Integrating All Direct Marketing Channels to

Build Customer Loyalty

A BMW Case Study
Kay Madati, Relationship Marketing Manager BMW
Arthur Middleton Hughes
VP / Solutions Architect
KnowledgeBase Marketing
The DMA 84th Annual
McCormick Place, Chicago
Tuesday, October 30th 2001 10:00 AM – 11:15 AM

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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

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 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

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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)

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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 identifying which
households are good targets for additional BMW purchases

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 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
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
• To 3 and 4 year BMW owners. Goals:
– Increase the repurchase rate
– Multiple BMWs in each household
– Widespread use of BMW Financial Services products
• To new BMW owners, Goals:
– Purchase BMW financial services products
– Capture information about their preferences, lifestyles, automobile interests,
etc. useful for further dialog

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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
• Begin with a printed newsletter to gather email addresses
– Move to email newsletters as quickly as possible
• Multiple offers to generate owner response
• Promote the use of Owner’s Circle

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Newsletter Content

• New products • Roadside Assistance

• BMW awards • Servicing requirements
• Sports stars that drive BMWs • BMW Insurance
• Ratings by leading car magazines • BMW credit cards
• Why the BMW engines are superior
• BMW Accessories
• The history of BMW
• Driving Events
• Event calendar
• BMW trade in prices
• Magazine reprints
• BMW Owner Clubs
• Sponsorships
• Owner’s Circle
• BMW Brand Values
• 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
• Allow BMW owners to purchase merchandise
– Provide direction to BMW Online Store for purchase
• 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 sales process
• Increase the overall effectiveness of future prospecting programs by
learning from this one

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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 Q2 Q3 Q4
CPO Program
Owner Referral
Car Birthday
Launch

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 what women are looking for
– Live chat support by females
– Develop a network of female sales reps

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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 vehicle

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 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 e-birthday 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