For Lincoln dealers, 2013 started as a tough year when production problems and quality glitches forced a three-month delay of the MKZ sedan, a car they needed badly. Bill Knight, who is entering his second and final year as Lincoln dealer council chairman, believes better times lie ahead in 2014.
Knight, owner of Bill Knight Lincoln in Tulsa, Okla., believes that Lincoln has learned its lessons from the difficult MKZ launch, and that those mistakes will not be repeated when Lincoln launches the MKC compact luxury crossover, which is scheduled to reach dealerships in the spring.
Knight has seen the industry from many sides. For 14 years he worked for Ford Motor Co. in sales and marketing positions. He then joined Penske Automotive Group, where he did an eight-year stint as an area vice president.
In 2008, as the financial crisis was gathering steam, Knight took a leap of faith and bought two stores in the Tulsa area: a stand-alone Ford store and a Lincoln-Volvo dealership.
Knight's term has coincided with Ford's efforts to remake the Lincoln brand. Last year Lincoln launched the MKZ, heralded as the first vehicle in its reinvention. Lincoln also started the Lincoln Dealer Academy to train dealership employees to provide better customer service. Lincoln also launched an online concierge service to help customers choose their vehicles.
A deluxe Black Label line of luxury trim levels debuts in 2014.
Lincoln has also been running a series of ads comparing Lincoln models to Lexus competitors. The ads feature young couples interviewing their perspective vehicles, which talk via cartoon-style balloons.
With an owner body that has averaged nearly 65 years old in recent years, finding younger customers is imperative.
For 2013, Lincoln sales dropped 1 percent to 81,694 in a robust luxury industry that rose 10 percent for the year. The numbers are minuscule compared to those generated by Lincoln's luxury rivals such as Mercedes-Benz, BMW, Lexus, Acura and Cadillac.
Knight talked with Staff Reporter Bradford Wernle.
Q. How was 2013 for Lincoln dealers?
A. Clearly from a volume standpoint it wasn't what we had planned or what the objective called for. Year-over-year the volume was flat in a luxury industry that continues to grow, so it certainly was not what the company or the dealers wanted.
But if there's a bright spot, profitability for the Lincoln dealer improved 30 percent in 2013. A lot of that can be attributed to some of the invoicing actions that we took back in 2012.
We're certainly not where we want to be on volume. But it has been awhile since profitability for Lincoln dealers was up 30 percent.
How does 2014 look for Lincoln dealers?
There's a lot of positive news about the MKC. The reaction of the press to the unveiling has been really positive. It shows the continued commitment on the part of the company to provide differentiated vehicles for Lincoln. The MKC is the best example of that. The MKZ got criticism from the media that it was too close to the Ford Fusion. We're not hearing any of that on MKC.
It's an incremental product for us, which we need, and it hits at a very exciting time. The segment it hits, there just aren't a lot of players. This is the type of product that sets us up well as we continue the journey.
In what areas would you like to see improvements?
We continue first and foremost to challenge the company to increase the breadth and depth of the product lineup, whether it's a third-row SUV or CUV or a small sedan. We recognize it just takes time. We continue to have dialogue with the company to get throughput for the dealer network.
Any specific vehicles you'd like to see added?
The thing we don't have is a mid-sized SUV or CUV that has a third row. We don't have a volume entry in a third-row SUV. As those segments continue to grow, when you look at the other luxury players moving down to that B- and C-car segment, those are things we hope the company can look at going forward.
What about the MKT? Sales have been very slow.
It is certainly polarizing. From a dealer perspective, we're not in a position to tell the company we don't want certain products. The MKT fills a small niche. It's certainly not providing the volume or throughput we need. We are selling some of them. We're anxious to see what the company's plans are.
The MKZ launch was delayed. Lincoln has admitted the launch was botched. How well has Lincoln recovered from that episode?
I think the company learned a lot from that. It certainly wasn't what the company planned, nor was it what the dealers expected. But we got through it.
The company did some unprecedented things by providing cash payments to the dealers most affected. Clearly it was something we didn't anticipate and don't want to go through again. It showed we can have collaboration and constructive conversations. The company will take those lessons learned and apply them to the launch of the MKC. We're confident that it won't happen again. They were launching the MKZ right after the Fusion. The Fusion was a complicated launch, and that got more complicated because of the MKZ.
How would Lincoln dealers react to a flagship sedan?
Our priorities are products that will help our throughput. We try to keep them focused on products that will provide volume. I don't think we're ready yet for a small-volume, high-dollar flagship sedan. That's why it's important to have the MKC in a growing segment.
Once we get a throughput increase and get the dealer network healthy again, absolutely that's the vision of the future.
How about a compact luxury sedan?
We know that is where it appears the other luxury manufacturers are going. It appears there is going to be volume there. Let's go chase the segment where we can get volume and increase our throughput.
Lincoln dealerships that have Ford know 95 percent of sales will come from the volume brand. But the stand-alone dealers are different. What more can Lincoln do to help the stand-alones?
I'm a stand-alone. You could argue if you're a stand-alone you have to be engaged, because that's what's paying the bills. The differentiation I see is those who are engaged and those who are not. For those that are, we've made good progress.
