Luxury Auto Marketing in China

Executive Summary
There is a shift in the Chinese luxury car market, and BMW is building a plant to take advantage of it. The top three luxury automakers – by far – are Audi, BMW and Mercedes. They each are very similar to one another, and have similar market shares in China as well. Early adopters in China were the newly-rich, making their first luxury car purchase as a status symbol. This is shifting, and to win greater market share BMW will need to win existing customers to buy a second or third BMW. The problem is that a) their marketing strategy in the country isn't built around that objective and b) Chinese consumers have very low brand loyalty compared with those in other nations. This report will outline the unique characteristics of the Chinese market, and make recommendations for how BMW can target the new segment – current customers – in order to meet its aggressive sales targets. The key elements of this plan are in the product, the buying experience and the messaging.
Part I. Current Marketing Situation
Market Description
BMW is based in Germany, and this report will focus on the company's approach to the Chinese (PRC) market. The People's Republic of China is one of the world's largest auto markets. BMW's positioning slots in more or less at the lower end of the luxury market, where there is a fairly sizable market worldwide among people who are generally well-off but not super-rich. BMW ranks 4th in its domestic market, behind Volkswagen, Mercedes and Audi, meaning that it does not capture the number one position in the German luxury market. It has a 7.8% share in Germany (Bekker, 2017).
The Chinese auto market has accelerated rapidly in the past fifteen or twenty years, from being a relatively minor market with huge potential to a major market but still with huge potential as China's economy continues to grow. BMW is approaching the Chinese market aggressively, building a plant in Shenyang in order to increase Chinese production capacity by 50% to 450,000 vehicles (Clover & McGee, 2017). For reference, BMW sold 262,000 cars in Germany in 2016 and 313,000 in the United States, so that figure would make China the company's largest market by far (Car Sales Base.com, 2017; Bekker, 2017).
The Chinese market is generally favorable, at least to foreign companies willing to open manufacturing facilities in the country. China has a totalitarian Communist regime, which means that there is both significant corruption (Transparency International, 2016) and significant government interference in business (Heritage.org, 2017), but private enterprise that partners with Chinese entities or creates large amounts of jobs generally receives favorable treatment. Overall, though, China is a riskier place to do business than Western democracies.
Because the Chinese market is has such potential, competition is high. All luxury automakers want a piece of the Chinese market, and thus are invested in growing their market share. That the market is growing allows for all companies to compete more on the basis of establishing their brands in the market than on fighting each other for share; building share is competitive, but not ruthlessly so, because it doesn't need to be.
There is an interesting juxtaposition in the Chinese economy. The automobile industry is growing rapidly, turning in 13.6% growth in 2016, but that growth is expected to slow to 5% in 2017, which still leaves the country as the world's largest auto market. The country's growing economy is one of the reasons why its auto market is booming. But the government is also conflicted about the auto market. Aware of the need to curb the country's contribution to climate change – China has massive pollution and water issues (Hsu, 2016) – the government has incentivized smaller vehicles, at the expense of luxury vehicles. However, the cross-price elasticity of demand between those small vehicles and the luxury car market is minimal; the latter is driven by the economy rather than by tax policy. Further, the government is instituting a complex quota system in order to reduce the number of gasoline or diesel-powered vehicles on its roads (APF, 2017). This could put BMW's new plant's success at risk.
Overall, the Chinese market remains highly lucrative. Most automakers, faced with mainly-mature markets in their home countries, see China as one of the major key pathways to growth. Thus, they are willing to put up with the different challenges in doing business in an unfavorable environment, just to gain access to the sort of growth and market scale that China has to offer.
Channels and Logistics Review
As a general rule, automobiles in China are sold through dealerships, not entirely unlike what is familiar in the West. This distribution model was basically brought to China by foreign automakers that wanted to retain a familiar distribution channel for their autos. There are, however, a number of different forms that this takes. The different distribution models found in China's retail auto market are: 4S, auto supermarkets, mega-dealerships, auto trade markets, and auto parks. Auto loans are common to help move vehicles, and these are government by government-run banks (USCBC, 2010). To put things in perspective, the top-selling group in 2010 was the Shanghai Automotive Industry Group. They moved 2.4 million vehicles, which means that one company is 25% bigger than Canada, as an auto market.
