In this series of “Extreme Ads Makeover”, I will be tearing down ads of Lexus (lexus.com) and have them completely remodeled to have better targeting and ROI.
Check out more ad makeover case studies such as Lexus, Chanel, Chase Bank, Amazon, Starbucks, Nike, Target, Home Depot, and Nature Made.
About Lexus (lexus.com)
Lexus is the luxury vehicle division of Japanese automaker Toyota. In 2022, Lexus sold over 500,000 vehicles globally, down 2% from 2021. However, Lexus saw record sales in China of over 230,000 units. Lexus has ranked highest among luxury car brands in dependability and reliability for years. The brand’s global revenue reached $53 billion in 2021. Lexus has launched electrified models like the RX hybrid SUV, which make up over 25% of sales. Key models include the ES sedan, RX and NX SUVs, and LC coupe. Lexus represents Toyota’s strategy to compete in the global luxury market against the likes of BMW and Mercedes-Benz.
About Lexus’s marketing agency
Lexus does not have a single dedicated marketing agency. Their marketing is handled by an in-house department within the larger Toyota organization.
Some key details about Lexus’ marketing:
- Team One is Lexus’ long-standing U.S. advertising agency of record. They have handled Lexus ad campaigns and creative work in the U.S. for over 30 years.
- Lexus also works with various regional marketing agencies and creative partners around the world. In Europe, they’ve worked with agencies like AMV BBDO. In China, they partner with agencies like WPP.
- For digital marketing and social media, Lexus works with smaller specialized agencies like IZEA and retains dedicated staff internally as well.
- Saatchi & Saatchi was previously Lexus’ ad agency until they moved to Team One in the 1990s. Team One was formed by a group of former Saatchi employees specifically to handle the Lexus account.
- While Toyota handles most marketing in-house, they use partnerships with creative agencies to develop branding, campaigns, and execution in specific markets. But the overall strategic marketing direction for Lexus globally remains within Toyota.
About Michael Nguyen – CEO of Produce Results Agency, aka the “Extreme Ads Makeover” Host
Since 1999, Produce Results Agency has helped clients double assets from $5ooM to $1B and generated 4000% ROI for a regional bank turning their $66K marketing budget to $2.8M in revenue.
In this post, I will perform an ad audit on Lexus ads, analyze what’s missing from the ads, come up with new ads, and eventually validate those new ads by running paid traffic on my own dime to see how new ads perform.
I am using Meta Ads in this case study but the same principle applies to other mediums such as Google, Youtube, Programmatic Ads, and short forms.
Table of Content
1. Ads Audit
3. Ads Makeover
6. Next Steps
Ads Audit
Promoted Product: Lexus Service Center
Here are some key details about Lexus service centers and their business:
- Lexus has over 220 service centers in the U.S. These are dedicated facilities that only service Lexus vehicles.
- Industry average service and parts revenue per dealership is around $5 million annually. With over 200 service centers, Lexus’ total service revenue likely exceeds $1 billion per year in the U.S.
- Profit margins on service are typically higher than vehicle sales. Industry average is 15-20% net profit on service vs 3-5% on new car sales.
- Lexus owners on average return to the dealer for 2 service appointments per year during a typical 3-4 year ownership period. With around 2 million Lexuses on the road in the U.S., Lexus dealers see 4+ million service appointments annually.
- Customer service satisfaction is very high for Lexus service centers. Lexus ranked #1 in dealer service satisfaction in multiple JD Power awards.
- Growth in service revenue is tied to overall vehicle sales growth and the expanding Lexus owner base over time. In the last decade, service business has likely grown steadily for Lexus along with U.S. sales.
So in summary, Lexus service centers see over $1 billion in annual revenue in the U.S. alone and 4+ million customer appointments per year, with strong growth and industry-leading satisfaction ratings.
Landing page: https://www.lexus.com/service
Facebook Ads: The Lexus team created one ad set to promote.
Ad set #1 (see link)
Ad set #2 (see link)
Ad set #3 (see link)
Ad set #4 (see link)
Analysis
What I like:
- The ad “Treat yourself and your Lexus right with Service by Lexus” is concise and straightforward.
