Look Out for Lexus


Image from: Lexus / automotive.com

Recently, Lexus announced plans for its first ever global branding campaign set to kick off in May 2013. The objective is to generate interest and appeal among younger people who may not have considered Lexus in the past.

Globally, Lexus sales trail the German brands – BMW, Audi and Mercedes – by a considerable margin. However, here in the US it’s a different story. Lexus is the third best selling luxury brand in the US, trailing BMW and Mercedes but comfortably ahead of Audi. And while BMW and Mercedes duke it out over luxury sales leadership – and sling a few arrows along the way – Lexus is nipping at their heels and making some noise that could make them a contender in the not so distant future.

To understand more about what’s driving Lexus growth in the US, Compete assessed luxury automotive brand performance over the past two years. This analysis leverages Compete’s proprietary and patented technology that monitors and normalizes the online behaviors of more than 2 million consumers each month. It focuses on the shopping behaviors of in-market automotive prospects across 40+ 3rd party automotive websites. Observed lower funnel shopping behaviors such as Request a Quote are aggregated and unique shoppers for a model are measured (i.e. no double counting of those doing the same shopping activity more than once in a month).

Post-Tsunami, Lexus Shifts into High Gear

When the Tsunami hit in spring 2011 Lexus sales plummeted, as did those of most Japanese auto manufacturers. Inventories were depleted and conversion (sales as a % of shoppers) fell to period lows as there weren’t enough vehicles on the ground to satisfy demand, finally bottoming out in June ’11.

Lexus shoppers and conversions

Importantly, however, during this time Lexus shopper counts remained robust. While low inventories kept many from buying, Lexus continued to attract shoppers. That meant that when inventories returned to normal so did sales. And conversion improved throughout the rest of the year, finishing on a high note in December as is seasonally typical due to year-end sales events.

2012 – Lexus Takes on the Germans

In 2012, Lexus re-asserted itself atop the luxury market. Year-over-year sales growth of 23% was fueled by strong demand for its products, so much so that Lexus shopper volume surpassed Audi in February and never looked back. Lexus share of luxury shoppers peaked in December at nearly 16%, right behind luxury leaders Mercedes and BMW (and Cadillac, not shown below).

share of luxury car shoppers

Most of the shopper gains Lexus enjoyed in 2012 were driven by new product launches and the ad support behind them. The new GS and ES were both introduced in 2012 which helped push Lexus demand to a 5 year high in September and kept overall brand demand high for the entire year. In addition, RX, the stalwart model in the Lexus lineup remained the most shopped Lexus, though it did take a slight hit once the new ES came to market. Combined with the demand resurgence, sales took off as well, trending higher versus their year ago levels from May 2012 on.

Lexus Model Shopper Counts

2013 and Beyond – Continued Growth?

Lexus enjoyed a banner year in 2012, fueled by new product and replenished inventories following the 2011 tsunami. But what’s in store for 2013?

The new IS, scheduled for launch later this year, should provide Lexus the opportunity to maintain momentum in a competitive luxury market. Building on the success of ES and the ongoing success of RX, IS could provide Lexus with the firepower to compete even more with Mercedes and BMW for luxury leadership in the US.

The road to luxury leadership, however, is not all smooth sailing.  Monitoring the performance of Lexus as well and rivals requires additional analyses such as:

    Tracking the IS launch and understanding the impact it has on ES shoppers and conversion.

  • Will IS cannibalize ES shoppers and buyers or will it complement ES and add to Lexus success?
    Understanding the evolution of the Lexus line-up and each model’s contribution to demand.

  • Will RX continue to be the “flagship” model for generating shopper demand? As the car line up evolves will shoppers look past the luxury SUV and focus their attention elsewhere in the showroom?

    Monitor the competitive environment and responses by Lexus rivals (don’t expect the competition sit idly by as Lexus continues to make headway).

  • What impact will the new IS and ES have on the highly competitive luxury mid-size car segment?
  • How will competitive cross-shopping trends evolve, especially competitive interest in Lexus models? And will that impact spillover demand opportunities?
About Dennis Bulgarelli:
Dennis Bulgarelli is a Client Services Director at Compete. At Compete Dennis is responsible for advising auto clients on trends in consumer online shopping behavior. Before Dennis joined the Compete team he did research and planning at most of the large ad agencies. Dennis hopes to one day, drive cross- country on the blue highways. Follow Dennis on Twitter @dennisbul or connect with him on LinkedIn at http://www.linkedin.com/in/dennisbulgarelli.