Mercedes Dangles Bounties Pushing Dealers for Top Service

Photographer: Daniel Acker/Bloomberg

German premium automakers are introducing a wave of initiatives, big and small, to help the shopping and service experience match the luxurious and pricey vehicles they sell. Close

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Photographer: Daniel Acker/Bloomberg

German premium automakers are introducing a wave of initiatives, big and small, to help the shopping and service experience match the luxurious and pricey vehicles they sell.

A Bellagio casino staffer wheeled $60 million in poker chips onto the ballroom stage to show the value of improving service at U.S. Mercedes-Benz dealerships.

The chips represented the bonus dealers can earn for higher customer-service ratings. Daimler AG’s Mercedes explained the happy-customer bounty at the dealers’ annual meeting in Las Vegas last year. The company is improving how it surveys customers, and the stores ranked in the top half will divvy up the extra cash. As U.S. sales grow, so will the pool.

German premium automakers are introducing a wave of initiatives, big and small, to help the shopping and service experience match the luxurious and pricey vehicles they sell. Bayerische Motoren Werke AG’s BMW is adding so-called genius shopping assistants, like those at an Apple store. Volkswagen AG’s Audi is expanding hours and adding services. The three rank near or below average in dealer-shopping experience, according to J.D. Power and Associates.

“We’ve languished in the middle of pack the last 10 years” in terms of service, Steve Cannon, head of sales for Mercedes-Benz in the U.S., said in an interview. “It’s almost cognitive dissonance to say Mercedes-Benz is in the middle of the pack.”

The three brands rank in the top six for appealing vehicles, according to a separate J.D. Power survey. When it comes to customer service, the rankings are led by Japanese and American brands. Toyota Motor Corp.’s Lexus rank first, followed closely by Nissan Motor Co.’s Infiniti. General Motors Co.’s Cadillac and Ford Motor Co.’s Lincoln rank third and fourth.

‘Ultracompetitive Market’

“As the products get better, the biggest differentiator in this ultracompetitive market will be the customer experience and the absolute power of the brand,” Cannon said.

Every sale counts as Mercedes and BMW duel again this year to be the top-selling luxury brand in the U.S., having pulled away from Lexus. BMW has sold the most luxury vehicles in the U.S. the past two years, based on reported sales. By vehicle registrations, Mercedes topped BMW last year, according to researcher R.L. Polk & Co.

Mercedes widened its 2013 lead over BMW in October to almost 5,000 vehicles. The figures don’t include Daimler’s cargo vans and Smart cars and BMW’s Mini brand, which aren’t luxury vehicles. Audi, the fifth-best selling luxury brand, said its sales rose 11 percent in the month. That’s a bigger increase than No. 4 Cadillac and smaller than No. 3 Lexus.

Industrywide sales rose 11 percent in October and 8.4 percent through 10 months, keeping the market on pace for its best year since 2007.

BMW’s Geniuses

BMW, which ranked below average in the J.D. Power study, is taking a cue from Apple Inc.’s retail stores, where salespeople roam the showroom floor, offering advice with no strings attached.

BMW Geniuses, one or two per store, donned in navy blue polo shirts, will offer advice with no threat of a salesman’s push. They’ll be paid a straight salary or wage with no commission.

The Geniuses are in 19 dealerships as a pilot program. By the end of next year, 500 of them will be working in stores in all major U.S. markets, Peter Miles, executive vice president of operations for BMW of North America, said in an interview. The idea is to address the way shoppers buy cars now, providing a bridge from their online research to the actual transaction with a salesman.

“There’s substance in our engineering,” Miles said. “You have to have the ability to explain that in a way customers are interested in hearing it -- or bragging about when they own a car.”

Audi’s Approach

Audi is taking a practical approach, adding weekend and evening hours to let buyers pick up their new cars at times and locations convenient for them. Its new Manhattan store offers valet parking. Audi dealers are using scanners and other technology to speed or eliminate the paperwork required in dropping off a car for service or applying for a loan.

“We spoke to people who fly a lot,” Scott Keogh, president of Audi of America Inc., said in an interview. “You can have wine on a plane and good food. Most people in business class don’t care. They want to know was the plane on time? Was the seat comfortable?

‘‘We zeroed in on this.’’

Aiming Younger

The big German luxury brands are trying to improve service to win over the new, younger customers the brands aim to draw to their dealerships with the most affordable lineup of cars they have offered in the U.S. Younger buyers are more resistant to the car-buying experience, so the idea is that better treatment can keep the experience positive.

‘‘It makes sense that they’re trying to address this now as they bring in the younger generation of buyers, who have proven to be less brand loyal, and more willing to hop around, if they don’t get the service they expect,” said Alec Gutierrez, auto analyst for Kelley Blue Book.

Mercedes is at the early stage of introducing 30 new or refreshed vehicles over the next seven years. Some, like the $30,000 CLA, are designed to lower the brand’s average customer age. Audi and BMW are also targeting new, younger buyers with entry-level cars like the Audi A3, priced at $29,900, and the BMW 1 Series, which starts at $31,500. The top-of-the-line Honda Accord, by comparison, starts at $33,480.

The power of social media also heightened the urgency, Cannon said. Through consumer review websites such as dealerrater.com and yelp.com, a customer’s bad experience can now be echoed exponentially and instantly.

“Through social media, the multiplication tables have changed dramatically,” he said.

7203 JT <equity> F US <equity> GM US <equity> VOW GY <equity> DAI GY <equity> BMW GY <equity>

NI RET NI SALES NI SPEND NI LUX NI AND NI CORE NI CODES NI HERE NI CARSALES

To contact the reporter on this story: Mark Clothier in Southfield, Michigan, at mclothier@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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