Brand repositioning for Proton

Proton has embarked on a ground-up strategic plan for the Australian market -- a plan which encompasses its dealer network, its product, pricing, customer service and brand image.

The first rumblings that the importer was making a start on this reorganisation came in two stages. First there was the news that the company would be offering retail incentive pricing for its Savvy and Persona models. Then came the further news that the entire passenger car range would be reduced in price to tackle cheaper light and small-car segment competitors from lower-cost production bases in the region.

Proton is among the companies most vulnerable to these newcomers. For a number of years, its product has been criticised for high prices, relative to its quality of manufacture and design. In order for the company to be relevant in this market and build up equity in its own brand, it had to make some drastic changes.

Proton has, over a number of years, tried different tactics and strategies with its dealer network -- including a direct marketing set-up in Sydney some years ago. When the Carsales Network spoke to Proton MD, John Startari, he said that the Sydney market is one where Proton has a low profile and little direct accessibility to prospective buyers.

This, combined with a dealer network comprising in part used-car dealers, rather than multi-franchise new-car dealers, has strongly worked against the sound establishment of the brand in this country.

Now, with the importer headed downmarket and unit margins (and sales) dwindling, these independent retailers are finding it harder to justify staying with the brand. According to Startari, the importer and a substantial number of its dealers have mutually agreed to part company and Proton is now looking at appointing more dealers to expand the brand's share and presence throughout the country.

"We went through a dealer restructure... which contributes to the lower sales," he advised in response to a question concerning the importer's sales (down from 1195 units year-to-date for 2008 versus 789 for the same period this year).

"We've parted company with 15 dealers and we've replaced seven of those -- and we're in the process of putting on more. So it was a restructure year planned prior to the Global Financial Crisis. The timing, I guess you could say, wasn't the best to be undertaking this exercise, but we're still moving forward.

"Our future plans stand on their own two feet and if anything, the current financial times fit more into our strategy than they did before the Global Financial Crisis."

"We basically had planned this just on two years ago. We went to them and said 'this is how we're moving forward; it's a totally different strategy to what we've had in the past. You can either come on board or we agree to part company.' And they're not terminations...

"Obviously as time goes on and we're all under more pricing pressure -- exchange rates have played a role -- there's a heavier reliance on auxiliary income and some dealers weren't able to achieve that. Their infrastructure wasn't there.

"It was simply a matter of investing in that infrastructure or choosing to part ways, but we weren't going to compromise our strategy on the basis that dealers required two or three years to put that stuff in place -- because it just wouldn't work."

The nub of the plan is to upgrade the dealer network operations across Australia -- and that clearly revolves around attracting dealers who are more committed to building the brand and seeing a return on investment over a longer period of time.

Asked whether the dealers who were handing back the franchise were multi-franchise dealers, Startari answers: "They weren't. They were generally used-car operators or one other smaller franchise."

Proton is now appointing "multi-franchise, bigger operations," says Startari.

In addition to fielding the necessary infrastructure to support parts and service as well as sales, the newly-appointed dealers are setting up shop in locations that better suit the needs of Proton's prospective buyers.

"Sydney, to us, is our largest area of potential and one [in which] we have very few dealers, but we undertook to bolster Victoria, Brisbane and a lot of rural centres... So Gosford, Woollongong, Newcastle...

"We've managed to fill those. Those people are either on board or in the process of being signed on. Now we're undertaking Sydney. We've got expressions of interest -- it's just a matter of finding the most appropriate representation for the Sydney region."

Proton is aiming to have 50 dealers around the nation by March 31 of next year. Startari describes support from the factory for this plan as "fantastic".

"This isn't something we just rolled out overnight; it was something we started two years ago -- in the view that there was going to be somewhat of a financial disturbance. We didn't predict it was going to be a crisis the way it's turned out, but we knew we had to do something."

Proton was determined to prepare for the coming avalanche of new makes and models from lower-cost production bases in the region and these were, as Startari points out, "not just Indian and Chinese-based brands, but more established players moving their production to those regions always".

The company decided to reposition the brand as an "exceptional value for money" proposition with a view to building market share. But Proton is not just planning to offer the best possible value in the market to entice buyers. The pricing strategy will be supported by a very strong focus on customer service.

"CRM -- Our Customer Relationship Management -- is probably the key for us, going forward. We're going to provide a level of service not seen in this end of the market. We're hoping that those people that purchased on the basis of that pricing propostion, will remain within the Proton family for years to come and act as brand ambassadors..."

Startari was not in a position to identify how the new CRM strategy would manifest itself, but he drew a parallel with a level of service normally associated with "prestige" importers. Lexus is a brand that springs to mind, as a model for Proton to follow in different market segments.

Startari is grateful for the timing of events and admits that if the importer hadn't already begun implementing the new marketing plan, Proton would have been "in real strife" once the Global Financial Crisis hit.

Asked where he expects the company's brand to be in three years, Startari is unable to answer, but points out that market acceptance will come with market share.

"A lot of our brand building is essentially what we need to address more than anything. Acquiring market share goes a long way to having an acceptance of the brand -- which gives us a platform to build off.

"Unfortunately, until the cars are seen out in the car park, it's very hard to lay a platform to build your brand off -- and can be very costly."

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