Section 3. Rapid Growth of the Japanese Market and Development of the Lexus

Item 5. Developing the Lexus

The Lexus Covenant

In the United States, Toyota Motor Sales, U.S.A., Inc. (TMS) began to establish Lexus outlets with the goal of building the best sales network in the industry. When TMS began recruiting dealers with a goal of 200 stores, approximately 1,600 dealers applied, of which 81 were selected in the first round. In August 1987, TMS established the Lexus Covenant, which included a sincere and wholehearted commitment to satisfy customers, to ensure that dealers would provide an unsurpassed level of hospitality.

As the target customer base, TMS focused on the so-called "yuppies", or nouveau riche who had acquired considerable wealth within their own generation. Because people in this group were realistic and sensitive about value, TMS set the Lexus price 10,000 U.S. dollars lower than the price of a Mercedes-Benz in the same performance class. The advertisement slogan used throughout the United States during the launch was "The Relentless Pursuit of Perfection". Lexus dealers in the United States began selling the LS 400 and ES 250 in September 1989.

The LS 400 was well received by customers, quickly establishing Lexus as a recognized luxury brand. In 1990, the year after the launch, the Lexus brand topped the J.D. Power and Associates Initial Quality Study (IQS). Then, as an industry first, Lexus won a J.D. Power and Associates triple crown in 1991 by finishing in the top spot in the IQS, as well as in the J.D. Power and Associates Customer Service Index and Sales Satisfaction Index. The same year, TMC launched the SC 400 ("Soarer" in Japan) as well as the ES 300 ("Windom" in Japan), the follow-on to the ES 250, enhancing the product line-up and solidly establishing Lexus as a luxury brand.

The LS 400, first introduced as the Celsior in the Japanese market in October 1989, was also launched in 1990 under the Lexus brand name in the European market where many luxury cars were jostling for position. Although the LS 400 had been well received in Japan and the U.S., it struggled to gain a foothold in Europe because of a product shortage and because it started by using a "shop-in-shop" arrangement inside existing dealers instead of a dedicated sales network.

To top of page