Customer Service, The New Mercedes-Benz Way by [email protected]

How Mercedes-Benz Transformed Its Customer Service

Customer service can make or break a company. So it’s surprising to learn that Mercedes-Benz – one of the most highly respected car manufacturers in the world – used to have a reputation for dismal customer service.

In the book Driven to Delight: Delivering World-Class Customer Experience the Mercedes-Benz Way, New York Times’ bestselling author Joseph Michelli examines the changes made at the top to rescue the company from itself.

Michelli sat down with [email protected] to discuss Mercedes-Benz’s colorful history and customer service turnaround on the [email protected] on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)

An edited transcript of the conversation appears below.

Joseph Michelli: I guarantee you that someone listening to (or reading) this interview right now is remembering how awful it was to be in the service line at Mercedes-Benz.

[email protected]: That’s strange because Mercedes-Benz is known for its quality cars, so you wouldn’t assume that this had been an issue. Explain how this all came about for Mercedes-Benz.

Michelli: Our greatest strength is our greatest weakness. Their greatest strength was innovation and engineering. Their product was amazing. Sometimes you fall in love with your product and it becomes challenging to shift the working culture to stay in step with the times. But today, a good product isn’t enough.

[email protected]: What kind of approach did they take? Did they emphasize their technology and assume that the technology alone would keep people coming back?

Michelli: That was the core challenge they faced. Of course, some dealerships were phenomenal — I don’t want to cast this with a broad brush. But the focus was the product. At one point in the company’s history, I interviewed customers who kept saying things like, “I should feel grateful that I got this car.” That was the perception that they had, based on the way they were treated at time of sale, and more importantly, in the service drive after they purchased the vehicle.

“It wasn’t good enough to simply out-Lexus Lexus in terms of the customer experience.”

[email protected]: Mercedes is unique in the auto industry because they really haven’t had any large mechanical issues in the last couple of years, correct?

Michelli: Relatively speaking, I think that’s true. They came out of the Chrysler merger with some morale issues and quality issues, but that was a long time ago. They had to get their staff re-engaged and motivated at the corporate level after that, so they focused on employee engagement at the corporate level and frequently got on Fortune’s list of best places to work. Beyond that, the corporate leadership had to re-engage people around the brand and change the conversation so that they weren’t only talked about for their engineering or marketing, but for the incredible experiences customers could have in dealerships.

[email protected]: This was a philosophical change that came right from the top. Stephen Cannon, the president and CEO of Mercedes-Benz USA, was the guy who really started to drive this change, correct?

Michelli: Absolutely, and it really was visionary. The executives had meetings to discuss key opportunities and this was it.

The Lexus brand was created from the best-of-the-best Toyota dealers. They had a customer manifesto when they came onto the scene. Lexus had a fresh approach to customer orientation that challenged Mercedes dealers who had been putting cars on the market for generations.

I think Stephen Cannon wanted to bring the brand up to speed and decided that it wasn’t good enough to simply out-Lexus Lexus in terms of the customer experience. He really needed Mercedes to be the best for customer service, as per the brand promise.

[email protected]: What Mercedes-Benz is dealing with now is obviously different than what they were dealing with 40 years ago in terms of competition in the U.S. market. There weren’t as many high-end options for consumers. So in some respects, competitors like Lexus forced this change.

Michelli: It’s a common theme in business right now. A recent Forrester study says 92% of companies say customer experience is a top strategic priority. They are trying to differentiate their business based on customer experience. Yet the American Customer Satisfaction Index shows customer satisfaction is at a nine-year low.

It’s not the products. It is a proliferation of competitors who have access to comparable products, so the differentiation comes in the execution of customer experience.

[email protected]: Through your book and its exploration of the Mercedes-Benz story, you’re also opening the door for other corporate leaders to think about their customer experience, correct?

Michelli: Yes. I’ve been blessed to be a consultant in this space. In fact, I came to Mercedes-Benz to help them benchmark their business against Ritz-Carlton and Zappos, which are other brands I’ve written about and worked with. For me, it is all about helping every single person improve the quality of experiences they provide to consumers because we all rise with better experiences. This means less stress. We don’t have to work so hard to get our needs met, and we have technology integration.

[email protected]: How did the poor customer service at dealerships affect the bottom line?

Michelli: It’s important to note that the lifetime value of a customer is linked to their willingness to maintain a service relationship with the brand, which increases the probability that they’ll want to buy another car with the brand again. This ensures customers aren’t lured in by a competitor.

“Competitors … have access to comparable products, so the differentiation comes in the execution of customer experience.”

Things suffered on the service side because people asked themselves, “Do I get it serviced at a Mercedes-Benz dealership or do I go outside of the dealership family?” The company was having significant churn and attrition in that space because service at the Mercedes-Benz dealerships was not up to standard.

[email protected]: Also, when you look at customer experience, you’re not simply competing against other automakers, as you alluded to before. You’re also competing against Ritz-Carlton and other top brands as well.

Michelli: Yes. For example, Tesla’s creation of their customer experience, which has a more retail type of sales environment, is much more comparable to Apple than the traditional car dealership experience.

Of course, Tesla has a much lower sales volume, so it’s not a fair comparison with Mercedes-Benz. But it demonstrates the disruptive force that exists in how things are changing in the industry. For example, people are buying more of their vehicles online and are just going into the dealership to sign the deal and to test-drive the vehicle.

Most of these purchasing decisions now happen much earlier in the process, thanks to technology. This change in purchasing habits has to change the way you think about the customer experience. For example, I don’t need to go to a cashier at Apple to check out. I can do it right by the products, or in advance. There are many technology advances that are changing the way things are done.

Unfortunately, for a long time in the service drive at Mercedes-Benz, customers still had to go from the service advisor to the cashier to pay. But that’s all changing with the integration of technology and a re-thinking of how the system works.

[email protected]: Does Mercedes-Benz have data to demonstrate how

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