How to build a luxury automotive brand in the tough Malaysian market

The Malaysian automotive industry consists of two low-end manufacturers. To help these manufacturers, the government protects them with massive import duties, sales and other taxes that can jack up the price of an imported car with a large engine by as much as 155%.

In addition to these taxes an Approved Permit (AP) is required to import a car. These can cost around RM30,000 (US$10,000) each.

This makes it a tough country in which to sell foreign cars, especially luxury vehicles. To give you an example, a BMW 3 series that costs approximately £30,000 (RM150,000) in the UK, will cost about RM230,000 (£46,000) in Malaysia.

Top selling luxury cars in Malaysia
The BMW 3 series and the Mercedes C class are the most popular of all luxury vehicles in Malaysia. Sales of the BMW 3 series are around 2,000 units per year and the Mercedes C class slightly higher at 2,200 units. Both these models account for about 40% of each manufacturer’s total annual sales in Malaysia.

Mercedes Benz C class interior
Mercedes Benz C class interior

So you would expect any dealer that makes a living selling and servicing luxury cars to be on top of their game. Right?

In November and December 2012, a prospect visited a number of luxury auto dealers and had a few test drives. During one test drive, the sales person spent the whole time texting.

On another occasion, at a different showroom he was approached by an executive who began the discussion by arguing about whether a particular vehicle in the showroom was the latest model.

Despite operating in a very competitive space, neither sales executive followed up on the prospect’s visit. However one of them does send ad hoc emails focusing on discounts.

Eventually the prospect asked a friend to refer him to someone at one of the main dealers. He was introduced to a senior Director who referred him to a manager who referred him to an assistant manager. Despite this the prospect purchased a new Mercedes Benz C250 because this dealer offered a larger discount than any of the other dealers.

Even this luxury car dealer who got a referral from a supplier and made a sale with zero marketing investment has done little to build a relationship with the customer, preferring instead to simply sell a car. More on this later.

Selling a luxury product is not like selling a bag of rice
More than any other sector, luxury brands must have people who know how to build relationships with customers. The market for these brands is 0.02% of the Malaysian population. It is not like selling rice, LCD TVs, Computers or Fax machines where volume is the key to success.

Ensuring a luxury purchase requires an investment in time and effort to build a relationship. A one-to-one relationship with a representative that offers individual specific value, exclusivity and personalisation is what customers want.

Levels of service must be exemplary because customers in this space have so much choice and have worked hard for their disposable income.

They want to be seen as special, important and part of a select club and not simply as another anonymous person in an anonymous crowd buying an anonymous product.

In the first month after purchase, our buyer received two or three calls and both times the callers were essentially going through the motions of ticking service and satisfaction boxes.

Since then he has heard nothing. Then last week he received a text message. It is enclosed here, in full.

Poorly written, too familiar and a lazy way to try and upsell a luxury product!
Poorly written, too familiar and a lazy way to try and upsell a luxury product!

Pathetic I know. And the cars listed in the text are not cheaper. We’re talking about RM350,000 (£75,000) and upwards!

Now manufacturers, dealers and salesmen are going to say that all that matters is price and discounts but that is only because you cannot be bothered to build relationships with prospects and customers.

So what should this dealer of luxury automobiles do differently? Here are 10 things they need to do and do fast:

1) Recruit the right people and train them not with generic training courses that are used for automotive today and property tomorrow, but with bespoke training relevant to your brand, your industry and your customers.
2) Use technology correctly. Text messages are not a sales tool.
3) Put in place processes and systems that must be adhered to. For instance, if a member of staff has never met a customer before, the relationship must start on a formal footing, at least to begin with. Depending on how the relationship evolves, staff may be allowed to become more familiar.
4) Telling isn’t selling. Appeal to prospect emotions by identifying individual requirements for value and matching your product attributes to those preferences. You don’t sell cars, you realize dreams.
5) Service, service, service. Every interaction with a luxury brand must be of the highest level and expectations must be exceeded every time.
6) Make the experience of dealing with the brand special, unique, glorious but never, ever assume the customer will come back.
7) Too many brands spend a fortune on marketing and then practically ignore the customer. You have a 50% chance of selling to an existing customer and only a 15% chance of selling to a new customer. But sending a poorly written text is not going to retain a customer.
8) Don’t discount.
9) Carry out a sales process audit and sales skills analysis (yes, we can do that for you) and improve the skills of your customer facing staff.
10) Don’t waste time measuring satisfaction. It offers no value.

There is talk of liberalisation of the Malaysian automotive market but the reality is there won’t be any significant changes soon. Luxury brands need to know how to build relationships and realise dreams, not sell cars.


Print advertising done right

Because of the massive increase in advertising noise and clutter, it’s getting increasingly difficult for advertisers to capture the attention of consumers with traditional print ads.

You’d expect therefore that Malaysian advertising agencies would increasingly push the creative envelope, to develop material that makes consumers stop, read, mark, learn and inwardly digest.