- First of all, I applaud the Lexus team for creating 4 ad sets with different images and I appreciate their effort. It tells me that the team is professional and knowledgeable about digital ads.
- At the same time, their effort in 4 ad sets is negated by the lack of creativity in ad messages because all ad sets share the same message!!!
Room for improvements:
- In this installment of “Extreme Ads Makeover”, I am going to remodel Lexus Service Center because I don’t think it deserves the right attention and care. In other words, all 4 adsets Lexus team created have the same message, “Treat yourself and your Lexus right with Service by Lexus.“
- If Lexus Service Center’s mission were to treat customers and their Lexus right, it would start by treating itself right, wouldn’t it?
- If you didn’t have the right attention, care, and respect for your brand and your mission, how likely would you dedicate the right attention to your customers?
- That’s the narrative Lexus team certainly doesn’t want its customers to foster and even appear on their minds.
- While Lexus ranked #1 in dealer service satisfaction in multiple JD Power awards, I expect to see MORE from a world-class team like Lexus because one message across 4 ad sets does a disservice to Lexus’s high satisfaction record.
- Specific Benefits: The ad doesn’t specify what “Service by Lexus” entails. Does it mean regular maintenance, emergency repairs, or something else? Highlighting specific benefits can make the offer more tangible and appealing.
- Emotional Appeal: While “treat yourself” has an emotional undertone, it could be amplified. For instance, emphasizing peace of mind, pride in ownership, or the joy of a well-maintained vehicle can resonate more deeply with potential customers.
- Social Proof: Testimonials, ratings, or references to satisfied customers can enhance trust and credibility.
- Addressing Potential Objections: The ad doesn’t preemptively address potential concerns or objections a customer might have, such as cost, time taken for the service, or quality of parts used.
Effect on Ad Performance:
- Reduced Engagement: Without emotional appeal or a clear value proposition, the ad might not capture attention or resonate with viewers, leading to lower engagement rates.
- Lower Conversion Rates: Without urgency or a clear CTA, viewers might not feel compelled to take immediate action, leading to lower conversion rates.
- Less Memorability: Without strong visuals or emotional triggers, the ad might be less memorable, meaning consumers might not recall the brand or offer later on.
- Broad Targeting: Without specifying a target audience, the ad might reach individuals who aren’t interested in the offer, leading to wasted ad spend.
- Lower Click-Through Rates (CTR): Without a compelling reason to click, viewers might just scroll past.
- Lower Conversion Rates: Even if they do click, they might not be as motivated to purchase without clear value, differentiation, or emotional resonance.
- Less Retention: Without a clear connection or reason to remember the brand or offer, even those who click might forget about it shortly after.
Moreover, having only one control ad leads to the following issues:
Lack of A/B Testing
- Limited Insights: With only one ad, you won’t be able to perform A/B tests, which are essential for determining what aspects of the ad are working and what aren’t.
Targeting Limitations
- Missed Opportunities for Segmentation: Different ad sets can target different customer segments. A single ad may not be as effective across all segments, missing out on some potentially lucrative opportunities.
- Reduced Personalization: Multiple ad sets allow you to customize messages based on user behavior, geography, or other demographics. A single ad will be less personalized and potentially less effective (more on this below when I do an ad makeover)
Creativity and Message Fatigue
- Ad Fatigue: Over time, the same ad is likely to become less effective as users get tired of seeing it. Multiple ad sets can help mitigate this effect.
- Limited Creative Testing: Having multiple ads allows for testing different creative elements like headlines, images, and call-to-actions. A single ad limits this flexibility.
Risk Management
- Higher Risk: If your one ad doesn’t perform well, you don’t have other ad sets to fall back on. This all-or-nothing approach can be riskier.
- Budget Allocation: With multiple ad sets, you can allocate more budget to higher-performing ads. A single ad does not offer this flexibility.
Optimization Challenges
- Limited Learning: If your single ad isn’t performing well, it’s harder to pinpoint what exactly is going wrong. Multiple ad sets can provide you with more data, making it easier to optimize.
- Inability to Leverage Platform Algorithms: Many advertising platforms use machine learning algorithms to automatically allocate budget to the best-performing ads in a campaign. With just one ad, you can’t take advantage of this feature.
