Mercedes-Benz USA's renewed focus on the customer experience has boosted dealer training and changed the margin structure, and it could mean more money for stores.
Mercedes-Benz wants its dealers to be the best in customer satisfaction and began programs last year. The brand also is preparing dealers for the launch of a new generation of front-wheel-drive cars starting this fall with the CLA sedan with coupe styling.
"It is a segment we have not competed in before. We are trying to go after a different buyer and a different demographic, and we really need to be prepared for that," said Joseph Agresta Jr., chairman of the Mercedes-Benz Dealer Board.
He was interviewed by Staff Reporter Diana T. Kurylko.
How was 2012 for Mercedes-Benz dealers?
2012 was a good year overall. It was another strong sales year for Mercedes-Benz, especially the second half. Profitability was improved year over year for the dealers on average, and it was somewhat of a transitional year. We are heading into a very high growth period for Mercedes with some new product introductions.
What major issues will Mercedes-Benz dealers face this year?
A lot of the big structural discussion issues are kind of resolved. Mercedes-Benz has completed the big push on their facility redesign -- the Autohaus initiatives. There are still some dealerships under construction and some that are taking on the project now, but the dealer body as a whole has moved past that.
We had a lot of discussion about the margin structure. There has been more of a realignment of the margin structure, which was a long, complicated discussion. That new margin took effect on Jan. 1. With a lot of these big heavy discussions the dealer board faced with the manufacturer resolved, it will give us an opportunity to focus on monitoring the changes with the margin structure to make sure the realignment doesn't have any unintended consequence and that it is really performing as expected on all sides. We also will look very closely at the customer experience rankings, how we are performing in an area where Mercedes-Benz and the dealers have invested a lot of resources -- money, time and training efforts. There has been a lot of time and a lot invested in the past couple of years around improving the customer experience and really revolutionizing it for the customer. We really want to focus in on it and making sure that we are having an impact there and that the efforts are yielding a positive result.
Will the new margin program make dealers more profitable or take away revenues? Will it really reward dealers who do best?
I believe yes on all counts to those questions. We have an expanded margin, there is additional margin that we did not have before. Right off the bat as a dealer body, we are guaranteed to have a higher payout in total than we did in the past, so that automatically is a win. I believe because of the realignment, the high performing dealers will be rewarded at a higher level in every category. In this realignment there is a greater emphasis on the customer experience. At a time when we are investing tremendous resources in providing a better customer experience and training our staff, there is a reward.
I think on all fronts it will help improve dealer profitability for the entire dealer body and in addition it will help the top performers exceed where they have been.
Do you think this is a good replacement for the bonus you previously had for improving stores under the Auto Haus facility standards program?
What other areas is the board looking at?
As a dealer board we want to focus on the operational aspects -- we have revamped a lot of our processes. Now we want to look at how operationally we can be more effective with Mercedes-Benz and where can we root out some inefficiencies and processes that are holding us back from improving the customer experience and improving profitability.
Anything in particular?
It is such a broad area. We have to take a look across the board. I do not have one particular thing that is a standout.
How has the Driven to Lead: Customer One program Mercedes-Benz has launched to improve the customer experience changed the way you do business?
It has raised the bar of expectation within the dealerships because Mercedes-Benz has placed such a focus on it and created so much more of an awareness of how we approach the customer. It is a cultural change more than a project. It is an effort that will be ongoing for the foreseeable future. It is more about how do we change what we do every day as opposed to a one time training effort.
It has had a positive impact throughout the dealer body and if nothing else, creating a much higher level of awareness of how we approach the customer -- whether it is in the sales department or service or the body shop. There is a much more ingrained focus on the customer experience and it transcends to every employee. It is not simply about your service adviser or your sales account representative, who are generally your primary contact points, but everyone that touches a customer -- whether it is a porter or someone even in a back office function.
Mercedes-Benz surveyed dealer employees on their involvement with the dealership where they work. How have dealers embraced the survey results? We understand that they were given out last year at the dealer meeting in Las Vegas and that Mercedes-Benz will send a team to any dealer who wants to discuss results.
Generally speaking, the feedback has been very good. There was some concern as to how the information would be used by Mercedes-Benz, and was it truly going to be kept anonymous. But I think Mercedes has proven that this is exactly how they wanted to proceed -- to give us an idea of what is happening in our own stores and to ask some questions that many dealers don't ask or had not asked in the past.
Is Mercedes-Benz investing more in training?
Certainly, and especially starting with the Customer One training effort, there has been revitalization around training -- and a renewed emphasis on product, technical and all training. They are looking to jump that area of investment even further. This year all the new product entries that we have will require an awful lot of training with the dealer body to get everyone up to speed. In the case of the CLA, which is being introduced this fall, it is a segment we have not competed in before. We are trying to go after a different buyer and a different demographic, and we really need to be prepared for that.
How about the DASH -- Drive a Star Home -- program? Mercedes-Benz is taking a fleet of cars on the road for dealership employees to drive. Is it really going to work?
The intention of the DASH program is tremendous and an opportunity for many of our staff who don't regularly drive our products to be able to get them into these cars, experience them and to get a real feeling and understanding of the brand and what it all stands for. Let's face it, it all starts behind the wheel.
