BMW of North America: Dream It. Build It. Drive It.
BMW of North America:Dream It. Build It. Drive It.IM513 Marke+ng Analysis & Strategy – KAIST Business School Team B – The Outliers: Sung Taek Cho, Kun-‐hee Han, Seung Yun Lee, Na Yoen Nancy Lew, Anggriawan Sugianto, Sithandone Prachansiri
Outline 1 Problem2 Analysis3 Strategy4 Mass Customization5 Recommendation
BMW of North America: Dream It. Build It. Drive It. Problem
Problem 1. What? • BMW mass customizaCon has been a successful strategy for North America to boost the X3 sales (+457% in 2011). • Joseph Wierda wonder if they should expand this strategy to new models or exisCng one with struggling sales. • What are the real beneﬁts and weakness of a mass customizaCon strategy? 2. Why? • BMW is now the leader on luxury cars segment and try to see how it could keep this posiCon? • New models are planning to be schedule. • Is mass customizaCon the only element that could explain this bump in sale? • Is the customer more sensiCve to waiCng Cme or tailored oﬀer?
Problem 3. How? • Conduct some research to decide which strategy to adopt for future models in terms of mass customizaCon. • What will it imply in terms of supply chain organizaCon (move the producCon to US or import cars? • How to manage our relaConship in the future with car dealers? What will be the best strategy to adopt for the future? More mass customiza+on for all model or keeping it for some speciﬁcs models?
BMW of North America: Dream It. Build It. Drive It. Analysis
Overview • The issue of the market was market growth • US Economy is gradually overcoming its deep crisis • Consequently, US Car market is also on the recovery a_er 2009 US GPD Growth rate Car Unit Sales in USA mn %, yoy Source : Bureau of Economic Analysis,DB Research, 2012 Source : Bureau of Economic Analysis,DB Research, 2012
Customers • For 50 years, Consumer’s percepCon of Car changed • Consumers are more focusing on “PragmaCsm” these days • For the real usage, not for showing oﬀ, as they need and want Pragma+sm Luxury/ Large Key U+lity word Fuel Eﬃciency Performance 1960-‐1972 1973-‐1983 1984-‐1995 1996-‐2007 2008~ Golden Growing Before A_er Oil Shock Age Period Crisis Crisis Source : hhp://Kari.hyundai.com, 2012
Company • BMW is in the 1st posiCon in the US luxury car market unCl now • 2011 vs. 2012, Sales of Small sedans/CUVs Increased in BMW TOP3 Luxury Cars in US Sales changes in BMW unit 1,000 unit Change in Aributes -‐2012.09 -‐2011.09 % BMW 1 Series 168,426 129,041 30.5% 199 ? 220 BMW 3 Series 286,622 288,077 -‐0.5% BMW 5 Series 263,738 250,666 5.3 Sedans 245 ? 225 BMW 6 Series 16,607 5,314 -‐ BMW 7 Series 43,794 48,842 -‐10.3 229 248 ? BMW X1 10,2519 94,294 8.7% BMW X3 107,833 83,754 28.7% 2010 2011 2012-‐now BMW X5 76,725 75,055 2.2% CUVs BMW X6 31,497 31,357 0.4% LEXUS BENZ BMW Source : BMW 2012 3Q report Sedans CUVs Source : hhp://Online.wsj.com, Modiﬁed : all asserted their posi+ons as : made a strong contribu+on to the leaders in their relevant segments overall success of the brand except 3 series
Product BMW X3 Customiza0on Service Posi%oning Posi%oning • Mid size Premium CUV segment • Fulﬁll speciﬁc needs of each consumer with high quality customizaCon Compe%tor • Vs. Audi Q5 Compe%tor • Vs. Benz GLK • Vs. Private Tuning shops • Vs. Other luxury brand Customizing Service Character of Targets Character of Targets • Household w/ children – spacious • AcCve lifestyle – outdoor acCviCes • Self-‐Expressional • ProacCve in expressing themselves • AcCve lifestyle • Younger, ambiCous, progressive • High self-‐esteem • Freedom, youthful spirit, • Freedom and independence independence Source : BMWeducaCon.com
Compe+tors • CompeCtors in same category are not diﬀerenCated enough • Even targets are not same, but the only diﬀerenCaCon is their brand Compe+tors Comparison Aributes BMW X3 AUDI Q5 BENZ GLK Safety Luxury Compact Upscale Midsize Luxury Compact Category SUVs Cars SUVs Price Household Couple or family Target Aﬄuent Mom w/ children w/o children Performance $38,850 -‐ $37,850 -‐ $37,090 -‐ Price $43,950 $68,900 $39,090 Mass Design Customiz-‐ YES / 2wk NO YES / 8wk a+on Benz Audi BMW
BMW of North America: Dream It. Build It. Drive It. Strategy
Targe+ng 1. The people who are NEW to the luxury market. 2. People in their 20s, 30s or 40s who are stepping out of domes+c and non-‐premium SUVs. 3. Young families who need SUV with space but not large size. 4. People who have money and can aﬀord luxury cars.