A review of the different distribution channels, along with their pros and cons, is as follows:
Type of Channel
Strengths
Weaknesses
Segment served
4S
· Comprehensive service
· Popular with consumers
· High start-up costs
· Most lose money
· Poor OEM-dealer alignment
· Lack of reliable dealers
Mainstream consumer market in big cities
Auto supermarkets
· Variety of brands at single location
· Consumer choice
· Penetration into small- and mid-sized markets
· Brands sold alongside rivals
· Cost pressures
Small- and mid-sized markets
Mega-dealerships
· Sell multiple brands
· Generally profitable
· 44% of auto sales
· Brands sold alongside rivals
· Poor value prop for luxury brands
Low end / mass market
Auto parks
· Clusters of different types of dealers
· Financing services on site
· Newer model, relatively untested
· Only major cities
Not 100% known but seems to be mass market in big cities
Source: USCBC (2010)
Market Characteristics
As noted above, China is the world's largest auto market, and growing rapidly. Sales at the low end are governed to an extent by tax policy, but for luxury automakers this is less important that the overall health of the economy. Luxury cars are seen as status symbols. The market is very competitive, but high growth rates have allowed all competitors to grow quickly, and BMW has made a massive new investment in a manufacturing facility in order to capture more share in the market. The Chinese auto market is estimated to be around 29.4 million vehicles. At capacity of domestic supply, BMW would make 450,000 cars, for a 1.5% share of the market. This is much lower than its share of its domestic market in Germany, but still would make China its biggest market by far.
Market Potential
The Chinese market's estimated 2017 growth rate is 5%. Last year's high rate was illusory, based on a tax policy that has since lapsed. Without that tax policy, and knowing that China's economy is starting to slow, a continued 5% rate can be expected. That delivers the following estimates for the size of the Chinese auto market over the next three years:
2017
2018
2019
2020
Vehicles Sold (millions)
29.4
30.9
32.4
34.0
USD value (billions)
$ 572.5
$ 601.1
$ 631.1
$ 662.7
Thus, the growth in terms of units and dollars is still projected to be very strong. By 2020, BMW hopes to make 600,000 autos a year in China (Clover & McGee, 2017), and sell them. That would give them a market share of 1.76%. up from 1.5% today . With current volume at 300,000, this means that BMW will double its 2016 sales level by 2020, just to capture that tiny bit of added share.
Customer Needs
There are two reasons why people buy luxury cars – because they are great cars, and for the status that luxury cars convey. The Chinese car buyer certainly appreciates the former, but also buys for the latter, to a greater degree than a Western auto buyer might. A lot of that comes down to many new car buyers in China being the first generation in their families to be able to afford a car, much less a luxury auto. A BMW is an affirmation that one has arrived, much as it was in the US for many decades. Interestingly, 2016 saw the lowest levels of buying luxury goods in China since 2009, indicative of changing tastes where Western luxury brands are viewed less as pure conveyors of status. The major shift here is from first-time buyers of luxury goods to the country's wealthy class now being regular luxury buyers, which has a marketing implication in that the shift is more towards retention that attraction (Bu, et al, 2017).
The following are the main needs of the Chinese luxury market today:
· Brand status
· High quality product
· Luxury buying experience
· Exclusivity
· Top of mind (high visibility brand)
The marketing plan to expand sales in China for BMW will need to take into account all of these factors. These can be further refined with the understanding that segmentation can be done on the lines of first-time buyer versus repeat buyer; that segmentation is done on the basis that the buyer journey is going to be quite different between the two, even if they have relatively similar demographic and psychographic characteristics.
Company Review
Market compatibility is high. BMW is already a major player in the Chinese luxury auto market, and has achieved a high level of penetration. The marketing plan here pertains more to the meeting the company's need to basically double the unit turnover in the next four years. The features and benefits of BMW products align well with the needs of the market:
· High status brand
· High quality workmanship and design
· High visibility brand
· Moderate exclusivity
· Luxury buying experience

The biggest area of misalignment is actually in the exclusivity – BMW has never positioned itself as the utmost in exclusivity, but rather an attainable luxury. This positioning allows the company to move a lot of units, and it will need to maintain this positioning in China in order to reach its target of 600,000 units sold per year by 2020.

