Few people appreciate auto dealers and their role in the auto industry as much as Dennis Clements, group vice president and general manager for Lexus, Toyota Motor Corp.'s luxury division.
With Clements guiding the way, Lexus has built one of the nation's most sophisticated dealership networks since the luxury division debuted 13 years ago.
It's a relatively small band of 196 dealerships. But it's formidable. Lexus stores consistently rank first in customer satisfaction surveys. They also collectively sold more luxury vehicles than anyone else in the U.S., last year — 224,000 units — taking the crown from Mercedes-Benz. Currently, there's but an average 20-day supply of inventory at Lexus stores.
Clements credits dealers for much of the division's success.
“I can't tell you the number of times a customer has told me, ‘I love my Lexus and I love my dealership.’ In that order. How often do you hear someone say, ‘I love my dealership’? I hear it all the time.”
Much of that stems from Lexus' great relations with its dealers. Clements cites the company philosophy: “Customers first, retailers second, the company third.”
Anyone who has done business with a Lexus store knows what pure customer satisfaction is. It's not something every dealership can deliver. But for a luxury car brand, high customer satisfaction at the dealership is critical. No one does it better than Lexus dealers, according to J.D. Power & Associates.
That requires a lot of tender, loving care; something Lexus dealership personnel give, and something Lexus division is willing to pay for.
Says Clements, “If a salesman spends three hours with a customer, we need to make it worthwhile, and, with our level of customer service, we need for dealership personnel to spend time with customers.
“If it costs us money, it costs us money. We have 14-16% margins for dealers versus an industry average of 7%.
“We also spend a lot of time training and talking with dealers. They're our most important partners. We don't screw them, and they don't screw customers.”
Lexus dealerships are beautiful facilities. They should be. Each costs in the millions. About $500 million in Lexus dealership construction work is going on right now, according to Clements.
He says it's heartening to see the turn-outs at Lexus dealerships' various special events for customers featuring wine, food, music and, of course, vehicles in a posh showroom setting.
“It's amazing to see the people who attend those dealership events — and I'm talking about affluent people who have a lot of options of how to spend their free time,” says Clement. “But they're delighted to spend an evening at a dealership.”
Clements is a former Ford Motor Co. Lincoln Mercury veteran. He still hooks up for dinner occasionally with Jim O'Connor, a Ford group vice president for North American marketing, sales and service. O'Connor is another auto executive plugged into the importance of dealers. He's a former general manager of a Florida dealership.
Clements recalls the bad old days when manufacturers were quick to point fingers at dealers.
“If sales were slow, the dealers were told they weren't working hard enough,” he recalls. “Of course, it had nothing to do with the quality or desirability of what the dealers were expected to sell back then.”
Lexus has an eye for spotting marketplace opportunities. Latest case in point is the '03 GX 470, a mid-size SUV. It's Lexus' third entry in the luxury SUV segment. That segment is growing steadily: 90,000 units in '97, 322,000 last year and 500,000 expected by '04.
“It doesn't take a rocket scientist — or even a whiz-bang auto executive — to realize there's a golden opportunity there,” says Clements, who's always on the lookout for those chances and never misses a chance to praise dealers for their part in the Lexus success story.