Data and Analytics
- Limited Data for Analytics: Having only one ad will provide you less data, reducing the reliability and validity of your performance metrics.
Attention:
If you had multiple product lines and currently ran paid ads, there’s a 97% chance that you had less than 3 ads based on my experiences of remodeling ads from Lexus, Chanel, Chase Bank, Amazon, Starbucks, Nike, Target, Home Depot, and Nature Made.
Maybe you are perfectly okay with one control ad and burn your ad budget without ROI.
But if you would like to have a second-opinion ads critique so that you can see the gaps and areas where you can extract MORE juice out of your ads, click on the link below to have me critique your ads.
Gaps Analysis
The Landing Page (see link )
Audience avatar:
The ideal Lexus customer values luxury, craftsmanship, and a personalized service experience. They are likely middle to upper-middle class, aged 30 and above, and seek convenience, quality, and exclusivity in their vehicle ownership. They appreciate attentive, expert service and desire a seamless post-purchase experience. Lexus positions itself as a brand that offers more than just a vehicle, emphasizing its commitment to quality, expertise, and treating customers as special guests, ensuring they feel valued and protected throughout their journey.
Ads Makeover
Here’s the disease that most marketing agencies and businesses running paid ads:
“They think they’ve tested 20 ads but they really just tested 2 ads 10 different times.”
The best analogy for this is if you play the game “Battleship”.
Battleship is a strategy-type guessing game for two players. It is played on ruled grids (paper or board) on which each player’s fleet of warships are marked. The locations of the fleets are concealed from the other players. Players alternate turns calling “shots” at the other player’s ships, and the objective of the game is to destroy the opposing player’s fleet.
Using the context of the Battleship game, the fact that you just tested 2 ads 10 different times is like you are calling “shots” for the same spot 10 different times at the other player’s ships.
The lack of ideas for ad angles is making your ads dull and boring and ultimately leads to ad fatigue.
Headline Options
- “Craftsmanship Meets Luxury: Experience the Lexus Difference.”
- “More Than a Car: A Journey of Exclusivity with Lexus.”
- “Elevate Your Drive: Discover the Lexus Gold Standard.”
- “Where Expertise Meets Elegance: Dive into the Lexus Experience.”
- “Lexus: Where Every Drive Feels Like a Red Carpet Ride.”
- “Crafted for the Elite: Welcome to the Lexus Family.”
- “Tired of Mediocre Rides? Lexus Ain’t That.”
- “Settling for Less? That’s a Tragic Tale.”
- “Ready for the Unexpected? Lexus Brings the Wow.”
- “Ever Felt the Blues Over a Car? Lexus Changes the Tune.”
- “Guess What’s Missing in Your Driveway? Lexus Magic.”
Body Copy Options
- “Ever wondered what sets a service center apart? It’s the touch of craftsmen who know your Lexus inside out. From the moment you step into our dealership, you’re not just a customer; you’re our esteemed guest. Dive into a world where maintenance is a breeze, and luxury is a standard. With 24/7 Roadside Assistance and cutting-edge digital tools, we’ve got you covered in every way imaginable.”
- Models Applied: Relationships (Your customer, The advertiser), Imagery (Visual, Kinesthetic), Emotions (Feelings: joy, anticipation), Types of Statements (Questions, Statement), Time (Present), Capability (Does, Is), Levels of Identity (Behavior, Environment), Proof (Credibility: Powerful demonstration, Unique Mechanism), Numbers (Periods of time), Language Devices (Metaphor, Rhythm).
- “Crafted for those who value the finer things in life. At Lexus, we ensure every experience mirrors the luxury you seek. From expert hands guiding you through features to complimentary loaner vehicles, we redefine service. And with LexusCare, say goodbye to maintenance woes. Ready for an unparalleled journey?”
- Models Applied: Relationships (Your customer, The advertiser), Imagery (Visual), Emotions (Feelings: joy, anticipation), Types of Statements (Statement), Time (Present), Capability (Does, Is), Levels of Identity (Beliefs, Behavior), Proof (Credibility: Powerful demonstration), Numbers (Periods of time), Language Devices (Metaphor).
