Case 17 BMW Marketing Innovation a premium and therefore not competitive for market share.

. By marketing Evians unique pristine qualities, and positioning the brand as a niche, high-end premium beverage with a healthy edge, Evian may be able to provide Danone a higher-margin product, albeit with smaller volumes. A second part to Danones U.S. water market strategy would be to position its Dannon spring water, a locally sourced spring water, to compete against Nestle and the colas for market share in the high-volume, price-driven retail market. However, the Dannon lines production and distribution would have to be built out with acquisitions. The strategy to go it alone would require high investment from Danone, and the return on that investment would be very long in coming. Get out of the U.S. Market. Another option presented to Franck Riboud is to leave the United States altogether, keeping the Evian brand in the United States only as a niche player. Perhaps management needs to realize that water drinkers in the United States with their lack of differentiation among bottled water varieties, are not within the scope of Danones global marketing strategies. Because the marketing successes that Evian has experienced in other countries cannot translate to the U.S. market, a no-entry strategy would eliminate costly entry expenditures and allow Danone to shift focus to gaining share in countries where the glacier premium is recognized. This option could be referred to as the LU Biscuit strategywhile Danones biscuit brand is number two in the world, it is nonexistent in the United States. Merger/Acquisition. Among the possible acquisition suit ors for Danone, including Nestle, Unilever, and even the cola giants, Kraft Foods appears to be the company best positioned to capitalize on the merged synergies. Kraft is the largest branded food and beverage company in North America and the second largest worldwide, based on 2001 revenues (Nestle is number one). Krafts brands are sold in more than 145 countries. According to AC Nielsen statistics, they

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are found in more than 99 percent of all households in the United States. Nearly three times the size of Danone, Kraft derives 70 percent of its revenues from North America and has an extensive brand portfolio that includes a variety of food products except for bottled water. Acquiring Danone would allow for entry into the growing bottled water market, as well as increase the consumer base into Europe and Asia. One of Krafts core strategic goals is to increase its global economies of scale and expand its brands geographically. Acquiring Danone would be in alignment with this strategyits 90 percent revenue base outside of the United States and owner of the number two water brand in the world could make a Kraft/Danone combination a true synergy t. Perhaps one of the most important factors stopping an acquisition of Danone is companys nationalistic, historical, and family pride. Franck Ribouds family, his allegiance to his French culture, and his sense of individual ownership of the Danone brands are formidable blockades to allowing the company to be acquired. Riboud contemplates Danones U.S. bottled water market strategy as he windsurfs the calm waters of Lake Geneva. He muses, Five years from now, could the decision I will make be the subject of numerous business school case studies as the correct way to maintain market presence in the U.S. or a wrong way? Of course, only time will tell. DISCUSSION QUESTIONS 1. Why has Evians U.S. market share continually decreased since the emergence of the cola giants bottled water brands in the late 1990s? 2. In evaluating Danones strategy for gaining U.S. market share, present the positives and negatives for remaining a single-enterprise entity and going it alone. 3. Given Evians lack of success in the U.S. market, what would be the ramications of Danones existing the U.S. bottled water market altogether? 4. Are the joint ventures with Coca-Cola the right decision? Why or why not?

ASE 17

BMW MARKETING INNOVATION

Since the competition started to imitate BMWs advertising messages of outstanding quality, BMW decided to come up with a unique way of reaching its target audience. The company did so by hiring Fallon Worldwide, an advertisement agency based in Minneapolis, Minnesota, to come up with a new campaign. Fallon developed the concept of The Hire
This case was prepared by Martin Hellhake, Fabian Henault, and Josh Jacob of Temple University under the supervision of Professor Masaaki Kotabe for class discussion rather than to illustrate either effective or ineffective management of a situation described (2002).

series. Fallons responsibility also included the way in which these movies were to be delivered to BMWs target audience. It was also questionable whether the campaign should be the same throughout the world, or if it should be localized to adapt to language and consumer taste differences. In order to attract highly recognized directors, as well as actors, BMW was willing to spend a large amount of money. In addition to coming up with a unique advertising campaign, BMW also wanted to change its image. One of the goals was to make BMW look not only cool, but likeable, which

