Automotive Management Speak to Sam Burton

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    Jobbybob

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    Automotive Management Speak to Sam Burton

    Post by Jobbybob on Fri Mar 14, 2014 3:15 pm

    Spotted this on ARonline and thought that people here might be interested in it.

    LINK: http://www.am-online.com/news/2014/3/13/how-mg-is-trying-to-make-an-89-year-old-brand-new-again/34606/

    How MG is trying to make an 89-year-old brand ‘new’ again

    Anyone of a certain age will remember the last days of MG Rover: BMW ownership, the rise and fall of the Phoenix Four management team, the sadness and bitterness of the workforce and, not least of all, the network of dealers, many of which stood by the brand for as long as possible, until its final demise in 2005.

    Now the brand is back, in Chinese ownership and with the benefit of considerable investment, which is leading to a slow roll-out of new vehicles.
     
     NEED TO KNOW        
    ♦ MG wants 51 additional sales points by the end of 2014
    ♦ 2014 forecast is 4,500 registrations, including 3,500 MG3s
    ♦ Manufacturer holding monthly open days to woo dealers


    Some elements are the same, such as the Longbridge headquarters – a spiritual home, of course, but also, today, a hotbed of manufacturing and design activity – and the emphasis on the brand’s Britishness, including the appearance of the Union Jack in some of the marketing. But new beginnings are also important, insist senior, UK-based directors.

    As MG Motor makes its first appearance at the AM Awards as a sponsor, showcasing its latest model, the MG3, and the MG6 and meeting senior figures from dealer groups, its head of sales Sam Burton reveals his strategy for the brand.

    MG’s heritage is undeniable, but in many people’s minds – particularly those dealers that remember the pain of the 1990s – the brand’s recent history is not something to dwell on.  

    However, Burton insists the brand is at the beginning of an evolutionary cycle: “Next year, MG celebrates its 90th anniversary as a brand. But as a current business proposition to the motor industry we’re a company that doesn’t have a legacy to offer. We’re not able to say we’ve got a database of 100,000 customers out there and you’re guaranteed their business.”

    There are thousands of current and former MG Rover owners in the UK, but their data was not part of the deal when the Chinese bought MG.  

    So, from a dealer point of view, MG’s current proposition is based on the ability and opportunity to attract customers. As a sales operation, it’s early days.

    Where it differs from a completely new entrant to the market is there is a consumer awareness of the MG brand, both negative and positive. But with this awareness is the uncertainty about a company that ‘went under’ eight years ago.

    “Consumers know it’s in foreign ownership, although one recently told me it was in Indian ownership. So there’s uncertainty in terms of it being here in another 10, 20 years’ time,” said Burton.  

    “When I talk to customers, it’s on the strength of the parent company, that it manufactured 4.5 million cars last year – which by my rough estimate is probably about 5% or 6% of global production – and how they are now 103rd in the Fortune 500 companies. It is financially very strong and stable.”

    Backed by one of China’s ‘Big Four’
    That parent company, SAIC Motor Corporation, is a Chinese state-owned vehicle manufacturer and is one of the country’s ‘big four’ carmakers. At 4.5m units, it was the largest producer of cars in 2012.

    SAIC has reputedly made more MGs than the original MG Rover made even in its best year in its former incarnations and it makes as many cars as Nissan Motors.  

    SAIC’s investment commitments in MG are considerable. It has invested £100m since it purchased Longbridge in 2007/08.  It recently invested a further £1m in the design centre. About 500 people work at Longbridge, a mix of designers and technical experts, in addition to about 75 people at MG Motor, the sales and marketing side.  

    SAIC design director Tony Williams-Kenny, a Briton who leads teams in the UK and Shanghai, is a key part of the home-grown appeal – and adds to the desirability of the brand for the Chinese market.

    Burton is not privy to the five- to 10-year investment plan or the research and development budget. But he takes managing director William Wang’s word that SAIC is “very committed to making this work”.  

    In many ways, the MG6 was launched to coincide with the launch of MG in China. There’s no doubt SAIC has to make it a success in China, but it’s equally very important for SAIC that MG succeeds in the UK, the brand’s ‘home’. An example of SAIC’s commitment is that it developed a diesel engine for Europe that isn’t for sale in China.


    MG needs 137 dealers to cover the UK

    But was launching the MG6 first, with an old engine emitting 184g/km CO2, a wise move?

