There are only 21 retail groups invested in the Mercedes-Benz cars franchise, a factor which UK chief executive Gary Savage believes gives the brand the edge in its dealer relations.

Those relations are currently at an all-time high. Mercedes-Benz won the AM Award for Best Franchise in February, voted for by dealers, and has been the highest-rated franchise in the past two consecutive Dealer Attitude Surveys conducted by the National Franchised Dealer Association. The results breakdown suggests Mercedes-Benz retailers see strong profit potential for the future, are not overburdened by standards and are happy with communication and support from the manufacturer.

It’s a marked change from the last decade. In 2008, Mercedes was rated bottom for profitability and second from bottom for new car target negotiations.

“Some dealers are going at different speeds and I’m comfortable with that, because they are changing the sales process and the conventional sales executive role” Gary Savage, Mercedes-Benz UK

When Savage replaced Dermot Kelly to head the German prestige brand in 2010, the former Audi and Citroën executive quickly noticed members of the franchised network were being treated like children.

“We had an obsession with measuring KPIs. I think that becomes overbearing. I don’t think there was much of a priority around what they were, we’d measure everything. I think we were quite proud of it.

“While I highlight it as a weakness, it was an impressive measurement system that all the network were focused on, but they ended up being focused on the various weights of measure behind things and the algorithms behind the process as opposed to the end result. That was something I felt was holding us back.”

Savage believes this overbearing focus on measurement may have been holding back the potential within the dealer network.

“One of the things that I was probably most struck with was that we had, as I described it back then, a sort of a parent/child relationship with the network. I felt there was a lot of latent ambition and opportunity within the network that was being probably subdued by this sense of mistrust in terms of their relationship with us, which potentially could have been predicated by the very draconian KPI measures.

“That’s where we put most of the focus. It wasn’t in growing, it was in measuring.”

Fuelled by ambitions for Mercedes-Benz to become the global market leader in prestige cars, the three-pointed star has moved on from its haughty roots. It is still a brand associated with people who have made it in life, but as the global head of Mercedes-Benz Cars Dr Dieter Zetsche told AM in 2012, it must also appeal to “those who are still getting there”.  

Mercedes-Benz dealer opportunities

Thanks to the introduction of its latest generation of small cars, the A-Class, CLA-Class, GLA-Class and B-Class, Mercedes-Benz now features on corporate fleets for young executives and wins retail custom from 30-something professionals. A consumer can get behind the wheel of a new Mercedes for £22,140, or less than £300 a month on a subvented lease – 85% of Mercedes’ retail sales are on PCP or personal lease now.

Savage pointed out that the average age of an A-Class customer is now 41 years old, a 13-year drop from the old model, and 70% of its buyers are new to the brand. Yet he insists that the brand also caters for its traditional customer who can afford the finest things. Its plushest and fastest models, such as the AMG GT and S63, have a list price of considerably more than £100,000.

Along with the broader product, the brand’s growth has been fuelled by more emphasis on the core retail and fleet markets. Another aspect that surprised Savage on joining Mercedes was the brand’s approach to sales.

“The network only had an annual target. They didn’t have a quarterly sales target, let alone a monthly one, and only a modest amount of the bonus margin was attributed to it. I thought that showed a lack of focus, but, as you can imagine, turning up in a new role and telling the network you want to introduce monthly sales targets created a little bit of upset.

“There was an awful lot of concern around what this might mean to a brand that was the very premium of premium. However, I think the network partners did acknowledge a need – in 2010 we sold 74,000 cars, but the partners had invested in capacity to sell in excess of 100,000.”

Savage said the marketing was very conservative and aimed at Mercedes’ conventional customer, reflective of the past and not dynamic and engaging. AMG, its high-performance division, was like a trade secret, and it wasn’t shouting about its involvement in Formula One.

He said its approach to the fleet market was inconsistent, dabbling one moment and not the next, which made it hard to build the necessary relationships with leasing companies. In 2010, its fleet sales numbered just 5,000 cars.

This year, Mercedes-Benz UK will register more than 140,000 new cars and it is currently ahead of BMW across the retail and fleet markets. The network’s used car sales have almost doubled, too. Retail workshop hours sold have increased by almost 10% and will rise further in the next five years off the back of the increased Mercedes car parc.

“In the UK, we will exploit every single sales channel available to us. We are by no means pussycats” Gary Savage, Mercedes-Benz UK

"I’m most proud that we’ve been able to achieve this significant growth and at the same time tangibly improved the relationship with the network,” said Savage.

He pays a lot of attention to the NFDA survey “and not just because we’re winning”. He said he was concerned that in the past, franchisees really valued having the three-pointed star above the door, but had a problematic relationship with the brand. Now, he is confident the momentum can be sustained because of such a high degree of engagement between the dealers and the manufacturer.

