June 30, 2017 5:46 am JST

Mazda to overhaul incentive program for US dealerships

Focus on customer satisfaction, showroom upgrades to enhance brand

TOKYO -- Mazda Motor will revamp its dealer incentive programs in the U.S. in an effort to encourage showroom operators to boost brand power, with the image-improvement push to also include renovations.

Mazda has been providing incentives, which dealers use to offer discounts, based solely on sales volume per model. Under the new system, half of the payments will be determined based on a dealer's efforts to strengthen brand awareness -- such as customer satisfaction, website design, equipment, and a showroom's interior and exterior appearance.

In line with this plan, Mazda will promote showroom renovation, agreeing to overhaul about 100 of some 600 dealerships in the U.S. by the end of fiscal 2018. Upscale black, white and wood-grain themes, which have already been introduced in Japan, will be utilized in revamped showrooms, replacing the green-and-orange theme currently in use.

The dealerships will have to shoulder the costs of the renovations, but Mazda will help cover them with the new incentive system. About 20% of all U.S. locations will have the fresh theme, including those that have already been refurbished.

Cheap image no more

Mazda aims to increase global sales by 3% in fiscal 2017 to 1.6 million units, with the U.S. accounting for the largest share of 328,000 units, up 9% on the year.

The Japanese automaker used to be perceived a "cheap" brand, largely because sales to businesses like rental car services made up about a fifth of its U.S. sales until around 2010 -- leading to sharp price declines in the used-car market. But beginning in 2012, the company jazzed up its vehicles with new engines and bodies as well as stylish designs to enhance its brand power.

As a result, the average annual income of Mazda buyers rose to $93,300 from below the industry average in the $80,000 range. With stronger brand power, Mazda is now able to insulate itself, to a degree, from the intense discounting war.

The Japanese carmaker's incentives to U.S. dealerships are believed to be in the $2,000 range per vehicle, compared with the industry average of $3,300 or so. The average credit score of Mazda buyers is far above those of subprime loan borrowers, helping reduce the risk of loan defaults.

Starting from fiscal 2018, the company will roll out vehicles featuring gasoline engines with a roughly 30% fuel-economy improvement, along with fresh styling. Mazda aims to completely erase its previous image as a cheap brand with its reforms in sales promotion, and hopes the changes will also weed out dealerships unable to keep up with expectations.

(Nikkei)

Mazda Motor Corp.

Japan

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Motor Vehicles
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