Posi+oning Brand posi+oning 1. Connect the dots by extending BMW’s high quality reputaCon. 2. Emphasize the “Not individual Thema+c posi+oning superiority of BMW in branding but comparison to its ü Appeal to the consumers by brand extension” compeCtors. using senCmental brand themes such as quality Cme with family, memories or love Enjoy your luxury “Acceptable Price posi+oningü PPL in Family movies or TV of BMW with shows. price” whole Family 1. AhracCve Style and ü Emphasize the fact that Superior Quality for safety of your family comes Acceptable Price ﬁrst 2. RealizaCon of fuel eﬃciency and low maintenance cost
Consumer value Cost to sa+sfy • Luxurious high-‐class design Price diﬀerenCaCon • • Mass customiza+on PromoConal price in auto show • Marketing MixCommunica+on Convenience to buy • Online rela+onship Extra services in auto dealer • • EmoConal-‐touch communicaCon Premium freebies •
BMW of North America: Dream It. Build It. Drive It. Mass Customiza+on
Mass Customiza+on • Mass customizaCon allows ﬁrms to produce only things their customers want or produce a_er they have orders in hand. • General Advantages • Lower inventory levels & Eliminate of material waste : ProducCon to orders, not produce to stock • Increase cash ﬂow : Lower inventories, prepayment • Shorten Cme of responsiveness : accumulaCve Cme from receiving orders to delivering • Customer sa+sfac+on : Maximized market share & sales • Approaches To Mass CustomizaCon • Collabora+ve customizers : these organizaCons establish a dialogue to help customers arCculate their needs and then develop customized outputs to meet these needs (Levi’s, Nike, Dell) ß BMW • Adap+ve customizers: customers buy a standard product but they can modify it by themselves based on their needs (Microso_ : Add more funcCon a_er purchase) • Cosme+c customizers: these companies produce a standard product but present it diﬀerently to diﬀerent customers ( Wal-‐Mart, 7-‐Eleven :Planters packages it peanuts and mixed nuts in a variety of containers on the basis of speciﬁc needs of its retailing customers ) • Transparent customizers: These companies provide custom products without the customers knowing that a product has been customized for them. ( Amazon.com : book recommendaCons )
Failure case of The automobile industry in Mass Customiza+on Prac+ces by 2008 Automobile Industry Brands BMW, GM, ToyotaConclusion Almost Failure 1. Impossible to set up their own dealers (ProhibiCon of most US states) -‐ Dealers prefer large stock to show variety for consumers to chose(opposite of mass customizaCon) -‐ it is hard for carmakers to pursue low inventory and adapt to individual demands since dealers think diﬀerently from auto manufacturers 2. Weak connecCon between carmakers and customers -‐ Buyers informaCon does not go directly to the carmakers, as customers rely on the dealers Reasons 3. Require many operaConal changes 4. Modules could involve increased redundancy and within the supply chain compared to using non-‐modular components 5. Cost of mass customizaCon is a big problem carmakers are facing.
Strategies For Mass Customiza+on • Key Success Factors • Strategies • Modular product design • DiﬀerenCaCon • Flexible manufacturing process • Lower Cost • SophisCcated order management • Supplier RelaConships (Or Alliance) • Integrated informaCon system Outsourcing • Postponement of assembly • Forward IntegraCon DistribuCon Network Of Customer RelaConship Developments • OrganizaCon Structure • OpCmal level of customizaCon • The value and cost of customizaCon has the following relaConship to the degree of customizaCon. It is crucial to ﬁnd the point where the cost is minimized and the value maximized for opCmal outcome.
BMW of North America: Dream It. Build It. Drive It. Recommenda+on
Conclusion 1. Expand the mass customizaCon but only for car produce in US for now Ø Building on the success of X3 strategy Ø Limit the mass customizaCon to certain products to see if it’s a really relevant strategy Ø Don’t need to change all the structure of our worldwide Supply Chain Management 2. Build our diﬀerenCaCon by oﬀering a deeper Brand Management relaConship with the our customers
Mass Customiza+on for Limited Products Mass CustomizaCon’s wayLimited to US Products TradiConal way Online Order what customers choose If customer want to buy mass customizaCon Pass through the dealer with small margin BMW Dealer Customer (factory) Oﬀ-‐line shop
Digital Marke+ng to Inﬂuence Buying Decision Process In late 2011, more than 70% of purchases originated from online research! Need InformaCon EvaluaCon of Purchase Post-‐Purchase RecogniCon Search AlternaCves Decision Behavior Brand Online Online Online Loyalty PosiConing Presence Engagement Purchasing Program High Performance, Auto CommuniCes Mass SEO, Online Ads Online Campaign Luxurious, Elegant & Reviewers CustomizaCon
Digital Planning for Online Rela+onship Crea0ve Adver0sing Online adverCsing: • PC banner • Mobile ad Word-‐Of-‐Mouth Marke0ng • Video ad • Social media markeCng • Photo & video compeCCon AhenCon • Advertorial • Facebook app / social gaming • “Share Your Story” compeCCon Share Interest Digital Campaign • EmoConal-‐touch markeCng communicaCon • Direct adverCsing: lead generaCon • Indirect adverCsing: automoCve microsites & mobile applicaCon Mass Customiza0on Online AcCon Search Strong Online Presence BMW • Search Engine OpCmizaCon Dealer Customer (factory) • InformaCve BMW homepage • Online communiCes engagement • AutomoCve review sites Oﬀ-‐line Mass CustomizaCon shop ConvenConal Way
BMW of North America: Dream It. Build It. Drive It. Q&A