Name: Eberhard Kern
Age: 51 years
Designation: CEO and managing director, Mercedes-Benz India
Challenges Faced: To get Mercedes back to the number one position in the Indian luxury car market
Mercedes-Benz was the first luxury car entrant in the Indian market in 1994. For many years we had a monopoly, and it is always difficult to sustain such situations. Once the new entrants came in, India turned into a mature market. Like other markets that Mercedes-Benz operates in, here, too, we had three competitors (BMW, Audi and Porsche) slugging it out for a slice of the pie. Globally, these four brands have an 80 percent market share in the luxury car business.
In the early 2000s, with the entry of competitors, the market normalised in India and this was when we started seeing real competition. Initially, the new entrants gained volumes as they had a wider portfolio with both SUVs and sedans, while Mercedes was seen primarily as a sedan brand. Over the course of a decade, our market position fell twice. In 2009, BMW became the largest luxury car company in India and in 2012, we moved to the number three position when Audi overtook us.
While the product portfolio was an issue, Mercedes also faced a perception problem in the market. The brand was seen as old and stodgy. It was seen as a brand for people who had already arrived in life and were successful. People who were climbing the ladder of success were looking at other options and this is where the entry models sold by our competitors caught their interest. Clearly, this was not the position we wanted to be in.
As soon as I took over (in 2012), we defined a long-term strategy that was centred on profitable growth and regaining our leadership position in the market. I knew this would take time, and took a conscious decision not to rush things. We gave each year a theme: 2013 was the ‘Year of the Offensive’, 2014 was the ‘Year of Excellence’ and 2015 is titled ‘Live with the Best’. We decided to give every year a headline as we wanted to align the whole business, including sales, marketing, dealership, etc., and make them proud of what Daimler (the owner) stands for.
This was not a top-down decision. The management met and we developed it together with our partners. We decided to focus on the product, the dealer network, the customer experience and the downstream business of selling insurance, warranty, financing and so on.
In 2013, we got back to the second spot and in the first quarter of 2015 we have reclaimed the number one position. I know it is still early days, but as a result of our changes, I am confident that we will retain this spot in the years to come.
Let’s look at each of the measures we took starting with our portfolio. Sedans have always been Mercedes’s core business and in India we had followed that strategy. We started with the E-Class and then introduced the S- and C-Class sedans. But there is a clear trend worldwide in luxury and that is to go in for compact products. This is not just with automobiles, but also with luxury music systems, city apartments, etc. Clearly, our portfolio was inadequate. We introduced not only newer sedans but also performance SUVs with the GL63, ML63 and GLA45. Each of them has worked out well. We introduced 10 new models last year and plan to introduce 15 this year. Our customers are well-travelled and expect the latest models as soon as they are out. We do that as soon as homologation (or approval from authorities) is obtained.
Even while we were adding to our product range, we also went out and collected market feedback. Two clear findings emerged: First, our customers wanted top-end models. They did not want stripped-down versions with sticker pricing that our competitors were offering. Second, they wanted models with automatic transmission. As a result, we decided to discontinue manual transmission in our entire portfolio.
On the dealership front, we realised that we had to go deeper and broader. There is a saying in our business: ‘The first car is sold by sales, the second is sold by service’. We now have the densest dealership network among luxury car makers with 72 dealers in 39 cities across India and an additional 15 will be added this year. We changed the look of the dealerships and made them more modern. We went deep into the customer-relationship management process and realised that we had some distance to go in this area. Now, every Mercedes dealership has a customer-relationship manager who reports directly to the CEO of the dealership. There is a joint budget (contributed by both the company and the dealer) to address customer problems, 95 percent of which are now resolved at the dealership itself. Earlier, they would get escalated to the company and take several days to get resolved. A part of the bonus system we have for dealers is based on their performance on customer complaints, both in sales and service. Customers are happier and this is now reflected in our JD Power scores as well. JD Power’s 2014 India Customer Service Index ranked Mercedes-Benz the highest among luxury brands in customer satisfaction.
While there were improvements to dealers and the product portfolio, what was also needed was getting the brand excitement back for our existing customers as well as reaching out to new customers. Mercedes customers are, more often than not, golf players and we expanded the Mercedes-Benz golf trophy by taking it to 14 cities with 26 tournaments. This is the 15th year that it has been active in India and it has never been this big before.
For prospective customers, we created something called the Mercedes-Benz Luxe Drive. Aspiring customers are treated to four hours of test drives, haute couture and gourmet. We’ve tied up with celebrity chef Vikas Khanna and customers get a chance to test drive our cars and experience the brand. While they may not immediately buy our cars, the idea is to get them to think of Mercedes first when they are ready to buy a luxury car.
Lastly, we renewed our focus on the downstream business. There is a very clear trend in the luxury car business to go in for full-fledged mobility solutions. Three out of four cars are financed or leased and insured by Mercedes-Benz Motor Insurance. We have service packages available for all our products that buyers can customise. We also offer a three-year unlimited mileage warranty, which is the best in the industry. And there is the on-road assistance programme, which offers complimentary service privileges.
We also recently doubled capacity to 20,000 units at our plant in Chakan near Pune and added a new paint shop. By 2020, we expect the luxury car market to total 1,00,000 units in India. With the building blocks in place, we expect Mercedes to do well in the next five years.
(As told to Samar Srivastava)
(This story appears in the 26 June, 2015 issue of Forbes India. To visit our Archives, click here.)