Mercedes-Benz of N. America President & CEO Addresses 1999 NADA
6 February 1999
Mercedes-Benz of North America President & CEO Mike Jackson Addresses 1999 National Automobile Dealers Association (NADA) Convention
Jackson - a Former Dealer - Outlines the Future Forces
Of Tomorrow's Retail Environment
SAN FRANCISCO, Feb. 6 -- Mercedes-Benz of North America, Inc.
(MBNA) president and CEO Mike Jackson delivered the keynote address at the
opening session of the 1999 National Automobile Dealers Association (NADA)
Convention in San Francisco, California. NADA represents more than 19,500
franchised new-car and truck dealers holding nearly 40,000 separate
franchises, domestic and import.
"There is a fundamental change occurring in today's marketplace -- a
remarkable change in how the retail automotive business will occur in
America," said Jackson. "The coming of age of the Internet and E-commerce as
market enablers combined with the new phenomena of publicly held retail chains
and the potential of their processes is changing the dynamic of the automotive
retail environment. The old rules don't apply anymore and, for many of us,
the circumstances call for very aggressive, progressive action. Such
initiative must be rooted in true partnership and a holistic approach between
manufacturers and their retail partners."
Jackson described the strategic foundation that MBNA has laid out over the
past six years (which has led the company to a tripling of its annual sales
volume to over 170,000) through specific product marketing, customer care,
communications and retail strategies.
With this foundation in place, Jackson said that MBNA and its retail
partners have identified a series of "Future Retail Assumptions" that will
come to define the way business is conducted in the luxury segment. "We don't
use 'assumption' in the sense of supposition, but rather in the context of
taking on new ways of doing business -- taking control of our destiny -- into
the next millennium. Some may seem simple, some controversial but, taken as a
whole, we firmly believe that this will define a whole new retail paradigm
which starts within the luxury market but potentially has broader
implications," Jackson said.
Jackson delineated the "Future Retail Assumptions" as follows:
-- Change is inevitable. "The days of doing business a certain way in
automotive retail are over. We're in an unbelievably dynamic situation
here in the United States. It is the successful companies here in the
U.S. that have not only the skill to manage, but the foresight to
embrace change. Change brings opportunity, if it's managed properly.
Our industry certainly offers a continual opportunity to grow, it also
offers a continual opportunity to decline -- it all depends on how well
you master change."
-- Manufacturer control of the retail system enables change to be used to
an advantage. "We are absolutely committed to keeping control of the
retailing of our products within the Mercedes-Benz retail network.
Toward that end, it is a priority for us to assist our retailers in
harnessing the power of new technology rather than becoming victims of
it. Our retail partners are the best competitive advantage we have
because they provide a variety of services and support -- an added
value -- that can't be obtained anywhere else or by any other means."
-- All actions must be developed in line with a varied and rapidly
changing legal environment. "That sounds like a simple statement, but
we're dealing with 50 states and different franchise laws in every
state which therefore will continue to create unique challenges for our
industry moving forward. The same legal system which was designed to
address the dealer/manufacturer interface cannot be relied upon to
protect the individual retailer from the fundamental change and new
challenge at the retail level."
-- Strong working relationships must be forged with entrepreneurial retail
partners. "We want to work with entrepreneurial partners at retail.
We don't want to go into retail ourselves, it's not our core skill.
And we don't want to contract it out to some big publicly held entity.
We firmly believe that the right entrepreneurial partners with the
right management, the right capitalization and the right location at
retail give us a competitive advantage that cannot be obtained anywhere
else."
-- The retail focus must shift from intrabrand to interbrand competition.
"If our entrepreneurial partners are spending 80 to 90 percent of their
energy trying to beat their own colleagues across town, that's not
added value, that's not added business. We want to gradually change
the focus to really competing with those who want to take business away
from us."
-- The new retail model must be financially rewarding and cost effective
for all. "Whatever changes we make, whatever new ways we go, they must
be financially rewarding. We have all made significant investments in
capital, in time, in energy, and in talent. Those investments should
be emotionally rewarding, but at the end of the day, they've got to be
financially rewarding for both sides, wholesale and retail."
-- Manufacturers should provide the technology for their retail
environment. "The Internet is absolutely going to be part of the
future of commerce. But what consumers are ultimately looking for is
knowledge. We already have information overload, so the challenge will
be how do you convey that knowledge on the customer's terms? If we
want to be the provider of knowledge, then we must create and manage
the platform ourselves upon which we all, in real time, can provide our
customers and prospects with knowledge in a very convenient and
effective way."
-- Stimulate demand, manage supply. "The foundation of this industry
remains in strong products. This business is all about product, and
managing the associated supply chain as appropriate is key. In so
doing, high inventory costs, discounts, programs and other
brand-eroding tactics give way to low inventory carrying costs, little
discounting at retail, high gross profits, record volumes and very
successful net profits."
-- Provide the right product in the right place at the right time. "We
can all do a much better job of having the right car or truck at the
right place at the right time. We all have complex distribution
processes with products coming from around the world, but we know we
can do it in a much more efficient and effective way in the future.
Future technology and our new product marketing strategy can create
opportunities through the distribution chain that were previously never
even dreamed of."
-- Automotive retail is an emotional experience requiring contact with
people and product. "Of course, we have to take care of the rational
side of the equation, but we are truly in the emotion business. And we
have to be experts at managing the emotions that take place in
relationships. Commodities are purchased purely on price or access --
ours must be a business based on mastering passion. We need to
systematically manage relationships and expectations that are
successful, win-win, and build for a future."
-- We are in the relationship business. "We need the skill and the
capability to systematically manage the entire relationship and the
entire cycle of the relationship from how we create awareness, to
consideration, to what clients experience, to why they own the product,
to the reconsideration. Our goal must be to continually ensure
relevancy and add value while creating advocates for our brand, those
who bring others to Mercedes-Benz with their infectious enthusiasm."
-- Negotiation must be minimized through credible processes and policies.
"When you start a relationship at the retail level, the first thing you
have to do is negotiate price. That is inherently an adversarial
process. Customers are very skilled at it and so are we. Just think
if we could engineer a relationship with credible policies and
processes that are at the same time motivating and rewarding. For
that, we need to create transparency at the retail level. For
example, customers have more information than ever before on pricing.
This new empowered customer must know that the price -- whether it be a
new vehicle, pre-owned, parts or accessories -- is the same wherever he
or she goes and negotiation is unnecessary because the value is
inherently there. In that moment, we've opened the door to start the
relationship in a whole new way."
Jackson concluded his remarks by emphasizing: "Most importantly, there
has never really been a better time -- or a greater need -- for the
partnership between wholesale and retail, dealer and manufacturer. That
partnership, however, must be rooted in the spirit of teamwork, trust,
agility, and utmost profitability to ensure that both entities are mutually
prepared for the magnitude of change and the speed of change that will now and
forever mark our industry."
Jackson joined Cherry Hill Motors in New Jersey as a service technician in
1971. Over the next 18 years he broadened his knowledge of the retail auto
business with several auto dealerships, as well as working five years for MBNA
as a district manager and field service manager in the company's Washington,
D.C. region. Prior to coming to corporate headquarters in Montvale, N.J., in
July 1990 as senior vice president, Jackson was executive vice president,
general manager and partner in Euro Motorcars, Bethesda, Maryland. He was
named president, Mercedes-Benz of North America in March 1997, and assumed the
additional responsibility of chief executive officer in October 1998. He is
the first American to be so named.