Competitive Review
BMW competes against several other luxury brands in China. Among them are close competitors Audi and Mercedes, two other German brands in that same attainable luxury category. Other brands in the same approximate category are Lexus, Cadillac, Land Rover, Porsche, Jaguar, Volvo, Infiniti and the more differentiated Tesla. In China's luxury auto market, the three largest companies are BMW, Audi and Mercedes. They account for approximately 70% of the luxury auto market (Clover & McGee, 2017). These three German companies each offer similar ranges at similar prices points to one another, emphasizing the need to establish a strong book of repeat business in order to gain further market penetration. There is more differentiation among outliers in the market – Land Rover, Porsche and Tesla in particular have strongly differentiated offerings in the Chinese market.

Positioning
The perceptual map of the Chinese luxury auto market is as follows:


The market share leaders are all well-positioned. The companies that have better positioning tend to be high-end sports cars, typically with limited production (i.e. Lamborghini, Ferrari, etc.). Tesla has lower prestige in China than it does in the US or Europe. Porsche is a bit of an outlier, in that it should sell more based on its blend of prestige and performance. Mass market autos are in the lower left quadrant, well away from the luxury segment.

SWOT Analysis
The SWOT analysis here is really just BMW, not taking into account the reality that both of its major German competitors have roughly the same SWOT. Because the three competitors are so similar, there is actually not much insight to be gained from a SWOT in terms of what BMW can do in the competitive environment. That said, one of the important ways that BMW can build share in China is to win over new consumers to the brand, and that still relies on this type of analysis.

Strengths
Weaknesses
Opportunities
Threats

High brand status
Reliance on existing distribution channels
Retention of existing owners
Audi & Mercedes

High quality product
Difficulties in differentiation vs German competitors
Poaching from other luxury brands
Differentiated competitors

Domestic production
Level of exclusivity
New luxury consumers
Declining economy

Top of mind


Buyer fickleness

Buying experience


Political risk



The analysis shows what you'd expect – a firm with BMW's market share has more strengths than weaknesses. But the most popular distribution channels in China are squarely mass-market, which means BMW faces a trade-off between market access and maintaining sufficient exclusivity. If it can control the buying experience, and entice visitors to its dealers, the BMW will be in a better position. The SWOT analysis clearly puts the focus on distribution channels as a critical element in the marketing plan.
There are some significant risks that should be taken into consideration. The other major Germans are the direct competitors, but if consumer tastes shift to more differentiated offerings, like SUVs or electrics, then other companies could win substantial share away from all the Germans. Furthermore, some luxury goods saw slow growth in recent years due to underlying weakness in the Chinese economy – if economic strength created this category, economic weakness can harm it. Overall, however, BMW is positioned well in the Chinese market, and simply needs to ensure that its marketing strategy is both built for growth but also that it is aligned with the needs of the Chinese luxury auto buyer.

Marketing Strategy
Overview
There are a few keys to success in the Chinese market, given the growth aims of BMW. First is to continue to attract new customers at a high rate – the German category will generally drive this, but BMW needs to do its part to ensure that it doesn't undercut its counterparts too much; the vitality of Germany' s reputation is the rising tide that floats all ships. Another key success factor will be retention. The Chinese luxury market is shifting away from first-time buyers to repeat business (Bu, et al, 2017) and that means BMW needs to focus on retaining its existing customers when they buy their second car, or replace their current BMW. Reducing switching is definitely a key success factor. The third key success factor will be to maintain exclusivity while reaching consumers that the company maybe has not yet reached – in emerging middle class areas or newly-wealthy cities.

