Cadillac calls Ritz to capture luxury lost on young

Automotive News -- June 13, 2010 - 8:33 am ET

DETROIT (Bloomberg) -- General Motors Co. CEO Ed Whitacre wants Cadillac to treat customers better.

At a June 3 meeting in Chicago, GM managers told 300 salespeople how a Texas salesman had dissuaded a friend of Whitacre's from buying a Caddy. When his buddy test drove a CTS- V sedan, it ran out of gas. Whitacre's e-mailed response was projected in large letters on a screen: “If true, awful.”

The gathering -- a combined pep rally, lecture and confessional -- was part of a GM offensive to revive Cadillac, which has fading appeal, aging customers and trouble persuading buyers it's worth paying a premium. GM brought in trainers from Ritz-Carlton Hotel Co., a unit of Marriott International Inc., to show dealers how to reconnect with customers.

“It's truthfully a new beginning for us,” said Kurt McNeil, Cadillac U.S. vice president of sales and service. “We know we've got a lot of work to do on the product side, the marketing side and the customer service side. We think we do pretty well, but we know we have to do better.”

Cadillac, which once called itself the “Standard of the World,” ended a six-decade run as the top-selling U.S. luxury brand in 1998 and hasn't placed higher than third since 1999. Though U.S. sales rose 32 percent through May, Caddy's results last year were the worst since 1953.

The GM brand finished eighth among 12 upscale makes in the Luxury Institute's 2009 survey of buyers who make at least $150,000 a year, said Milton Pedraza, the New York-based group's CEO. About a third of the wealthy respondents said Cadillac was worth paying a premium, compared with 57 percent for BMW and 63 percent for Mercedes.

Less affluent

Cadillac buyers are older and less affluent than buyers of BMW, Mercedes and Lexus models, say researchers at J.D. Power & Associates, a division of McGraw-Hill Cos. A J.D. Power survey found the average Cadillac buyer is 62 and earns a median household income of $129,656. That is 13 years older and $39,633 poorer than a BMW buyer and 9 years older and $44,902 less than a buyer of a Daimler AG Mercedes, J.D. Power said

GM brought in the Ritz trainers to help Cadillac create a consistent sales experience across the U.S., similar to what customers expect at Ritz-Carlton hotels, said Jeff Hargett, who is corporate director of learning and content delivery at the Ritz-Carlton Leadership Center in Chevy Chase, Md.

So far he has led nine training sessions in cities including New York, Atlanta and Los Angeles with more than 1,800 dealership owners and salespeople.

Cadillac has copied Ritz's pocket-sized “Credo” cards with a version it is handing out to all company and dealership employees. The card explains how customers should be treated. All Ritz employees are required to produce it on demand.

Spotty service

Ed Peper, Cadillac's general sales manager, told dealers during the June 3 presentation that spotty service from store to store has hurt sales everywhere. He played audio of employees on the phone dismissing poor service experiences or failing to explain pricing to customers who opted to get service elsewhere.

Ritz employees have $2,000 a day, per customer, that can be used to make up for a bad experience or surprise a guest with a better one, Hargett said. He suggested Cadillac dealers find similar ways to let sales and service people “wow” customers.

Cadillac service chiefs are now allowed greater flexibility to extend OnStar subscriptions, provide free maintenance or even reduce service charges for customers who are upset, said Steve Hill, GM's manager of customer care.



Inflatable animals

Gary Grossinger, who owns Grossinger Cadillac in Palatine, Ill., near Chicago said he gave employees $300 to $500 in “wow” money after hearing the discussion last week. He's phoning customers to see if they are satisfied, too.

Cadillac is encouraging dealers to adopt a new showroom design that features a modern reception area that resembles a high-tech coffee bar. Though the new look was recently redesigned to be less expensive to build, GM can't force dealers to follow its lead because they're independently operated.

GM is also pushing Caddy dealers to unify the brand message. Cadillac recently removed most references to General Motors from its Web page and identity, using Cadillac.com instead of gm.com in e-mail addresses. Displaying inflatable animals, neon letters and balloons to advertise sales is not allowed, Peper said.

Attracting a new generation of buyers is key to Cadillac's makeover. The brand lacks a true competitor for models such as BMW's 3-Series sedan, which attracts younger buyers, McNeil said.

John Wolkonowicz, an analyst at auto forecaster IHS Global Insight said Cadillac should phase out land yachts such as the DTS, which Strategic Vision says appeals to buyers in their 70s.

‘Geezer mobile'

“You no longer need a geezer mobile,” Wolkonowicz said.

Cadillac will begin sales later this year of a new CTS Coupe and also has a station wagon version of the sedan. The company won't discuss other new products except to say there are plans for a new, rear-wheel-drive sedan that will be smaller than the CTS sedan, currently Cadillac's entry-level model.

The automaker plans to debut an all-wheel-drive XTS sedan next year and the smaller ATS the year after, said IHS, based in Lexington, Mass. IHS also predicts a Cadillac version of the Buick Enclave, maybe in 2013 or 2014.

Cadillac spent $354 million last year on marketing, more than any other luxury auto brand, according to estimates from Kantar Media in New York. This year it will spend an extra $50 million, said Don Butler, Cadillac's vice president of marketing and the fourth person to hold the position in three years.

Not all the news is bad, Butler told the audience in Chicago. Cadillac dealers last year ranked second after Toyota Motor Corp.'s Lexus among luxury brands in a J.D. Power customer service index. They just need to do better, Butler said.

“The Cadillac of Cadillacs, that's what we need to get back to,” Butler said. “There is this residual positive sentiment for Cadillac. But the challenge is that a lot of folks think ‘It's just not for me.'”

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