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Integrating All Direct Marketing Channels to Build Customer Loyalty

A BMW Case StudyKay Madati, Relationship Marketing Manager BMW

Arthur Middleton Hughes, VP for Strategic Planning

M\S Database Marketing

The DMA 84th Annual

McCormick Place, Chicago

Tuesday, October 30th 2001 10:00 AM – 11:15 AM

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1950 - 2000 Brands built by mass advertising1985 - 2000 Database Marketing arrived, but

not integrated with mass advertising.1996 - 2000 The Internet arrived, but not

integrated with DBM or mass advertising2001 BMW brings them all together

How brand marketing has evolved

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BMW customers want:A realization of the brand promise

Performance, safety, technology, innovation

RecognitionService InformationConvenienceHelpfulness

BMW Buyers Not Necessarily Driven by Price

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Personal Profit from Purchase =

a (usefulness of product)

+b (perceived brand value)

- c (money cost)

- d (time or inconvenience)

How BMW Buyers Make Purchase Decisions

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Constructors

People who build databases

Merge/Purge, Hardware, Software

Creators

People who understand strategy

Build loyalty and repeat sales

You need both kinds!

Two kinds of database marketing people

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In 2000, BMW built a robust customer and prospect database designed to:Provide a comprehensive view of the automotive and

financial services BMW customerDeliver short term, incremental revenue through

opportunistic marketing programs Increase customer loyalty through understanding and

ability to deliver relevant, timely communicationSecure BMW’s place in its customers’ lives by

identifying which households are good targets for additional BMW purchases

Situation Analysis

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BMW now has a central system of measurementThe BMW Report Center monitors communications

and response from prospects and customersMeasurement includes cost per response and cost per sale

BMW now has the ability to view prospects as well customers in its universeThis 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 consumerCampaign, response, and financial service data 190 appended individual and household data points

BMW Situation II

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Allowing a full view of the BMW customer delivers smarter targeting and profit-generating up sell and cross sell opportunitiesWhich 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?

BMW Situation III

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Improve the effectiveness of marketing programs in the years 2001 – 2003 in order to:Return to BMW the cost of the database buildPay 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

BMW Database Marketing Goals

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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 communicationsTesting results against Control Groups

How BMW measures return on investment

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

mailed groups

Reports on the BMW Report Center provide a consistent form of measurementCost per lead, response and sale measurementCross-penetration of product purchases

Controls and Measurement

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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 profitsA higher level of data from and about BMW

customers

Benefits to BMW

Relationship Marketing Strategy

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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 beforePowerful tools to support BMW loyalty and

prospect conversion programsAutomated communication that supports the

Owner Experience

The Database

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Increase customer loyaltyIncrease prospect conversion to sales ratioIncrease vehicle sales through existing

customersMaintain existing BMW household recordsKeep communication costs down while

increasing effectivenessDevelop a consistent process of program

measurement

2001 Database Marketing Goals

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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

BMW Relationship Marketing Objectives

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Consumer CommunicationsWelcome KitLoyalty CommunicationsProspect Prioritization/Extending the DialogueBMW Magazine EnhancementsBMW Owner’s CircleFinancial Services Programs

Credit Card & Banking Customer AcquisitionCross Sell and Up Sell Marketing

Opportunistic “Quick Win” Programs

Core Communications Program

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The Owner Welcome Kit

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A static kitInformation on

BMW, the BrandBMW, the CompanyBMW, the Products

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

The old welcome kit was:

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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 yearEach of the kit pieces enhance your perception of the

BMW Brand and the ExperienceMultiple calls to action which lead you deeper into the

Experience It inherently fosters the collection of information

needed for further relationship dialogue

The new BMW welcome kit

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Weekly feed of new owners from the database

Rapid record cleanup for mailingWeekly fulfillment of corrected names,

addresses and data to the welcome kit program

Monthly maintenance of the database which supports all owner

and prospect communications

The Database Supports the Welcome Kit

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Task: Provide individual customer data for personalized welcome kit fulfillment

Strategy:Provide new owner personalized fulfillment

information on a weekly basisRecover key information requestedMaintain owner files based on collected

information for future programs Identify customers by model, financial status, and

preparatory segmentation (i.e. loyalty, activity, etc.)

