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

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

2. 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

3. 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

4. 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)

5. 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!

6. 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

7. 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

8. 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?

9. 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

10. 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

11. 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

12. 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

13. Relationship Marketing Strategy

14. 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

15. 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

16. 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

17. 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

18. The Owner Welcome Kit

19. 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

20. 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

21. 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

22. 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.)

23. Loyalty and Owner Communications

24. 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

25. 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

26. 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

27. 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

28. 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 Newsletter Content

29. BMW Magazine

30. 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

31. 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

32. Extending the Dialogue – Prospect Messages

33. 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

34. 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

35. 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

36. 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

37. 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

38. 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

39. 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

40. 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 Program Content Objectives

41. 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

42. Quick wins: X factor programs

43. 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

44. 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

45. X Factor: something new every quarter Plus improved reporting, query development and a half dozen new ideas to be developed and implemented during the year

46. 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

47. 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

48. 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

49. 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

50. 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