BMW: “Newness” and the Product Life Cycle
“We’re fortunate right now at BMW in that all of our products are new and competitive,” says Jim McDowell, vice president of marketing at BMW, as he explains BMW’s product life cycle. “Now, how do you do that? You have to introduce new models over time. You have to logically plan out the introductions over time, so you’re not changing a whole model range at the same time you’re changing another model range.”
BMW’s strategy is to keep its products in the introduction and growth stages by periodically introducing new models in each of its product lines. In fact, in contrast to many auto manufacturers who launch a new model and then leave it unchanged, BMW works continually to improve its existing products. Explains McDowell, “Anyone can sell a lot of cars the first year, when a car is new. It is our challenge to constantly improve the car and to continuously find new innovative ways to market it.”
BMW started in 1916 as a manufacturer of airplane engines. “When you look at our roundel, the BMW symbol, it is a blue-and-white circle,” says McDowell, “that is meant to represent the spinning propeller on a plane, to remind us of our heritage.” Since then the company has added motorcycle and automobile production. Today, BMW is one of the preeminent luxury car manufacturers in the world.
BMW produces several lines of cars including the 1, 3, 5, 6, and 7 series, the Z line of roadsters, the X line of “sport activity vehicles,” and the M line of “motor sport” sedans. Currently, the U.S., Germany, and the United Kingdom are BMW’s largest markets. BMW recently introduced its 1 series—a compact car designed to compete with the Volkswagen Golf in Europe and the Rabbit in the U.S.—to attract a new younger audience. In addition BMW owns the MINI and Rolls-Royce brands. Combined sales of BMW, MINI, and Rolls-Royce exceed $59 billion and are expected to increase 40% by 2020. Reasons for the growing popularity of BMW include high-performance products, unique advertising, an award-winning website, innovations such as smart technologies that learn what the driver prefers, and new vehicles such as the V-series—which will compete with popular minivans.
BMW cars typically have a product life cycle of 7 years. To keep products in the introductory and growth stages, BMW regularly introduces new models for each of its series to keep the entire series new. For instance, with the 3 series, it will introduce the new sedan model one year, the new coupe the next year, then the convertible, then the station wagon, and then the sport hatchback. That’s a new product introduction for five of the seven years of the product life cycle. McDowell explains, “So, even though we have seven-year life cycles, we constantly try to make the cars meaningfully different and new about every three years. And that involves adding features and other capabilities to the cars as well.” How well does this strategy work? BMW often sees its best sales numbers in either the sixth or seventh year after the product introduction.
As global sales have increased, BMW has become aware of some international product life cycle differences. For example, it has discovered that some competitive products have life cycles that are shorter or longer than 7 years. In Sweden and Britain, automotive product life cycles are 8 years, while in Japan they are typically only 4 years long.
BMW uses a system of “product advocates” to manage the marketing efforts of its product lines. McDowell explains that a series advocate would actually use and drive that series and would constantly be thinking “How can I better serve my customer?” In addition to modifying each model throughout the product life cycle, BMW modifies the markets it serves. For example, during the past 10 years BMW has expanded its market by appealing to a much larger percentage of women, African Americans, Asians, and Hispanics. BMW’s positioning strategy is the same worldwide and that is to offer high-performance, luxury vehicles to individuals. “You won’t find it as a taxi or a fleet car,” says McDowell. Generally, once a model is positioned and introduced, BMW avoids trying to reposition it.
“BMW is fortunate—we don’t have too much of a dilemma as to what we’re going to call our cars.” McDowell is referring to BMW’s trademark naming system that consists of the product line number and the motor type. For example, the designation “328” tells you the car is in the 3 series and the engine is 2.8 litres in size. BMW has found this naming system to be clear and logical and can be easily understood around the world.
The Z, X, and M series don’t quite fit in with this system. BMW had a tradition of building experimental, open-air cars and calling them Zs, so when one of them was selected for production, BMW decided to continue with the Z name. For the sport activity vehicles BMW also used a letter name—the X series—since the four-wheel-drive vehicle didn’t fit with the sedan-oriented 1, 3, 5, 6, or 7 series. The M series has a 20-year history with BMW as the line with the luxury and racing-level performance. The lettered series now includes the Z4, X3, X5, M3, M5, and M6. Compared to the evocative names many car manufacturers choose to garner excitement for their new models, the BMW numbers and letters are viewed as a simple and effective branding strategy.
In the past BMW has built a brand personality for its vehicles with high-visibility product placements. BMW products, for example, have been featured in four James Bond films. Similarly, BMW hired master directors to create a series of Internet-based mini-movies called “The Hire,” which featured “the ultimate driving machine” and edgy actors. The movies were so successful and attracted so much attention from consumers and industry experts that the movies have been placed into the Museum of Modern Art. Other marketing programs that contribute to the BMW brand personality include the BMW Art Car Collection, created by internationally acclaimed artists, sponsorship of America’s Cup and Formula 1 Series racing teams, and events such as the BMW Golf Club International tournament.
One of the ways BMW is improving its product offerings even further is through its innovative website (www.bmwusa.com). At the site, customers can learn about the particular models, e-mail questions, and request literature or test-drives from their local BMW dealership. What really sets BMW’s website apart from other car manufacturers, though, is the ability for customers to configure a car to their own specifications (interior choices, exterior choices, engine, packages, and options) and then transfer that information to their local dealer. As Carol Burrows, product communications manager for BMW, explains, “The BMW website is an integrated part of the overall marketing strategy for BMW. The full range of products can be seen and interacted with online. We offer pricing options online. Customers can go to their local dealership via the website to further discuss costs for purchase of a car. And it is a distribution channel for information that allows people access to the information 24 hours a day at their convenience.”
The ultimate extravagance in buying a car is having everything customized to the owner’s preferences. Today, 80% of European buyers and 30% of U.S. buyers use the BMW website to choose from 350 model variations, 500 options, 90 exterior colors, and 170 interior trims to create their perfect vehicle!