It is a difficult program to administer and there is an awful lot of administration behind it. The intention is great, and it is a much needed program. It will create an opportunity to help connect with the brand at a deeper level.
How will the changes to the loaner car program affect dealers?
It is a vast improvement over what we had. It will significantly reduce the expense of maintaining a loaner car fleet and in some cases allow a dealer to more heavily invest in the loaner car program to accommodate their customers.
What are the most important changes to the program?
They are paying us more and allowing us to sell the cars in an easier fashion. We have fewer restrictions on how we sell the cars when they are ready to be turned.
Meaning you don't have to hold onto them as long?
The time frame is shorter, we can rotate the vehicles more frequently, and we have access to new vehicle programs when we sell those cars -- with some restrictions. Before you had six months to a year -- it fluctuated quite a bit. Last year a decision was made to reduce that to 90 days, and with the new program it stayed at 90 days.
But you can no longer use other brands as loaner cars -- only Mercedes vehicles?
How will the new family of front- wheel-drive compact cars starting with the CLA coupe this fall be a game changer?
We are going after a segment that we have not competed in before. It is a volume segment, this is not a niche strategy. We are jumping into a mainstream segment with a volume plan. Just cranking up those types of volumes is absolutely a game changer. We are competing at a price point we have never competed in before, which gives us an advantage with the brand.
Meaning starting prices of about $30,000?
What kind of annual volume do you expect for the CLA vehicles?
I don't know the eventual target. We are talking about volume eventually over time, similar to the C and E class.
Meaning when all three compact products are out?
Will Mercedes-Benz dealers, who are used to selling more expensive and bigger cars, be able to easily sell the CLA? Will it require a culture change?
I think it requires some change, but it is a change that has been ongoing throughout the dealer network and the brand for years. We have moved into various segments over time -- like the GLK, for example, a small SUV that competes in a lower price segment, and realignment of the C class and having a C-class sport coupe. We have been trying to compete in a different price point and a younger demographic. This is not as much of a stretch for the dealer body. It is a well timed and fairly consistent next evolution.
Are the changes made in midlife to the 2014 E-class lineup significant? Why were they necessary?
I just had a chance to see the redesign again. It is a dramatic change from the current model. There are 8,000 new components. That is not a facelift. It is absolutely beautiful, and it updates the vehicles. The current E class has sold unbelievably well for us, and getting a mid-cycle refresh that is aggressive, young looking and done really well should carry us to the next generation in 2016.
How will the redesigned S class due this fall change the game in the upper end of the luxury sedan segment?
We had a chance as a dealer body to see the new S class in advance quite a bit of time ago. That car is spectacular; it raises the bar again for luxury standards. It is the flagship for Mercedes and it has been the benchmark for super luxury vehicles. It creates a very strong stately presence on the outside and the inside is just dripping in luxury. I have never seen a prettier interior in a car. It is nicer than a Maybach and nicer than what I have seen in a Rolls-Royce or a Bentley.
What do you need in the C-class family -- where you have a sedan and coupe today -- to be competitive with the BMW 3-series lineup? We know there is a new C class coming in 2014 and it will be built in the United States.
We have done really well with the C class since this current iteration has been out. We have a coupe version. The C class it is a great all-around performer. We have great performance in that car being headlined by the C63 AMG and the Black Series. We have everything we need in that category.
What vehicles do you need in the lineup?
Once the CLA and that series is introduced and we get an alternative-fuel platform starting in the B class, our range will really extend unbelievably far.
We believe it starts with the Smart products. When you consider that you have a price point that starts around $11,000 and works up the ladder to around $200,000, that is a broad offering. I think it is the best offering in the marketplace right now.
From the dealer perspective, did BMW beat Mercedes-Benz in sales last year because it had more aggressive finance deals, secret lease pull-aheads, etc.?
I think that is probably true. I was a little closer to it through the dealer board. We didn't expect to surpass BMW last year. I am happy that the executive management team at Mercedes-Benz doesn't view that as their primary focus. It costs a lot of money at the end of the year when the gloves come off and everyone is slugging it out for a title.
There are various programs that come out that make it difficult for dealers -- these demo-type programs that come out at the end of the year. Mercedes-Benz didn't do it this year, and I am happy that they didn't. It has to cost BMW more to do that. We're happy that we stayed out of the fray.
Will the lease pull-ahead deals that Mercedes-Benz offered at the end of last year affect 2013 sales?
They won't. We have a huge portfolio of off-lease vehicles coming in comparison with what we had in the last few years. We saw less lease maturities in the past two years and we are looking for a rebound starting in the second half of this year. I do not think the pull-ahead programs we saw last year will have a huge impact on this year's business. It surely helped us in 2012.
How has the new management team changed the way things are done at Mercedes-Benz USA?
Because of this renewed focus on the customer through the Customer One program, they have really looked within their own organization department-by-department at how they support the dealer body so we can support the customers better. That feels different from what we have seen in the past. It is a nice change and that will continue.
Over the past couple of years, the dealer board has worked hard with the executive management team to build a better dialogue between the dealers and Mercedes-Benz and vice versa. It has been a two-way street.
I do not think that dialogue has been better or stronger. It truly feels like there is an ability to have a conversation about any issue that may be on the table and like we can move the needle.