BMW uses lifestyle products as a strategic differentiating factor in the automotive industry

by Dr. Markus Seidel, General Manager of Product Line Management, Merchandising & Lifestyle, BMW Group

Companies can benefit from leveraging their brands. But the road to successfully doing this is fraught with danger-and unique challenges. Here is how one international company -BMW-is moving into the lifestyle products arena systematically.

Over the past few years, the BMW Group (BMW) has begun to differentiate itself with the creation of a number of lifestyle products in the automotive industry. This article will describe how we created these new products and extended the power of several of our brands through development and collaboration.

Most specifically, we have used both the BMW and MINI brands for these lifestyle product extensions. In 1994 BMW acquired MINI, a brand that has reached iconic cult status since the 1960s. In extending these powerful brand identities, an example of successful collaboration was the new MINI motion shoe introduced at the Frankfurt Motor Show in 2003. The MINI motion shoe was the result of cooperation with the German sports goods manufacturer PUMA, as shown in Exhibit 1 on this page.

Two years earlier, the BMW X-Bike concept study, an innovative high-tech bicycle shown in Exhibit 3 on page 25, grabbed the attention of the press in Frankfurt. The BMW Street- Carver, an innovative skateboard shown in Exhibit 4 on page 25, also generated a lot of attention and received numerous awards, including being named "Invention of the Year" by Time magazine in 2001. These three products are part of BMW Group’s fast-growing lifestyle business, covering all non-car-related products for the BMW and MINI brands.

Framework for lifestyle products
These products were developed through collaboration between BMW, MINI, and a broad range of partners. But the lifestyle product programs of the two brands differ in focus. While the BMW program is focused on mobility and technology, MINI’s is built around a trend setting urban and postmodern way of life. The product lines are a unique opportunity to further differentiate both brands.

People around the world know BMW as a premium producer of automobiles and motorbikes. Perceptions of the brand are strongly linked with dynamic sport values. Because of this strong brand identity, brand extensions would be misleading if the new products had no connection to the car, the core competencies, or brand values.

Our lifestyle program therefore focuses on mobility products including bicycles, skateboards, and miniature cars for kids. The product program’s "genetic code" builds on BMW’s technological core competencies, which have evolved over decades. The development process involves intensive cooperation with designers and engineers from the core business to create outstanding mobility products and related accessories, such as functional clothing.

MINI’s lifestyle program tells a different story: The company’s vehicle program relies on a unique vehicle concept, created over 40 years ago, in which the driver can experience a unique and exciting go-cart feeling, as shown in Exhibit 2 on this page. From the beginning MINI fascinated the world, evoked an emotional experience, and gradually became a powerful brand. This emotional basis of this brand makes experimentation possible in extending the brand to other product categories.

In fact, stretching the MINI brand into other product categories is almost an imperative. With its strong emotional appeal, the MINI brand can flourish through additional sources of income. A broad product base has the potential to market the brand.

The MINI product-extension categories range from design pieces to fashion items such as clothing, eyewear, handbags, and watches, as shown in Exhibit 5 on page 25.

Our goal is to create a unique cosmopolitan lifestyle world. A MINI enthusiast will be able to experience "MINIness" in many aspects of daily life.

Strategic objectives of the lifestyle business
The BMW Group has two key objectives for its lifestyle business: brand support, and a positive contribution to the company’s overall financial goals. These two objectives can either support or contradict each other. For instance, many financially promising opportunities cannot be realized because the product does not fit with the brand or might even jeopardize it.

Measuring brand support is much more difficult than measuring the achievement of financial targets. It is a qualitative parameter that encompasses an increase in brand awareness. Typical measurements include the number of articles published in lifestyle magazines, positive impact on the retention of existing customers, or increased attraction of new customers. Brand awareness plays a crucial role in development of these new products, so both brands have to be managed carefully.

Implementation into marketing and sales
Initially, we planned to sell these new BMW/MINI lifestyle products at automotive dealerships. We set three parameters for the successful implementation of brand extensions and have added a fourth, following our decision to expand our sales channels.

Ease of use
First, the products must be easy to use and self-explanatory, since sales personnel are busy selling ever more complex cars. Additionally, these products should be perceived as premium products for the customer and provide a good margin for the dealer. Their conceptual design and point-of-sales layout should reflect the fact that the decision to buy a lifestyle product in an automotive dealership is usually spontaneous and impulsive.

When customers enter the showroom they usually do not intend to buy a product that has little to do with a car. This purchase of a lifestyle product in an automotive dealership is essentially an impulse-driven decision. The single-brand showroom environment at an automotive dealership represents a sort of supply-side monopoly for the lifestyle product lines, since there are no competitor products for sale in that location.

Integrating the products
Secondly, a company must integrate these lifestyle products into an overall customer relationship management system. Here it is essential that the cost/benefit ratio for lifestyle products is as good as or better than other activities such as specialized vacation trips or mileage bonus programs. Therefore it is important that the lifestyle products offer some outstanding features that can be easily communicated.

Expansion of sales channels
Third, to attract new customers we eventually began to sell lifestyle products in sales channels controlled by third parties such as department stores or specialty shops. Since an automotive company has very little expertise in dealing with non-automotive sales channels, we found that the most promising way to do this was to set up a professional licensing organization. A specialized licensee can develop, produce, and distribute a specific kind of product according to a given set of corporate standards and will pay royalties to the licensor - in this case BMW. Licensing is the most promising way for us to merge financial and brand objectives. Moreover, licensing is the only way to deal with the increasing complexity of the product range.

There are numerous ways to sell through a licensee-from wholesale shop-in-shop channels to stand-alone brand stores. Since 2002, one of our licensees has established more than 10 BMW Lifestyle Shops in premium locations in China. We have also found that selling through non-automotive channels improves our products. The moment the monopoly at an automotive dealership is abandoned, our products have to compete against other premium products, and this competition has improved our products significantly.

Marketing activities
Finally, we place our lifestyle products within overall Group marketing activities such as TV commercials, print campaigns, or special events. It is vital that whenever a lifestyle product is needed, we try to integrate one of our own into the specific marketing activity.

In the years to come we see almost no limit to further expansion of the BMW/MINI lifestyle product portfolio. There are many ideas for products of greater sophistication on the way. This continuous process may in the end become a game changer for our business.

Dr. Markus Seidel is the General Manager at BMW Group in Product Line Management, Merchandising, & Lifestyle.

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