"We want long-term growth": Bruno Cattori, general director of Mercedes-Benz and Smart in Mexico.

MERCEDES-BENZ is gaining speed in the Mexican market. With a renewed communication strategy intended to expand its reach to younger buyers, last year the luxury brand of DaimlerChrysler hit record sales of 3,830 units, a 16 percent increase from 2003. "Before our communication was too formal, arrogant, a little boring, too," says Bruno Cattori, general director of Mercedes Benz and Smart in Mexico. "Now our advertising is much more informal, direct and challenging, and without a doubt it has drawn more attention."

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The ad of the new Mercedes-Benz C 230 Kompressor is a good example. The close-up photo of the car goes with a slogan that says, "Now you can close your mouth." The ad even includes something that elegant Mercedes-Benz had always refrained from discussing in its advertising: the price.

This year, the company will also focus on improving its post-sale services, usually seen as the weak spot in the imported car market. In this way, Mercedes-Benz expects to repeat its record sales performance and to sell around 4,700 cars this year, a 23% increase from 2004. "What we want is a long term growth, not just gaining market share," adds the executive.

During an interview with BUSINESS MEXICO, Cattori detailed the new Mercedes-Benz strategy, the challenges the brand faces in the more than ever-competitive Mexican market and the impact of the political climate on business.

--Why did the Mercedes-Benz strategy change?

--When I assumed my position three years ago, we saw clearly that a reconfiguration of the company's strategy was needed. Mercedes-Benz was the first luxury brand to arrive in Mexico, at the beginning of the 90s, and things were great then because there was no competition. But the enviroment has changed radically, and today the Mexican market for luxury cars is one of the most competitive in the world, with more than 20 brands. The market has grown but not at the same rythm, so we had to change our business model.

--How did you do it?

--Our main objective was to extend the reach of the brand beyond the traditional buyers, meaning people older than 50 who always had a Mercedes. So we targeted a younger market, consumers from 30 to 35 years old, which is a very attractive segment since Mexico has a much younger population than a mature market. To do it we designed different products for that specific target. The first car launched to attack that segment, in 2003, was the Class C, which had been in the Mexican market for three years. We re-designed it with a much more attractive look, a new motor and sportier tires. It made younger people say: "This is the Mercedes-Benz I want to have." The brand has always had a sporty character, but that was not being exploited in Mexico. Now we are doing it. An the results have been excellent: After a few months, the Class C moved from the third to the first position in its segment, the medium sized luxury cars. And we have maintained it. And thanks to this car, we have extended the reach of our brand and, today, we have lowered the average age of our buyers by almost 15 percent.

--Mercedes-Benz has the image of being a very out-of-reach brand ...

--Exactly. So we also started to hold different events. A good example is the On Road Tour, driving tests in shopping centers to encourage people to try the product. Our slogan is "Everybody knows what a Mercedes-Benz looks like, but few know how it feels." The idea is that you don't have to be anyone to come in and try a Mercedes.

And that's something we are also trying to change in our dealerships. They used to be like big palaces, imposing, that finally kept people away. Today our dealerships are very simple, and have a lot of glass, a lot of light and white and colored walls. We want them to look much friendlier, so people are not afraid to come in. And we are training our sales force, with the idea that we have to sell to everyone.

--What about the service area, especially the auto-parts supply?

--We have been working very intensively on that for a year and a half. Without a doubt it was a headache. And it is a very complex matter, because we sell more than 50 models. We have advanced significantly to respond in a faster and more effective way to the demand. We did a re-engineering of the whole process of auto-parts supply, balancing our stocks and the stocks of our dealerships, and classifying auto-parts because of demand and price. On that basis, we determined which auto-parts have to be in the company stock, which ones have to be with the dealerships and which ones have to be brought from Germany. That's how today we can supply the distributors with 90 percent of the auto-parts the next day, when five months ago we were at 75 percent. If we have to ask for them to Germany, they are in the distributor's hands in a maximum of 5 days. It was a radical change.