Welcome Kit Fulfillment Process

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Loyalty and Owner Communications

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BMW customers are fiercely loyal to their brand

Loyalty can be measured: it is the repurchase rate

Successful loyalty is a two way streetCustomer loyalty can be strengthened by

relevant personal communicationsBMW Loyalty initiatives cover the entire

ownership experienceWelcome Kit, Newsletters, BMW Magazine,

Multiple Vehicle Owner programs

The Loyalty Situation

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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

Owner Communication Goals

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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

Loyalty Building Newsletters

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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 responsePromote the use of Owner’s Circle

Newsletter Strategy

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New productsBMW awardsSports stars that drive

BMWsRatings by leading car

magazinesWhy the BMW engines

are superiorThe history of BMWEvent calendarMagazine reprintsSponsorshipsBMW Brand Values

Roadside AssistanceServicing requirementsBMW InsuranceBMW credit cardsBMW AccessoriesDriving EventsBMW trade in pricesBMW Owner ClubsOwner’s CircleWorld news featuring

BMW

Newsletter Content

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BMW Magazine

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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

Magazine Strategy - Before

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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 CircleEach program effectiveness measured by control

groups: Control Group: Owners who are not sent the

communications Test Group: Owners who get the communications

Magazine Strategy Today

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Extending the Dialogue – Prospect Messages

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Increase prospect conversion to sell more BMW automobiles

Provide a steady flow of “qualified” leads to BMW Centers

Make communications interactiveContinually improve the conversion rates by

better prospectingMeasure the conversion rate by Center, Region,

Prospect Lifestyle, Income

Goals of the Prospect Management System

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

InternetRapidly qualified and scoredCenters receive qualified leads electronically

within 48 hours of receiptProspects get BMW message within 48 hoursEvery lead tracked electronically, with daily,

weekly, & monthly reports for BMW management on the web

Automated Database Processes

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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

Testing and Implementation Strategy

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SalesResponse

To electronic vs. paperPredetermined vs. RelationalOffers and incentives

Modeling success% prospect conversion (historical)Media preference automated systemCost of programCost of sales

Measurements of the Prospect Program

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Measuring success through the dealers

Scored leads sent to each dealerConversions are measured monthlyEach dealer conversation ratio calculatedProgram success measured by comparing

dealer to dealer conversion ratioDealer, Market, Region and National average

conversion ratios create measurable benchmarks

Above average dealers manage their leads better

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Direct Mail and E-mail integrated communication planAlternating content delivery mediumsEach 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 activitiesProspects given the opportunity to opt-out at any pointProspects removed from program if they purchase a

vehicle

Prospect Program Communications Strategy

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Immerse and invite the prospect into the BMW Experience

Reinforce the initial contact with BMWEducate as to the depth of the Brand

Products and ServicesPoint the prospect towards a test drive and the dealerReinforce core marketing communication objectives

about:Brand ValuesBrand HeritageProduct attributesThe BMW Ownership Experience

Program Communications Objectives

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New productsBMW in the NewsBMW Technology and InnovationBMW SafetyThe history of BMW and BMW Brand ValuesEvent invitationsTest drive incentivesBMW giftsMagazine reprintsBMW Financial Services products

Program Content Objectives

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Sell more cars by: Immediate Scoring of Prospects Immediate electronic Center notification of leads Immediate communications with the prospectContinually engage the customer in the ExperienceProvide more information on the depth of the Brand

Reduce the cost per car soldProvide Management with accurate & timely

knowledge of the prospect and sales processIncrease the overall effectiveness of future

prospecting programs by learning from this one

Prospect System Benefits

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Quick wins: X factor programs

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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 opportunitiesLow cost per sale Increased customer/prospect contact and

satisfaction

X Factor Situation

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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

X Factor Initiatives

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Q1 Q2 Q3 Q4CPO Program

Owner ReferralCar Birthday

Launch

Plus improved reporting, query developmentand a half dozen new ideas

to be developed and implemented during the year

X Factor: something new every quarter

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Identify ways to build relationships with female owners:Bring them to the Brand, and keep them longerAppeal to their unique needsRecognize the purchasing power and influence that

automotive marketers typically ignore

Provide tools that reduce pre-dealer visit anxietyTailored communications that highlight what

women are looking forLive chat support by femalesDevelop a network of female sales reps

X1 Women’s Program

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Identify households that are prime prospects to purchase a second BMWAnalyze multiple purchase householdsTarget 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

X2: Certified Previously Owned Program

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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 seriesAppeal to their appreciation of inclusion by asking for

their feedback and opinionAllow them to be among the first to test driveNotify them periodically of the status of the vehicle

X3: Series 7 Launch

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Identify those current owners who are most likely to purchase the MINI

Create a unique lifestyle message to these ownersAppeal to the early adapterFocus on active lifestylesGet them to preview on the web and opt in to

marketing messages

X4: Mini Launch

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Develop a program that uniquely appeals to the BMW ownerCommunicate the personality of the brandReinforce the relationship that the BMW owner has

with their car

At the anniversary of purchase, send an e-card to ownersDirect them to a micro site to get an e-birthday gift

X5: Birthday Cards

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Database provides the central focus for:Owner loyalty communication programsProspect communicationsOpportunistic “Quick Win” ProgramsMeasurement of successBuilding BMW Brand Loyalty

Summary: BMW has put it all together

10866 Wilshire Blvd., Suite 650

Los Angeles, CA 90024-4354

Phone (310) 208-2024

Fax (310) 208-5681

www.msdbm.com