714 Case 17 BMW Marketing Innovation the brand needs to do to combat negative perceptions some people have based on old associations with the 1980s style yuppie arrogance. COMPANY PROFILE BMW (Bayerische Motoren Werke Aktiengesellschaft) was founded in 1916 and has been publicly traded since 1969. The company produces, and markets, a varied range of higher end sporty cars and motorcycles. BMW has also manufactured the rst passenger car running on hydrogen ready for common use, although the production gures are limited by the lack of a respective lling station net. In addition to cars and motorcycles, BMW operates an aircraft engine division under the brand name of Rolls Royce. The company has worldwide subsidiaries and manufacturing plants in Germany, Austria, the UK, the United States, Mexico, Brazil, South Africa, Egypt, Thailand, Malaysia, Indonesia, the Philippines, and Vietnam. The company also operates its own nancing company, which offers nancing for vehicles. Automobiles accounted for 78 percent of 2000 revenues; vehicle nance leasing, 18 percent; motorcycles, 3 percent; and other, 1 percent (see Exhibit 1). in response to economic, environmental, and competitive changes. This design philosophy, which runs through every BMW, has been communicated through a number of TV and print ads. The brand image has been built up by using over 300 color press advertisements and, more recently, through a total of 64 different television commercials. Throughout this campaign, BMW has remained true to its beliefs in focusing on the substance of the cars themselves. In addition to the high-prole national color press and television advertising, individual dealers are encouraged to run their own local campaigns. Local press, radio, and bus advertisements are all available from BMW dealer marketing. In addition, brochures, price lists, and dealership point-of-sale materials are made accessible through the corporate ofce. BMW encourages its dealers to make use of these services. Providing the dealers with a central source for advertising, BMW ensures that all communications remain standardized as well as maintaining BMWs brand values. BMW has embarked on a global advertising campaign. What differentiates this promotion is the fact that it remains consistent throughout the companys international campaign across the European, U.S., Asian, South African, and Middle Eastern markets. In over 15 countries there will be:

EXHIBIT 1 BMWS REVENUE SOURCES

2000 Revenue 80% 70% 60% 50% 40% 30% 20% 10% 0% Auto Motorcycles Finance leasing Other

TV spots Print advertisements Mega-posters Radio spots Events

In all three James Bond lms, BMW, MGM, and EON Productions Ltd. worked together on a cross-promotion project. This was accomplished worldwide with TV commercials and print ads, as well as displays in BMW dealer showrooms. BMW FILM The best new lm series, by the most cutting-edge directors, are not playing at the local theater. Instead, these lms are accessible through your home computer as well as your local BMW dealership. Since its launch at BMWFilms.com, The Hire (a lm series consisting of ve different short lms) has been singled out as the rst high-prole, big-budget, celebrity-laden Internet marriage of advertising and entertainment. It has been reviewed, scrutinized, deconstructed, and cited as evidence of the perilous future for traditional advertising. New York Times lm critic Elvis Mitchell called the series a marriage of commerce and creativity, straddling the ever-dwindling line between arts and merchandising. BMWFilms is simply the latest and possibly the hippest Website to make use of streaming video in order to lure prospective customers. Fast cars, mysterious passengers, Buddhist monks, rock superstars, and sinister enemies are all part of the lm series, which are presented in installments by some of Hollywoods top directors. These lms are being advertised on television the same way that movie trailers are advertised; the difference is that instead of the catch-phrase Coming soon to a theater near you, this catch phrase reads See it only on BMWFilms.com. Actor Clive Owen (star of the acclaimed British lm Croupier and, in the opinion of his growing legion of fans,

MARKETING OVERVIEW The majority of BMWs success is attributed to the development of a consistent marketing policy, the market niche strategy. The company has built its brand on four core values:

Technology Quality Performance Exclusivity

BMW has maintained these core values since the companys inception. Coupled with WCRS (BMWs advertising agency since 1979), the company has adopted a consistent advertising strategy. In addition to the message of these values being portrayed in advertising campaigns, the company explicitly expresses one or more of these values in all BMW advertisements. However, it is important to point out that BMW also relies on its sensitivity to the environment, which is clearly seen by how the companys advertisements evolved

