Lessons from Lexus—Why It Pays to Do the Right Thing

Posted by Bill - December 12th, 2007

I am back from chairing the first-ever Source Media Customer Engagement Symposium, and my notebooks are overflowing with good ideas, smart practices, and fun stories. There’ll be more to come from the conference over the next few weeks. But I thought I’d highlight just one point from one of my favorites talks at the gathering, a presentation by Nancy Fein, vice president for customer services with Lexus.

The story of Lexus’s launch, rise, and position of leadership in the US luxury-car market is well known, as is the familiar (but still-impressive) Lexus Covenant—the fundamental statement of purpose and strategic intent that has guided the brand since its debut in September 1989. The Covenant aims high: Lexus automobiles, it declares, ” will be the finest cars ever built.” As for creating a unique luxury experience, “Lexus will do it right from the start,” the Covenant promises. “Lexus will treat each customer as we would a guest in our home.”

Those are the sorts of aspirations that stir the soul—but what happens when big dreams get mugged by reality? That’s what Nancy addressed in her talk. As soon as the first Lexus 400 sedans hit the market, she said, the company learned that there were three minor technical problems with the car. (About 3,000 had been sold before Lexus recognized the flaws.) Rather than cross their fingers and hope customers wouldn’t notice, or issue the standard notice to ask customers to come in for repairs, Lexus saw this small problem as a chance to make a huge statement about what made the company different. So more than 300 Lexus officials from all parts of the company created a team to solve the problem. They organized into small groups and traveled to all parts of the country. They visited the affected customers at home, brought them a gift, apologized for the glitches in person, and, of course, brought along a technician who fixed the problems. On the spot. In their driveways.

It was a bold move that sent a loud message that Lexus was taking its Covenant seriously.

Last year, another small problem developed with a Lexus model—this time, the new ES 350 sedan. Something about the transmission skipping second gear and slipping directly from first to third. (Don’t ask for more details, I’m not a gearhead.) Again, it was not a cataclysmic problem (more a possibility than a guaranteed flaw) and it affected about 700 cars before the Lexus factories fixed it. So what did the company do? This time, rather than visit customers at their homes, it did ask them to visit their dealer. But rather than fix the problem, Lexus gave all the affected customers a brand new car. No questions asked.

What was the upshot of the free-car move? Based on surveys, the affected customers were more loyal to Lexus than buyers who didn’t have the problem in the first place. And Lexus was able to fix the transmissions on the original cars, put them up for auction, and sell them for as much (if not more) than the company would have gotten in the first place.

Two small stories that underscore one important point: It pays to do the right thing. In a world filled with companies that spend most of their time cutting costs, outsourcing jobs, and reshuffling org charts, it doesn’t take much to separate yourself from the crowd. And when you do go the extra mile, you earn the appreciation and loyalty of customers who have come to expect so little from the companies with whom they do business.

In the words of the Lexus Covenant: “If you think you can’t you won’t…If you think you can, you will.”

So what’s stopping you?

Addendum: More evidence that Lexus gets it. Great stuff.

PermaLink: Lessons from Lexus—Why It Pays to Do the Right Thing