Lexus to Borrow From Scion to Transform Showroom Experience

Lexus will take a page out of its Scion playbook as it looks to transform the retail and service experience for its U.S. customers, Toyota Motor Sales U.S.A. Inc. Group Vice President and Lexus General Manager Mark Templin says in an interview.

Templin, who jumped back to Lexus in October after a stint atop Scion, says there are a lot of things to be gleaned from Toyota’s youth division.

“We’re learning about what young people want,” says Templin, who prior to joining Scion led Lexus marketing. “And that gives us a glimpse into the future. We can see what our future looks like by looking back and seeing what those people want today.

“The reality is, we’re all going to become like those young people. They’re not going to become like us.”

What Scion buyers want – and future Lexus customers will desire, as well – is a quicker purchasing and no-fuss service experience.

“Time is very important for them,” Templeton says of the Scion customer. “So we have to figure out how to speed up the process for them, whether it’s buying the car or whether it’s the parts and services side of the business. Those are important things.”

Younger customers also are skeptical of traditional advertising, he says, so Lexus is emphasizing “lifestyle marketing” that attempts to put its products in front of the right people. To market its upcoming IS-F performance sedan, for example, it held a promotional event for potential customers at Laguna Seca raceway in Monterrey, CA.

Templin: Scion provides glimpse in Lexus’ future.

Scion buyers also want more customization, he says, pointing to the variety of add-on accessories available for the brand’s vehicles, a concept on which Lexus is looking to put its own spin.

“At Scion, personalization usually comes in the form of product personalization – lots of accessories,” Templin says. “We’re trying to do that too. We’ve got a new lineup of F sport accessories that we’re going to launch to allow people to have some more performance-oriented accessories for the IS 250 and 350. That’s one example.

“But we’re also trying to make sure we allow them to personalize their experience. And we’re working closely with our dealers to make sure they can work with every customer as an individual and provide something better than what that customer expects.”

That could mean doing business in an easier way over the Internet, he says, pointing to some dealers who have made their websites more interactive, providing virtual showroom tours or allowing customers to chat online with service representatives.

It also may mean making sure customers who do come into the showroom to buy can get in and out fast, providing around-the-clock service facilities or offering pickup and delivery of vehicles needing maintenance.

“Some of these young customers we’re talking about, they don’t want to spend any time,” Templin says. “We’ve got another whole segment of our dealer base who just loves our dealer body, and they just want to come by and hang out and spend time with the dealer. That’s why we’re building these nice facilities and great places for people to come.

“(But) we need to be able to adapt to every individual’s wants and needs and desires and deliver even more than they expect.”

In a presentation earlier this week to the Automotive News World Congress in Detroit, Templin joked about the palatial showrooms being built by many of the luxury brand dealers, citing one Lexus store in Newport Beach, CA, “where each of the palm trees cost $100,000 apiece.

“That trend has been going on at Lexus for 10 years,” he says. “Just in the 3-year period of time that is 2006, 2007 and planned for 2008, our dealers will spend more than $1 billion building new facilities and upgrading facilities they have. So they’re taking the money they’re making and reinvesting it for their customers.”

Templin says Lexus isn’t twisting dealers’ arms to make the investment, but “we have guidelines of the size of the facility they need based on their sales volume and the units in operation they have, how many customers they need to service.

“We have the highest retention in the industry, the highest owner loyalty and the highest service retention in the industry,” he says, “so we want to make sure they have a big enough service facility to take care of those customers. But we also encourage them to upgrade to be able to adapt to their customer needs. And we even reward them with some additional product to offset some of the expense, because usually when a dealership does that, they grow automatically.”

Templin says there are no plans to add dealers, although there could be additional showrooms, or what he calls customer-convenience outlets – springing up as adjuncts to existing dealerships. Today, Lexus has 224 outlets in the U.S. operated by 178 dealers.

“We’ll allow a dealer to build another store…not so he can sell more cars but so he can more efficiently serve (his) customers,” Templin says.

The existing dealer body should be enough to handle volume growth at Lexus. Despite widespread pessimism about the U.S. new-vehicle market in 2008 – Toyota is predicting a drop in industry volume to 16 million units, Templin believes Lexus sales will grow slightly to “something in the 330,000 range,” up from 329,178 last year.

A relatively new lineup of sedans and strong SUV sales will help the brand gain ground, he says.

“Last year we sold over 200,000 cars,” he says. “And with our whole car lineup being (relatively) new, I think we’ll have a good year again with cars, and the SUV numbers will probably come up a little bit. So there’s an opportunity there.

“We’re not greedy,” he adds. “If the luxury market continues to grow as it has, we’ll grow with it. If it doesn’t grow, we don’t have any intentions of trying to steal market share from other people. That’s not what we’re about.

“But I think there is opportunity for growth in the marketplace.”

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