Sadly, and for whatever reason, the work produced by Malaysian advertising agencies rarely pushes the creative envelope. Furthermore, much of the local agency output focuses way too much on the product and not on the benefits.

Other ads contain far too much copy and weak headings or taglines. Worse still are those ads that make outrageous claims that are ridiculed in coffee shops up and down the country.

The golden rule of any advertising should be, “Sell the sizzle, not the sausage.” In other words don’t focus on the product and how great it is, focus on what it can do for the reader.

Have a strong call to action and include a prominent URL and telephone number. And make sure that there is an answering service. We recently spotted an ad for a German automotive manufacturer and called the number. The phone wasn’t answered and there was no way to leave a message to arrange for a sales person to call back.

A picture really does paint a thousand words so make sure you have an clear, simple image that grabs attention.

Here are some great examples of print advertising from around the world that deliver effective messages.

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Advertising campaigns need to be integrated across the organisation

Recently I wrote a post about my experiences when I called the number on a billboard selling a luxury automotive brand. You can read the full article here

Basically I talked about how I rang this brand after seeing a billboard outside my office. I got through to the receptionist who asked for my number and said she would get someone from sales to call me back. Nobody called me back, even though the car costs about RM500,000 (US$166,000)! I thought this was an excellent example of why so many brands fail. But I didn’t think much more about it.

Then today I was sitting at a traffic light outside Bangsar Shopping Complex and I saw the same company had another billboard, this time it was advertising their jaw dropping top of the range V10 sports car that costs over RM1,250,000 (US$420,000) in Malaysia. Now this really is an exclusive motor and in the middle of last year there were orders for about 240 of them in the UK and a waiting list of 12 months. If they are only selling 250 odd in the UK I would expect them to sell no more than 50 in Malaysia. So you have to question why they market such an exclusive product on a billboard.

But this is not a rant about using old mass market mass economy models to sell luxury brands, this is about the fact that it is imperative that marketing campaigns are integrated and organisational excellence is at the heart of any tactical campaign.

And I know it isn’t at the heart of this campaign because whilst waiting for the lights to change I decided to call the number on the billboard and see what sort of a response I would get.

I called the number. No answer. Now it was 5.17pm and perhaps the receptionist has gone home. But I doubt the sales team had gone home. I bet they were sitting around wondering how to drive traffic to the showroom so they can make target this month and get a nice juicy bonus for Chinese New Year. Perhaps at least one of them might have been wondering why the expensive outdoor campaign they’ve been running for some time hasn’t generated any results!

I’ve tried to go and see these guys but the marketing manager tells me they are doing well. Here are some basic principles to abide by when you run an advertising campaign so that when you are doing well, you can do better.

1) You advertise on billboards to stimulate, inform, persuade etc. If you want to inform perhaps a 100 people in the country about a luxury product, spending large amounts of money on billboards or for that matter print ads in daily newspapers, is a complete waste of marketing dollars.
2) Consumers who can afford to spend over 1 million Ringgit on a car are unlikely to keep to your office hours. Make it easy for them to spend money with you.
3) Your advertising copy should appeal to a specific audience – in this case, those who can afford over RM1,250,000 on a car – everyone else is just getting in the way. So create copy that will resonates with that target market. This ad just mentioned the engine capacity and that was it! Ever wondered why mini does so well?
4) Develop metrics for measuring channel effectiveness. A simple metric for outdoor ads is a specially assigned number for that campaign.
5) Outdoor advertising is 24 hours. That’s probably one reason why you bought it in the first place! If you can’t have someone on standby 24 hours a day, install an answering machine or after office hours have calls diverted to a sales manager or sales director.

These are elementary and should be included in any strategy document created by a brand consultant.

Another argument for building brands

A year ago, the Wall Street Journal was telling us that wealthy consumers were suffering from ‘luxury shame’. Others were talking about the end of the luxury business. Certainly, the luxury business took a massive hit when the sub prime crisis blew up and the repercussions were still being felt at the end of 2009 when many luxury manufacturers and retailers reported poor sales over the traditionally lucrative Christmas and New Year period.

But even a global financial meltdown doesn’t seem to be able to keep the wealthy out of the stores for long as the luxury industry outperformed the MSCI World Index over 1Q 2010. And unsurprisingly, the wealthy don’t head for the department store to save pennies on same store brands.

So what brands are people, sorry the fabulously wealthy buying? Here’s a quick round up of the most popular brands at the mall or wherever it is the wealthy shop!

Last weekend, the Ferrari 599 GTO was officially unveiled at Modena’s Ducal Palace in Italy. This is the legendary brands fastest road car and does 0 – 100km/h in 3.35 seconds! Although a number of key clients were at the launch, all 599 units of the US$450,000 (RM1,500,000) monster have been sold.

Still with cars, top end ‘more affordable’ brands are also performing well, despite current figures reflecting the anniversary of the peak of the scrapping scheme in Europe. In Germany, car sales plummeted 26.6% last month, year-on-year, but Mercedes declined only 6.1 per cent, while BMW sales rose 9 per cent. During the same period in China Mercedes and BMW both increased their sales in 1Q 2010. Audi meanwhile was up a respectable 77%.