- “Lexus isn’t just about cars; it’s about a promise of unmatched luxury and service. Our technicians? Think of them as craftsmen who cherish your vehicle as their masterpiece. And with benefits like 24-hour Roadside Assistance, we ensure you’re always in safe hands. Experience the Lexus difference today.”
- Models Applied: Relationships (Your customer, The advertiser), Imagery (Visual, Kinesthetic), Emotions (Feelings: joy, anticipation), Types of Statements (Statement), Time (Present), Capability (Does, Is), Levels of Identity (Beliefs, Behavior), Proof (Credibility: Powerful demonstration), Numbers (Periods of time), Language Devices (Simile).
- “Step into a realm where every detail echoes luxury. Lexus is not just a vehicle; it’s a commitment to excellence. From our finely crafted vehicles to our top-tier service, we ensure you’re always treated as a guest, not just a customer. Why settle for less when you can have the best?”
- Models Applied: Relationships (Your customer, The advertiser), Imagery (Visual), Emotions (Feelings: joy, anticipation), Types of Statements (Question, Statement), Time (Present), Capability (Does, Is), Levels of Identity (Beliefs, Behavior), Proof (Credibility: Powerful demonstration), Language Devices (Metaphor).
- “Discover the Lexus legacy. Where maintenance is effortless, and luxury is the norm. Our experts don’t just know your vehicle; they treasure it. And with state-of-the-art tools and benefits, we ensure you’re always ahead of the curve. Dive into the world of Lexus today.”
- Models Applied: Relationships (Your customer, The advertiser), Imagery (Visual), Emotions (Feelings: joy, anticipation), Types of Statements (Command, Statement), Time (Present), Capability (Does, Is), Levels of Identity (Beliefs, Behavior), Proof (Credibility: Powerful demonstration), Language Devices (Metaphor).
- “Why Lexus? Because every journey with us is a testament to luxury, craftsmanship, and unparalleled service. From the first touch at our dealership to our unmatched post-purchase care, we ensure you’re always in expert hands. Join the Lexus family and elevate your driving experience.”
- Models Applied: Relationships (Your customer, The advertiser), Imagery (Visual, Kinesthetic), Emotions (Feelings: joy, anticipation), Types of Statements (Question, Statement), Time (Present), Capability (Does, Is), Levels of Identity (Beliefs, Behavior), Proof (Credibility: Powerful demonstration), Language Devices (Metaphor).
- “If you’re fed up with cars that just don’t cut it, it’s time for a change. Why envy the luxury of others when you can own it? With Lexus, it’s not just about the drive; it’s a statement of defiance against the ordinary. But here’s a warning: once you experience the Lexus difference, there’s no going back. Don’t let the defeat of settling for less be your story. ”
- Models Applied: Emotions (Feelings: anger, envy, defiance, disgust), Types of Statements (Condition), Future (Warning), Language Devices (Slang, Tragedy), Shame (Defeat).
- “Ever felt that sting of defeat when your car lets you down? It’s a gut punch, right? Don’t be that guy green with envy, watching Lexus owners cruise by. Stand defiant against mediocre rides and say no to the tragedy of average. A heads up though: once you’re with Lexus, everything else feels like a downgrade. Choose wisely.”
- Models Applied: Emotions (Feelings: anger, envy, defiance, disgust), Types of Statements (Condition), Future (Warning), Language Devices (Slang, Tragedy), Shame (Defeat).
- “Anticipating the next big thing in luxury driving? Why stick with the same old when Lexus promises a ride that’ll leave you shook? But here’s a question: Are you ready to ditch the tragedy of mundane drives? Don’t let past car stupidity hold you back. With Lexus, vulnerability turns into confidence. Dive in, and let the surprises roll! ”
- Models Applied: Emotions (Feelings: anticipation, sadness, surprise), Types of Statements (Question), Future (Promise/Prediction), Language Devices (Slang, Tragedy), Shame (Stupidity, Vulnerability).
- “Feeling down about your current ride? We get it. But what if there’s a car that promises to turn that frown upside down? Question is, are you ready to escape the tragedy of average? With Lexus, you’re not just buying a car; you’re investing in a future filled with delightful surprises. Don’t let past mistakes define you. Rise above! ”
- Models Applied: Emotions (Feelings: anticipation, sadness, surprise), Types of Statements (Question), Future (Promise/Prediction), Language Devices (Slang, Tragedy), Shame (Stupidity, Vulnerability).
