BMW bungles the brand.

January 11, 2005

Bmw_logoKeeping a brand focused is not an exciting or glamorous job. That’s why so many successful brands fall into trouble. As soon as we write up a great case history of how a brand narrowed its focus, owns a word in the mind and dominates a market, the brand’s managers go out and expand the brand which greatly weakens its power and many times destroys it. Great brands like Toys R Us, Mercedes-Benz, Coca-Cola and McDonald’s have all fallen victim to this tragedy.

The latest causality is BMW. See The Wall Street Journal front page story Monday, January 10, 2005 BMW’s Push to Broaden Line Hits Some Bumps in the Road.

BMW is one of the most powerful brands in the world. A brand focused on single market: premium priced cars. A brand that owns a word in mind: driving. A brand that has the best automotive advertising slogan ever written: “The ultimate driving machine.” And a brand that has been highly profitable. In 2003, BMW’s automotive operations generated $3.5 billion in operating profit, more than that of General Motors, Ford, Volkswagen and Renault combined.

Despite this amazing success, Sigma, a German research firm, told BMW management after an exhaustive consumer study by that there would be little growth in the company’s future if it stuck with serving just its hard-core customers. Sigma dubbed these customers “social-climbers”, a group of people categorized by their motivation for professional success. (As a seven-year owner of a black 328i BMW, I guess you could say I fit the brand profile.)

No future growth from keeping a company focused on its core strength? What are they drinking over there in Germany? Short-term growth may at times be achieved by line extension but long-term success can only be sustained by having a brand stand for something in the mind. In other words, a brand that focuses on its hard-core consumers.

The biggest problem with line extension is that it undermines the power of a brand in the mind. Mercedes-Benz is a powerful brand because it owns prestige in the mind of consumers. When they come out with cheap Mercedes cars, it slowly erodes this perception of prestige. Initially they might sell a lot of cheap cars, but long term the power of the brand is crushed. Which is exactly what has happened at Mercedes. Why would BMW want to follow down this same path?

To appear to a wider audience than just the social-climbers (and attract such groups as the upper liberals, post-moderns and upper conservatives), BMW underwent a dramatic and radical redesign of its 3, 5 and 7 series cars, the company’s core products. The reactions to the new designs have not been favorable. Major glitches in the 7 series and iDrive electronics have severely dented BMW’s reputation for quality. Consumer Reports did not judge a single BMW as reliable enough to include on its 2005 recommended list.

Despite these problems, the new models and redesigns keep on coming including the Z4 roadsters, X5 SUV, X3 SUV, 6-series and 1-series. And there is even talk of introducing a minivan! No minivan on earth could ever be called the ultimate driving machine; what an oxymoron!

But that’s just the point. The more models BMW makes, the more consumers they target and the more markets they enter, the less valuable the brand becomes. Only a small range of cars can be classified as ultimate driving machines. And that is the standard by which BMW should drive its business. Otherwise they run the risk of driving the brand right off the autobahn and into a ditch.