Wednesday, 23 May 2018

How Nissan got to 10%

NASHVILLE — For Nissan North America to claim a 10 percent U.S. market share, it first had to turn itself into a company that was capable of achieving a 10 percent share.

That, says the automaker’s chief U.S. sales executive, has been the real point of the audacious six-year goal of lifting its U.S. market share to 10 percent by March 31, 2017 — an increase of more than three points from the moment the plan was announced in June 2011.

“We had to grow the entire organization to be capable of selling that many cars and trucks,” says Christian Meunier, senior vice president for Nissan sales, marketing and operations. “It required changes all through the company, in how we operate, in how we distribute, how our dealers perform and how we manage.

“It made us ask, “How do we get there?’ You have to put in place an organization that makes it possible.”

For the record, Nissan North America indeed reached a 10.2 percent market share as of Feb. 28, 2017, although market shares ebb and flow from month to month. The industry’s March results, due out this week, traditionally come in a spot lower for Nissan. Early April will reveal whether Nissan has precisely hit that bold 2011 target.

It has been a workout.

Like a determined 50-year-old training for a marathon, Nissan has felt the burn. The mission has sometimes harried company managers, discombobulated retailers who recoiled from factory pressure to move the metal, and even provoked scorn from competitors and industry analysts who criticized the push as a sure path to diminished brand value.

Now, regardless of whether Nissan’s March results hit the 10 percent mark, the company’s U.S. management is putting the exercise into perspective.

Nissan’s twisting path to 10% U.S. market share

In June 2011, Nissan CEO Carlos Ghosn set a goal of 10% U.S. market share by March, 31, 2017. He nearly hit that goal in January, and surpassed it in February. SOURCE: AUTOMOTIVE NEWS GRAPHIC

“We had to grow the entire organization to be capable of selling that many cars and trucks”
Nissan’s Christian Meunier

“We’ve really transformed ourselves in the process,” Meunier told Automotive News just ahead of the March close. 

Meunier, a Frenchman who took over U.S. sales in early 2016 after lifting Nissan’s market share in Canada, said the transformation required more compelling products, more employees in the field, a more concerted effort to make customers happy and keep them happy, and a more sophisticated approach to how Nissan researches, forecasts and plans for its local markets.

Sentras to L.A.

“It takes a lot of different things to make this happen,” says Rinaldi Halim, executive manager of Downey Nissan near Los Angeles. “The competition hasn’t just laid down and let it happen. We’ve really had to get better at what we’re doing.” 

Halim is seeing the effort firsthand. Los Angeles has been a key battleground for Nissan’s market share campaign, hotly contested sale for sale by its chief rivals, Toyota and Honda, which are powerfully entrenched with strong dealer networks there. 

Los Angeles offers a glimpse of how Nissan has tried to get smarter. 

The market traditionally was weighted toward compact sedan sales, and in years past Nissan focused its fight there on pushing Sentra sales. 

But that put the brand at a disadvantage. In 2011, the Sentra — at one long-ago time the biggest-selling import nameplate in the U.S. industry — was getting outsold 2 to 1 by the Honda Civic and the Toyota Corolla. An earlier strategy to make the Sentra stand out in the market with an edgier design had fallen flat, and Nissan’s local share was suffering for it. At the end of 2012, a year and a half into the national market share drive, the Nissan brand share of Los Angeles new-vehicle registrations stood at just 6.9 percent, according to IHS Markit. 

Nissan planners took the Sentra back to the drawing board and in late 2012 unveiled a new generation that was a little roomier and more fuel efficient, with more content and a more dignified look that linked it to the more expensive Altima and Maxima.

Nissan’s attention to the Altima’s design paid off. The car has outsold the Toyota Camry and Honda Accord at times.

That redesign got Sentra back in the game, and today it sells nearly twice the number of Sentras it sold in 2011. Nissan also lavished attention on the design of the current Altima, to similar results. Once an also-ran in the midsize sedan segment, the Altima gained enough popularity after 2012 to sporadically outsell the Toyota Camry and Honda Accord. 

As it rolled out more attractive sedans, Nissan also stepped up its marketing to Hispanic consumers, a large part of Downey Nissan’s customer base. The automaker diverted ad dollars to market models other than the Sentra there. It also became more aggressive with lease programs, which Halim says is critical in Los Angeles. 

