Smart dealers count on marketing support, new product
Joseph Agresta Jr.
Age: 45 Dealer since: 1988 Dealerships: Benzel-Busch Motor Car Corp. (Mercedes-Benz), Englewood, N.J.; Audi Meadowlands, Secaucus, N.J.; Smart Center Englewood, Englewood, N.J. Average monthly Smart sales in 2011: 5 new, 3 used Quote: "This brand will remain challenged for the foreseeable future."
U.S. Smart dealers had their worst sales year in 2011, selling just 5,208 of the microcars. The challenges continue, but prospects are looking up for the Smart retailers who stuck with the brand through last year's transition of distribution rights from Penske Automotive Group to Mercedes-Benz USA.
The 54 Smart dealers who were retained also had Mercedes franchises. Mercedes has since added 33 dealers, bringing the total Smart dealer body to 87 as of mid-January. Mercedes officials have said they want about 100.
With a new marketing campaign that rolled out last fall, Smart dealers already have seen some gains, said Joseph Agresta Jr., outgoing chairman of the Mercedes-Benz Dealer Board's Smart subcommittee. But continued marketing support, ongoing price subsidies and, ultimately, fresh product are necessary to give the brand a lift, he said.
Staff Reporter Amy Wilson spoke with Agresta, a New Jersey Smart dealer, about the brand's prospects in 2012.
How was 2011 for Smart dealers?
2011 was a transition year. Mercedes-Benz took over the brand midyear. We definitely saw increased activity starting in September. Consumer interest seemed much stronger. Mercedes put a lot of resources behind a big marketing effort. It started with [advertising] and was followed with a great lease program. For the first time, there was a full-blown television campaign. There was quite a bit more spent on digital, and those areas seemed to drive us an awful lot.
What resources were put into the advertising spend?
They did not share the budget. But it was a huge jump, and it was noticeable. They are still continuing on TV. I don't know what the marketing plan is for 2012, [but] they really need to continue in 2012 to keep the momentum.
What do dealers think about the new $99-a-month lease deal?
The lease program has been really great. We don't have a freshened product right now, and you need some additional incentive to close the customer. We're generally an 80 percent lease market here, so having that kind of support on a car is absolutely critical. It's lower than a lot of people's cell phone bills.
Are all your Smarts now being sold on the lease deal?
It's still a combination. Our average jumped significantly the last four months. If we averaged five sales over the course of the whole year, we were probably averaging eight or 10 in those last four months. We did the bulk of our sales in the last four months of the year.
Have you seen the customer demographic change?
It's the funniest thing about this brand: It is almost impossible for us to pinpoint the demographics. There's no consistency in age, socioeconomic status. There's no consistency anywhere except they all seem to have a social responsibility theme. It's environmental. It's "I don't need a big car." It's parking and commuting and not wanting to add to the congestion.
What are the biggest issues facing Smart dealers in 2012?
We're going to need to make sure the market support and the advertising plan stays in place for 2012 because we don't have fresh product until the end of the year when we get a new electric-drive vehicle. We need something to carry the momentum until that product arrives. It's going to require a subsidy to the car to keep it moving.
We'll have a sell-off of the 2012s early in the year and a ramping up of the '13s. It's got some nice enhancements. If the price point stays where it is and the market support is there, it should carry us to the electric drive in the fall. Beyond that point, we really need a product plan for the brand. We need to get other variations of the ForTwo.
Are variations of the ForTwo coming?
We haven't heard anything official yet. There has been a lot of talk about a four-seat vehicle, but we haven't seen anything as of yet. Long term, that's really going to be critical.
Do dealers think that would make the brand viable long term?
Yeah. If we just have a two-seater, we're going to always be limited in the number of cars we'll be able to sell. We want to open up the demographic to a wider range of customers -- who might have children they can't put in a front seat, for example. It doesn't need to be a four-door vehicle. It just needs to have four seats.
Is the manufacturer considering that?
Yeah, they are. They haven't given us any kind of definitive answer.
How do dealers feel about the level of commitment to the product long-term?
The commitment to the brand seems phenomenal. Mercedes really needs the Smart brand to be successful as an environmentally friendly car. It's going to help their average corporate fuel economy for the 2016 regulations. So for us to continue to sell our larger S-class vehicles, we really need Smart to be successful at the other extreme. We get the sense they're going to do whatever it takes to be successful.
To make a significant contribution to CAFE, won't volume need to increase significantly?
Yes. They have a target of 10,000 vehicles this year. That's a big jump.
Is 10,000 doable?
If the marketing support stays intact -- and the advertising. If we get enough resources, 10,000 is doable. It's a tough goal, no question, coming from where we have been. But we've gotten good momentum these last four months.
If we can keep that push going and the electric drive comes in on target, I think we should achieve that.
Are Smart dealers satisfied with the brand?
Smart dealers, since the transition, have been very excited about the momentum we're seeing. What will make us a happy group overall is if we can start to get the volumes to a point where the brand seems like it will be viable over the long run.
What is that ongoing viable volume level?
It's a tough question to answer. The model has changed. Mercedes-Benz's requirements are different because they've combined the brands. They've allowed dealers to reduce the cost of the operation by allowing us to combine pieces with our Mercedes-Benz operations. So it's not as expensive as it had been to operate. You don't need huge volumes. But they need to get to volume levels that are significant. I don't know if that's 15,000 or 20,000 vehicles. But it's certainly got to be higher than 10,000.
What is the right number of Smart dealers?
Some of that is going to depend on volume targets. At the 10,000 target, 100 dealers is probably the right number.
What is the factory doing to help the F&I business?
The merger of the brands has enabled Mercedes-Benz Financial to get deeper in the game with dealers. Having their products available to us, [like] wheel and tire, certainly helps. Access to credit has been a lot easier. I think we'll see more Smart-branded products from Mercedes Financial.
How about service?
We'll see an expansion of accessories. That's always been a difficult spot for us. Accessories seemed to be a gray area between the manufacturer and the distributor. But from what we're hearing, there will be more of a commitment to accessories and boutique items. I would think we'll start to see that this year for sure.
What must the factory do to help you sell more vehicles? We've talked about leasing, marketing and product.
This brand will remain challenged for the foreseeable future. Those three items are absolutely critical for the success of the brand. There's no question.
What is Smart doing in terms of digital marketing and social media?
They jumped into both pretty heavily, which is great. This is the type of brand that really needs social media. It needs a full digital marketing plan to keep momentum. There have been refreshes of the dealer and corporate Web sites. They went heavily into digital marketing on lifestyle sites, news sites.
Where do you stand on TrueCar and other third-party transaction services?
It's a tough question. We've been a Zag client for the past couple of years. We haven't seen a tremendous amount of success with it. Some of that could be the way we price vehicles -- maybe we're just not doing it the way it works for that model.
The hard part about some of those types of programs is it doesn't allow you to add value. Your purchase experience and the ownership experience is about a lot more than the price of the car. There's an old saying that once you start to talk about the price of the car that all you have left to talk about is the price of the car.
We do an awful lot that adds value to our customer. Not getting a real opportunity to talk about that really does hurt the overall buying process. And I don't think it's just the dealer side that gets hurt. The customer gets shortchanged as well.
Because they aren't aware of those value-added services?
Exactly. If they're making a decision purely on the cheapest price in the marketplace without an opportunity to really look at the quality of the ownership experience they can expect, they're getting shortchanged as well.