The best or nothing!

Mercedes-Benz seeking to expand presence in Korean market

By Kim Jae-kyoung

Over the past few years, the auto industry has been growing very fast both at home and abroad. There has been a rapid change in industry trends and consumer preferences, which has changed the look of the global car market.

First of all, global premium brands, such as Mercedes-Benz and BMW, have paid more attention to comfortable, highly-efficient and economic cars, while a growing number of consumers from emerging markets have become able to afford low-priced models manufactured by luxury brands.

South Korea is one of the representative markets embracing this transformation. In particular, along with Koreans’ changing attitude toward foreign cars, this trend has created a new market segment for premium auto manufacturers.

Against this backdrop, foreign automakers have been in cutthroat competition to win market share in the world’s most competitive market. In the midst of the competition here, Mercedes-Benz, a famous luxury brand, is trying to penetrate into a niche market by modifying its positioning strategies.

“We achieved tremendous growth over the past years. Particularly, last year we achieved record sales and market share, which is a sign of the strong acceptance of our brand by Korean customers,” Harald Behrend, CEO of Mercedes-Benz Korea, said in an interview with Business Focus at his office in Seoul on Sept. 26.

Two-pronged approach

In order to capitalize on the rapidly-changing environment, the German company has adopted a two-pronged approach. The company has sought to broaden its customer base by introducing a more affordable line-up, while also strengthening its brand leadership by unveiling luxury models for rich customers.

The company has to provide the optimal vehicle for a person’s individual needs for further growth in the auto industry. It is also adapting new technologies to make its cars more famous among customers by unveiling low-priced luxury on the market.

“Since launching in Korea in 2003, we are striving to provide a wide range of product choices and quality services. Understanding the needs and characteristics of Korean customers worked effectively in providing the right model line-up as well as services,” said Behrend who took charge of the Seoul office in 2007.

Mercedes-Benz is still considered a high-quality, highly-engineered and prestigious car but the two-pronged approach indicates that the Stuttgart-headquartered company has tweaked its strategy to expand its customer base.

If you wander into a dealership in Korea, you are faced with wide range of models — from the compact segment (B-Class, C-Class), business sedans (S-Class, E-Class), SUVs (GLK-Class, M-Class) to luxury cars (CLS-Class, SLK-Class and SLS AMG.) Prices range from 39 million won to 300 million won (including value added taxes).

“I have met with many Korean customers saying that they will wait to buy our cars until they become “super rich.” But I want them to change their mindset. Our cheapest product starts at 37 million won,” he said.

The result is that the approach has diluted its luxury image among rich customers but it has gained popularity by enabling more customers to get access to German-made cars, which are known as a status symbol of high class consumers.

In 2010, its sales totaled 16,115, up 80.7 percent from 2009. This year sales have reached 12,546 as of August, an increase of 19.4 percent from the same period last year.

Now the the subsidiary of Daimler Group is focusing on attracting younger customers. To attract this group, it has strengthened communication channels by utilizing viral marketing tools.

Preserving core values

All customers have their own values and beliefs when purchasing a car. For some, it is just a vehicle carrying you from one place to another. But for many, it is not just transportation but a symbol of status.

For Mercedes-Benz, the image of a premium brand is the value that the company cannot trade, according to the 51-year-old CEO.

In 2010, the company introduced a new slogan, “The best or nothing,” a move that was seen as an effort to strengthen its brand leadership while seeking further growth in the market by introducing more models.

“Fascination, perfection, and responsibility are our core brand values which are reflected in the brand claim “The best or nothing,” Behrend said. “Based on our systematic innovation strategy, we occupied a leading position in the league table of the world’s most valuable brands.”

Korea has great potential

Behrend, who worked as chief operating officer of the company’s Hong Kong subsidiary and head of Retail Network Development at its China subsidiary, said that Korea has great potential to grow in the coming decade.

“Mercedes-Benz Korea’s presence and importance in the global market is getting bigger and bigger. It is the third largest Asian market after China and Japan, and it holds a great potential for increased growth over the next several years,” he said.

“In recent years, Korea has been often mentioned in future growth strategies from headquarters as one of the key markets in Daimler worldwide,” he said.

The chief executive added that the company will seek to expand presence here.

“We will continue to expand market share at the same time as securing brand leadership in premium imported cars,” he said.

However, he stressed that he has set no specific target for market share here because it is not the right approach.

“I am already very satisfied with what we have achieved. We will continue to grow in the market but we are pursuing healthy growth. You can always buy market share but it’s not a healthy development. The main focus should be to get a better understanding of the Korean market,” he said.

Business sustainability

Business success in Behrend’s words means more than just more sales and business growth. He recognizes the importance of creating economic value and contributing to strong communities where the company operates, demonstrating its long-term commitment to the market.

The company takes pride in its corporate social responsibility (CSR) program, which received a further boost in September this year through the establishment of a contribution program.

“We continue to strive to contribute to the advancement of the Korean auto industry as well as Korean society. As part of our efforts to contribute to society, we recently launched the Culture and Arts Sponsorship program together with the Korea National University of Arts,” he said.

The program will nurture emerging talents in arts in Korea to contribute to enhancing culture and the arts. The company will invest 200 million won in the program in the first year.