Raahil Chopra
May 27, 2015

‘Gone are the days when you could just attribute it to the brand name’

Santosh Iyer, VP – marketing, CRM, explains Mercedes Benz India’s market-leading last quarter of sales, and why the brand has steered clear of a brand ambassador

‘Gone are the days when you could just attribute it to the brand name’
You have a presence in 38 cities and want to ramp this up to top 50, based on several parameters. Among the 38, is there a cluster that would constitute the most volumes? Is there a percentage for the metros, versus the non-metros?
 
Traditionally, Mumbai and Delhi have constituted 40 per cent of our sales. Pune and Chennai are seeing immense growth too. Tier three cities, like Indore and Thiruvananthapuram, are seeing good sales too.
 
So, the Mumbai-Delhi domination is coming down and the other marketers are growing.
The good part in India is that the sales are spread (out) compared to other markets like Malaysia, in which we see hubs like Kuala Lumpur contributing almost 60 per cent of the sales. 
 
On the other hand this provides us with a marketing challenge too. We have to reach out to more markets. We can’t get away with doing one launch in one city. We need to do launches in 13 or 14 cities.
 
The classic seven metros will still form 70 per cent of our total sales. But, we are seeing a trend with smaller cities growing (in terms of sales).
 
You sold over 10,000 cars in FY 15, growing at 17.5 per cent y-o-y, putting the brand in second spot in terms of sales for the year, but in the top spot for the last quarter. What explains the growth numbers in the year? And what explains the jump in the last quarter?
 
A couple of things.
 
We were always a very strong luxury brand in the top end of the spectrum. The M-Class, S-Class, the GLA, and E-Class were market leaders in their segments, so we’ve been doing well there.
Then, the newer generation cars, like the A-Class and B-Class came in last year, and the year before, and, the GLA and CLA came in this year. These cars are definitely finding much better acceptance within the younger target group and generation. A combination of a good product portfolio and a lot of focus on experiential marketing (events), have helped us get this.
 
Also, we have very good finance offers and schemes, which drives the market for us in a very intelligent manner.
 
Everyone seems to be offering finance schemes. What’s unique about the finance schemes offered by Mercedes?
 
We have Daimler Financial Services, and because Mercedes Benz has the highest residual value, it makes it unique. By residual value, what I mean is a three-year-old Mercedes Benz commands a higher price compared to a three-year-old car from some other stable. So, we offer a repurchase guarantee at the end of three years. The customer ends up paying only an ‘x’ amount then. So, a Mercedes Benz becomes much more affordable for the consumer. We don’t offer discounts, but we can do leasing. We call this ‘Star Agility’. The customer can choose to retain the car after three years, or give it back to Mercedes, or continue the lease for a further three years.

The ownership of the car remains with Daimler Finance, until the full payment is made. This is quite popular in the US and other developed markets, where about 50 per cent of the sales happen through this model. We are slowly trying to bring this concept to India. With consumerism growing quite rapidly, at a strong pace, we feel this is a good way to expand the market.
 
Mercedes Benz was famously in the news for catering to group buyers in smaller cities from the business community. Tell us about the genesis of targeting beyond the metros.
 
As a policy, we don’t have these ‘group offers’. Dealers may be doing that. But, what we have, are offers for corporates; we have special packages for employees of companies like American Express and KPMG.
 
How many of your customers do you think are first-time luxury car buyers? Is there some data to back this?
 
It varies from segment to segment. The C-Class and above are repeat buyers. We call these customers our ‘luxury dwellers’ as they keep changing cars every three years.
 
With the A-Class and B-Class too, we don’t see too many first time buyers. A lot of these customers’ parents have owned a Mercedes Benz before. From a percentage perspective, 60 would have tasted luxury (cars) before, while 40 per cent would be first time buyers.
 
The CLA and GLA are the two cars where we see more than 50 per cent of consumers are first time buyers.
 
Taking a macro view, what is your understanding of loyalty in the luxury car segment today in India, by brand? Is there a diehard Mercedes loyalist you witness upgrading from within the portfolio? What is the incidence of churn to/from other brands?
 
We find our customers being highly loyal now. This wasn’t the case about three years ago, because back then our product portfolio wasn’t fully geared up. Now, when we have a fresh portfolio, we find many of our customers loyal.
 
We are leading by a far margin in the first quarter (Jan to March 2015). This is a mixture of first time, loyalists and luxury dwellers.
 
How has pre-owned taken off? Could it be a nice incubator for the first-time luxury car buyer, to bring them into the Mercedes stable?
 
We have a very strong residual value for our cars. So, we thought that if there is a proper place to trade and exchange, it helps in two ways; one, our current customers can get the best value for their cars. Secondly, with ‘Mercedes Benz Certified’ we assure correct documentation.
 
On the other end of the spectrum, yes, there are a lot of consumers in India who want to own a Mercedes Benz. This (pre-owned) helps them get into the brand at different price points.
 
