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Who Is Benz’ s Most Important Customer?

Date:08-04 10:04 Source: Autochina.comnews.cn Authour:He Lun

(The article was published in 2015)

It remains to be seen whether Mercedes will continue to value the manufacturer-dealer relationship more than its sales, but building a new relationship is no doubt necessary in a situation where the Chinese auto market is seeing slow growth and serious oversupply, where dealers are suffering serious losses, and where the Implementation Measures for the Management of Automobile Brand Sales have not yet been revised. Mercedes-Benz has developed its own philosophy of the new manufacturer-dealer relationship; as Li put it: “We have never seen the relationship between auto makers and dealers so clearly as we do now.”

 

Who Is Benz’ s Most Important Customer?

Mercedes-Benz has developed its own philosophy of the new manufacturer-dealer relationship.

In July 2013, the newly-founded Beijing Mercedes-Benz Sales Service Co. quickly became the center of media attention due to falling sales and its tense relationship with dealers. At that time, Li Hongpeng, Senior Executive Vice President of the company, clarified to the media plans for its manufacturer-dealer relationship in Beijing: “We will better support our dealers through internal management and also offer them a better external sales environment.”

Two years later, when such tense relationships between manufacturers and dealers had become quite common in the industry, Li said to reporters: “Today’s ‘cold’ environment means that it is still not easy for Mercedes-Benz to collaborate well with its dealers. But our continuous efforts over the past years have begun to pay off.” In 2014 Mercedes achieved year-on-year sales growth of 28%, and in the first half of 2015 it achieved year-on-year growth of 23%, far surpassing its two German rivals. More importantly, dealers achieved stable business and there has been a fundamental shift in the manufacturer-dealer relationship, a fact that was publicly praised by the China Automobile Dealers Association. On this subject, Ni Kai, President and CEO of Beijing Mercedes-Benz Sales Service, said “The greatest gain was not the rapid growth but the mutual trust built between Mercedes and its dealers.”

It remains to be seen whether Mercedes will continue to value the manufacturer-dealer relationship more than its sales, but building a new relationship is no doubt necessary in a situation where the Chinese auto market is seeing slow growth and serious oversupply, where dealers are suffering serious losses, and where the Implementation Measures for the Management of Automobile Brand Sales have not yet been revised. Benz has developed its own philosophy of the new manufacturer-dealer relationship; as Li put it: “We have never seen the relationship between auto makers and dealers so clearly as we do now.”

Li Hongpeng went into greater detail on this new philosophy to the media, together with Yang Jian and Gao Yaobin, the GMs of Taiyuan Star and Dah Chong Hong Jiangmen Heli, Benz’ s two dealer representatives.

From “managing” dealers to “improving the environment” for them

Li Hongpeng: In the past, the concept of “dealer management” was widespread – auto makers set the rules and supervised dealers to make sure they were followed. But nowadays, the word “management” has lost traction, and it is not hard for us to find the reason for this – would any company manage its clients? As an auto maker, Mercedes Benz has gradually become aware that its most important customers are its dealers – ultimately they are the ones who face our end customers. Through this re-orientation, we have changed the old ways of thinking – instead of “managing” our dealers, we care for them like customers and give them help and support.

I once said at a dealers’ convention that we and our dealers are like fish and water - we need each other to survive and thrive. Therefore, rather than “manage” our dealers, we should “improve the environment” for them, and developing sales policies and strategies are our ways to improve the environment. We will think from the dealers’ perspective and also encourage them to do the same for us: if you were an auto maker, how would you like to communicate with the dealers and what would be your strategic direction?

Since last year, we have been trying to create a free and competitive environment for our dealers. To succeed in this we have done a lot of hard work, which can be seen in the good business performance achieved by our dealer network. Currently, in this less than favorable market environment, our dealer network is still maintaining high profitability.