“We can look beyond the Sentra to sell Maximas and Muranos for $40,000, but my customers need to lease them,” he says. “Nissan has responded.” 

The efforts are yielding market share results. The Nissan brand closed 2016 with a 7.7 percent share of L.A. registrations. This week, Halim’s dealership will move to a newly constructed store down the street that triples its current outgrown 2½-acre operation. 

“It’s time for us to step up and make a nicer appearance for our customers,” Halim says. “People expect more from us now.” 

Meunier sums up the company’s marketing attitude toward L.A. this way: “If all we’re doing there is advertising peanut butter Sentra on TV all year, we’re never going to grow and we’re doing a disservice to our local dealers.”

Munoz: Let field staffs have say in decisions.

Another evolution occurred when Nissan North America Chairman Jose Munoz concluded that Nissan’s individual field regions needed to have more decision-making authority if the company expected to read the local market better. 

“If everything is decided here in Nashville for San Francisco and Little Rock, it’s not always going to be the right decision,” Meunier admits. “The regional vice president has more information about his region than we do here.” 

Munoz increased the number of regions from five to eight to let field staffs devote more time to individual territories. That move, urged on Munoz by the Nissan National Dealer Advisory Board, addressed a long simmering frustration among many dealers that they did not have enough access to factory reps to sort out problems. 

The field expansion required Nissan to hire about 10 percent more sales and marketing personnel to staff the new sales and service regions, and meant decentralizing the company’s decision-making roles. Munoz began empowering the regions to decide for themselves which vehicles they wanted at dealerships, what their ad budgets should be, and how to advertise and incentivize locally. 

“We want to put a lot more power into each region,” Meunier says. “And that means also increasing the knowledge at the regional level.” 

Nissan had to step up its training efforts for regional employees and managers to duplicate many of the skill sets of the home office, giving regional staffs the tools and know-how to monitor the market, forecast sales trends, analyze production plans and correctly fill inventories. Nissan created a headquarters position to focus on regional staffing and training needs. 

Meunier, who meets twice a month with each regional staff, says it is an ongoing evolution. 

“You can’t decentralize too quickly or you’ll have anarchy,” he says. “But we can see the results now. The regions are deciding what products to sell and how to advertise them and what to incentivize.” 

That matters, Meunier emphasizes. The Phoenix market illustrates why.

“They’ve created a very large portfolio of models — all the way from the Versa, the lowest priced car in the market, to the GT-R, selling for more than $100,000. That’s a lot of products to keep fresh.”

Dave Sullivan
manager for product analysis at AutoPacific

Before the shift to regional management, Nissan’s field organization considered Phoenix to be similar to the other cities in its Mountain region, and as a result distribution and marketing plans were aligned. 

“Denver is part of the same region,” Meunier points out. “But Denver and Phoenix are not at all similar in their buying habits. Denver is a big 4×4 market. It’s mountainous and snowy. But Phoenix? You don’t really sell 4x4s there. It’s dry and it’s a 2×4 market. Phoenix is a sedan market. Denver is all crossovers and SUVs and pickups.” 

Improved local inventory planning has helped Phoenix dealers capture a bigger share. 

According to IHS Markit, Nissan’s share of Phoenix registrations rose from 8.1 percent in 2012 to 9.4 percent at the end of 2016. 

“We had to be there listening to our dealers, and we had to know the local market to know what vehicles to order for those dealers. Otherwise we were trying to push models that consumers didn’t want, which meant discounting their value. 

“And discounting our products,” he goes on, tracing the vicious cycle that Nissan has been trying to break, “means dealers are making less money, the factory is making less money, and customers perceive us badly.”

Customer perceptions

Throughout Nissan’s drive for market share, it has kept Honda in its crosshairs. As part of then-CEO Carlos Ghosn’s directive to capture 10 percent, officials also said it behooved Nissan — Japan’s No. 2 automaker — to displace American Honda Motor Co. as the U.S. industry’s No. 2 foreign automaker in sales. 

But overtaking Honda and Acura in U.S. sales has been elusive, even as Nissan’s market share inched forward in the past six years. Honda has also prospered. Deep-rooted customer loyalty at Honda and a broad perception of its products’ quality meant that Nissan needed to do more than simply sell more cars. Nissan needed to improve its own product quality and find out how to make customers like it more. 