Some of the success can be attributed to the changes in the car brand’s senior management since Savage’s arrival. Sales director Adam Chamberlain was recruited in 2013 from Fiat Group; Nick Andrews joined in 2011 from Volkswagen Group and was promoted to fleet and remarketing director in 2014;   customer service director Sally Jones was promoted internally to her post in 2013; marketing director David George joined from  Volkswagen in 2011; and Angela Shepherd took the network operations director role in 2014.

Communications with the network have been improved,  with an emphasis on improving the partnership and collaboration. Savage sees everything before it is sent out and has banned verbose, overbearing communications – the days of three-page memos are gone and presentations at the quarterly regional retailer meetings are concise.

Network stability has been a second element of the improved relations between the carmaker and its franchisees. There have been only three transitions in the network: Marshall bought Pendragon’s market area in the North West of England 2010; Dorset-based Jacksons took over the neighbouring Tony Purslow Group in 2011; and Arnold Clark acquired John R Weir’s territory in the North East of Scotland in 2012.

He said although the network was profitable in 2010, five years on its profits have “broadly doubled”.

Another sign of the franchisees’ satisfaction is that they are investing in a new corporate identity (CI), first revealed at Drayton Group’s Mercedes-Benz of Shrewsbury site, which opened in mid-2014.

The implementation of this new CI, which comprises exterior changes and a new interior layout, will be completed by the end of 2016. Savage said it will contemporise the look and feel of the network, and franchisees are adopting it ahead of plan – 70% of sites have already refurbished the interiors.

A large, illuminated Mercedes-Benz star against a black background on the showroom exterior is central to the new design and will face the major approaches to retailers, clearly identifying the business to customers. Every site will have EV charging points for the growing Mercedes hybrid range.

Inside, black and white replaces pastel shades to provide an understated backdrop against which cars are displayed. Walnut furniture is used throughout the showroom, where  lounge areas allow visitors to wait in comfort, continue with their work and even watch their car being serviced on screens relaying activity from the workshop.

Savage said workshop capacity is not currently an issue, but added that the network does need to look at its efficiency, using Lean-type principles, in readiness for future needs.

The internal changes to Mercedes dealerships reflect its new point-of-sale system. Like many brands, it wants to streamline the experience for the customer, and move away from sales executives sitting behind desks in the showroom, utilising a number of different systems on different computers.

Every market area has at least one AMG centre, with its own car displays and lounge area, to highlight the sportiest models. It reinforces the importance of AMG, which achieves more than 4,000 sales a year in the UK, compared with just 800 in 2010.

“In some respects, we’ve guided and left it very much to the entrepreneurial spirit of our dealers. Some are going at different speeds and I’m comfortable with that, because they are changing the sales process and the conventional sales executive role,” said Savage.

To soften the customer’s experience, dealers have already recruited more than 100 product experts and expect to have 200 in place by the end of 2016. Known as Mercedes-Benz Star Experts, these fulfil a customer service role with expert product knowledge, but work closely with and support the sales and service teams.

In the new sales process, Mercedes-Benz Star Experts will help to demonstrate safety and assistance systems during static demonstration, assist with the technical part of the handover, provide support to existing customers who have questions about the systems of their car, and advise customers on accessory sales that suit their lifestyle. Sales will still be concluded by a sales executive.

“It’s about a warm welcome, understanding our customers, presenting our products and making the whole experience of buying a Mercedes-Benz special,” said Savage.

This winter, Mercedes-Benz UK has been running a multimedia advertising campaign to help recruit new talent from outside the automotive industry to its dealer network.

Savage said: “The ongoing professionalism of our dealer network is absolutely critical to ensure our continued success, to best serve our new and returning customers and for us all to achieve the company’s ambitious growth plans. We’ve already got brilliant colleagues working around the country and now the time is right to encourage more talent to join us.”

He said the Star Experts have an important role to play in ensuring each customer still gets the right brand experience, despite the pressure of increased numbers of customers at each dealership. Savage compares the dealerships to operating “in a sort of Waitrose supermarket environment”, but with a “need to have a boutique experience”.

The experts need to determine which experience an individual customer requires, whether they are a traditional Mercedes buyer or a newer, digitally savvy purchaser.

“If a customer actually wants to immerse themselves entirely in the buying experience, to sit there and talk about the options and the range, that’s fine. However, many customers have already determined through the online configurator exactly what they want, and how much they want to pay, and these customers want a different, more expedient experience.”

Mercedes has found these customers often re-engage after taking delivery of their car and visit the dealership several times for help from the expert with the technology on their car.

“We are in a different place now, with a great deal of goodwill, and that’s something I want to cherish and not erode. But at the same time we must be clear that we will continue to grow this business in the UK, we will exploit every single sales channel available to us. We are by no means pussycats, the proof is there from what we’ve achieved.

“The NFDA survey gives me such encouragement that we are so aligned and have such confidence in each other. I’m entirely confident that our network partners are the right partners and can deliver unequivocally. We have the most professional network in the UK without a doubt.”