Standardisation key to profits for premium brands

Standardisation key to profits for premium brands

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Premium manufacturers Mercedes-Benz, Volvo and BMW want to sell more standardised cars and services to boost profit margins and simplify the complex list of buyer optionss , while also giving them the choice of a bespoke car if they want.

The move is partly aimed at attracting customers who might struggle with the ever growing list of model variants, multimedia features and safety technology available in new cars, said all three companies at the Paris motor show.

Volvo Cars chief executive Hakan Samuelsson says the trend to offer more and more choice in equipping cars was over-rated.

“There is no customer desire for all these options. The iPhone has demonstrated that you can compete by selling a good well thought out product,” he told Reuters. “They out-competed rivals who offered many more model variants.”

Samuelsson says Volvo had spent the past two years reducing the complexity of its vehicles in a bid to make life easier for buyers, arguing this did not run counter to customer tastes.

“You eat better in a good restaurant where the chef has made a clever combination, than one where you have to ask for what you want,” he says, adding that cutting down the options list also helped profitability in manufacturing.

The approach to bring some order into the multitude of options for buyers is also being pursued at rival BMW.

Ian Robertson, BMW board member responsible for sales and marketing, says the new 4-series coupe was being offered with four different trims, and the i8 hybrid sports car was being offered in only three packages of options.

“We have packaged a number of trim levels to help the customer and ourselves, because the complexity was very high. A clearly understandable package was the M sport package,” Robertson told Reuters, referring to cars equipped with the performance luxury trim which comes with more ornate bumpers and spoilers and top of the line engines.

Standardising equipment also helped the market to gauge the second-hand value of a car.

“It helps customers with understanding what is available, that also helps with the residual values of the car and therefore the leasing rates,” Robertson notes.

Standardisation is also a response to the polarisation of customer tastes in various countries.

“BMW has, for example, stopped proactively offering manual transmission versions of its sports cars in markets such as the US, and tends to push four-wheel drive versions in markets such as Austria,” says Robertson.

“Customers nonetheless have the option to order a bespoke, tailored vehicle if they want to,” Robertson adds, adding that was still a key part of the premium buying experience.

MercedesMe: custom made service

Mercedes-Benz is also looking at ways to strike a balance between standardisation and custom building.

“There are two approaches, you build to order, or you build to stock,” Ola Kaellenius, head of sales for Mercedes-Benz told Reuters.

“In Germany the classic approach is to build to order, but in the US the dealer orders the cars and waits for the customer to drive it out of the showroom. We offer both.”

The growing number of model variants and the expanding range of trim, safety and multimedia options have, however, led Mercedes to simplify some of its offerings into brand packages.

Mercedes digital connectivity and some customer interactions with servicing and dealership personnel are now being bundled under the “MercedesMe” brand.

Because some clients like going through the detailed specification lists before ordering their new cars, Mercedes is making it easier for them to make decisions with the help of dedicated staff.

“We now have a product concierge, comparable to a product genius in an Apple computer store. Their only job is to help customers understand the car before buying it, to take care of them during delivery, and to be available for customers after the sale,” says Kaellenius.

“We want to ensure that customers can understand it all,” he notes. “Despite all the digital tools for specifying cars, you still need the human touch.”

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