The bottom line is that last year for the first time, Nissan surpassed both Toyota and Honda in customer satisfaction with product quality, according to J.D. Power’s annual Customer Service Index. Nissan also for the first time surpassed Honda and Toyota on last year’s J.D. Power Sales Satisfaction Index, the industry benchmark that measures customers’ satisfaction with their dealership experience while buying. 

“We’ve been working very hard with our dealers to do better,” Meunier says of those results. “It was partly a matter of improving the products. And it was partly a matter of improving how we handle customers in the sales process and in the service lane.” 

In one case, Nissan created an online dealership analytics system that, among other things, lets a dealer compare profit center results with industry averages, or identify all of the customers within 25 miles who have not been in for service in the past six months.

McSherry: A big business boost

“They’ve really helped us boost our service business,” says John McSherry, executive manager of Central Valley Nissan in Modesto, Calif., a midsize market in the agricultural belt east of San Francisco. “The number of Nissan units in operation has grown a lot over the past few years, and Nissan has helped us capture more of them for service. It’s not unusual now for me to see 100 cars coming in here before noon on a Saturday for an oil change.” 

Nissan also created an incentive program to reward dealers for winning and retaining service customers, hitting sales targets on basic maintenance orders such as windshield wiper replacements and new brake pads. 

In the most recent quarter, McSherry’s efforts in service earned him a $27,000 incentive check from the factory. 

“People say you shouldn’t need an incentive program to do the right thing,” McSherry says. “Maybe so, but Nissan is really trying to encourage dealers to do what we ought to be doing anyway.”

The product

Dave Sullivan, manager for product analysis at the automotive marketing research and product consulting firm AutoPacific, says that whatever else Nissan has accomplished or not accomplished since 2011, its position in the market is only as good as its products. And that continues to be a work in progress. 

Over the past several years, Sullivan says, Nissan has landed some products that resonated well, such as the redesigned Altima that bowed in 2012, the GT-R sports car and the Murano crossover. 

A few products failed to move the needle, such as the boxy Cube and the brand’s foray into full-size commercial vans with the NV series. 

“But they’ve made some inroads in a few segments,” he says. “They’ve looked for different approaches to styling and marketing. 

“One problem with their growth is that they’ve created a very large portfolio of models — all the way from the Versa, the lowest priced car in the market, to the GT-R, selling for more than $100,000,” he points out. “That’s a lot of products to keep fresh.” 

Meunier counters that Nissan’s diverse portfolio has helped it maintain growth momentum, even as consumer tastes changed. Six years ago, the Nissan brand was primarily a purveyor of sedans, staking its future on robust demand for the Altima and Sentra. 

That changed abruptly when consumers shifted in droves to crossovers. 

Nissan was ready with the Rogue, Meunier says. The compact crossover sold 124,543 in the U.S. in 2011. Reading the tea leaves for increased demand, Nissan put two assembly plants onto Rogue production, and then a third. Last year, Nissan sold 329,904 Rogues in the U.S. and is now preparing to introduce a second version of the nameplate, the Rogue Sport, which it expects will lift sales still higher. Last December, the Rogue was the largest-selling nameplate in the U.S. industry, outside of full-size pickups. 

“If we had not been able to shift our resources to the Rogue, with the help of our dealers, we wouldn’t be at our current market share level right now,” Meunier says. “We’d be down to 6 percent.” 

Investment in product is critical to bigger share, he says. 

“When the product is appealing and the value is stronger, we discount less and we all make more money,” Meunier says, repeating the company’s mantra of recent years. 

“Nissan has invested to be a more serious player. You don’t say you’re going to get 10 percent market share and just go out and sell. It’s about building the blocks that will enable us to get there. 

“Now we’re there,” he says, “and we have the blocks in place to continue growing.”

Nissan’s market share strategy

Steps taken by Nissan North America to operate at a bigger volume

  • Portfolio: A more appealing Sentra, Altima; more compact crossovers, including the Rogue, sourced from 3 factories
  • Organization: More sales regions with more field staff and more local authority on inventories, advertising
  • Marketing: More effort to look beyond general market preferences for buyers
  • Customers: Dealers encouraged to improve customer satisfaction and build service

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