Similarity to Domestic Market and Required Changes
This is actually a bit moot; the two markets are nothing alike, and since BMW already sells more cars in China than it Germany, whatever it is doing in the domestic market is more or less irrelevant to this discussion. The key will be to identify the similarities and differences between the first-time buyer and the repeat buyer, as the latter is basically an entirely new target for the company in China.
Both groups basically have the same demographics –middle aged men in business or government, usually in relatively high positions. They are not the 1% of China's elite, but they are among the more well-off people in the country. They are not always educated, but they are almost always well-connected. They are concerned with enjoying their wealth, and spend freely on other luxury goods, domestic travel and increasingly on international travel as well. They will typically have a family, and probably aspire for their child(ren) to study overseas.
Beyond those similarities, however, there are differences. The first major difference is that the repeat buyer has had their money for longer. This is someone who bought 3, 5, or 10 years ago. The BMW might be their day-to-day car and they have another luxury car. This market has more money in all likelihood, because they "arrived" earlier than someone who constitute a new buyer today (and thus probably only "arrived" recently). For the repeat buyer, the product is more important because they have already established their status in society; they have little to prove on that front, so the buying experience and the product are more important to them.
There are definitely some implications with respect to this. First, BMW is building the Shenyang factory because it thinks that this market is going to be strong enough for them to grow going forward. So the company clearly sees ongoing potential for both target groups. The shift to repeat buyers is actually more along the lines of its approach in other markets, so there will be some familiarity amongst members of management. This familiarity will bode well, as they must shift their messaging and start to distinguish between the different target groups with different messaging and different content.
It is also worth considering what implications the change might have for the distribution channels. On one hand, focus on the more mass market channels might be beneficial for a company looking to double sales. On the other hand, the repeat market will definitely prefer that exclusivity is maintained; large auto supermarkets are contrary to the buyer experience that they seek.

Targeting
This part of the marketing plan is targeted at the return buyer; the current customer looking for another vehicle or replacement vehicle. The demographics are the same as the new buyer market, but this is a customer who has already been vetted as a buyer, and who is already in the marketing system. What is needed is a remarketing strategy – at a certain point of time BMW will need to target this existing customer to convince them to buy another vehicle, or replace their existing one. Both strategies should be considered, as both are viable and plausible for this group.

Positioning
The perceptual map can be found above, in the competition section. As it illustrates, differentiation is a challenge for BMW. The three market leaders are all the big three German luxury car makers, and it can be difficult for BMW to differentiate as a result. National origin, quality of product and to an extent price point are all pretty much the same. Brand prestige is built over a long period of time so there is little differentiation to offer here. There are, however, some key ways to differentiate. First is the buyer experience. The buyer of luxury cars expects a certain luxury during the buying experience; they should not have to go to a large auto supermarket to buy their BMW, and in fact might reject the brand if they cannot have at least a little bit of status conveyed during the buying process.
A further point of differentiation that might be available to BMW is with its product line. While the product line is similar to its close competitors, anything it can do to differentiate – in types of cars, in design, or in luxury features, would be an asset. Having its own plant in China will allow BMW to design and build cars specifically with the Chinese audience in mind. This may give the company a competitive advantage if it can become more attuned to the detailed needs of the Chinese consumer than its competitors. This strategy, product-driven, is the one that is most likely to succeed given how difficult it can be to change brand perceptions, and the fact that whatever buying experience BMW adopts can be easily adopted by the competition as well.
The value prop is going to be the same as it is everywhere else in the world – that is an element on which the brand should be globally consistent. Further, the positioning statement should not change. These should be carried over from where they are now, or in lieu of that from where they are in the domestic market; there is no logic to localizing these.
Product Strategy
This needs little detail – it's BMW. They make luxury cars. The luxury elements, design and workmanship are all key features of the product.
More interesting are the modifications that will be required for the Chinese market. Naturally, branding should be consistent, as any global brand needs to maintain a high level of consistency when operating in international markets. The reason is simple – the consumers of this product travel, and are globally-minded. It is an imperative that the vast majority of branding elements to do not change for this market. Furthermore, individual vehicle names should remain the same in this market. Automakers often localize car names, but for luxury vehicles, that they are foreign is part of the cachet, and thus they benefit from maintaining the same foreign names. If anything, a slight adaptation to indicate that this is for the Chinese market might be ideal, as there will be some subtle product differences.
Now that BMW has established its presence in the Chinese market, what is needs to do is engage in substantial market research to determine what differences, if any, exist with the Chinese buyer. Naturally, language is one, but that has already been built into the company's product and marketing. The area with strong differentiation potential is in product features; what Chinese consumers value differently from consumers in Germany or the US. For example, Chinese consumers rank safety as the most important attribute in a vehicle – the only country in the world to do so (Nylander, 2016). Chinese consumers are also dissatisfied with the dealer experience, opening the door to differentiation there, and they want constant connectivity. The latter is almost mandatory in the luxury segment – you're not in the game if you're not fully connected, but there are still opportunities for BMW to get ahead of its competitors on that front (Baan et al, 2017).
Chinese auto buyers are notoriously fickle with respect to brand loyalty, though at the luxury end they are more loyal than in other categories (Baan et al, 2017). The product lifecycle strategy has to maintain a strong relationship between the brand and the consumer. There has to be incentives for consumers to choose BMW again with their next car, in order for the marketing strategy to work and BMW to win repeat buyers. This probably won't be discounts, but it could be other incentives such as extra luxuries, or special perks, for people who choose to buy a second or third BMW. Tactics should focus on strengthening the relationship post-sale, something a lot of auto marketers don't pay much attention to.

