Integrating All Direct Marketing Channels to Build Customer Loyalty A BMW Case Study

Prof. Rushen Chahal

Prof. Rushen Chahal

How brand marketing has evolved

1950 - 2000 Brands built by mass advertising 1985 - 2000 Database Marketing arrived, but not integrated with mass advertising. 1996 - 2000 The Internet arrived, but not integrated with DBM or mass advertising 2001 BMW brings them all together

Prof. Rushen Chahal

BMW Buyers Not Necessarily Driven by Price

BMW customers want:

A realization of the brand promise

Performance, safety, technology, innovation

Recognition Service Information Convenience Helpfulness

Prof. Rushen Chahal

How BMW Buyers Make Purchase Decisions

Personal Profit from Purchase = a (usefulness of product) +b (perceived brand value) - c (money cost) - d (time or inconvenience)

Prof. Rushen Chahal

Two kinds of database marketing people

Constructors

People who build databases Merge/Purge, Hardware, Software

Creators

People who understand strategy Build loyalty and repeat sales

You need both kinds!

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Situation Analysis
In 2000, BMW built a robust customer and prospect database designed to:
Provide a comprehensive view of the automotive and financial services BMW customer Deliver short term, incremental revenue through opportunistic marketing programs Increase customer loyalty through understanding and ability to deliver relevant, timely communication Secure BMW s place in its customers lives by Prof. Rushen Chahal 6 identifying which households are good targets for additional BMW purchases

BMW Situation II
BMW now has a central system of measurement
The BMW Report Center monitors communications and response from prospects and customers
Measurement includes cost per response and cost per sale

BMW now has the ability to view prospects as well customers in its universe
This allows BMW to view the full shopper-owner cycle from first point of contact, through sale and cross sale

The new marketing database contains a broad range of information on the BMW consumer
Campaign, response, and financial service data 190 appended individual and household data points
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BMW Situation III

Allowing a full view of the BMW customer delivers smarter targeting and profit-generating up sell and cross sell opportunities
Which vehicle owners are best targets for credit cards? How can BMW card owners increase the lifetime value of the vehicle owners? Where are the pockets of our most profitable customers? Which customers will deliver additional revenue through financial services products after they have disposed of their BMW?

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BMW Database Marketing Goals

Improve the effectiveness of marketing programs in the years 2001 2003 in order to:
Return to BMW the cost of the database build Pay for database maintenance going forward Increase the revenue per customer over time Increase the profit per customer Increase the lifetime value of the combined BMW automobile and financial services customer
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How BMW measures return on investment

Consistent measurement and enhancement of BMW marketing programs Ability to prioritize prospects and customers based on their likelihood to buy Identification of low hanging fruit programs that can be quickly implemented to generate revenue in the short term Refinement of customer communications
Testing results against Control Groups
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Controls and Measurement

Control groups measure the effectiveness of each program
Non-mailed groups that are measured against the mailed groups

Reports on the BMW Report Center provide a consistent form of measurement

Cost per lead, response and sale measurement Cross-penetration of product purchases
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Benefits to BMW
Increased communication effectiveness
Integrated database used by all groups

Increased efficiency The right information to the right customer at the right time Reduced communication expense
Fewer pieces mailed with higher effectiveness

Increased customer participation Increased customer satisfaction Increased corporate and center profits A higher level of data from and about BMW customers

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Relationship Marketing Strategy

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The Database
All programs are built on a state-of-the-art customer relationship management database which provides:
More information on owners and prospects than BMW has ever assembled before Powerful tools to support BMW loyalty and prospect conversion programs Automated communication that supports the Owner Experience
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2001 Database Marketing Goals

Increase customer loyalty Increase prospect conversion to sales ratio Increase vehicle sales through existing customers Maintain existing BMW household records Keep communication costs down while increasing effectiveness Develop a consistent process of program measurement
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BMW Relationship Marketing Objectives

Use the marketing database to realize a communications dialogue with both our prospects and our customers Systematic use of customized information to attract and retain customers Facilitate mutually beneficial and relevant information exchanges Increase owner loyalty and customer acquisition rates Strengthen BMW brand perception at the individual customer level
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Core Communications Program

Consumer Communications
Welcome Kit Loyalty Communications Prospect Prioritization/Extending the Dialogue BMW Magazine Enhancements BMW Owner s Circle Financial Services Programs
Credit Card & Banking Customer Acquisition Cross Sell and Up Sell Marketing

