Jaguar Land Rover to revise dealer incentive program
Eberhardt: "I have to give credit to our dealers -- we do a phenomenal job on the sales side."
Editor's note: An earlier version of this story incorrectly described the payment terms of Jaguar Land Rover's variable dealer margin program called Business Builder.
Jaguar Land Rover North America will work this year to revamp its variable margin -- the incentives dealers receive on top of the standard margin -- in an effort to improve customer satisfaction, says Joe Eberhardt, the company's new president.
The current program has been in place for about 10 years. It is "way too complicated" and is tied to processes, not results, Eberhardt says.
Eberhardt, 50, was named president in December. He was interviewed last month by Staff Reporter Diana T. Kurylko.
Q: What are your priorities as president of Jaguar Land Rover North America?
A: There are business and relationship priorities. On the relationship side in the first three months, I have made it a priority to get out and see and interact and talk to as many dealers as physically possible.
What are dealers' major concerns?
Some of the shorter[-term] concerns are availability and supply for Range Rover in particular and Land Rover in general. That is the single biggest concern from the dealer network.
What vehicles are in the shortest supply?
The Range Rover, the Range Rover Sport and the LR4 are where we have the biggest issues. Our days supply is in the single digits, which is really unheard of in the U.S. market at the moment. We need to address that because we are losing loyal customers. They are willing to wait for three or four or five months. When it gets beyond that it becomes critical.
Is the problem limited capacity?
We are working three shifts. We are working with our colleagues in the U.K. to address that, but there is no immediate and short-term relief.
We are working with our retailers to hold the hands of our customers through this process and to find the means to at least openly communicate when their vehicle is slotted for production. [We are] looking at ways to extend leases and find other means and ways to keep customers as happy as they can be.
And your other priorities?
Another opportunity is on the Jaguar side to continue to create awareness for the new product portfolio. A lot of people are aware of Jaguar. We have seen spikes in unaided awareness and consideration.
How much has it increased -- especially after that Super Bowl commercial?
The Super Bowl activation and things we do on the social site take some time. The expectation has never been to do that Super Bowl ad and you flip the switch tomorrow and the world will be fine.
To go forward, we have to take that upper funnel and drive actual consideration and interest at the point of retail. And that is still where we have challenges.
What are some of those challenges?
There is just not an awareness of how well the cars are put together and how well they drive dynamically. Everybody looks at it and says, "Beautiful." F-Type coupe, how can you not love the design and spirit of that vehicle? Most people do not know that underneath that skin is a perfectly balanced dynamic sports car. You need to get them into the seat to experience that performance.
How does Jaguar Land Rover do that?
We are debating various ways to do that. Obviously, our retailer partners are key. You can do it with direct mail, events and have a personal invitation -- a one-on-one. We are trying to leverage relationship marketing to the greatest extent possible.
Will Jaguar Land Rover build the Jaguar crossover that has been shown as a concept?
We haven't announced it.
If Jaguar Land Rover greenlights the Jaguar crossover, wouldn't it come at the same time as a new Land Rover Discovery?
The first vehicle in the Discovery family is the Discovery Sport compact premium SUV as the replacement for the Freelander/LR2. It is not a replacement; it is an all-new vehicle with fundamentally different characteristics and capabilities and a larger capacity bay. It will come here in 2015.
Will the price range be higher or lower than the current model?
It is safe to say the Discovery family will be positioning below the Range Rover in the same segments as today and probably not lower than today. It is in the mid-30s. It won't be below that.
Will Jaguar Land Rover continue to urge dealers to combine their Land Rover and Jaguar stores into one dealership? How is that going?
It is going pretty well. We started that initiative 2.5 years back and were slightly above 50 percent combined stores. We are today at around 70 percent.
We will not get to 100 percent because there are certain situations where we have extremely well-performing Jaguar and well-performing Land Rover dealers that are making a profit, penetrating the market perfectly, taking care of the customers in the best way and where there is just not an interest to sell or combine.
How can Jaguar Land Rover improve its rankings in J.D. Power and Associates surveys? Do you use the carrot or the stick?
Neither. We had a big discussion at the retailer cabinet meeting around that particular subject.
I have to give credit to our dealers -- we do a phenomenal job on the sales side. On the satisfaction side with Jaguar, we are doing great.
Jaguar and Land Rover dealers are the same in many cases. Why are Jaguar's customer service ratings high and Land Rover's well below average?
There are a lot of elements that play into this. One is the situation that we discussed before -- it is not very satisfactory that you have to wait for your car. The waits are too long and, while it doesn't have direct impact on the service quality, it does set a mind-set that customers have.
But Jaguar Land Rover also has Land Rover quality issues that drag down those scores.
There are product quality issues and I am not telling tales out of school. We have the [J.D. Power Initial Quality Study] number which we are fully aware of, and we are improving. How long does it take? Sometimes it takes generations.
You can't flip the switch -- realistically six or five years. There should be improvements every year but to get all the way to the top, it is very difficult to do that with existing platforms.
Can Jaguar Land Rover afford an incentive program similar to those of its competitors? When money talks, customer service apparently goes up.
We have a variable margin program called Business Builder, which is different for each brand -- 7 percent for Jaguar and 6 percent for Land Rover.
The base margin for Jaguar is 8 percent and 9 percent for Land Rover. The total is the same, 15 percent.
What is Jaguar Land Rover's base margin?
It depends on brand and vehicle. There are a whole number of things associated with it -- 30 or 40 or 50 things associated with those two items that make up a certain percentage.
It is way too complicated. We are controlling the process vs. incentivizing the outcome.
And this will change?
We had a discussion: Is this really the best for both of us together to do this or should we look at doing something that is simpler, more concise and focused on the issues that really matter -- customer satisfaction, customer loyalty and sales market penetration? At the end of the day, that is what really matters. We should get out of the way and let dealers do their business.
You can reach Diana T. Kurylko at firstname.lastname@example.org. -- Follow Diana on