Distribution Strategy
As noted earlier, the distribution strategy has to focus on the fact that Chinese buyers are dissatisfied with the dealer experience, and luxury buyers in particular want a differentiated sales experience. This means having product modifications available so that consumers can choose what they want in their car, having dealerships located in wealthy areas, and away from large auto malls or supermarkets. It also means investing heaviliy in a sales team, so that personalized service is always available, and that the sales team is well-trained to build a relationship, not just to win the sale.
Distribution intensity should be substantial. As Baan et al (2017) note, the top 17 urban clusters account for 50% of China's population, but 90% of its GDP. These clusters are where BMW needs to intensify its distribution. Setting up its own dealerships, and having maybe a greater number of smaller dealerships to provide an intimate experience, is likely the pathway to maintaining brand visibility and delivering the buying experience the Chinese consumer wants. Furthermore, locating these in wealthier areas will help the brand maintain its exclusivity. A high level of saturation of such dealerships is the recommended strategy for the major expansion upcoming.
This distribution channel is key because while the majority of Chinese car buyers buy from very large dealerships, supermarkets or auto parks, the luxury car buyer wants nothing to do with that. The BMW consumer is drawn to a more personal, intimate, relationship-based buying experience, which implies that BMW should take control of its distribution and set up smaller dealerships in wealthier areas, with a high level of saturation. Other channels should be eschewed, as they do not align with either the BMW brand image or with the needs of the Chinese luxury car buyer. This may be a modification from the distribution strategy in other countries.

Pricing Strategy
Chinese luxury car buyers pay relatively high prices (Nylander, 2016). Part of this is taxes, but part of it is that luxury buyers still see their brands as emblematic of prestige. Being able to pay for a BMW has a prestige that the buyer wants; the nouveau riche want to show off their wealth still. So BMW should aim to maintain its margins, taking into account the high taxes, but also keep prices roughly in line with direct competitors. There is no particular value to undercutting Mercedes and Audi; consumers will simply view BMW as an inferior product if they undercut the other Germans on price. Going along with this, there will be no price promotions.

