Chapter 11 BMW "Newness" and the Product Life Cycle

Transcription

1 Chapter 11-BMW 1 Chapter 11 BMW "Newness" and the Product Life Cycle Origins BMW is known the world over as the ultimate driving machine. In fact, one study found BMW to be the third most recognizable manufacturer brand in the world, just after Coca-Cola and Microsoft. The brand dates back almost a century when the company got its start in the aviation business. BMW started very early in the 20th century as the manufacturer of airplane engines. And when you look at our roundel, the symbol of BMW, it's a blue and white circle. That's meant to represent a spinning propeller on a plane to remind us of our aircraft engine heritage. And over the years, we've added motorcycle production to that, car production. The company is vital in many different aspects of the industry. Today, BMW, which also owns the Mini and Rolls Royce brands, has combined sales of over $50 billion and has been growing at a rate of 3.5%. BMW doesn't aspire to be the world's largest car company. We already are, and we want to continue to be the largest premium company. And from that perspective, we look at areas that we can grow with interesting new products and ways that we can expand the market that we serve. For example, compared to ten years ago, we sell a much higher fraction of our cars to females than before, to African Americans, to Hispanics, to Asian Americans and also BMW has been a brand of youth. We tend to bring people to our segment earlier than our competitors. One of the keys to BMW's success in the auto industry has been the manner in which they manage product life cycles. Managing Product Life Cycles They're able to keep all of their lines new and competitive within each individual sector. Now how do you do that? Well, it's not that you introduce all the cars at once. You logically have to plan it out over time so you're not changing a whole model range at the same time that you're changing another model range. That means that while they manage all of the series all of the time, they take care to stagger the start of each new life cycle. For example, maybe working

2 Chapter 11-BMW 2 on the new 3 Series this year, the new 5 Series next year, the 6 Series the year after, continuing through the 7 Series, the Sports Activity vehicles, the M Series, the Z Models and, if in Europe, the 1 Series. Products often have life cycles. Life cycles are the stages that a new product goes through out in the market place, from its introduction through its growth into its maturity and eventual decline, where it is ultimately deleted from a company's product line or harvested. Normally, at BMW, we have a seven-year product life cycle. That may seem a little bit long, but actually we're active at every step during the life cycle to make a product better and even better. So one year, it'll be the sedan. The next year, it'll be the coupe. The next year, it will be the convertible. The next year, it will take you to the station wagon. The next year, maybe you're going to have a sport hatchback. Wow, that's five of the seven years already. And then BMW is always working to see that we make meaningful changes in the product. And almost always somewhere in that seven-year life span, we'll have a brand new generation of motors, for example, that bring a whole new definition in terms of the driving performance. This continued focus stands in contrast to some car companies that simply launch a product and then leave it. We launch a product and we keep coming back to it because we want to make certain that we optimize the result over the entire life cycle. This optimization leads to more stability. Anybody can sell a lot of cars the first year that a car is new. And it's our challenge to constantly keep improving the car, constantly keep finding ways to market it in new and interesting ways. The result is that revenues increase through most of the product life cycle. But very often the best year of sales for a BMW is actually the last year of its product life cycle. By adding variations, like a convertible model, and features, like upgraded engines, or more sophisticated suspension systems as the product matures, BMW doesn't have to worry as much about the decline of most models. We re always looking so that when someone comes off of a two-and-halfyear to three-year lease of a product that if they want they can come back and buy the exact same car that they just returned on their lease, and have something new and exciting and different that they'll be wanting to explore in terms of the new product offering.

3 Chapter 11-BMW 3 In fact, BMW often harvests a model in its decline phase as an alternative to deleting it outright. They basically go back to certain retired models and refresh them, bringing them back with a technological makeover and reintroducing them, thus keeping them alive for many decades. And we brought back a car that was beloved and not in the market for more than a decade, the 6 Series. That's all in addition to the host of new products that BMW introduces over time. This is our X3 Sports Activity vehicle. What you'll see, it's a rugged BMW at a price point that a lot of younger people can afford. It's ready to go anywhere, anytime you want it to go. Another new model that BMW is fielding in Europe is the 1 Series -- a smaller, more economical car to compete in international markets. The thought process behind that is to gain more market share. You get in down into a different price segment, and consequently you attract more buyers. You get to compete with the likes of Toyota on a more realistic basis or a better comparison is probably Volkswagen One way BMW maintains a marketing focus through each successive stage of the product life cycle is employment of product advocates. We re organized around a system of product advocates. The product advocate may be the 3 Series advocate or the 7 Series advocate or the X5 advocate. Let's talk about the 3. That guy gets up in the morning, and he brushes his teeth in the mirror like a 3 Series customer. He goes out and drives a 3 Series to work during the day. He's constantly thinking, "How can I better serve my customer, the person that buys the 3?" That's a powerful force because we have that person that really represents that customer, trying to make that 3 Series absolutely perfect. Branding Male Speaker: BMW's manufacturer branding is so strong they are able to use an alphanumeric naming system that is both simple and elegant. I think it's very informative because you can actually walk up to a car and because of the name of the vehicle you can see about what size engine is in the car.

4 Chapter 11-BMW 4 If you're looking at a 3 Series and you see that it's a 325, the three identifies the body style, and the 2.5 indicates the engine type. BMW has found this naming system to be more clear and logical, and it can be easily understood around the world. And premium car customers know instantly what model they're dealing with. BMW has a tradition of aggressive product placement, such as when James Bond broke precedent and used a German-made car over a British car. BMW has also created remarkably innovative short film series called "The Hire" for its website. The movies feature A-list action directors, like John Woo and Tony Scott, and actors, like Clive Owen, Madonna, James Brown and Gary Oldman. Scene from "The Star", director Guy Richie Madonna: Why are going so slow? Clive Owen: Excuse me? Madonna: Are you deaf as well as stupid? I said why are we going so slow? People are waiting for me. Clive Owen: Well, ma'am, I wouldn't like to put you in any danger. Madonna: Don't ma'am me, smarty pants. If you'd keep your eyes on the road instead on me we might be getting somewhere. Clive Owen: Let me see what I can do. [Speeds away] You just hold on tight, sir. We ll get you there safely. [End of film clip] If you haven't seen them, check out BMWFilms.com and witness a savvy use of the web in marketing. The movies have been so successful in fact that they've been inducted into the Museum of Modern Art. Managing the Product Through the Web Of course, you can do a lot more on the BMW website than just watch movies. It is one of the most technologically advanced automobile sites in the world, allowing users, for example, to create their own cars from the ground up and even compare the finished designs with products from other companies in the same class. So you can sit there and look at the BMW of your choice versus a Mercedes of your choice or the Lexus or whatever the case may be. And it clearly, very objectively outlines the advantages and benefits and features of both products. Today, many BMW customers walk into the showroom with their cars already designed to the last detail.

5 Chapter 11-BMW 5 Carol Burrows: Many people have taken those steps when you get on the website and actually start to take mental ownership by specifying out how you would like your color, how you would like your equipment, your features. The BMW website is an integrated part of the overall marketing strategy for BMW of North America. It's not seen as a separate entity but one of the components that make up the entire strategy. BMW has shown that careful attention to the product life cycle can pay dividends literally year after year. What was once a niche market product has now evolved into a brand that has something for everyone in multiple demographics and price ranges. And we find a lot of our customers progress up through the entire family because they're so impressed by that very special, unique BMW driving experience. A driving experience that remains not only consistent in terms of quality but also fresh and exciting thanks to a life cycle focus that keeps the cars attractive and relevant year after year. [End of video]