Q&A: Mercedes’ Steve Cannon

NEW YORK With the launch of a $75 million campaign for Mercedes-Benz’ 2010 E-Class, U.S. vp, marketing Steve Cannon discussed the psyche of Mercedes owners, the role of  “rational red meat” in the ads and why the automaker is creating mobile apps for the first time. The following are excerpts of an interview with senior reporter Andrew McMains.

Adweek: How has the economy impacted your consumers?

Cannon: They’re definitely nervous. They’ve been shaken like they’ve never been shaken before. So, a bunch of confidence has been removed from the system. They’re still very optimistic. For the most part, these are people who are go-getters. They build companies, they’re leaders, they’re entrepreneurs. So, while they’ve taken a hit, there’s an underpinning of absolute optimism in all of our communications that we’ve had with those folks. Everybody has told us that they’re definitely taking tighter control over household finances. They’re postponing some things — some of that casual dining, some of that impulse stuff they’ve cut out. One lady talked about her 24-hour rule. She still loves to shop but she walks back out, gives herself 24 hours and, in most cases, doesn’t go back. So, they’re definitely cutting back. 

What have you learned from your dealers?

The dealers are definitely seeing a more cost-cautious customer. The way the dealers see it, it expresses itself in traffic: There’s a whole lot less traffic out there. [Customers] are giving them some reasons for optimism, so the E-Class is coming at a great time. It gives them a reason to re-engage with a very big customer base. The E-Class is in its ninth generation. We’ve got lots of E-Class customers out there and it’s important in a time like this to work with your loyal customer base. It’s easier to maintain loyalty than it is to [try for] conquest in a tough, tough market.

What are the biggest challenges of marketing a luxury product in a recession?

The biggest challenge for us is to connect with consumers that are postponing [purchases], cutting back. Almost to a person, though, in the dialogues I’ve had with Mercedes-Benz customers, they don’t see their Mercedes-Benz as a luxury. You’ve probably heard a couple of phrases out there, like “conspicuous consumption” and “luxury shame.” None of our customers are ashamed of the cars they own. In fact, for them a Mercedes-Benz is a necessity and it’s not a luxury by any stretch of the imagination. But we definitely have to give them the rational reasons to buy. That’s why our campaign is built on the heritage of 120 years and nine generations, but it’s all about innovation. That’s why we spent a lot of time highlighting [features such as] the attention assist, lane-keeping assist, blind spot merger, this automatic breaking system — life-saving technologies that matter to the customer whether you’re in a recession or not. So, we’ve built communications that’s giving them lots of rational red meat.

Have all your models been hit equally by MBUSA’s 30 percent sales decline year-to-date through May?

GLK is a great story. That just launched in January and we’ve got 30 percent share of the segment. That’s all on-top volume, which is great…Obviously, the segments that have been hardest hit are at the top [of the price range]. Some of the bigger trucks have been hit harder than the overall market. Most of the fun-to-have roadster SL and the heavier car S-class segments are down significantly. So, while the overall market [sales] were down 30 percent, the market itself is down 35 [percent]. The slight silver lining through a tough year is the fact that we’ve been gaining market share.

Are dealers seeing a bump in servicing revenue as a result of owners keeping their cars longer?

What we see is: folks walking in, asking about pre-owns almost as a lower-price-point Mercedes-Benz. Body styles don’t change that much. You can be in a Mercedes-Benz pre-owned vehicle with a CPO, with a warranty, and they look at that as a smart bet in a tough environment. And that gives us a way to keep people in a brand. We also see some downsizing going on. So, M-Class folks looking at the GLK are saying, “Smaller platform, a little bit more efficient.”

What lines or scenes in this campaign were indelibly shaped by what’s going on around us?

“If you want to see the future of the automobile, look at the E-Class today.” That to me is a really strong leadership position that [says] the technologies we’ve got in there are [valuable]. We’ve got a public out there driven by consumer electronics. We’re innovation-hungry. We like to see new innovations. We like to see those cycles kind of fast and furious. To me the watchword [phrase] is “innovation that matters.” A couple of years ago, one of our competitors talked about a vehicle that parked itself. That was a bit of a gimmick that might have been an innovation but one that didn’t matter all that much. People are pretty decent at parking themselves. But when you talk about something like attention assist — that’s a brand new innovation…[It speaks to consumers because] they equate more accidents to driver fatigue than they do to drunk driving. And the fact that we’ve got a system, a smart always-on system that monitors your driving behavior, detects peak driving patterns and warns you to take a break, that’s something that matters.

What’s the thought behind the tagline, “This is Mercedes-Benz?”

It came out of a dinner. We start every new campaign with about five people at a table over dinner with the agency to frame the discussion. Out of that came a very frank insight that was, If you could distill everything that Mercedes-Benz is as a company, as an engineering company, as a marketing company — all of our heritage and all of our prowess — if you could kind of distill it down into a single car it would be the E-Class. This is Mercedes-Benz.

Were all the economic warning signs in place when you started planning for this campaign?

Oh yeah. We have been cognizant of the environment and we’ve been really reaching out to try to understand the impact of all this on our customers…[We’ve been asking,] “What is its impact on consumer psychology?” We’ve got an online community — MBA Advisors. We’ve got about a thousand people that participate in this. We poll them constantly to find out how they’re thinking and responding. We even invited a bunch of people to blog for us. It’s kind of like reading their personal diary. One of the questions was, “How are you responding? What are you doing in this economy?” They’re cutting back, they’re postponing purchases, but this thread of upbeat optimism [is there]. “We’re going to get through this. We’re taking a tighter, more proactive role in our household finances.” But they’re feeling pretty empowered about that. Ironically, in one study I saw happiness. People are happier. It’s just so counter-intuitive. With all the doom and gloom that we’re surrounded with, we asked people if they are happier and the scores have jumped. A couple of things are part of that. No. 1, it’s this feeling that I can take the worst that the economy can throw at me and it hasn’t killed me. There’s a little bit of that. Plus, they’re telling us they’re feeling empowered and good about their pragmatic, proactive approach to get control of their household finances.