    “From that point of view, no it probably wasn’t. However, it was important for the MG brand to be launched,” Burton said. If MG had launched in China and not elsewhere, that could have raised questions about its intentions. Management expected the 2013 launch of the MG3 supermini to be the real “trigger point” for the UK business, given that the B-segment is the UK’s largest and it is a competent, good-value car.

    The less-than-ideal order of events has led to Burton adjusting the way MG goes to market. It aims for UK registrations in excess, eventually, of 10,000 units. “Once we have a range of models to offer, we will be a very serious proposition.”

    When Burton joined the company in April 2013, MG Motor had 29 sales points as well as 35 service points. In terms of coverage, this meant only 14% of the UK population was catered for in sales and 20% service.

    His task is to establish a network, grow retail sales and then build business and fleet sales. Burton said an analysis of ideal network coverage to cover 100% of the UK shows MG needs about 137 dealers. To entice partners, the company has taken a more pragmatic view on standards with focus on the right location and the quality of the dealer, not showroom size.


    MG3 attracting interest from prospective dealers

    MG has also approached XPart, the independent service and repair network that specialises in MG Rover cars. It  appointed 15 XPart locations as MG authorised repairers in 2013 and may  add 20 to 25 this year in order to boost service coverage from 50% of the UK to 70%.

    In terms of sales points, MG wants 80 by the end of this year and 100 by the end of 2015, giving 90% UK coverage. However, the network has been challenged by winning sales and service business with what has been until recently a one-car brand. Now that the MG3 is turning heads and getting positive press, thanks partly to price positioning, low 4A insurance rating and 42% 3yr/60,000 mile CAP Monitor residual values, there has been an increase in interest from prospective dealers.

    Burton believes dealers have appraised themselves of SAIC, they like the MG3 and have been biding their time before making up their mind on the brand. MG holds an open day every four weeks for potential dealers.

    Burton and his team had initially put AM100 groups on their target list, but recognised it wasn’t going to build a UK-wide network this way, as the companies included are expecting considerable volumes. So, smaller companies and independents wanting to take their first franchise are in the frame.

    Multi-franchised sites are acceptable, and ideally a franchise holder would display three MGs, but in certain rural locations a single car on display plus the ability to run a couple of demonstrators and provide servicing would be acceptable.  

    Previously a three-car display was mandatory and franchisees were required to stock a minimum quantity of used MG6s, a requirement they didn’t particularly like.

    Burton took the view that if MG made the commercial conditions right, dealers would stock them – it shouldn’t be imposed on them. So he changed the dealers’ standards: “I’d rather incentivise and encourage dealers than say this is what you must do, otherwise you fail to comply with our standards. That’s not the way to get the most out of your network.”

    On margins, with the MG3 the company introduced no-haggle pricing, rather than build in a “big fat distributor and dealer margin” that ultimately is given away. It had tried the latter with  the MG6, but dealers weren’t hitting the volumes because the car was overpriced.

    “We took that on board with the MG3 and decided on a range of fixed margins with no haggling on price. Our dealers are able to then present to the customer with a fair price. And it’s working for them. They are retaining good margin, £800-£900 a unit, or 5% to 8% depending on the model.”

    MG sees itself competing with Kia, Hyundai, and Škoda. As those carmakers have moved up the price chain, MG wants to capitalise on the value-oriented buyers left behind: “The consumers we are talking to are coming from the likes of Hyundai and Kia, and mainstream B-segment car owners, someone who has a three-year-old Fiesta, but can’t afford the price hike for a new one. A top-of-the-range MG3 is £10,000, a Fiesta is more like £13,000.”

    MG is sticking with the industry-standard three-year/60,000-mile warranty, both in terms of need and the negative impact on a car’s price. The company concluded a five-year policy would add about £850 to the list price.

    MG has narrowed down its ‘ideal’ customer to two key groups: 45- to 60-year-old men – the historical MG customer – and 30- to 45-year-old women.  

    “The MG3 is a great proposition for a young driver – low insurance, cheap to buy, to run and easy to drive. But most don’t have the disposable income to buy their own new car, and it tends to be the parent who’s funding it. So we took the view that we’ll target the parent.”

    And regarding the 30- to 45-year old woman, who’s probably got a young family, MG research is showing the car’s right for them because as, while it’s a small car, it can accommodate child seats, passengers and shopping.

    MG’s model plan and registration aspirations
    MG’s model line-up will grow from 2015 or early 2016 with the CS crossover, described as akin to the Kia Sportage, which demonstrates an awareness of a growing segment.

