How Dealers Saved Lexus

In 1995, Toyota's fledging Lexus brand was hit by currency fluctuations, low volume and a trade-dispute threat of a 100% tariff on foreign luxury vehicles.

Confidence in the then 5-year-old luxury brand was “pretty low,” Irv Miller, group vice president of Toyota Motor Sales U.S.A. tells the American Institute of Certified Public Accountants' National Auto Dealership Conference in Baltimore, MD.

What's an auto maker to do?

“We visited all of our dealers and held ‘fireside chats,’ where we explained the facts and sought their counsel on what should be done,” says Miller.

The visitors got an earful from dealers, based on their daily interactions with customers.

“Dealers told us, for example, that one of our early models was out of synch with the Lexus brand image,” Miller says. Toyota executives took a closer look and decided the dealers were right.

Dealers also told the auto maker to broaden the lineup, cut the design cycle and introduce more new products faster.

Other suggestions led to the development of the RX luxury SUV line, launching a whole new industry segment.

“What our dealers suggested took a lot of work, but the brand turned around,” says Miller. “For the past five years, Lexus has been America's No.1 brand of luxury vehicles. We credit our dealers with 100% of this turnaround.”

Dealers remain a vital part of the information flow between auto buyers and auto makers, says Miller.

“There is no substitute for first-hand knowledge about consumer preferences, and nobody is closer to that information than a dealer,” he says.

He urges dealers to “act as the radar for product development, playing back the impressions, compliments and, yes, the criticisms to their manufacturing representatives without delay.”

He also encouraged dealers to better train and retain sales and finance staffers to prepare for modern-age customers who are “younger, more affluent, more diverse, better educated, better informed, more discriminating, more demanding and less patient” than ever.

“Rapid turnover in auto showrooms around the nation is hurting dealerships, manufacturers and our industry's reputation,” Miller says. “Plus, it's really annoying the consumer.

“Wise dealers will try to raise the level of professionalism in their sales forces by looking at the whole package of training, compensation and incentives.

“The old ways just aren't working anymore.”