Case 17 BMW Marketing Innovation the next James Bond) is The Hire in the series title, a skilled mercenary driver who seems to specialize in risky assignments. While he is certainly a smooth operator behind the wheel (very James Bond like), it is always the Ultimate Driving Machine that saves the day. The car is denitely the star of the show. Each episode features a driver (in a BMW, naturally) who is on a mysterious nighttime mission along with a mysterious passenger. Examples include one incident where the driver is on the run with a small Buddhist boy and another episode that has an arrogant superstar diva (played by Madonna) desperately wanting to escape the swarm of the paparazzi. Filmgoers, thrill seekers, and potential customers have the option of watching the video using Real Video or QuickTime video players. Another option is to download the BMW Film Player, a fairly simple process offered through the BMW Website, which turns the computer screen into a miniature personal theater complete with DVD quality pictures and sound. Installing this player allows the user to download and view the video on the full computer screen while ofine. In addition to the full-length videos, BMW also offers trailers for those customers with slower modem connections. These trailers allow viewers to have a quick peek at the lms. The numbers of viewers to the site are soaring each week. One week following the advertising blitz of the Website lms, trafc to the site was up 55 percent to 214,000 unique visitors compared to only 138,000 the previous week (according to the Web measurement rm Nielsen/Net Ratings). This tremendous leap made BMWFilms one of the Internets fastest growing sites. The lms all have differentiating styles, but they all hold one thing in common: the majority of the action takes place in a BMW while the participants are in the middle of a car chase. There is no limit to the actual number of BMWs that you will see; one, two, three, even more Beemers are seen speeding down alleyways and streets, screeching around corners. BMW did not randomly decide to initiate a Web-based advertising campaign. The company clearly did its homework. It is well known among advertising rms that over 85 percent of potential car buyers will conduct most (if not all) of their initial research on the Internet before they make a nal decision on a purchase. Therefore, BMW has made it convenient for shoppers by adding a link to their lm site from BMWUSA.com. This site gives consumers basic information about the car(s) as well as the location and phone number of the local dealerships. Given that the average BMW automobile starts at approximately $30,000, the companys decision to design a classy lm series, which can be viewed on a high-speed Internet connection by an upscale, mostly male audience, is clearly targeted. The simple concept of these lmsBMW wants to sell cars! Film Concept In the spring of 2000, two factors were on the table at BMW. The rst was concern over TV effectiveness, and the second was how to exploit the popularity of the Internet. BMW wanted to come up with an entirely new branding campaign; too many competitors were copying the look and feel of the BMW, and the company needed to do something different to

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distinguish itself. On a more basic level, BMW was growing more concerned about its ability to reach its core market via traditional methods such as network TV. The creative team of writer David Carter and art director Joe Sweet had recently completed a project for Timex with director Tim Burton. This marketing campaign incorporated an Internet portion that featured short videos specically shot for the Web. The executives at BMW saw this as a way to differentiate the company from other manufacturers. BMW wanted something done exclusively for the Internet, something not only entertaining but also cinematic. A concept was borna longer lm that would be shot in segments and distributed via the Internet as a series. This series would combine product placement with entertainment. Most importantly, it would allow BMW to push the envelope when it came to scripting the series. The Internet would allow the company to show what a BMW can do when pushed to the limits, under extreme conditions and circumstances. BMW would not be able to convey this type of advertising through traditional TV ads, without a few hundred disclaimers. BMWFilms has accomplished several objectives; the most important being the tremendous buzz in both the entertainment and business press. This was important to BMW, since one of its goals was to make the BMW look cool, without the old association with the 1980s style of yuppie arrogance. A fact that was not prominently mentioned in much of the coverage of The Hire was that the core creative concept, along with key strategic thinking, Web development, and several scripts, all came from one source: Publicis Troupes Fallon Worldwide in Minneapolis. I think were reinventing advertising, said David Lubars, Fallon president and executive creative director. Lubars added: Were not looking to make this a template, as though this is what advertising is [going to be]. I think what technology affords you is that every client can get their own customized media approach, and this was really right for this client. BMWFilms.com is a good example of blurring the lines between entertainment and advertising, said Jarvis Mak, senior Internet analyst at NetRatings. The site combines Hollywoods intense car chase scenes and Internet video to deliver a new spin on product showcasing, added Mak. We think that a lot of the time when people view traditional advertising they view it through a lter of disbelief, said Jim McDowell, vice president of marketing for BMW of North America. When people watch entertainment or a movie, then theyre watching in an entirely different way where they enjoy the fantasy, and hopefully remember it and share it with others. We thought maybe instead of doing advertising we should be doing entertainment and doing something fun and interesting on the Web, McDowell said. What if you do not have a computer, or if your computer is not hooked to a T1 connection? Never fear, BMW has already begun buying infomercial time on the Bravo and Speedvision channels to showcase their Hire series. Target Audience Initially, BMW had no real idea as to whom the lms would appeal. BMW executives knew they would have everyone

