Merc takes the road to small cities

Luxury carmaker is reaching out to tier-II and III buyers with brand tour

Even as urban clusters drive industry growth, consumers and purchasing power are increasingly emerging from beyond the metros, particularly in tier-II and III cities. Taking a cue from the growing size of and affluence in such markets, Mercedes-Benz is eyeing buyers outside of the top eight cities. Currently, 45 per cent of the sales for the luxury carmaker come from markets outside Delhi and Mumbai. The company expects this to only increase over time. To give sales in tier-II and III cities a push, Mercedes-Benz has implemented “Go to Customer” strategy, to expand its position in these markets. The company sees sizable opportunities to grow volumes in cities such as Aurangabad, Udaipur, Allahabad, Haldwani, Ranchi, Arunachal, Shimla, Vapi, and South Goa.

“Smaller and emerging markets have less volumes to begin with, but we believe these will gradually contribute to higher sales volumes. Many high net individuals (HNIs) and ultra HNIs reside in smaller towns and they are the potential customers for our high-end products and services,” says Roland Folger, managing director and CEO, Mercedes-Benz India.

To strengthen customer connect and create awareness for its luxury vehicles, the carmaker has embarked upon the “Mercedes-Benz Brand Tour”. As part of the tour, Mercedes-Benz is travelling to potential growth markets where it does not have a direct presence through a retail outlet. The brand tour aims to engage with customers by offering compelling brand experience that includes test drives, off-roading and showcasing the entire product portfolio, besides providing Mercedes-Benz-certified customer service and flexible financial services. The company is reaching out to prosperous and aspirational customers by leveraging the database that its dealerships have in various locations. The database helps to geo-target and select patrons to be invited to brand tour.

“Companies like Mercedes-Benz are focusing on emerging prosperous markets as the metros are maturing. This is not to say that metros are not crucial for luxury car sales. However, to grow such brands will have to expand their reach in search for new buyers by entering emerging prosperous markets,” says Saurabh Jain, associate vice-president, research (equity), SMC Global Securities.

A programme like Brand Tour would help Mercedes-Benz go closer to buyers,

who otherwise would not have access to a physical company store to experience the brand, in tier-II and III cities.

Getting the right retail space in smaller cities is a challenge. Before making significant investment in physical stores in smaller cities, it makes business sense for companies to first test-market these cities and identify potential buyers. “Big cities like Delhi and Mumbai, by their sheer size, can support several stores. But smaller cities cannot support too many stores. In

case the company receives strong traction in a particular market, it can decide to open a store in a city which could help serve a large customer base surrounding its periphery,” adds Jain.

So how is a Merc buyer in tier-II and III market different from one in metros?

“These buyers are value-conscious and demanding, wanting the most out of their purchases. What makes them different from those in metros is that they are highly driven by local cultural influences and traditions and often have different financial goals,” says Folger.

He adds that it is important to remember that in India, each market has a different outlook and pattern and one cannot be compared to the other. Customers in smaller markets in the north, for instance, are different from those in the south or east where the spending patterns and outlook may vary due to multiple factors.

Keeping varying buyer behaviour in mind, Mercedes-Benz is approaching each city differently. For example, market research shows that in Allahabad, sports utility vehicles enjoy high traction while in other markets it is the sedan that is more in demand. The company has mapped each of the cities. Depending upon buying preferences, it is targeting each city with a skew of the particular product form (vehicle portfolio) that is more in demand.

The cars that are showcased and available for test drives as part of the ongoing brand tour are Mercedes-Benz sedans—CClass and E-Class. At select locations, the Mercedes-Benz AMG range of cars, known as the dream cars or specialty cars, are also available for the patrons. One of the key objectives of the customer outreach programme is to dispel the myth that “It is easy to buy a Mercedes-Benz but difficult to maintain one’. The company is offering buyers easy vehicle finance options along with attractively priced after-sales service package.

According to industry reports and available companies’ data, Mercedes-Benz was the best-selling luxury brand in India for third consecutive year in 2017 by registering sales of 15,330 units in the January-toDecember period. The carmaker’s volumes increased by 15.9 per cent as it clocked its highest ever yearly sales. The BMW Group was ranked second with sales of 9,800 vehicles (BMW + MINI) in 2017, registering a growth of 25 per cent as compared to 2016. Audi India stood at the third position with annual deliveries of 7,876 units in 2017.