Messaging Strategy
The messaging strategy will focus on relationship building, reinforcing status, and highlighting the BMW value prop. The reality is that messaging has to emphasize the brand, as competitors have similar status and value propositions. Focusing on relationship building is better for driving new sales, but it is also effective in allowing BMW to convey the strength of its differentiated buying experience, and the prestige value of buying a second or third BMW. A word of caution: The messaging should never acknowledge that there are competitors, nor that switching is even an option. It should instead convey more that switching is simply not an option; there are no true competitors.
BMW utilizes a lot of mass media and this should continue, along with a strong social program, and some inbound marketing as well. The inbound should emphasize on telling user stories, making the brand more relatable, and lifestyle elements that will convey the value of owning a BMW. The ads themselves can introduce the theme of buying another. The social should be high on engagement, as that is what the Chinese audience wants. The shift towards marketing to existing customers will be reflected in the messaging – BMW can introduce the brand in other promotions but the campaign for repeat buyers should generally assume that the consumers are perfectly familiar with the brand, because they are.

Controls
Marketing today requires extensive testing, and BMW can definitely afford this. Each marketing team should include a number of data specialists and digital marketing specialists tasked with setting, gathering and analyzing metrics. A/B testing should be used extensively to test messaging, especially as this campaign contains new messaging for this market. It may take time to see what works best, so data is going to be a critical control. Reviews should be basically an ongoing process, rather than periodic, especially for social and inbound campaigns, as these can be changed frequently and easily. It is way too early to create specific KPIs - you can't do that without having ones already established. Making up KPIs without existing data against which to benchmark is a worthless endeavor – you're just guessing, and that's not a data-driven approach. But measures will be set for pretty much everything – email open and click rates, social engagement, web/blog traffic, conversions, etc. Surveys will be used to learn more about consumer awareness and perceptions, and about buyer reactions to BMW's differentiated features, and the buying experience. The company will leave no stone unturned in gathering data. Once data is gathered (there should already be some from existing operations) then it will be possible to set KPIs and targets in an intelligent manner.

Conclusions
BMW clearly believes in the growth potential of the Chinese market, and has aggressive growth targets. Key to this will not just be new buyers, but repeat buyers, a group that has not really been targeted yet. Lack of loyalty is definitely a barrier that the company will need to overcome, but challenges in differentiating will be another. There is no point trying to snow the market with spurious points of differentiation – BMW has to admit to itself that there is only so much it can do to differentiate from Audi and Mercedes, and work with what it can change. The areas of value where it can change are the buying experience, the product, and the marketing strategy, in particular targeting existing BMW owners to try to increase brand retention. Doing so will give the company the best chance to meet the aggressive sales targets that come with its new Shenyang plant.




References

APF (2017) China to ban production of petrol and diesel cars in the near future. The Guardian. Retrieved October 16, 2017 from https://www.theguardian.com/world/2017/sep/11/china-to-ban-production-of-petrol-and-diesel-cars-in-the-near-future

Baan, W., Gao, P., Wang, A. & Zipser, D. (2017). Savvy and sophisticated: Meet China's evolving car buyers. McKinsey Retrieved October 18, 2017 from https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/savvy-and-sophisticated-meet-chinas-evolving-car-buyers

Bekker, H. (2017). 2016 full year Germany: Best-selling car manufacturers and brands. Best Selling Cars. Retrieved October 16, 2017 from https://www.best-selling-cars.com/germany/2016-full-year-germany-best-selling-car-manufacturers-brands/

Bu, L., Durand, B., Kim, A., & Yamakawa, N. (2017). Chinese luxury consumers: More global, more demanding, still spending. McKinsey. Retrieved October 17, 2017 from https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/chinese-luxury-consumers-more-global-more-demanding-still-spending

Car Sales Base.com (2017). BMW. Car Sales Base. Retrieved October 16, 2017 from http://carsalesbase.com/us-car-sales-data/bmw/

Clover, C. & McGee, P. (2017) BMW goes for pole position in fast-growing Chinese market. Financial Times. Retrieved October 16, 2017 from https://www.ft.com/content/92486e7c-4034-11e7-9d56-25f963e998b2?mhq5j=e5

Heritage.org (2017) 2017 Index of Economic Freedom: Country rankings. Heritage Foundation. Retrieved October 16, 2017 from http://www.heritage.org/index/ranking