Yang Jian: I have been an agent for Benz for 15 years. As a person who has been working in the auto industry for about 30 years, I think Benz is a trustworthy business partner. As an auto maker, Benz not only cares about its dealers, but also helps them to make a profit. Dealers are offered a lot of training opportunities, in both skills and management. I have done business with a lot of brands, and only Benz teaches us how to sell cars better and offer better services for our customers, as well as how to be an ethical dealer. Only by meeting these requirements will we succeed in our business in the long-term.

Gao Yaobin: Dealer profitability depends on both internal and external factors. The external factor is the market environment. Now with the whole auto industry experiencing a downturn, many 4s stores are suffering from low profit margins. The internal factor is the management level of the 4s stores. Good management means that some dealers can still make profits in this adverse situation. In this respect, Benz has given us dealers a lot of support, especially during the current difficulties. Today’s talent training (referring to the training program designed by China Europe International Business School specifically for the senior management of Mercedes-Benz’s dealers) is just such a good example, showing how much Mercedes values the future development and talent training of the 4s stores. It teaches us how to improve the management of the 4s stores so as to increase profitability, which is very helpful to us.

Giving a timely response to individual issues reported by dealers

Li Hongpeng: in the past, if only a few dealers provided feedback, the manufacturer would think this information was one-sided and not important enough in the strategic sense for the manufacturer to take into account when developing plans. As a result, voices coming from dealers were ignored. However, nowadays we will gather individual items of feedback together through the Mercedes dealer association and allow dealers to communicate with the manufacturer face to face. After that, the manufacturer will ask relevant departments to summarize and assess the probability of these issues occurring. What is more, in the past, if the probability of an issue was below 20%, we would regard it as rare and not give much attention to it, something that could affect some dealers’ operations. Now, even if it is not a regular issue, we will still develop a targeted solution and respond to the dealers very quickly – it usually takes only a month or two to release and implement new measures.

Establishing a proper dialogue mechanism with investors and professional managers

Li Hongpeng: In order to build mutual trust with dealers, we first adjusted our attitude and stance; secondly, we changed our methods; and thirdly, we prioritized. Dealership is a channel. 4s stores are established by dealership investors and run by professional managers. After establishing the dialogue mechanism with investors, above all we need to align with them on core issues. As for professional managers, we should gather information on the problems our agents have encountered in their operations, help them to solve them, and use them to guide our daily management and operations. By taking these steps, we enable investors and professional managers to understand our way of doing business. We no longer impose management on them; instead, we communicate with them in ways that can be readily accepted by them so that they will follow our instructions properly.

Yang Jian: nowadays, the manufacturer pays greater attention to the fairness, openness and impartiality of the communication platform, and thus will seek our input when making policies. I have written many letters under the name of “an old soldier of Benz” to the manufacturer, trying to offer constructive suggestions. I do not expect Mercedes to adopt every single one, so it made me very happy when they took up suggestions like how to reward dealers for their performance in a fairer and more reasonable manner. We attach great importance to our communication with the manufacturer and also appreciate the training opportunities on offer. I think we really communicate with Benz on an equal basis.  

Gao Yaobin: we do business with a lot of auto makers, but Benz is the only one who actually cares about whether we make a profit or loss. What is more, among the many brands our group sells, Mercedes has maintained good profitability. Overall, I think the equality between a manufacturer and its dealers mainly depends on whether it values its dealers enough and whether these two parties can support each other when facing challenges.

Mercedes Benz has changed its market forecasting approach this year

Li Hongpeng: As of this year, Mercedes has changed its market forecasting approach. We will hold strategic investor meetings on a quarterly basis, a nationwide dealers’ convention twice a year, and regional dealers’ conventions three times a year to carry out open communications with dealers.  

Dealers are independent individuals, but the manufacturer has stronger resources to get the whole picture of the market and thus will forecast the market more accurately. Facing market changes, dealership investors will feel a lot of pressure coming from competition. Therefore, we need to communicate fully and frequently with them on market expectations. Currently, whenever Mercedes releases a policy or makes a plan, it will first invite dealership investors, general managers and sales managers to attend a workshop to discuss the relevant issues and exchange opinions, and then work out the solutions. 


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