"Full page ads and TVCs are no longer as effective": Santosh Iyer, marketing head, Mercedes

Launched in India in the mid-1990s, luxury car maker Mercedes-Benz basked in its initial glory as the sole player in its space for more than a decade before BMW, and later Audi, arrived. Besides being dethroned by BMW on the sales front in 2009, Mercedes was also re-positioned by these late entrants as a stodgy, old brand.

Of late, though, things have changed for Mercedes. After overtaking BMW in the first quarter of this year, last month's figures indicate that Mercedes outsold Audi by over 100 units, making it the top luxury car brand in India.

Currently, the luxury car market in India is pegged at about 30,000-35,000 luxury cars per year. This number may not be huge, but the competition among the three leading German players certainly is. Competition is set to increase with the players' eyes set on the under-25 lakh zone. It's been over two months since Mercedes launched its A-Class, a compact luxury car, in India. BMW is expected to launch its 1-series next month, while Audi's A3 sedan is expected to arrive next year.

Interestingly, the average age of the Mercedes buyer has reduced by almost 10 years over the last four to five years. Within 10 days of its launch, the A-Class received 400+ bookings, majority of which came from customers between 25 and 35 years. And, the new generation offerings, A-Class and B-Class, are together expected to constitute approximately 20 per cent of Mercedes' overall volumes by this year-end.

Moreover, there has been a spike in the number of under-35 buyers for Merc's luxury sedan, E-Class. We spoke to Santosh Iyer, head, marketing, Mercedes-Benz India, about changing trends. Edited excerpts.

Edited Excerpts

This is a myth in the industry, more so in the media. This image has been successfully created by our competitors in a move to appeal to our buyers by telling them 'Buy our cars and start looking younger'. Going by data, the average age of our consumer is similar to that of competition, if not younger.

But yes, as an image that used to be the perception. By the time our competition came to India, we had already sold over 20,000 cars; that was a strength but also a weakness. When competition entered, they were the 'new kids on the block' and were thus perceived to be 'younger'. It helped them that we were already present here; they didn't have to do much. So, they took advantage but now things have normalised.

Also, since we entered India just after liberalisation, we had older consumers buying our cars simply because at the time, wealth used to reside with these older guys. In the larger scheme of things, the idea of Mercedes being fuddy-duddy is all a farce.

The market is changing. India is moving towards a consumerist society and luxury consumption is rising. Traditionally, our buyer was 35-50 years old. This was true for the auto luxury segment as a whole, in fact. But now there is a new buyer group between 25 and 35. They are not just getting good salaries but are ready to spend. Earlier, a house was the only purchase they wanted to make. Now they want to consume luxury even when it comes to cars. We saw this trend and brought the A-Class to India.

Even globally, our buyer is getting younger, thanks to our contemporary design language. But in India, this is coupled with the economic scenario: unlike earlier, wealth is no longer considered an 'evil' thing, as a population we are becoming younger and there is an 'upgradation' into luxury.

Today, even the way a 35-45 year old guy consumes luxury is changing. He comes from 'new India' and the money he spends is 'post-1991 money'. Only the 45-60 year old guy today is from the pre-liberalisation era.

We have two sets of buyers for A-Class: 'luxury dwellers' and 'upgraders'.

Luxury dwellers already own luxury cars and want to make an additional purchase. Initial interest around the A-Class came from this segment. Upgraders are first time entrepreneurs or professionals who have done well in life and want to start consuming luxury. A lot of post-launch interest is coming from this segment. I can't say they are laggards, but they are consumers who are coming into the fold after observing the dwellers.

The demand for this car is connected to the recent demand for single-room studio apartments-- they satisfy emotional as well as rational needs. Similarly, the A-Class is compact, hence functional and has all the features of a top end luxury car, hence satisfies emotional needs.

And it's not a fair assumption that luxury dwellers come from inherited wealth. Today a lot of these people have made their wealth in this generation itself, thanks to the growth of dotcoms, small and medium enterprises, availability of funding, and growth of the construction segment. They have all made their own wealth by 35-40 and consume luxury in a big way. Ten years back, yes, luxury dwellers would typically be inheritors of wealth.

We recognised this changing market and tapped into it. Our job in marketing is to make the product relevant to the TG, failing which consumers will feel alienated. They will feel 'Maybe it's too early for me to upgrade to a Mercedes'. Youngsters are not as brand loyal as they are brand conscious. They have to be engaged with constantly. Full page ads and TVCs are no longer as effective as our experiential marketing efforts. We did pre-launch pub activations for A-Class and associated our brand with youth platforms like MTV. We have more than doubled our digital spends.

Consider StarDrive, a platform where we demonstrate our pre-safe technology by simulating accidents. Our cars can anticipate an accident (by detecting under/over steer) and prepare for it. The seatbelt gets tighter, the seats start reclining, the sunroof closes... What better way than a demonstration like this to communicate our safety features to a consumer who could say 'I may or may not meet with an accident so how does it matter?'

Research indicates that today there's more front seat driving in luxury cars. Even Mercedes is more of an owner's car today, not so much a backseat, chauffeur-driven car. We find a lot of owners bringing their cars to our after sales outlets, indicating that a lot of our consumers are driving their cars themselves. We have used this insight and changed our service reception. Our staff is now trained in behaviour skills and etiquette.