BMW Films ----Group 16

Amanda Jones

Elena Ratnikova

Mengjia Wang

Emily WalkerSongyan He

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foreign car manufacturer• Late 1970’s: very popular luxury brand• Late 1980’s: luxury car market shift– BMW as the outdated brand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

BMW Current Customers

>50

35 - 50

<35

7 Series

5 Series

3 Series

Most profitable

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

Thank You!