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Insight: Mercedes will grow even more despite record sales

After a brief spell as boss of Citroën UK, Gary Savage now heads Mercedes-Benz Cars UK and explains to AM his determination to grow the brand’s standing with an unprecedented series of new launches – and double market area profitability by 2015. 

AM: Outline your career path to where you are today.

GS: I spent 12 months with Citroën and before that I worked for Audi in Russia for a little under that time, experiencing the obscene highs of the lavish lifestyle and the lows of none of the ATMs giving cash out in the country.

It was an emerging market, predicted to be bigger than Germany’s in the space of a couple of years.

But in the recession it contracted enormously. Before that I worked with the Volkswagen Group in the UK from about 2002 to 2008 when Audi was a rookie prestige brand.

AM: What makes you the right person for this job?

GS: I was approached by Mercedes-Benz in around 2008 when Audi had grown significantly in the UK and eclipsed Mercedes in sales terms and its premium credentials.

I had been part of the team behind that. I had been marketing director and had been sales director when we had gone from selling 85,000 cars in 2006 to more than 100,000 in 2007. I was the right person for the UK market.

AM: How did you end up working at Citroën?

GS: Jean-Marc Gales interviewed me when he was vice-president of sales at Mercedes-Benz Cars and then he moved to Citroën (as executive vice- president) when I was in Russia and asked me to head Citroën UK.

We were at Stuttgart airport when we talked about Citroën for 90 minutes.

AM: So, is the challenge for you at Mercedes now to ‘do an Audi’ for the brand?

GS: Having spent many years with Audi aspiring to be like Mercedes-Benz the challenge now is to optimise the standing the brand has in the UK and the new product we have now and very soon for the company and our dealers.

We need to build the brand from the base level of the incredible brand image we have, based on a 125-year heritage. The brand has been at the top of its game for so long.

AM: Does that carry through to your network?

GS: The quality of representation provided by our network is incredible and sets the benchmark for others.

Since starting with the company in July I’ve visited 80% of our 32 market area partners and I’ve been impressed by the high standards, both in facilities, CI and housekeeping and, in particular, the professionalism of our people.

AM: Where does that come from?

GS: There is a deep seated drive in all things Mercedes-Benz and an intrinsic understanding of the brand that I’ve not experienced elsewhere.

What really sets it apart is an authentic desire to deliver great customer service. In other brands its much talked about as a target to achieve.

But at Mercedes-Benz it’s delivered consistently as a dealer’s first priority. The challenge, therefore, is to ensure this remains the case.

AM: How do you go about that?

GS: For 2011 we have simplified our CSI measure, adopting the Net Promoter score (www.netpromoter.com) for sales and aftersales which is more about advocacy rather than an eclectic mix of numbers which we had worked around before.

Now, we’ve liberated ourselves from that to one question: would you recommend us to a relative, friend or acquaintance?

And it’s more about anecdotal feedback from customers. We will continue with the traditional, wider set of CSI questions in parallel as we move to Net Promoter.

But the network will be rewarded on Net Promoter scores for sales now and in time aftersales. We weren’t the first to introduce this; a number of dealers, such as Inchcape, use it already.

AM: Is it applied only to those people that purchase from you?

GS: At the moment those that inquire and purchase, but we hope to move to lost sales.

AM: Have there been any results yet?

GS: We began ‘ghosting’ the scheme at the end of 2010 to give us an indication of what things would look like and it appeared positive.

AM: The move from traditional CSI to Net Promoter might suggest there are still issues around customer service that you are looking to tackle in a different way.

GS: You never stop working for continuous improvement; you’re never satisfied and forever pushing standards.

AM: So there are no weaknesses in the network?

GS: Not at all. It achieved record levels of customer service delivery in sales in 2010 and very high levels in aftersales. There are areas we haven’t given enough focus to: how we approach and support dealers in the used and fleet markets?

 

AM: You sold a record number of used cars in 2010 though.

GS: Yes, 53,500 units. But we could do better. The potential in five to six years is 80,000.

At Milton Keynes we haven’t had a consistent approach to used cars and didn’t realise the potential as clearly as the network so we’ve been working hard to right that in the last six months to give dealers the support activities and clarity of purpose.

And in Q4 2010 there was a universal engagement of the network.

AM: How did the engagement manifest itself?

GS: Through a consistent and transparent used car offer and we gave the network greater clarity on used car stocks. It was more about finessing what we had than open heart surgery.

AM: And in the fleet market?

GS: If you look at the C- and E-Class, the higher volume models, we do really well in retail. For example, E-Class achieves twice as many retail sales as the BMW 5 Series.

But there’s an imbalance against our competitors in the fleet market and it’s not because of the product, but the support we give our network.

It’s been rather schizophrenic: sometimes we’ve acted as if we’re in the fleet market and other times not. To be successful in the business market you need consistency. I’ve been working with the dealer council.

Some of what we’re doing is ‘work in progress’ such as our approach to contract hire and leasing companies.

AM: Is it a pricing issue?

GS: No. Our pricing, residual values and wholelife costs are competitive. The challenge is to make us easier to deal with.

One change we have made is that our campaigns were very much around a retail, quarterly model.

They are now extended beyond that, making it easier for the fleet market to embrace. And with products like the new facelifted C-Class we are right
for fleets.

AM: Can Mercedes-Benz match Audi’s or BMW’s sales volumes?

GS: I’ve not been given that as an objective. We’re measured on the qualilty of our business and yet no one matches us on the number of E- and S-Class sales.

We’re not looking to grow market share through existing product. Our strategy is based on new product and segments.

This year we’re launching brand new CLS, a facelifted C-Class coupé, SLK, SLS Roadster and in 2012 a new M-Class, SL and B-Class on a new front-wheel drive platform, rounding off the year with a new A- Class.

There will be new engines and seven-speed transmissions which will push down CO2 emission levels making the cars even more attractive to tax conscious retail customers and fleets.

AM: This volume of new models in itself presents a challenge.

GS: Our network has to be prepared to maximise the opportunity they present. Another challenge Mercedes-Benz has is to be less modest.

We’ve got an incredible array of product and our marketing communication hasn’t been confident enough.

For example we don’t make enough of the AMG brand and its dynamic attributes that appeal to the UK market. We’ve made too much of the value for money of the brand.

AM: A network won’t have the confidence to deliver great customer care, invest in the best facilities or get behind promoting new product unless it has the confidence it can make money and, particularly, match the profitability provided by other German brands.

GS: I’m a great believer in encouraging the network to make as much money as possible.

The return on sale in 2010 was the best for seven years at around £2 million per market area, each having three-to-five retailers. All our 32 market areas made a profit.

I made it clear at our retailer conference in November it was my ambition they would be making twice that amount by 2015. I should be measured on this as well as market share. (Editor’s note: the market areas are run by 27 groups and consist of 123 sales outlets).

AM: What is the RoS network average?

GS: It’s between 1.8 and 1.9%. All the market areas were in profit in 2010.

AM: Is that an acceptable margin?

GS: That’s a question for our network partners. But I get a genuine sense of collaboration with our retailers.

There’s an incredible amount of alignment between us and I get the sense we are delivering what the network wants.

AM: Is the network stable in terms of size and location?

GS: We have the geographical coverage we want and the partners. There are no open points.

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