Mercedes-Benz sharpens its act

It is exactly a year since the end of the ill-starred marriage between Daimler-Benz and Chrysler was announced. After almost a decade of problems and billions of pounds in losses, DaimlerChrysler made a deal in May 2007 with private equity group Cerberus Capital Management to take over the ailing Chrysler division, leaving Daimler to concentrate on its Mercedes Benz marque.

Despite Cerberus paying $7.4bn (£3.8bn) for just over 80% of Chrysler, the German automaker agreed to inject slightly more than that figure to cover debts and restructuring costs in a deal which industry observers characterised as Daimler effectively “paying a dowry” to offload Chrysler.

A year after the demerger from Chrysler was announced, the reverberations still echo at a corporate level inside the company, now known as The Daimler Group, as it extricates itself from the painful episode.

During the time that DaimlerChrysler was preoccupied with Chrysler and grappling with its attendant difficulties, the successful marque the company already owned, Mercedes-Benz, lost its status as the world’s leading luxury carmaker. The venerable brand, once the epitome of German excellence, developed some reliability problems and issues related to the integration of sophisticated technology. In the meantime, its competitors were stealing a march.

Rival BMW invested heavily in innovating some exciting premium models and surpassed Mercedes in global sales in 2005. Audi, too, made serious inroads into the market and earlier this year was threatening to overtake BMW as the UK’s premium carmaker, though in the past three months BMW has staged a sparkling UK comeback with sales up more than 25% in a virtually overall flat market.

Mercedes insists all is well and a glance at UK sales figures for the year to date seems to bear this out. Registrations of new cars are up 3.8% on the same period last year, giving the brand a market share of 3.4%, third place behind its main competitors BMW at 4.8% and Audi at 4.6%.

Closer inspection of these figures reveals that retail sales were down 11.6% and its fleet sales up 24.7%, which account for the acceptable numbers. Additionally, more than 45% of volume was made up of models from its new C-Class, launched in June 2007, despite there being at least 15 different Mercedes models available to UK buyers.

Former Toyota chief Mike Moran says: “The new C-class is doing well and some of the bigger cars are looking better. The new CLS, for example, is a very sexy car. But the smaller cars have been struggling and I think Mercedes has perhaps lost its way a bit with product”.

Behind the “all is well” public face, Mercedes seems well aware of the task it is facing to restore the brand to its former glory. A spokesman says marketing activity last year centred on the launch of the C-Class, but as this year will see only model revisions to the line, the decision was taken to focus on “rebuilding the Mercedes Benz brand” in 2008.

The company has refreshed its corporate identity and has been thoroughly examining its advertising arrangements. In August last year, it consolidated its pan-European advertising account into the BBDO network. In the UK, the business was handed to Abbott Mead Vickers.BBDO, having previously been handled by Farm.

A new ad campaign, the first work from AMV.BBDO was very recently unveiled, starring Josh Brolin, star of No Country For Old Men. The push is intended to attract a younger customer to the marque, something Mercedes’ competitors have been managing well.

And it has also undertaken a global review of its use of media, known as the Media Strategy Project (MW last week). Mercedes Cars head of media management Sven Dorrenbacher is spearheading the project, which he says is intended to establish how the company should best “manage big challenges in the media landscape”.

There is a consensus that the brand lags behind its rivals with creative and innovative use of media channels and by Dorrenbacher’s own admission needs to “ better leverage its opportunities”. But, as Moran observes: “Product is king in the car industry. If you’ve got a hot new model, you’re going to do well. If you’re struggling, there is only so much marketing money you can throw at cars.”

Chris Wood, chairman of branding agency Corporate Edge, points out that one opportunity Mercedes has largely failed to capitalise on is the fact that the sportsman who arguably most caught the nation’s imagination in the past year, Lewis Hamilton, drives a car powered by a Mercedes engine.

In terms of the cars themselves, Mercedes says a new addition to the C-Class, the CLC, an entry-level coupé, due to launch later this year, is aimed directly at being “an executive’s first Mercedes Benz”. The car has been engineered to be “more fun to drive” and has an “accessible price-entry point”. But the right balance between accessible and aspirational is notoriously elusive.

One initiative, the brand experience centre at Brookwood, which Moran describes as “stunning”, has proved a great success at getting people into the cars and trying them for themselves. Since it opened eighteen months ago, 400,000 people have been through its doors.
The company’s other brand, Smart, the urban two-seater, once referred to by the UK’s leading expert on the motor industry – Professor Garel Rhys – as a car “built on a flawed hypothesis” is seeing a fresh commitment and investment.

Largely neglected in terms of a marketing communications strategy for the past two years, Smart recently launched a fresh advertising offensive – also created by AMV.BBDO. A series of three ads earlier this month broke a few “myths” about the car. One execution addresses the “misconception” that the car has no space, another tackles possible doubts about safety and a third seeks to show the car is not simply an urban runaround and is perfectly suitable for long-distance journeys.

The Mercedes Car Group is obviously making a concerted effort to emerge from the Chrysler debacle and take on its Teutonic counterparts. But in the automotive industry there is often a considerable time lag before the public starts to adjust its perception of a brand.
Wood observes: “On a good day, Mercedes can be understated and sophisticated. On a bad day it can be bland. It understands the problem very well and is obviously trying to counteract the blandness, but hasn’t quite succeeded yet.”


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