716 Case 17 BMW Marketing Innovation from high school students to 7-Series owners as viewers. BMWs guess was that their central tendency would be 25-year-olds with a median income of $100,000. BMW and Fallon research indicated that many were tech-savvy and had fast, reliable access to the Web. Most important, 85 percent of buyers had researched the vehicle on the Web before stepping into a showroom. Characteristics of the Typical BMW Target Audience Societal values are changing rapidly. Society will increasingly take its cue from Generation Xers and dot.comers rather than the baby boomers who have dominated its thinking for most of four decades. Associated with that demographic shift will be a return to the appreciation of self-reliance and cooperationself-reliance because the traditional safety platforms such as Social Security and pensions will no longer exist, and cooperation because it involves group action that, in turn, is the optimal strategy for the use of scarce resources. Family issues such as long-term health care, day care, and antidrug campaigns will remain dominant issues until the end of the decade. Generation X and dot.com will have major effects in the future. This 30-something Generation X cohort will be recognized for its entrepreneurial instinct since its members are starting businesses at unprecedented rates. They are economically conservative, begin saving at an earlier age, and seek the shallow information skimmed from CNN or USA Today rather than absorb in-depth reporting. Members of the dot.com generation, now entering their 20s, are proving to be even more business-oriented. Twice as many say they would prefer to own a business rather than be a top executive. By a factor of 5 to 1, they would rather own a business than hold a key position in politics or government. In summary, the corporate and business culture of the baby boomers is a mismatch for these advancing generations that thrive on challenge and opportunity. It is more than cash that they want. They understand the need for lifelong learning because that is the way life has always been for them. In addition, as both customers and employees, they will demand even more advanced telecommunications and net-based transactions. Consumerism is still growing rapidly. Because consumers will increasingly have access to and information about pricing, services, delivery time, and customer satisfaction through the Internet, the consumer marketing battle will see a halt in the decline of prices and a counterprevailing shift to service improvement and salesmanship. In the end, however, xed pricing will fall out of favor as goods and services are sold through online auctioning. The proponents of the need for improved customer service will be proved right. To quote the report, As prices fall to commodity levels and online stores can list virtually every product and brand in their industry without signicant overhead, service is the only eld left in which marketers can compete effectively. Lorraine Ketch, the director of planning in charge of Levis trendy Silvertab line explained, This audience hates marketing thats in your face. It eyeballs it a mile away, chews it up, and spits it out. As expected, branded items with dominant reputations will remain powerful and in demand. MARKETING CHANNELS Internet Auto manufacturers have taken some innovative approaches to draw Internet users to their Websites. However, it is surprising how quickly innovative becomes ordinary. Slide shows, ash animation, and surround video are now commonplace on most manufacturers sites. In addition, contests have become so common that the possibility of winning a free car may not be enough to hold a viewer for more than a few minutes. Ad banners 468 60 in size are sold on a run-of-site (ROS) basis, meaning that they will appear on every search results page and on an equal rotating basis with other advertisers banners. Advertising rates for 468 60 ad banners are computed on a cost-per-thousand (CPM) impression basis and are currently priced at US$10 to $15 CPM. Flashing banners and other methods cost slightly more based on the Website and technology involved. For online ads, each advertiser is given password-protected access to real-time advertising statistics, including how many impressions were served, how many click-throughs were achieved, and what click-through rate was achieved. The industry standard for the click-through rate is anywhere from 0.25 percent to 2 percent, for sites like CNN, ZDNet, or Yahoo. Your actual click-through rate will depend on the appearance of your ad and on what it offers in terms of a marketing message and call to action. Just like running a television commercial during prime time, or placing a full-page ad in Time magazine, these ads do not necessarily cause people to pick up the phone and order a product at that very moment, whereas a Web-based process that guides the consumer through a systematic process makes a purchase more likely. Specically, these types of ads build name recognition for the company and establish it as a major force in the industry. Then, when consumers are ready to buy, your company will come to mind. Television The 1999 American Association of Advertising Agencies Commercial Production Costs Survey revealed that the average cost of a 30-second national commercial for an automobile was a whopping $389,000. The percentages of viewers of MSNBC and Bravo who are in BMWs target income bracket constitute 20.5 percent. The percentage of viewers in BMWs target age group (2534) is 26.5 percent. Print The advertising rates in a periodical like Time magazine range from $250,000 for a full-page mono to $360,000 for a full-page color ad. The average age of a Time magazine subscriber is 45, and readers have a median income of $69,000. This audience is twice the age and has half the income of BMWs intended target market. Time magazine is one of the premier periodicals on the market at this time. DVD Promotions/Freebies The cost of producing a DVD master is between $50,000 and $100,000plus the cost of producing any bonus materials. DVD player penetration in the United States today is approximately at 25,600,000 units. This trend is supposed to increase, and the DVD is projected to become the next VHS.