If I look at my situation, the tools that Lincoln has provided us over the last 18 to 24 months have transformed the experience I'm providing my clients on the showroom floor and service drive. It's very different from a personalized service client experience standpoint than at my Ford dealership. That has allowed us to bring the conquest customers we're trying to find and it's also allowing us to increase our service business. The training in hospitality is allowing us to provide a very different experience than Lincoln has provided before. It is hard work to engage your team to get where we're going. It can be done. Our employees have thrived with our Lincoln Academy. It allows us to do special things for our clients
The client experience in sales and service has to be fully separated from Ford. Have we made mistakes? Sure. For those dealers who are engaged and use the tools provided, they can change. We don't have a choice. We have to make this work. When I look at what we're providing on the service drive, it's completely different.
What changes have helped dealers improve on the service side?
The strategy has been to bring some of the techniques from the hospitality industry into our service departments. The Lincoln Academy, which we're in our second year of, teaches a lot of the soft skills -- situational awareness, things that are taught in the hospitality business. I know if you're a client of ours and you come in and I see you're a big Detroit Red Wings fan, I might put a Red Wings hat on the seat.
We've created what we call a "wow closet," and it's something we wouldn't have thought about doing without being challenged by our Lincoln Academy trainer. Give customers some token of our appreciation. We want people to know we appreciate them doing business with us and giving them truly personalized service. I can't do that on my service drive at Ford because there's too much volume. Lincoln has given us some funds to provide that wow closet.
With the shrinking of the dealer body, some Lincoln dealers now have very large territories. Are some spread too thin?
I don't think you'll get a dealer to say is the territory too large. Is the dealer engaged in the brand, and has that dealer earned the heart and mind of the team? We're still somewhere hovering around 300 dealers in the top 130 markets. But in total there are still 1,100 dealers. That's still too many. I do think there's still work to do on the network to make sure the right dealers are in the right places.
Has the dealer council suggested where Lincoln could adjust the network?
What we keep asking them for is to be sure dealers are in the right places, where the luxury markets are. That's something they'll continue to work on. It doesn't do any Lincoln dealer any good to have dealers who aren't engaged in the brand. We continue to talk about engagement in the brand, recognizing that engaging in the Lincoln brand today is very difficult because of the throughput.
The other thing I try to champion is asking the company to continue to be easy to do business with. You hear that with compliance issues. The company continues to make a lot of changes to make it easier for dealers to understand and comply and engage.
How have they separated Lincoln from Ford in the financial services area?
Let's make it look and feel like a luxury brand, which they've done. They've changed their Web site. It's fully differentiated from Ford. From shopping and purchasing with Lincoln Financial it feels completely separate.
We've done a lot of things with our lease returns and helping keep those lease returns in the network. Lincoln Financial Services has been right in the middle of helping us improve that.
We've improved greatly the amount of vehicles staying in the network. It has almost doubled from where it was last year. That's great for residuals and great for the Lincoln network. All things helped by Lincoln Financial Services.
Lincoln has made a big deal out of personalized customer service. Some dealers felt Lincoln was penalizing them too much for little compliance issues when the big picture was that they didn't have any new cars to sell. Has Lincoln let up a bit?
As we started the journey, it was important to say that the intent all along was to look and behave like a luxury franchise.
We knew from research that providing same make loaners and washing vehicles were some of basic tenets that other luxury brands do. It was not easy in terms of tying those to some of the back end, below the line money.
At the beginning there were some questions, some missteps with the questions they were asking with follow-up with the customer. Lincoln has adjusted. They've been nothing but fair. Is there still the occasional frustration about some compliance program? Absolutely.
The MK naming system continues to generate confusion. Would dealers like to see a change there?
If you ask most people today, they would say they'd like to see Lincoln transition away from the nomenclature we have today. That's easier said than done. We continue to have dialogue about that. The great thing about Lincoln is there are a stable of names from Continental to Mark to Aviator. From a priority standpoint, we know all of this takes money. If you said would you rather change the name or have a new product, we'd take the new product all day long.
What's the status of the Black Label rollout? We've heard Lincoln expects about 5 percent take rate. Will those dealers be mostly in the coastal areas and top 100 markets?
I think it's still early. There's going to be kind of a staged rollout. There's going to be a rollout with six states beginning in January. I've been really encouraged by the "take-it- slow" approach. It's going to be 100 percent voluntary.
Will dealers have to spend money to sign up for Black Label?
There will be an investment so dealers can have their eyes wide open about what the investment will be and what the return will be.
What about the technology allowance dealers have been getting to help explain MyLincoln Touch to customers? Any changes in that policy?
The technology delivery allowance will go away on the same cadence that Ford has, at the end of the 2014 model year.
The MKC has knobs and buttons on the center console. That's a big change from the MKZ. What's your reaction? Did dealers play a role in that change?
We fed back to the company what the customers were feeding back. They were more comfortable with knobs and buttons than touch screens and slides. We're happy we're going back. That's more the voice of the customer than the voice of the dealers. Buttons and knobs just work better than slides and touch screens for certain functionality.
Do you see more attractive leasing packages in the future?
If you look at how competitive the lease market is in the luxury business today, some other brands are offering leases in the high-$200s per month. We know they do it mostly with 36-month leasing, where Lincoln in the past has been more 24-month. As we go forward, we're having more conversations about 36-month leasing.