- “Ever had that sinking feeling of missing out? Lexus is here to change the game. Why settle for less when the promise of unparalleled luxury awaits? But here’s the real question: Ready to ditch the tragic tales of car woes? With Lexus, the only surprise is how you ever lived without it. Say goodbye to past vulnerabilities and hello to the future. ”
- Models Applied: Emotions (Feelings: anticipation, sadness, surprise), Types of Statements (Question), Future (Promise/Prediction), Language Devices (Slang, Tragedy), Shame (Stupidity, Vulnerability).
Validate New Ads
This is where the rubber meets the road as I am going to validate ad concepts from the previous step by running paid traffic to see which ad concepts would resonate most with the customers.
Here’s how I set the adset on Facebook
- Budget: $10 Lifetime
- Product/Service: Lexus Service Center
- Targeted audience: Target with interest in Lexus
- Placement: News Feed
- Optimization: Optimized for Traffic
Here are all the 9 ads being launched.
Fast-forwarding 24 hours to let the ads run.
Here’s the results
Campaign Numbers:
-
- Ad budget: $14.50
- Total Impressions: 3,284
- Total Reach: 2,615
- Total Clicks: 25
- Cost Per Click (CPC): $0.47
- CTR (all): 0.94%
Ad results
Summary
- Reach and Impressions:
- ‘Headline 3’ has the highest reach and impressions compared to all the other headlines.
- ‘Headline 6’ has the lowest reach and impressions.
- Frequency:
- ‘Headline 3’ has the highest frequency at 1.34, suggesting that, on average, a user saw the ad 1.34 times.
- ‘Headline 1’ has the lowest frequency at 1.03, which indicates almost all reached users saw the ad only once.
- Results (Link Clicks):
- ‘Headline 8’ performed the best in terms of link clicks, with 11 clicks.
- Several headlines (‘Headline 4’, ‘Headline 5’, ‘Headline 9’) have no link click data provided.
- Cost Efficiency:
- ‘Headline 6’ has the lowest cost per result (CPR) at $0.21 and also the lowest amount spent. This suggests it’s the most cost-effective in terms of cost-per-click.
- ‘Headline 2’ has the highest CPR at $1.09, suggesting it’s the least cost-effective ad for generating link clicks.
- CPM (Cost per 1,000 Impressions):
- ‘Headline 3’ offers the best value in terms of CPM at $1.32, suggesting that it’s the cheapest to reach 1,000 people.
- ‘Headline 5’ has the highest CPM at $4.56, indicating it’s the most expensive per 1,000 views.
- CTR (Link Click-Through Rate):
- ‘Headline 8’ has the highest CTR at 3.48%, suggesting that out of all the ads, users are most likely to click on ‘Headline 8’ after seeing it.
- ‘Headline 3’ has the lowest CTR at 0.23%, suggesting it’s the least enticing, even though it had the most reach and impressions.
- CPC (Cost per Link Click):
- ‘Headline 6’ and ‘Headline 8’ share the lowest CPC at $0.21, which means they are the most cost-effective in terms of getting users to click the ad.
- ‘Headline 2’ has the highest CPC at $1.09, making it the least cost-effective.
Analytics:
Graph comparing the “Reach” of each Ad
Graph comparing the “Impressions” of each Ad:
Graph comparing the “Amount spent (USD)” for each Ad.
Pie chart showing the distribution of “Link clicks” across the Ads:
Graph comparing the “CPM (cost per 1,000 impressions)” for each Ad:
Graph comparing the “CTR (link click-through rate)” for each Ad:
- Winning Ads:
From a strategic perspective:
- If the goal is to get maximum reach and impressions, ‘Headline 3’ is the top performer.
- Headline: “Elevate Your Drive: Discover the Lexus Gold Standard.“
- Ad body: “Lexus isn’t just about cars; it’s about a promise of unmatched luxury and service. Our technicians? Think of them as craftsmen who cherish your vehicle as their masterpiece. And with benefits like 24-hour Roadside Assistance, we ensure you’re always in safe hands. Experience the Lexus difference today.”
