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Company History
• Founded in 1916 as an aircraft engine manufacturer
• Produced first automobile in 1929• Luxury/performance segment by 1980’s with
three Series: 3, 5, 7
BMW in the US
• Mid 1970’s: niche foreign car manufacturer• Late 1970’s: very popular luxury brand• Late 1980’s: luxury car market shift– BMW as the outdated brand
• Competition: Acura (1986), Lexus & Nissan (1989)
• 1992 BMW sales fall & very low customer satisfaction
Invigoration & Recovery in the US
• INVIGORATION:– 1. Introduced new models within core Series– 2. Aggressive pricing strategy– 3. Reorganization of the dealer network– 4. Introduction of several new Series–Modifications for North America’s market
• RECOVERY:– 1996-2001: BMW recovered in the market– 2001: record level of sales: 2% US market share
BMW 5 Short Films• About the film
– $15 million
– 25% of their media-spending budget, major
competitors spent less than 50% on media advertising
– To reach 40% increase in sale, increase share of mind
– Only available online at BWMFilms.com
• Problems
– Wrong Segment
– Too much budget on short films
Luxury or Mass-market
• In case study, BMW targeted sales as high as 300,000 cars and planed to reach new sales goals of an additional 40% in the US
• Damage the luxury image of BMW• Various series and models or Reduce models to keep
simple as Mercedes-Benz• Raise quantity or price
Current Customer
• 10% under age of 30• Average age: 46• Median income:
$143,000• Gender: 63% male
Visitor ProfileVS
• 25% under age of 25,
60% under age of 35• Average age: 31• Median income:
$88,000• Gender: 88% male
Recommandation: Supplement the locations of Ads
Why ?• To better targeting the middle-upper class• To targeting the current consumers
How?• Advertising in The Wall Street Journal,
BusinessWeek, and finance.yahoo.com• giving them benefits in their customer service
plans to heighten retention rates
Maintain BMW films
Why ?• To attract the younger, urban and chic
neighborhoods• To increase their share of mind and add to their
future 3 Series consumer base
How?• Release films less frequently (every 2 weeks
now)• Produce films quarterly or less frequently
BMW’s Current Image
• Producing more cars than sustainable for a small luxury company
• Turning point• Do not enter mass market, maintain luxury
image• Rise in customer’s perceived value of BMW
cars
BMW: Luxury Brand ?
• Luxury-something that is expensive and hard to obtain.
• Cut down on the number of cars produced• P S1 S
DQ
McKinsey’s studyMcKinsey 2001 Profit Change
1 % increase in price Up to 8.6% increase
1% reduction in variable cost Up to 5.9% increase
1% increase in quantity sold Up to 2.8% increase
1% reduction in fixed cost Up to 1.7% increase
Recommendation: Differentiation
• Currently not much variety among 3, 5, and 7 Series Sedans
3 5
7
3 5
7
Why Differentiate?
–Better target customers–Avoid cannibalizing brand and entering
mass market–Maintain luxury
Differentiation
• Break consumers into 3 segments– Segment 1: willing to pay low price = 3 Series– Segment 2: willing to pay moderate price = 5 Series– Segment 3: willing to pay high price = 7 Series
• Use self-selection price discrimination
3 Series 5 Series 7 Series
Age Under 35 35-50 50 +
Features Minimal Moderate Enhanced
Design Youthful/Futuristic Practical Classic/Luxurious
Price $30,000 $60,000 $90,000
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