Here in Malaysia where cars are subject to astronomical taxes, BMW Malaysia sold 250 of the 7 Series from January 2009 to March 2010. With the cheapest 7 series costing around RM650,000 (US$200,000) and the top of the range 760Li costing RM1,400,000 (US$435,000), that’s impressive and shows the resilience of luxury automotive brands.

Down south in Singapore, Mercedes-Benz delivered 1,139 passenger cars in 1Q 2010, a 22.7% increase over the same period in 2009. Not to be outdone, BMW sold 960 units during the same period, a robust 29% increase over the same period.

Porsche meanwhile announced last week that orders for the latest version of the Cayenne SUV, due to arrive in European showrooms in May 2010 and priced at €56,000 (US$75,000) price tag, were ‘stronger than expected’.

Over in India, Porsche Design recently opened its first store in New Delhi, joining Prada, Louis Vuitton, Ferragamo and Mont Blanc to name a few luxury brand also taking up residence in the capital of the republic. Louis Vuitton now has 5 stores in the country.

LVMH, the company behind luxury brands such as Dior, Louis Vuitton and Moët Chandon recently reported a 11% increase in 1Q 2010 sales. Watches and jewellery sales rose by 33%, wines and spirits by 18% and fashion and leather goods by 8%. Sales of Dom Perignon and other LVMH owned champagnes shot up by 33% in the same period.

Watches and timepieces, there is a difference you know, are also having a bumper start to 2010 and the mood at Baselworld, the world’s largest watch and jewellery fair, was bullish after positive announcements from Bréguet, Blancpain, Omega and Longines whose sales were up 46%, 48%, 50% and 49% respectively in January and February 2010.

Meanwhile, due partly at least to the fact that it doesn’t have many high end high margin devices, Sony Ericsson has been plagued by declining sales for years and hasn’t made a net profit since 2Q 2008.

However the firm moved quickly to develop high end phones and launched the Xperia X10 and Vivaz last year. The result, the company reported a net profit for 1Q 2010 of €21 million, compared with a €293 million net loss a year earlier. Analysts were expecting a €128 million loss.

With the consultants, Bain & Co predicting luxury industry sales of €158bn in 2010, up 4% after a drop of 8% last year, it seems ‘luxury shame’ was nothing more than an itch!

The organization is the brand

This is a classic example of how a brand that spends millions on external branding, needs to also look at internal branding.

BMW has a number of dealers in Malaysia however, as far as I can determine, there are only 2 main dealers in the Klang Valley. We bought a BMW 3 series new from one of the 2 main dealers in Kuala Lumpur about seven years ago.

The dealer also has an impressive work shop and so we serviced it at the same dealer for the first six years. There is also a bodyshop and as my wife is the main user of the car, we’ve visited the body shop more often than most car owners. We own three cars but only one BMW so I consider us an ideal customer as there is obviously plenty of opportunity to cross and up sell us.

Indeed we’re intending to sell the 3 series and buy a new car in the next 3 months. However before we do so, the car require needs some attention.

Although we get plenty of generic direct mail and the occasional and predictable after service call asking if we are happy from the original dealer, the original sales person moved on a long time ago and we haven’t got a call from anyone else on the sales floor. Even when the car was 5 years old, an ideal time to sell and buy a new car, we didn’t get a call inviting us in for a test drive.

The original dealer hasn’t tried to build a relationship with us and therefore we don’t have any loyalty to them. So we sent the car to the original dealers main competition in the Klang Valley and asked them to look at the car and quote for the repairs.

Now in my business, if a client who has been with my competition for 7 years, were to knock on my door and offer me the chance of getting his business I would be all over him like the proverbial white on rice! Customers are the source of profits. Without them, brands would not exist. Existing customers are the most reliable source of future revenue. The thought of taking one of those nice profitable customers away from the opposition is, I have to say, a pleasant thought.

After all, we’re in the midst of a global recession that has seen marketing and other costs slashed. Passenger car sales are predicted to be down over 15% this year. In this environment, new customer acquisition is a massive drain on dwindling resources and any prospect is valuable, especially one that walks in the door and has “I’m a genuine prospect’ written all over him.

But no, instead of looking at us as an opportunity. An opportunity to acquire a new customer from the competition, we were viewed as another expense and the mechanic told us that they would carry out the inspection but would charge in the region of RM250 (US60)!

As you can imagine, this riled me. Sure I’m going to compare the quote with a quote from somewhere else but so what. That is a cost of doing business. But surely it is important to look past the issue at hand and the opportunity for future business?

With the right internal brand that includes standard processes for new prospects that are essentially a number of simple questions that lay the foundations for rapport. A dealer, who in this case represents the BMW brand, will be well positioned to acquire a new customer for a minor investment of RM250.

In this instance, I have a negative impression of the dealer and BMW that will require a lot of work and a much greater investment, to undo.