Opportunistic Quick Win Programs

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The old welcome kit was:

A static kit Information on
BMW, the Brand BMW, the Company BMW, the Products

It welcomed people to the brand, but offered no real taste of the BMW Experience

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The new BMW welcome kit

A personal welcome kit that owners realize was created just for them It arrives within the first 30 days It is a dialogue opener, an invitation to the BMW experience that extends over a full year Each of the kit pieces enhance your perception of the BMW Brand and the Experience Multiple calls to action which lead you deeper into the Experience It inherently fosters the collection of information needed for further relationship dialogue

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The Database Supports the Welcome Kit

Weekly feed of new owners from the database Rapid record cleanup for mailing Weekly fulfillment of corrected names, addresses and data to the welcome kit program Monthly maintenance of the database which supports all owner and prospect communications
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Welcome Kit Fulfillment Process

Task: Provide individual customer data for personalized welcome kit fulfillment Strategy:
Provide new owner personalized fulfillment information on a weekly basis Recover key information requested Maintain owner files based on collected information for future programs Identify customers by model, financial status, and preparatory segmentation (i.e. loyalty, activity, etc.)
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The Loyalty Situation

BMW customers are fiercely loyal to their brand Loyalty can be measured: it is the repurchase rate Successful loyalty is a two way street Customer loyalty can be strengthened by relevant personal communications BMW Loyalty initiatives cover the entire ownership experience
Welcome Kit, Newsletters, BMW Magazine, Multiple Vehicle Owner programs

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Owner Communication Goals

Increase BMW profits through:
Increased repurchase by existing owners Increasing the number of BMW s per household Increased sales of BMW previously owned vehicles Increased use/purchase of BMW FS products

Each program effectiveness measured by control groups:

Control Group: Owners who are not sent the communications Test Group: Owners who get the communications
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Loyalty Building Newsletters

General Goals:
Immersion in the BMW Experience Promotion of Owner s Circle Purchase of BMW accessories Increase the repurchase rate Multiple BMWs in each household Widespread use of BMW Financial Services products Purchase BMW financial services products Capture information about their preferences, lifestyles, automobile interests, etc. useful for further dialog

To 3 and 4 year BMW owners. Goals:

To new BMW owners, Goals:

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Newsletter Strategy
Ongoing collection of news and information of interest to BMW owners Owner surveys to determine preferences for:
News, information, and topics Communication Channel (email or print) Frequency Move to email newsletters as quickly as possible

Begin with a printed newsletter to gather email addresses

Multiple offers to generate owner response Promote the use of Owner s Circle

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Newsletter Content
New products BMW awards Sports stars that drive BMWs Ratings by leading car magazines Why the BMW engines are superior The history of BMW Event calendar Magazine reprints Sponsorships BMW Brand Values Roadside Assistance Servicing requirements BMW Insurance BMW credit cards BMW Accessories Driving Events BMW trade in prices BMW Owner Clubs Owner s Circle World news featuring BMW

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BMW Magazine Strategy - Before

BMW publishes a high-value magazine to its owners in the first two years after their purchase Because of its universal distribution, the magazine can be more than a magazine
It can be a data collection tool for further personalized communications

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Magazine Strategy Today

Capture additional information on customers
Email Addresses Purchase Intentions: owners identifying themselves as entering the purchase cycle Provide direction to BMW Online Store for purchase

Allow BMW owners to purchase merchandise

Push registration on Owner s Circle Each program effectiveness measured by control groups:
Control Group: Owners who are not sent the communications Test Group: Owners who get the communications

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Goals of the Prospect Management System

Increase prospect conversion to sell more BMW automobiles Provide a steady flow of qualified leads to BMW Centers Make communications interactive Continually improve the conversion rates by better prospecting
Measure the conversion rate by Center, Region, Prospect Lifestyle, Income
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Automated Database Processes

Prospects developed from all contact sources:
Telephone, Direct Mail, Auto Shows, Events, Internet

Rapidly qualified and scored Centers receive qualified leads electronically within 48 hours of receipt Prospects get BMW message within 48 hours Every lead tracked electronically, with daily, weekly, & monthly reports for BMW management on the web
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Testing and Implementation Strategy

Scoring models for incoming prospect requests determine priority
Focus on priority A & B prospects Moving to lower priorities as the systems proves itself

