Wednesday, September 2, 2015

Torsten Müller-Ötvös, CEO, Rolls Royce

In Conversation With Torsten Müller-Ötvös, CEO, Rolls Royce

Mr. Torsten Müller-Ötvös has been the Chief Executive Officer at Rolls-Royce Motor Cars Ltd. since March 2010.

In the four years since his appointment, the storied British luxury brand has delivered four consecutive years of record growth. Most remarkably, without any category extension, lifestyle products or outrageous increase in production numbers.

An all-time record of sales was achieved in 2013, when the brand sold 3,630 cars, In July 2014 it was announced that half-year sales had increased by 33% worldwide compared with the same period in 2013.

The brand has since opened in Azerbaijan and Kazakhstan, and announced that a new 30,000m2 Technology and Logistics Centre will be built at Bognor Regis in the coming years, to consolidate current logistics functions and allow for future expansion.

“ Rolls Royce is on track to achieve its fifth consecutive year of record-breaking growth in 2014 ”

If that wasn’t enough, in September it was confirmed that entrepreneur, Stephen Hung, had purchased the largest Rolls-Royce Phantom fleet in the world, for his Louis XIII hotel in Macau.
Mr. Hung ordered 30 Bespoke Extended Wheelbase Phantoms – representing the world’s single largest order of Rolls-Royces ever. Two of the fleet will be the most expensive Rolls-Royce Phantoms ever commissioned.

For all these reasons and many more, Rolls Royce is on track to achieve its fifth consecutive year of record-breaking growth in 2014. We sat down with CEO, Torsten Müller-Ötvös, to better understand the factors that are driving this success.

    “ Wraith has been very successful. 80% of Wraith customers are new to the brand ”

When we talk about production by units, the numbers have increased about 30% in three years. Is there a point where you will limit production to protect the exclusivity of the brand?

We are always talking low numbers, and we will always talk low numbers. There is one very crucial decision behind that and that is that we aren’t offering a car, which is price-wise under Ghost. We wouldn’t do that even though we understand that this would bring us lots of additional volume.

There is another player competing in our field, of which more than 80% of their offering is priced below €200,000 and they have demonstrated that you can achieve a much higher volume than we have using this position. But we are fully convinced that we need to keep Rolls Royce highly exclusive and stick to our own price positioning for our customers.

Nobody needs a Rolls Royce. It is not a product where your lease contract expires and you think, “Quick, which car are we going to buy next.” It is something that you give yourself as a present for successes in your life, or to celebrate something, and it needs to be rare. You don’t want to see a Rolls Royce at every single street corner.

    “ Rolls Royce will never enter into five digit production numbers ”

For that reason, Rolls Royce will never enter into five digit production numbers. I believe we could climb to 5,000 or 6,000, as long as we are making sure we have the right products to offer to our customers, as this is still a minute volume in the greater market. But for the moment I am definitely not worried about losing our exclusivity.

We also believe in this strategy as when you look at the market, into the growth numbers of ultra high net worth individuals, they are forecasted to grow over the next years, year by year, between 2 and 5%. These ultra wealthy people are the perfect customers for Rolls Royce, so for this reason we also believe that the outlook is positive.

    “ For the moment I am definitely not worried about losing our exclusivity ”

At the same time the age of ultra high net worth individuals is decreasing. How can you be sure to engage the younger generation?

Funnily enough, we have quite a lot of young customers already within Rolls Royce. I would say that our mix of demographics really changed dramatically after we introduced Ghost and now also Wraith. Many young customers are with us.

The youngest customer is around 25 or 24. Many of them, as you may guess, are coming from Asia – but not with inherited money – they are hard working self-made entrepreneurs from all kinds of different industries.

They are attracted to Rolls Royce because they believe that they need a certain level of transportation and our cars are offering the most luxurious means of transportation on roads that you can imagine. I can tell you, knowing that there are lots of traffic jams around, particularly in the Asian markets, there is no better way to sit in a traffic jam than in a Rolls Royce.
And whether they are young or old, I think so many people around the world know our brand. The brand is unbelievably well known, worldwide. You don’t need to explain what Rolls Royce is, wherever you go – Rolls Royce is even used as a synonym for the best. “The Rolls Royce of” whatever that may be.

