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IIPM MR Midterm Exam Lexus Case

IIPM MR Midterm Exam Lexus Case

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International Institute of Planning and Management (IIPM) CHENNAI

Mid-Term Exam (for earlier Absentees) MARKETING RESEARCH/ November 2010 COMPULSORY CASE STUDY Answer all questions at end of case study Assessment will be based on demonstrated understanding and application of marketing/marketing research principles and offering creative solutions LEXUS: Imparting Value to Luxury and Luxury to Value In the 1980s, Toyota developed a concept for a new car that was destined for success. The concept of the car, to be called Lexus was based on the observation that there is a large, affluent market for cars that could boast exceptional performance. A significant portion of that market ranked value highly but were unwilling to pay for it if priced as for Mercedes cars. Toyota planned to target this market by creating a car that matched the Mercedes on performance but priced much lower. Toyota introduced the Lexus in 1989 with much fanfare along with a clever ad campaign showing the Lexus next to a Mercedes with the headline” The first time in history that trading a $73000 car for a $36000 car could be considered trading up !” The Lexus had all the details that the Mercedes had- a sculpted form, a quality finish and a plush interior. Separate dealerships were also appointed to create this overall luxury experience. Toyota placed a lot of importance on the car’s performance and had also created videos to emphasize its superior engineering compared to the Mercedes (e.g keeping a glass of water virtually still on the Lexus engines block while it shook on the Mercedes!) This attracted a lot of customers making it a great success. Then, Toyota decided to increase its prices- a strategy which did not work- since they realized that price alone does not signify luxury. They realized that their cars lacked the heritage or prestige that European luxury cars like BMW or Audi had. They then turned to a new advertising campaign to inspire an emotional response to its cars. The campaign was extremely powerful as it had to combat the decrease in growth of the luxury car market, though the overall car industry was not doing so badly. The “near luxury” cars like Toyota’s own Avalon, Nissan Maxima, Mazda Millennia, BMW 3 series and Mercedes C class- all chipped away at the potential “true luxury” customers. Again, Toyota responded to this competition thro more traditional advertising and promotion to bridge this customer perception gap between “near and true luxury” segments. They were very successful during the early part of this decade and the

performance and style. These efforts are consistent with the Lexus philosophy of imparting value to luxury and luxury to value. *********** Note: .Lexus won several awards during the 2003-2005 periods for its luxury. Their target group now for the luxury sedan is with a median age of 47-55 years as against earlier 58 years old. 1.This question paper/case study is specially prepared for the exclusive use of IIPM. the Toyota management is now contemplating doing a marketing research study to help it understand its current and potential customers more thoroughly. They plan to modify their product design. Chennai and not to be used elsewhere in any form. Sashi Rao/ 18. Based on the case study situation. Elaborate on at least 4 areas of enquiry or research questions that you will look into (before designing a formal questionnaire) to help achieve the research objectives. styling. answer the following questions. Each question carries 10 marks. -Prof K. With these developments in mind. And formulate the marketing research problem corresponding to the identified management problem(s).2010 . What would be the kind and/or type of marketing research you would recommend to be done in this case? Do elaborate on the detailed research methodology you will adopt for such a study. especially when the population demographics moving in favor of progressively younger customers. Describe the Toyota management problem as it gets ready to face competition from both “true luxury” car makers like Mercedes. BMW and Audi and other “near luxury” car makers as mentioned in the case. which could drop even more rapidly to say 35-45 years age groups in coming years. Since then. 3.11. and overall offering that matches the expectations of a new generation of luxury car buyers. Toyota is faced with the challenge of how to retain and grow its Lexus customers. 2.

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