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niche foreign car manufacturer Late 1970’s: very popular luxury brand Late 1980’s: luxury car market shift BMW as the outdated brand Competition: Acura (1986), Lexus & Nissan (1989) 1992 BMW sales fall & very low customer satisfaction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 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 Problems $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 Most profitable 7 Series

VS Current Customer Visitor Profile 25% under age of 25, Average age: 31 Median income: $88,000 Gender: 88% male 10% under age of 30 Average age: 46 Median income: $143,000 Gender: 63% 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 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 5 3 5 3 Example is on 3/5/7 series sedans..but BMW needs to do a better job targeting all together on all series. BMW wants consumers to progress from 3 to 5 to 7 series b/c they get more profit esp. on series 7 model 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

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