For that reason you can go to cities you have never heard about in China and say to people “Rolls Royce” and they know, and the brand already has an aura that attracts young people. Of course, in a different way, which we see in the actual models.

A Wraith is a complete different animal to what the Phantom is. A Phantom is for, let’s say, the more astute elder gentleman who loves to be chauffeured. Whilst the Ghost is in between, a self-driver car, but also a car to be chauffeured in, and Wraith, it is definitely a self-driver’s car for younger people very much.

    “ There is no better way to sit in a traffic jam than in a Rolls Royce ”

And what about the female audience? Women’s wealth is also on the rise…

Women are definitely already spending with us. Women now purchase around 15% of our vehicles, which is a substantial increase. Our Phantom had an audience of only 1% women and they were very much interested in the coupes and convertibles, but Ghost has bought us women – not for their husbands – but businesswomen drivers.

We have also seen a big upswing from the Middle East. The Sheikha’s are running family businesses and they have decided to go for a Ghost, for instance, to be chauffeured in that kind of car. Also in Asia you see many, many very successful women running businesses or building businesses up. I’ve met very impressive women there, really, so that is very much in line with what happens anyhow in society.

    “ Women now purchase around 15% of our vehicles ”

The brand has been bold in entering some of the lesser-known emerging markets. How do you know when a market is ready for Rolls Royce?

We consider a few variables. The growth of ultra high net worth individuals in the region is important, then we are very much interested in stability – so that it should not be a market which peaks and then goes down again – the economy needs to be sustainable for some time.

Another early indicator is applications for dealerships, of which we receive many. So this demand factor also plays a part but t we only decide to enter a country when, from our side, it is a stable business because it’s a big investment.

And this investment is not necessarily on our side, but imagine that it is easy to sell Rolls Royce’s in the first year but what happens after that buzz dies down? You need to deliver a sustainable business. For that reason, it’s not so much about how the showroom looks, because if you don’t have the relations and connections into the kinds of people who can afford Rolls Royce, your business dies.

It’s very much about knowing influential people in the society and being able to roll them into the world of Rolls Royce. It takes some time, from time to time. People are not prepared immediately to say yes and spend the kind of money necessary on our cars. We have customers who are very quick decision makers on I go for a Rolls Royce and others who take maybe a year.

Is there a particular marketing channel that can effectively reach ultra high net worth individuals?

I’m not sure that it is channels in the sense of the Internet or social media or the likes. I’m very much convinced that the best way to connect with these individuals is through money can’t buy events. To structure experiences which attract these people, for example an invitation to a very special test drive event, to put them behind the wheel.

It’s crucial that we let them experience what Rolls Royce is. You can talk about our cars for hours but you really understand what it means to sit in a Rolls Royce once you are in there, once you drive it and once you are being driven.

And the experience must be exceptional. Maybe it is a drive through a beautiful part of the countryside to a three-star Michelin restaurant, where the chef will prepare a private dinner just for these individuals. Something that is so unique that yourself, as a wealthy individual, could not structure it yourself with your teams – something that you need to have an invitation for.

Our customers – or prospects – have invitations every evening like this. You need to have something really special. This is, for us, the most convincing way to come close and to attract them finally.

    “ I’m convinced that the best way to connect with UHNW individuals is through money can’t buy events ”

What is the next opportunity you would like seize with Rolls Royce?

First of all, a careful extension of our model ranges. We have announced that in mid-2016 we bring a new convertible kind of drophead coupe’ kind of car into the market. This is confirmed, and then, there are always lots of rumours around an SUV type of car. Yes, we are working on that, and we are making progress in the right direction, but nothing is confirmed yet. We might reach the point of a final yes or no next year.

And what do you think that the biggest challenge will be for Rolls Royce in the coming decade?

The economy, definitely. You can have a boost in a market like Japan, whilst at the same time the business in Spain collapses and it becomes very difficult to operate in France. So if you were to ask me what keeps me awake at night, it is the economy. I’m really worried about it. It’s never that people are short of money or that money is limited, this is not the point. The point is all about consumer sentiment.

Many of our customers are entrepreneurs, running their own entities, and if they find their businesses in difficult times or perhaps the overall global economic conditions take a turn for the worst, then they are probably not looking to buy a new high-end luxury car, for themselves or the business. You only do that when you feel good.

 By Sophie Doran

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