UPDATED: 1/27/14 1:56 pm ET - corrected
Editor's note: An earlier version of this story misspelled the name of Joseph Agresta Jr., a New Jersey Mercedes-Benz dealer and chairman of the Mercedes-Benz Dealer Board.
Mercedes-Benz is keeping its focus on customer service, and 70 percent of its dealers will be paid a bonus this year through a new margin structure tied to improving the customer experience, said Joseph Agresta Jr., a New Jersey Mercedes-Benz dealer and chairman of the Mercedes-Benz Dealer Board.
The results of the customer service push are beginning to show in studies such as the University of Michigan's American Customer Satisfaction Index, which rated Mercedes-Benz No. 1, Agresta said.
As Mercedes grows its Sprinter commercial vehicle unit, it may let dealers sell from satellite locations, he said. No other facilities changes are expected in the coming year.
Agresta spoke with Staff Reporter Diana T. Kurylko.
Q. What kind of year did Mercedes-Benz dealers have in 2013?
A. We had a record year. Mercedes-Benz finished with an overall record year -- No. 1 in the luxury segment -- and that translated into a record growth year for dealers and that helped us with dealer profitability. We are seeing improved dealer profitability across the board with the new margin structure put in last year. And we are seeing improvement on the customer experience side as well.
What is driving the increase in dealer profitability?
Last year there was a margin realignment and we were able to secure additional margin money from Mercedes-Benz. We tied the strategy of dealer profitability to improving the customer experience and delivery. As the strategy progresses, we are seeing an impact -- higher dealer profitably and higher customer satisfaction. That is the biggest driver of it, along with increased car sales.
Are luxury buyers back? It took them longer to return to the market than volume-brand customers.
We are seeing that consistently the luxury segment growth rate has outpaced the rest of the industry and luxury manufacturers responded quickly to help attract those buyers. I do believe that segment is doing very well.
Is Mercedes-Benz offering enough lease and APR deals to keep up with BMW?
It is always a tricky question. The answer would have to be yes. We are outpacing BMW and Lexus as the No. 1 luxury make. That would seem to suggest the programs are appropriate for the marketplace.
Is Mercedes customer service improving significantly because of the new margin program?
The new margin program was intended to get dealers to focus throughout the sale and service, through every touch point, and to get dealers to improve processes and training rather than think about the score -- to get dealers to think about how to deliver quality.
We thought about the overall luxury industry and how our customers who shop in luxury stores or have luxury travel experiences are treated and how to translate that into the automotive experience. We are seeing great results. The American Customer Satisfaction Index produced at the University of Michigan ranked Mercedes-Benz No. 1 in the industry. We posted our highest score ever from the No. 9 position.
The margin program will pay a bonus to the top scoring 70 percent of dealers. What about the dealers who fall into the lower 30 percent and don't get any extra margin money?
I think everybody is trying to get into that bonus structure and to stay there. Nothing was taken away from those dealers. It is not like they are getting less than before, but they aren't picking up the extra bonus money. They are getting the advantage of the higher throughput.
Have Mercedes-Benz executives carried out the promises made in the Customer One program such as more training and bringing cars to dealerships for employees to test drive?
They have. There were a number of Mercedes-Benz initiatives that started in 2012 and worked into last year. Large scale off-site training under Customer One was initiated for better than 90 percent of customer-facing dealer staff. Those efforts continued with Webinars, awareness programs, weekly e-mails and little in-house task forces. Those were the initial pieces. The DASH [Drive a Star Home] program was rolled out to get more staff into the cars to make them more enthusiastic about our cars. That program was very successful.
The DASH program was followed by a dealer engagement program measuring employee levels of engagement. Highly engaged employees deliver higher customer experiences. It uncovered a lot of things for dealers, like what obstacles staff face.
That was followed up with the margin realignment and a change in the customer survey program and getting dealers to focus on how to deliver that customer experience.
Will the all-new CLA front-wheel-drive sedan that went on sale in October be a hit?
Out of the gate, the CLA seems to be a huge hit. We are seeing a wide and diverse audience, much more than we expected to see, but very happily so.
Is the CLA bringing in the younger buyers it was designed to attract with its base price of about $30,000?
We are seeing a wide mix and we are trending younger than the rest of the model lineup. We are not seeing an exclusive Gen Y buyer. We are seeing a higher proportion of Gen Y and we are seeing a high conquest rate -- north of 75 percent.
Is the redesigned S-class sedan drawing conquest buyers?
It is hard to say. Most of the early S classes were pre-ordered for existing owners. We are seeing activity on conquest and we are still waiting for the 4Matic as well. I do not have a real indication yet. We will know with the 4Matic.
Have buyers embraced the S-class sedan's new technology?
Customers may not totally be fully aware of those Intelligent Drive systems that are operating in the vehicle -- it is what makes the car cutting edge. That is the big halo in the brand and you want the flagship to have all that technology.
I do not think people are overwhelmed by the in-vehicle technology. It provides a new experience and sets a new bar. It is not different to operate. It does require more time and patience and commitment at the dealership for delivery. We are trying to do a second delivery to just follow up on any items that the customer may be confused about because there is a lot of new technology. We will go out to their home and office to explain some of the features.
How can Mercedes-Benz make the replacement for the Maybach uber-luxury sedan a success? Have you seen it?