- Models Applied: Relationships (Your customer, The advertiser), Imagery (Visual, Kinesthetic), Emotions (Feelings: joy, anticipation), Types of Statements (Statement), Time (Present), Capability (Does, Is), Levels of Identity (Beliefs, Behavior), Proof (Credibility: Powerful demonstration), Numbers (Periods of time), Language Devices (Simile).
- Total Impressions: 1330 (40% of the campaign’s total impressions)
- Total Reach: 991 (accounts for 38% of the campaign’s total reach)
- Clicks: 3
- CPC: $0.59
- If the objective is to get the most clicks at the lowest cost, ‘Headline 8’ stands out.
- Headline: “Settling for Less? That’s a Tragic Tale.”
- Ad Body: “Ever felt that sting of defeat when your car lets you down? It’s a gut punch, right? Don’t be that guy green with envy, watching Lexus owners cruise by. Stand defiant against mediocre rides and say no to the tragedy of average. A heads up though: once you’re with Lexus, everything else feels like a downgrade. Choose wisely.”
- Models Applied: Emotions (Feelings: anger, envy, defiance, disgust), Types of Statements (Condition), Future (Warning), Language Devices (Slang, Tragedy), Shame (Defeat).
- Total Impressions: 317
- Total Reach: 287
- Clicks: 11
- CPC: $0.21 (64% cheaper)
Takeaways/Insights
So in this thorough case study, I extensively analyze, examine, and audit Lexus Service Center’s ads, then come up with new ad ideas based on 17 analysis “lenses”, and finally validate ad ideas by running them through paid FB traffic to determine the winning ad.
- “Feature/Benefit” ads like ad with headline #3 gets the most eyeballs (40% impressions of the entire campaign) but register 72% fewer clicks than ad #8 featuring more complex emotions like fear, defeat, anger, and envy.
- Having only one control ad can seriously underperform your entire campaign because of the lack of A/B Testing, targeting limitations, ad fatigue, risk management, and optimization challenges.
- Having multiple analysis “lenses” is the foundation to come up with ad ideas addressing customers’ needs, wants, objections, pains, and frustrations. Without additional analysis “lenses”, you are more likely to get more “lookie-lookie” but less hand/thumb action.
- I’d recommend the Lexus team create more ad angles for each of their products. The path of “Extreme Ads Makeover” doesn’t stop and should be continuously evolving with the market.
What-If Revenue Impact Analysis
- What If Lexus went ahead and doubled down on ad #8 with the lowest CPC, what would be the revenue impact?
- Let’s make some assumptions:
- The conversion rate is 1% (given the normal conversion rate of 2%)
- The average annual maintenance cost for a Lexus is around $551.
- The service and parts department accounts for 44% of the dealership’s gross profits.
- Double down on ad #8 by increasing the number of clicks to 10,000 clicks (Cost = 10,000 clicks x $0.21 = $2,100)
- Let’s calculate the potential revenues
- At 0.1% conversion rate, 10,000 x 0.1% = 10 owners scheduled appointment
- Revenue = 10 x $551 = $5510
- ROI = 162% ($5510- $2,100) / $2,100)
- At 1% conversion rate (the industry standard is 2%), 10,000 x 1% = 100 owners scheduled for maintenance at the shop.
- Revenue = 100 x $551 = $55,100
- ROI = 2,500% ($55,100- $2,100) / $2,100)
- At 2% conversion rate, 10,000 x 2% = 200 owners scheduled appointment
- Revenue = 200 x $551 = $110,200
- ROI = 5,148% ($110,200 – $2,100) / $2,100)
- At 0.1% conversion rate, 10,000 x 0.1% = 10 owners scheduled appointment
Next Step
- Depending on your objectives, double down on the winning ads (ad #3 and #8) and amp up the budget on it because I’ve done the homework for you, all you need is to increase the ad budget.
- I share with you the 17 proprietary models I used to create ad ideas. While those 17 models appear easy for me because I’ve used them to generate thousands of ad ideas, for you, generating ideas may not come easily. That’s why I want to introduce the…
- “Second Opinion” Package
If you are a 7-figure business owner and already run paid ads and need someone to critique your ads for a potential makeover, go ahead and order my “Second Opinion” package.
