BMW Films Case Study

Report
BMW Films
----Group 16
Songyan He
Emily Walker
Amanda Jones
Mengjia Wang
Elena Ratnikova
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– BMW as the outdated brand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
7 Series
5 Series
3 Series
Most profitable
>50
35 - 50
<35
Current Customer VS Visitor Profile
• 10% under age of 30
• Average age: 46
• Median income:
$143,000
• Gender: 63% male
• 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
S1S
D
Q
McKinsey’s study
McKinsey 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
55
3
7
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!

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