27 Years After Lexus - Can Hyundai's Genesis Challenge the Leaders?

27 years ago, Toyota successfully introduced the Lexus luxury brand to a new generation of American consumers. In it's 'relentless pursuit of perfection', it built great product at a great price. And, perhaps most importantly, it created a dedicated network of dealers who were committed to offering class leading customer service and experiences.  Lexus and its dealers pledge to excellence, the 'Lexus Covenant', drove the organization to always put the customer first. Today, Lexus consistently ranks within the top 3 luxury brands in the US.

Recently, Hyundai announced that they will be launching a new luxury franchise, Genesis in 2016. It will be the first time in over 25 years that a mainstream automotive brand will attempt a move up market. Unlike Toyota, Hyundai will not require dealers to build a stand alone facility, but rather, Genesis will use a 'store within a store' concept. 

Can Genesis establish credibility in the luxury space when their buyers are sharing physical space with Hyundai buyers? Can it credibly compete with established luxury brands like Mercedes, BMW and Lexus? 

Assuming Hyundai takes advantage of all that has changed since Lexus was introduced, the answer to these questions is likely yes. The three driving forces that will enable Hyundai's success are technology, an evolving competitive set, and a new generation of customers.

First, technology has enabled brands to leverage digital points of experience in ways never possible when Lexus was launched. Uber has demonstrated that pain points can be eliminated and value can be created strictly with the smart use of technology.

Digital Points of Experience?

Secondly competitive reference points have shifted. As automotive luxury brands continue to chase volume by reaching further and further down market, the definition of what luxury means has become blurred. How far can a badge stretch before it is devalued? And while these brands continue to tell the old luxury stories of craftsmanship and performance, Tesla has entered the market above them with a new storyline of innovation. Tesla's innovation permeates every aspect of the customer experience, and is creating a new luxury value equation that may very well appeal to a new generation of buyers.

New Luxury Value Equation?

Which leads to the third driving force, Millennials. Just like Boomers, aka Yuppies were entering their peak earning years when Lexus was launched, Millennials  are entering their peak earning years right now. And by 2018, Millennials are projected to become the largest generational segment in the luxury market.  

The Changing of the Luxury Guard?

Millennials have different expectations of luxury brands. They are less impressed with badges, and more impressed with the corporation behind the badge, and its commitment to society. For the 'we generation, luxury brands should be inclusive, rather than exclusive. Millennials expect that higher price points will deliver exponentially higher intrinsic value.


How can Genesis capitalize on these trends?

• Genesis can augment physical customer experiences with digital points of experience that will help them to achieve the deep one-to-one relationships that are hallmarks of luxury brands. With digital prowess and a customer orientation, Genesis could architect the premier automotive luxury experience.
• Because Genesis is not creating a dealer network that feeds on volume to cover its rent factor, Genesis has the luxury of supporting a premium-priced, higher profit per unit product line. This, in turn, has the added potential to raise Hyundai's price ceiling and profit, thought their close association.
• Genesis can advance its brand story along the lines of the new luxury brand equation by tapping into its parent company's roots to take the idea of 'New Thinking, New Possibilities' to a whole new level. Just like Hyundai raised the bar for mainstream brands with its 100,000 mile warranty, Genesis can raise the bar for traditional luxury marques with innovations in product, financing, service and ownership. They should look to technology companies and even ultra-premium automotive brands for inspiration in creating exponential customer value.
• In marketing, Genesis should position itself in a category of one, at the forefront of a new definition of luxury. It should create an inclusive luxury brand by encouraging audience engagement and participation at every step in the customer journey. It should develop and amplify strong CSR initiatives that contribute to the greater good of society. 

And, while creating a new luxury brand is a daunting task, if all goes well, sometime in the not too distant future, Mercedes, BMW, and Lexus, might need to begin their relentless pursuit of Genesis.