Mazda trains dealers to lift customer loyalty

NEW YORK — Masahiro Moro takes the helm of Mazda North American Operations at a critical time. The product portfolio is fresh and stocked with well-timed crossovers. But profits have stagnated, and 2016 sales are off steeply. The automaker also has some of the lowest loyalty rates in the industry — 39 percent vs. the industry average of 53 percent, according to IHS Automotive.

Like his predecessor, Jim O’Sullivan, Moro is a lifer in the auto industry, having joined Mazda in 1983 and risen through the ranks to become Mazda Motor Corp.’s global marketing chief.

Moro, 55, talked with Staff Reporter David Undercoffler in March at the New York auto show about the new kind of customer Mazda is after and how the company is helping dealers adapt.

Q: Now that you’ve taken over for Jim O’Sullivan, what are some of the issues that Mazda must address?

A: Over the course of Jim’s service, Mazda has won a good relationship and reputation from dealers. Mazda is very accessible for listening to dealers, which is great. Having said that, we have a couple of issues that remain. One is a profitability issue and secondly a big gap between great dealers and struggling dealers.

How do you address this?

In the past, our business philosophy was expansion of sales: Whatever you do, sell more cars. That caused a lot of bad business equations.

We believe we are not able to sustain this business model because we are small, a 2 percent market share company. So we set out two challenges.

First, companywise, how can we develop great products and technologies and design and craftsmanship so that we really embody our brand values through those products in front of customers and the dealers?

So we invested a lot. And you now see six brand-new models in the showroom, including the new CX-3.

Now another big challenge is that those new products and technology and design bring a very new customer for Mazda, one who is more affluent, more accepting of the brand values, more emotional. So we have to recognize that in the future, Mazda should focus on acquiring those good customers who really understand what we’re about and not engage with the rational type of price-seeker. So it’s important for dealers to understand where we are going.

I’d like a Mazda customer to be a customer for life. And if we would like to make that happen, the most important part is how we treat the customer, not just at the purchase but also through our dealership side.

I visited 40 different countries worldwide because of my former job, and there is only one common thing: A great dealer has a clear understanding of how they look after customers.

So I’m a strong believer that dealers need to change their focus to look after more customers so that dealer loyalty, brand loyalty, those are top of mind.

What changes are expected for dealers — personnel changes, physical changes to their stores?

I think hardware could be changed in 12 to 18 months. It’s just a matter of putting in money and going through the bureaucratic process. So it’s happening anyway if a dealer is willing to invest.

The most difficult thing is software and the people side. We will conduct a lot of training for dealers so they really have an opportunity to understand our brand values and our philosophy of customer care, not only for our sales consultants, but also technicians and service managers.

We have committed to doing this on an ongoing basis. Our first big event was in January, which totaled 900 employees, including all Mazda North American Operations employees, and significant business partners working for us.

It was a very, very thorough training session to engage the brand. And following that was a full day of customer experience training. That has never happened before at this scale. And we are now deploying to dealers and dealer partners. We are going to invest into this over the next three years as one term to see how much we can travel to the direction we want.

What are the challenges with the move from volume-focused to experiential-based?

I have a number of challenges. One, I said volume is not a target. For example, if we are not able to improve the market share for the moment, we should be thinking about if we’re getting a good 2 percent or not a good 2 percent. I really want a good quality 2 percent. That makes a huge difference rather than a lousy 5 percent.

So what makes a good 2 percent?

One, move away from a company selling only the Mazda3 into one with more crossover portfolio business. That allows us to improve net revenue.

And the second definition is brand loyalty. The current Mazda repurchase ratio is at the bottom of the industry, unfortunately.

That is in conjunction with how we were selling in the past. It was only Mazda3: 40 percent of total sales were Mazda3 five years ago. And the C-car segment is one where buyers then move to crossovers, so it is very difficult to retain those customers. But now we are moving towards more crossovers: the CX-3, CX-5 and CX-9. It’s a good combination and we are steadily increasing the Mazda6 sales, so customers are willing to stay more with Mazda, which is a good sign.

I’d like to win a high brand loyalty to make customers for life with Mazda. To retain a customer is much more efficient compared to courting a new customer.

If we are able to increase our retention rate to 50 percent, for example, then a lot of customers are coming back to Mazda. And if we are able to keep the same level of conquests, then our sales pace will be accelerating.

Why did Mazda decide to come out with the MX-5 RF?

We keep evolving the MX-5 as we get a new generation. On the former generation we came up with the PRHT [power retractable hardtop] and I was so impressed that so many customers came to buy that version specifically. But to be honest with you, it looked the same.

During the course of designing the new soft-top MX-5, we said to the program manager we really need a retractable hardtop. Because we do have a customer that we anticipate will want to purchase the hardtop again. Because those two customers are different. And I said don’t touch the boot space because it’s already compact enough. So they discussed and came up with a totally different idea: What if we split the roof and the side?

So that was the story. The bottom line is the restrictions forced them to come up with a fantastic idea.

The MX-5 is one of the hits of the New York show. Have there been conversations with FCA to do a Fiat version of the RF?

I think this must be a Mazda unique proposition.

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