The challenge for us at MB Certified is not to sell a car; it’s to buy a Mercedes from a consumer. Many of the showrooms get a car, and they are sold within a couple of days. This means the brand has a strong equity.
 
Beyond cost of vehicle, are factors like cost of spares a perceived deterrent for luxury car buyers in a value-conscious market like India?
 
Yes, definitely. I think one of the key strengths we have is also the cost of ownership. One key thing we did when we launched the CLA and GLA, was also announce a lower service package. For the CLA, our service pack is Rs 1.99 per kilometre. It has had a huge take rate. Lot of consumers, more so, first time luxury buyers, feel it is easy to own the car through financial schemes, but maintenance becomes a problem.
 
So, while we are expensive compared to competition, it is only on the initial purchase price. If you look at the total cost of ownership, we are much better. We offer three years standard (warranty) policy compared to the two years offered by competition. So, there is more peace of mind.
After three or five years if a user wants to sell the car, through MB Certified, one can get five to 10 per cent higher than a price one would get for competition.
 
So, our dealerships and sales team always pitch the total cost of ownership to the consumer, rather than just the purchasing price. It’s not just about launching products; it’s about the entire ownership experience.
 
Luxe Drive initiated in 2015 will target 15 cities, with the stated objective of giving people looking to upgrade ‘a taste of luxury’ but not through cars. How has this worked for the brand thus far? How will you evaluate the RoI on the initiative?
 
This is completely targeted at first time buyers of luxury. We thought that the person we’re targeting would be very busy over a weekend too. Calling them for a drive experience alone may not do justice. We partnered with gourmet (chef Vikas Khanna), fashion brands like Hugo Boss and kept the car as the central excitement. Consumer gets an experience of two to three hours into immersive luxury. We give a taste of modern luxury to the consumer before one gets into it. Anybody coming there is getting a sneak peek into the world.
 
We launched this in February in Chandigarh. We plan to take it 15 cities. The response has been immense. People are coming in and buying cars. But it’s not a sales platform, it’s about experiential.
 
 In each city we meet about 600 to 700 people. This gives us reach and a dialogue.
 
In 2012, Mercedes Benz brought in Farhan Akhtar, Chetan Bhagat, Irfan Pathan and Masaba Gupta as 'reflections of the brand'. But, the brand has steered clear of a brand ambassador. Is that the right strategy for a market like India?
 
It was for our ‘MB Inspired’ initiative. That was the time when we were about to launch new generation cars in India. We wanted the brand message to go to a larger TG. They were all consumers, and not brand ambassadors. They had a large following on social media, so we used them to communicate the brand promise to a large group.
 
About brand ambassadors… I’m sure they work, but it depends on the category. We are at the top end of the spectrum. The consumers, who buy a Rs 40-lakh car, are highly evolved. Many of them are CEOs, owners of large companies. The ability of brand ambassadors to influence them is limited. Whereas, in the mass segment, brand ambassadors from Bollywood etc. could help.
 
What would you enlist as the most memorable ad campaigns for MB India?
 
I would say the recent, India-specific ‘Ah My God’ for the Mercedes AMG (by Creativeland Asia) would stand out. People know about Mercedes Benz, but they don’t know the performance brand – AMG. We introduced the AMG Driving Academy with the Buddh International Circuit, and had other initiatives for which we partnered with the circuit too.
 
The film was meant to be only on digital, but when we saw the idea, we thought of taking it on television too.
 
New model launches are seen as a big driver of sales in the auto sector. Is this true? Should marquee brands have to depend on new launches for sales numbers?
 
Products in the automobile sector play the most crictical role. It’s the starting point of campaigns or activities. So, for us, the new product portfolio has helped us a lot. But, it’s always about positioning them well too.
 
We made a conscious decision three years ago of not compromising. Our product strategy doesn’t have an entry level car. You either take a car with a panoramic sun view and the works, or you don’t take a car at all. We believe that when the consumer takes his car home, he will show it to his friends and family. He needs to tell them why he’s got a Mercedes Benz. Gone are the days when you could just attribute it to the brand name. The car has to have the equipment. So, this is a major shift in strategy on the product front. I think it was painful when we took the decision, but in the longer term I think this will work. In the long run, products make a difference.
 
Have marketing spends gone up over the last, say, three years? How is this constitution of spends changing (between media, contact programmes, etc.)?
 
They’re not increasing at the pace of volume growth, but there has been an increase for sure. We’re more focused on the media mix. We’re shifting a lot of money to digital, we entered TV as well. The biggest change is we’re shifting to experiential marketing. The total industry is only 30,000 to 33,000 cars, and it may grow up to 40,000 units. So, these 40,000 customers need to be reached personally rather than through non-transactional and non-emotional methods. So, events like the Luxe Drive help. One of the key insights is that the story has to be told in person. This is where we spend a lot of our marketing monies, which was shifted from print.
 
(This article was published in the 15 May issue of Campaign India)
Source:
Campaign India

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