Hsu. S (2016). Is China's pollution accelerating climate change? Forbes. Retrieved October 16, 2017 from https://www.forbes.com/sites/sarahsu/2016/09/08/is-chinas-pollution-accelerating-climate-change/#160f366437ef

Nylander, J. (2016) Why Chinese car buyers are willing to pay more than consumers in any other country. Forbes. Retrieved October 18, 2017 from https://www.forbes.com/sites/jnylander/2016/01/06/why-chinese-car-buyers-are-willing-to-pay-more-than-consumers-in-any-other-country/#335311952dcd

Transparency International (2016) Corruption perceptions index 2016. Transparency International Retrieved October 16, 2017 from https://www.transparency.org/news/feature/corruption_perceptions_index_2016

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Powerpoint Slides:

Slide 1: Executive Summary
· BMW is one of the top 3 luxury automakers in China
· They are building a new plant and aim to double sales by 2020
· New target market: Existing customers
· Most buyers until now were first-time buyers
· Target: 600,000 units per annum by 2020
· Brand loyalty among Chinese luxury car buyers is 19%

Slide 2: Mission Statement
To increase brand loyalty to 30%, allowing BMW to hit its 600,000 sales target. This will be accomplished by delivering a superior buying experience, a product uniquely tailored to the needs of the Chinese consumer and focusing messaging on brand loyalty

Slide 3: Situation Analysis
· Current sales ~ 300,000
· Building new plant in Shenyang
· Target: 600,000 units sold by 2020
· Main competitors are Audi and Mercedes
· Poor differentiation between the German brands

Slide 4: Situation Analysis

· Market is growing rapidly, but growth is slowing
· Market growth driven by overall economic growth
· Luxury conveys status "You've arrived"
· Luxury buyers becoming more sophisticated
· Buyers willing to spend more for a great brand

Slide 5: SWOT Analysis

Strengths
Weaknesses

High brand status
Reliance on existing distribution channels

High quality product
Difficulties in differentiation vs German competitors

Domestic production
Level of exclusivity

Top of mind


Buying experience




Slide 6: SWOT Analysis

Opportunities
Threats

Retention of existing owners
Audi & Mercedes

Poaching from other luxury brands
Differentiated competitors

New luxury consumers
Declining economy


Buyer fickleness


Political risk




Slide 7: Marketing Strategy (Price)

· Price high
· No discounts
· Convey luxury
· Align price with competitors

Slide 8: Marketing Strategy (Product)

· Unique Chinese features
· Safety is #1 concern of buyers
· High connectivity – focus on electronics
· Produce locally to save on taxes

Slide 9: Marketing Strategy (Positioning)

· Positioned with Audi and Mercedes
· Good overall positioning
· But poor differentiation from other German brands
· Maintain exclusivity

Slide 10: Marketing Strategy (Promotion)

· Conventional ads
· Adjust messaging and campaigns for existing clients
· Email and social to target existing customers
· Measure, measure, measure: Data-driven approach

Slide 11: Segmentation

· New customers vs existing customers
· Latter group has not yet been targeted
· Low brand loyalty, but already in funnel
· Existing customers are pre-qualified
· Create campaign for existing customers

Slide 12: Targeting

· Campaign target: existing customers
· Goals: increase brand loyalty to 30% retention
· Sell 100,000 cars to existing clients

Slide 13: Positioning

· Premium luxury experience
· Find way to differentiate from other German brands
· Convey BMW's value prop
· Maintain strength of German segment
· Emphasize the value of brand loyalty

Slide 14: Action Program

· Saturate dealerships
· Wealthy areas
· Avoid auto parks/supermarkets/auto malls
· Create luxury buying experience
· Provide incentives for existing clients to return

Slide 15: Action Program

· Email
· Social media
· Inbound marketing
· All targeting existing clients (prequalified, in funnel)

Slide 16: Action Program

· Survey, measure
· Data-driven product decisions
· Align product with market needs
· Stay ahead of the curve on understanding Chinese buyers
· Maintain brand, but with Chinese characteristics