Fully integrated creative implementation in both electronic and paper media as well as events Test scoring models against anticipated response and adjust as needed Utilize a 5% control group for a period of one year for reporting comparisons

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Measurements of the Prospect Program

Sales Response
To electronic vs. paper Predetermined vs. Relational Offers and incentives

Modeling success % prospect conversion (historical) Media preference automated system Cost of program Cost of sales
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Measuring success through the dealers

Scored leads sent to each dealer Conversions are measured monthly Each dealer conversation ratio calculated Program success measured by comparing dealer to dealer conversion ratio Dealer, Market, Region and National average conversion ratios create measurable benchmarks Above average dealers manage their leads better
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Prospect Program Communications Strategy

Direct Mail and E-mail integrated communication plan

Alternating content delivery mediums Each reinforcing the one that came before it
Use of database information to drive customization and relevance Each communication introducing a new piece of the BMW Experience All communications tie in to web activities Integration with off-line and online marketing activities Prospects given the opportunity to opt-out at any point Prospects removed from program if they purchase a vehicle

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Program Communications Objectives

Immerse and invite the prospect into the BMW Experience Reinforce the initial contact with BMW Educate as to the depth of the Brand

Products and Services

Point the prospect towards a test drive and the dealer Reinforce core marketing communication objectives about:

Brand Values Brand Heritage Product attributes The BMW Ownership Experience
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Program Content Objectives

New products BMW in the News BMW Technology and Innovation BMW Safety The history of BMW and BMW Brand Values Event invitations Test drive incentives BMW gifts Magazine reprints BMW Financial Services products

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Prospect System Benefits

Sell more cars by:
Immediate Scoring of Prospects Immediate electronic Center notification of leads Immediate communications with the prospect Continually engage the customer in the Experience Provide more information on the depth of the Brand

Reduce the cost per car sold Provide Management with accurate & timely knowledge of the prospect and
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Quick Wins: X Factor Situation

The BMW Database offers a huge opportunity to utilize information to refine BMW programs X Factor programs are built on data mining, and deliver:
Highly effective marketing programs Incremental revenue opportunities Low cost per sale Increased customer/prospect contact and satisfaction
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X Factor Initiatives
The Loyalty and Prospect Programs, combined with the database, offer great potential for creative, interactive X factor programs:
Contests Programs for Women/Minorities Special Events Referral Programs Certified Previously Owned Cars Second BMWs in every home Lifestyle Programs Congratulatory Mailings to 3+ BMW Owners

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X Factor: something new every quarter

Q1 CPO Program Q2 Owner Referral Car Birthday Launch Q3 Q4

Plus improved reporting, query development and a half dozen new ideas to be developed and implemented during the year
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X1 Women s Program
Identify ways to build relationships with female owners:
Bring them to the Brand, and keep them longer Appeal to their unique needs Recognize the purchasing power and influence that automotive marketers typically ignore

Provide tools that reduce pre-dealer visit anxiety Tailored communications that highlight
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X2: Certified Previously Owned Program

Identify households that are prime prospects to purchase a second BMW
Analyze multiple purchase households Target groups most likely to purchase a CPO vehicle
Households with teenagers or young adults Identify seasonality graduation, etc.

Test the program on current BMW owners, then roll out to prospects
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X3: Series 7 Launch

Identify those current owners who are most likely to purchase a new 7 Series BMW Invite these special people to be among a small group who are allowed to preview the new 7 series
Appeal to their appreciation of inclusion by asking for their feedback and opinion Allow them to be among the first to test drive Notify them periodically of the status of the Prof. Rushen Chahal 43 vehicle

X4: Mini Launch

Identify those current owners who are most likely to purchase the MINI Create a unique lifestyle message to these owners
Appeal to the early adapter Focus on active lifestyles Get them to preview on the web and opt in to marketing messages

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X5: Birthday Cards

Develop a program that uniquely appeals to the BMW owner
Communicate the personality of the brand Reinforce the relationship that the BMW owner has with their car

At the anniversary of purchase, send an e-card to owners

Direct them to a micro site to get an ebirthday gift
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Summary: BMW has put it all together

Database provides the central focus for:
Owner loyalty communication programs Prospect communications Opportunistic Quick Win Programs Measurement of success Building BMW Brand Loyalty

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Thank You

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