more extraordinary than that of even

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