    Asked about C- and D- segment cars,  with their potential fleet interest, Sam Burton said while the MG6 sits between the two (not something leasing companies or fleet managers have traditionally been comfortable with), he needs the C- segment MG5 (shown as a concept  at the 2011 Shanghai Motor Show).

    It is not planned to arrive in the next couple of years, however, as the Longbridge team – and its dealers – have to prove they can do a better job at winning over the fleet sector with the MG6.

    At a ride and drive event last year, some fleet buyers told Burton they weren’t aware MG was making cars again.

    His contract hire plan will see MG target 20,000 businesses with a message focusing on the MG6 diesel, followed up with call centre activity.

    For 2014, MG is forecasting 4,500 registrations, made up of 3,500 MG3s and about 1,000 MG6s – 90 cars per dealer on average. For 2015, the plan is 7,600 units (6,000 MG3 and 1,600 MG6) from 80 dealers. Burton said if the MG3 really takes off, he can ask for more allocation to the UK.

    2016’s plan is 10,000+ units from 100 dealers, with crucial growth opportunities from the CS crossover added to the range.

    Some notes of interest for me within this:

    • The desire to expand the dealer network (51 more dealers this year) and the lengths they are going to to entice new dealers into the network.
    • That they have learned lessons from the MG6 launch
    • They now see themselves as aiming at the Koreans and Skoda.
    • The massively increased sales projections, 4,500 is a big increase on last year's figures (500, I think?).

    snifferdog1

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    Re: Automotive Management Speak to Sam Burton

    Post by snifferdog1 on Sat Mar 15, 2014 12:38 am

    I saw that yesterday and found it an interesting read.

    It all sounds very good and very positive - I still dont think they are advertising enough though.
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    patpending

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    Re: Automotive Management Speak to Sam Burton

    Post by patpending on Sat Mar 15, 2014 3:16 pm

    The report is from last year but like everyone else, I don't recall seeing it before yesterday.

    I'll put the bit about the target market under my thread about the target markets. Wink

    Brouwer

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    Re: Automotive Management Speak to Sam Burton

    Post by Brouwer on Sat Mar 15, 2014 3:27 pm

    Those forecasts are pure fantasy.

    Dorset Rocket

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    Re: Automotive Management Speak to Sam Burton

    Post by Dorset Rocket on Fri Mar 21, 2014 1:57 pm

    I met Sam Burton at Silverstone last September and he seemed enthusiastic and enjoying he new role at MG, but at the time was forecasting 50 dealers by the end of 2013. So take his figures with a pinch of salt, but even if they get half the sales he forecasts for this year that will still be a great step forward.
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    patpending

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    Re: Automotive Management Speak to Sam Burton

    Post by patpending on Fri Mar 21, 2014 2:04 pm

    Dorset Rocket wrote:I met Sam Burton at Silverstone last September and he seemed enthusiastic and enjoying he new role at MG, but at the time was forecasting 50 dealers by the end of 2013. So take his figures with a pinch of salt, but even if they get half the sales he forecasts for this year that will still be a great step forward.
    43 active ones now - aren't ten of those new? - as of when? - as in - it's taking longer to get them on board...
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    Jobbybob

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    Re: Automotive Management Speak to Sam Burton

    Post by Jobbybob on Fri Mar 21, 2014 2:26 pm

    There was something in this week's Autocar about Subaru wanting more dealers than they have too.

    They only have 55, which surprised me as I'd have thought that they have more than that.

    Didn't Burton come over from Subaru?
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    Windy
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    Re: Automotive Management Speak to Sam Burton

    Post by Windy on Fri Mar 21, 2014 3:22 pm

    Jobbybob wrote:There was something in this week's Autocar about Subaru wanting more dealers than they have too.

    They only have 55, which surprised me as I'd have thought that they have more than that.

    Didn't Burton come over from Subaru?
    Have you realised that Subaru sell less cars than MG?

    10 less in January and 10 less in February!
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    Jobbybob

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    Re: Automotive Management Speak to Sam Burton

    Post by Jobbybob on Fri Mar 21, 2014 4:13 pm

    Indeed. Low sales (2,200 last year) was the reason cited for the dealership drive.

    I'd say the reasons for their poor performance is less to do with the network (they seem to have a decent enough coverage of the UK, unlike some other makes) and more to do with the product range, which looks uninspired and overpriced (apart from the BRZ but you can get that with a Toyota badge).

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