Another very important project for us in the service area is Express Service. Our aim is that by the end of the year, between 30 and 40 percent of the cars that enter a Mercedes Benz garage will be delivered in an hour. We are already doing it in some garages and it has been very important for us, since the same clients are the ones who recommend it. Nobody wants to have his car in the garage. It is a way of increasing the level of satisfaction of our clients and the productivity of our garages. We definitely see post-sales as the area that is going to keep the loyalty of our clients. We're trying to offer our clients an added value that only Mercedes-Benz can offer them. We're not only selling a car to our client, we're offering him a complete solution.

--?Do you want to be the number one luxury brand in Mexico?

--Not necessarily. Of course we like to sell more, but again, our strategy is to develop a sustainable growth strategy.

--So you're never going to fall into a price war ...

--No. I believe that hurts the brand a lot in the long term. And you're sacrificing the future. We prefer a strategy that endures. We want to maintain the resale value of our cars and we want our clients to be happy.

--How do you view the competition?

--BMW is, without a doubt, our closest competitor, and then comes Audi. BMW leads the luxury market and has been very strong between younger consumers, but that's exactly the segment we're gaining. Before, the BMW 3 Series sold 3 to 1 against the Mercedes-Benz Class C, and last year we could almost overturn that. BMW continues to be number one, but we have been reducing the gap.

--Do you think there's too much competition for the segment in Mexico?

--The luxury market is a difficult one, relatively small, around 7.5 percent of the total market. What happens with the market is that it is not isolated in a bubble, so there are people who, when expectations are not good enough, decide not to buy the luxury car they were planning to get. That sort of thing damages the market a little; the luxury market is very sensitive to expectations. Its target is people of a higher economic condition, with a higher level of education and information, too.

But competition is something we have to get used to. It's good for the client, for us and for our dealers. We have to be better every day if we want to stay in the market. The one who falls asleep, dies. It's that simple. The challenge for us is to be better everyday, and to constantly think about how to make our business different.

--How do you feel, as a businessman, that the political climate is affecting business in Mexico?

--We see it quiet now. The luxury segment started the year badly, but it has been improving in the last months. Now we see a certain stability, people are more calm, even though we're not growing as we wished. Of course, in the months to come we will be exposed to more volatility and anxiousness. But what I do believe is that today there are much more sound economic bases, that in a way will eliminate the swaying that took place with other government changes. Mexico has been evolving very well and I see more political maturity. Things don't have to change from black to white because there's a new government. And that gives people more certainty.

--What results are you obtaining with Smart?

--The first months of Smart in a new market are never easy, since it's a totally different concept. It is a very young brand and it takes time to accommodate. We started selling it in Mexico in August of 2003, but we are already having excellent results with it. Last year we sold 403 units. This year its volume has grown 60 percent, and we expect to end it with at least 600 cars sold.

Smart is a totally different proposal. It's not only a small car, with a playful and attention grabbing design, but it's also an environmentally friendly vehicle--it uses recycled materials. Above all, it's very, very safe. Being such a small car, it is safer than many big ones. And we don't only sell it to young people, but to people of all ages with a young spirit. We have been promoting the car with a very small budget for two years, and it's surprising how we've managed to position the brand. There's a lot of mouth-to-mouth promotion, because the people who have it recommend it a lot.

--How do you distribute Smart? Having a small volume, that must not be simple ...

--Of course, to sell 600 cars a year you need a very well-structured business model. What we did was to open a Smart store in the Mercedes-Benz dealerships. We place, in a 50 square meter space with very bright lights, a Smart sign and two or three cars. That strategy has given us an incremental volume with a very little investment, attacking a target that's totally additional for Mercedes-Benz. And besides, the Smart shops are driving a different and younger audience to the dealership network.

We're also developing new promotions campaigns to increase the recognition of the brand, like the one we have with Bimbo to promote its cereal bars. People in Bimbo called us and said that their market research has shown them that Smart was considered the coolest car brand in Mexico. Those are the kind of alliances we are looking for to expand the brand.

Photographs by Frank Nowikowsky