ATLANTA — Mercedes-Benz dealerships increased their spending on local advertising after the automaker stopped auditing how the stores used their Tier 3 advertising money last year.
That result ran counter to the expectations of Drew Slaven, vice president of marketing for Mercedes-Benz USA.
"I was anticipating maybe a drop in marketing spend," Slaven told Automotive News. "A year later, we found the expenditures being spent on marketing by dealers had increased 3 percent at the Tier 3 level."
In June 2016, Mercedes dropped a requirement that dealers must use cooperative advertising money only to promote new-car sales. Dealers were then free to use the money to promote any part of their business. Slaven came to the decision after spending nearly a week in a Chicago-area dealership.
"I just don't think the factory marketing guy sitting in one part of the United States, whether that was New Jersey or Atlanta, should be directing the dealer in Portland, Oregon, or Los Angeles on where their funds should go," Slaven said. "They're very smart people. They run very successful businesses. They're ground zero, so let retail do what they felt they needed to do."
At the same time, the automaker stopped doing dealership audits of the money. Mercedes previously sent audit teams into the dealerships and asked for tear sheets, affidavits or other proof of spending on local advertising in order to credit them for it.
"We're done [with that]. They earn the money," Slaven said. "If 5 percent of our dealer body wants to keep some of their marketing funds for their operational costs, why are we burdening 95 percent of the dealers who are doing the right thing by sending an audit company to them? We shrugged our shoulders and said, 'This is stupid.'"
The surprise came when Mercedes compared local advertising in summer 2017 against where it was in summer 2016 and found the 3 percent spending hike instead of a drop. Dealers were doing the right thing, spending all of their co-op money — and some extra — on marketing, Slaven said.
Mercedes also found the Tier 3 spending has broadened and is now spread more across other areas such as used-car and service marketing, he said. Mercedes dealers have generally applauded the policy change.