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Lifetime Value


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									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

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

 BMW Buyers Not Necessarily Driven by
• BMW customers want:
   – A realization of the brand promise
        • Performance, safety, technology, innovation
   –   Recognition
   –   Service
   –   Information
   –   Convenience
   –   Helpfulness

How BMW Buyers Make Purchase

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

Two kinds of database marketing

• Constructors
   People who build databases

   Merge/Purge, Hardware, Software
• Creators
   People who understand strategy
   Build loyalty and repeat sales
• You need both kinds!

    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
     – 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

    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

    BMW Situation III

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

    How BMW measures return on

•   Consistent measurement and enhancement of BMW marketing
•   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

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
     – Cost per lead, response and sale measurement
     – Cross-penetration of product purchases

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

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
     – Automated communication that supports the Owner Experience

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

BMW Relationship Marketing

•   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
•   Facilitate mutually beneficial and relevant information exchanges
•   Increase owner loyalty and customer acquisition rates
•   Strengthen BMW brand perception at the individual customer

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

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

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
•   Multiple calls to action which lead you deeper into the Experience
•   It inherently fosters the collection of information needed for further
    relationship dialogue

The Database Supports the Welcome

•   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

Welcome Kit Fulfillment Process

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

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
•   BMW Loyalty initiatives cover the entire ownership experience
     – Welcome Kit, Newsletters, BMW Magazine, Multiple Vehicle Owner

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

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

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

Newsletter Content

•   New products                   •   Roadside Assistance
•   BMW awards                     •   Servicing requirements
•   Sports stars that drive BMWs   •   BMW Insurance
•   Ratings by leading car         •   BMW credit cards
                                   •   BMW Accessories
•   Why the BMW engines are
    superior                       •   Driving Events

•   The history of BMW             •   BMW trade in prices

•   Event calendar                 •   BMW Owner Clubs

•   Magazine reprints              •   Owner’s Circle

•   Sponsorships                   •   World news featuring BMW

•   BMW Brand Values

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

Magazine Strategy Today

•   Capture additional information on customers
     –   Email Addresses
     –   Purchase Intentions: owners identifying themselves as entering the purchase
•   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

Goals of the Prospect Management

•   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,

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
•   Prospects get BMW message within 48 hours
•   Every lead tracked electronically, with daily, weekly, & monthly
    reports for BMW management on the web

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

Measurements of the Prospect

•   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

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

Prospect Program Communications

•   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

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

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

     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

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

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

X Factor: something new every quarter

      Plus improved reporting, query
        and a half dozen new ideas
 to be developed and implemented during
                  the year

    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

    X2: Certified Previously Owned

•   Identify households that are prime prospects to purchase a second
     – 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

    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

    X4: Mini Launch
•   Identify those current owners who are most likely to purchase the
•   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

    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

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

Thank You

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