We did get a glimpse of it. It is the S class at the high end, the S600, and that car is pretty spectacular. To make that car successful, we have to do some of what we tried to do with Maybach and try to cater to that superluxury clientele, maybe with some special events for those buyers to make them feel a little bit more exclusive.
Is the wheelbase longer than the long-wheelbase S-class sedan?
It was significantly longer and you really feel it in the back seat.
Will dealers be able to sell all seven derivatives of the S class? Are there enough buyers in that segment who want big coupes, convertibles, etc.?
We think there are. We currently have the CL, which will be our new S-class coupe. At the very high end, again, we are going after our Maybach clientele. The convertible is a new segment and that will stretch us out further. We have had that question for years from existing clients: "When is Mercedes-Benz going to produce an S-class convertible we are really excited about?"
How about the new MLC, a coupelike crossover based on the ML four-door crossover, that's coming next year? Does Mercedes-Benz need it?
It will really be a niche-type product. I do not see it being a volume product. It will compete with the BMW X6.
Will the B-class Electric Drive, the fwd plug-in electric hatchback that goes on sale this spring, be a hit? Or should Mercedes-Benz have done something like the BMW i3 using a dedicated platform and building an electric car from the ground up?
I think the car will be a hit. There is utility from a size point, having that larger five-door. It is almost a mini SUV and that as an electric drive is not out there. There is a segment of our population that will go there. I am not disappointed. Mercedes-Benz needs this car in the lineup.
Daimler's Smart microcar brand is stalled with low sales. You won't get a new model until 2015. How are dealers coping?
A couple of things. Smart sales have improved a bit from where we were two years ago. We are at a level that for many dealers is not great but it is sustainable. The Smart Electric Drive, especially in ZLEV states, is seen as a bump up. It will be a longer-term struggle for sure, and it will have to be driven by a lower price point until we get a new vehicle. We absolutely need it and we absolutely need the four-seat vehicle in this market.
Does it make sense for Mercedes-Benz to make a larger and more expensive C-class range now that the CLA is the entry car? The new bigger C-class sedan is due next year.
I am not sure about more expensive. Making it larger is a goal to separate it from the CLA and I am not sure the intention is to drive it up in price. It does help fill out the portfolio more effectively. It helps us to attract a wider range with a bigger C class with more utility.
There's talk about more derivatives coming with the new C class. Can we expect a compact crossover?
I have not seen those and we as a dealer board have not had a lot of discussion. They are not always necessarily for our market. It would be interesting to see how those variants would look and fit into the lineup. The next-generation C class will probably fill more of the product niches than we fill with the current C class and there has been talk about different engine packages.
Industrywide, certified pre-owned sales set a record in 2013. Are you happy with the factory's efforts to support dealers' CPO sales?
There have not been a lot of changes. The CPO program for Mercedes-Benz has been in its current form for a few years but it has been successful and we have seen growth. We expect to see huge growth when leases will peak and that will require a greater CPO effort to keep those values higher. We expect to see a 20 percent growth rate in the next few years.
It there anything new on the facilities front?
We are wrapping up the Autohaus program. Some dealers are still going through it but the large bulk are currently Autohaus certified -- 50 out of the total are not and that is not a large amount.
Will the Sprinter commercial vehicle family help Mercedes-Benz dealers increase sales in the coming years?
It is a growth tool for dealers and Mercedes-Benz will probably have to get more creative with how they approach outlets for Sprinter, perhaps in satellite locations. It will probably be part of a future franchising plan. There will be smaller versions and other variants that will help drive that growth.
Is Mercedes considering bringing a van to the United States as part of the Sprinter family?
I saw that article. I do not know how far they are willing to go. We in the product committee have seen nothing.
Do dealers want a van?
We are always looking for opportunities in the lineup. There is a good place for it in Europe.
How have dealers responded to the MB Select program that provides them $2,500 per S class and $1,000 for each CLA to fix problems without factory approval?
We are really excited about it. This was Mercedes-Benz putting their money where their mouth is about customer service and empowering people at the front line both at their organization and the dealer network to make quick decisions and to try to help customers out in difficult situations with a car.
It is awesome when you are willing to step to that level as a manufacturer and to put that trust in your frontline people and make sure you have the tools and ammunition to take care of our customers. That is a great thing and a huge win.
As a dealer board we did not have a lot of advance notice on that. This is a program they put out very quickly.
And it will be offered on other new cars?
Where we had left off was that initially we will monitor it, and if we see a net positive result from it, we would like to analyze that and consider expanding it.
Last year, Mercedes-Benz launched an advertising blitz that started with Super Bowl commercials for the CLA. Can it keep up that pace?
They can keep up that pace and work at that level that was established last year.
With volume increases with the CLA and the GLA, we have no choice other than to keep those levels.
Mercedes-Benz did a phenomenal job launching the CLA and to build excitement from that point forward. People were inquiring about the CLA after the Super Bowl.
Does Mercedes-Benz need to do more in social media?
It is extremely important more and more as we are introducing cars in that younger buyer segment. The Gen X and Gen Y buyers are more likely to use social media to validate their purchase decisions.
Mercedes-Benz has put together a fairly good plan to try and make sure we are working in that space. I am not sure as a group of dealers that we are as active as we could be.