• by Karl Greenberg , April 5, 2010

Last fall, Mercedes-Benz ran a competition among business schools like Harvard, New York University, Wharton and Kellogg, in cooperation with NYU, to find out what the next critical market for the brand actually thinks of the brand.

The participants were an international and multi-ethnic group placed in teams, each of which comprised students from different schools, and one Mercedes-Benz advisor.

Steve Cannon, Mercedes-Benz USA VP marketing, says the students -- the "best and brightest at elite business schools" -- got a financial incentive to participate. They spent the first day at company headquarters in Montvale, N.J., and the next "locked in a hotel nearby," he says.

Cannon says MBUSA gave them an assignment: Assess the brand in terms of how well it connects with younger, Gen Y Americans -- whose front end is around 31 years old -- and offer recommendations on how the automaker can appeal to upwardly mobile people in their cohort.

The task wasn't an idle exercise: Mercedes in two years will bring a new car to the U.S. market under the C-Class. Like BMW's 1-Series car, the new vehicle will be the new entry point for younger luxury-brand car shoppers.

Cannon recalls that a big takeaway from the study was Gen Y's rather cool take on the brand. "It was 'we admire you but don't yet connect with you,'" says Cannon. "Yes, it's a level of respect, but a distant kind of respect."

He says the company has to close that gap both with dream-car products like the Mercedes-Benz SLS AMG gull-wing shown at the N.Y. International Auto Show, and with that forthcoming new generation of vehicles under C-Class set for 2013, "a sporty, economical 4-cylinder vehicle tailor made for younger buyers," says Cannon.

Another result from the B-school scrimmage: MBUSA has to acknowledge this generation's sophistication around social media, and how 20- and 30-somethings experience the Mercedes-Benz showroom.

"These kids are saying 'we are a generation of digital natives; we live in the digital space; we are data-obsessed' -- which means when they go into showrooms they will have done their homework. So, with salespeople, there is a clear disconnect with us if a dealership sales guy doesn't know his stuff."

On the positive side, says Cannon, the students said Mercedes-Benz is a brand that resonates with Gen Y. "They said [M-B] stands for everything that matters to them: safety, authenticity, environmental awareness; the good news was that they connect with what the core of our brand represents, but we have to reach out to them in a way that is relevant."

That, he says, is where M-B has to rethink social media. "Because of social media, they are network-driven and they turn to these giant networks as their number one source of information to help them in daily decisions. It's almost a hive mentality."

Cannon says the company is not in a rush to execute on the study. "We are in a listening and learning phase now; we don't have to force things now because they are not yet in our prime buyer wheelhouse," he says, adding that Mercedes' tactics to get Gen Y into showrooms down the road include giving influential young people an inside line to forthcoming vehicles.

"We might give five of the best business schools what are basically prototypes for several weeks, to try out, and talk about with peers. Because they are sharing their experience with a car nobody has seen or driven, they are insiders; they have social capital within their networks, and that creates brand ambassadors for us," he says.

"We are just going to have to understand social networks in a really intimate way and understand what that 'social capital' is for them to be compelled enough to share something."

Dan Gorrell, president of Tustin, Calif.-based AutoStratagem, says MBUSA is heading down the right road in terms of how to engage social mavens, but argues that the jury is out on how effective social mavens are in building brand or product buzz. "There is a question in my mind about how much influence these people really will wield," he says.

"But I agree that the key is to develop a reciprocal relationship with consumers. There has to be a reciprocal benefit because that's the foundation for trust.

"The consumer gets the benefit of having been invited to the table, so to speak. The manufacturer benefits by being connected to the consumer," he says, adding that such programs can't be turned around overnight. "Developing social capital, like brand equity, takes a long time. On the plus side, you have to start somewhere, and there really isn't a downside."

The challenge for Mercedes-Benz -- when that new vehicle arrives -- is explaining why it is a premium vehicle, a legitimate Mercedes-Benz, since the car will have a value orientation within the lineup. "It will take us time to articulate why it's a premium product. The good news is, we have time to do it," says Cannon.