Case 18 Herman Miller, Inc. vs. ASAL GmbH COMPETITIVE ANALYSIS In 1997, BMW was in danger of losing its long-standing lead in the import luxury car segment. Mercedes, Lexus, and Audi were coming on strong, with great new products and new marketing campaigns designed to dethrone BMW. Nearly half of those considering a luxury car rank fun to drive as their number one reason for purchasing the car. However, for the rst time since BMW had been tracking its image, consumers ranked BMW at virtually the same level as Mercedes or Lexus on attributes like fun to drive and responsive handling. BMWs three biggest competitors had launched new advertising campaigns that highlighted what traditionally had been BMWs greatest strength: performance. Therefore, BMW was not able to distinguish itself anymore as the only company that boasted the unparalleled standard of quality as before. Mercedes The range of cars from the giant company DaimlerChrysler traditionally rival BMWs. In 2000, DaimlerChrysler sold 1,155,000 units and had revenues of 43.7 billion euro. Mercedes strengths would be its global presence, strong brand presence, product range, and technology leadership. Mercedes marketing campaigns have always been subdued and low key. It allocates 25 percent of its annual marketing budget to innovative Internet strategies, recognizing the power of the Internet for delivering effective and precise marketing campaigns. When the car manufacturer launched the new Mercedes C Class Sports Coupe, it positioned the online campaign right at the top of its marketing mix. Joining in a winning partnership with MSN, another global brand with similar values, Mercedes sponsored A-Has eagerly awaited homecoming concert. Lexus Sparked by a decision from Toyota chairman Eiji Toyoda in 1983 to challenge the best luxury vehicles, Lexus has since grown into one of the worlds most inspiring automobile companies. Lexus is a division of Toyota Motor Sales, U.S.A., Inc. It is trying to leverage the Japanese technology to add brand value to its vehicle. Lexus is Americas top-selling luxury marquee. The tough task for Lexus is to lose the Cheap But Reliable Toyota image. The annual sales of Toyota vehicles in the United States have been on the order of $90 to $93 million in recent years. According to Chris Conrad, Lexus national advertising manager, Lexus is targeting its youngest buyers ever with the

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IS 300, roughly 75 percent male, between the ages of 35 and 40, married, highly educated, with annual household incomes of $100,000. The current average age of a Lexus owner is 50, with the median age of the brands hottest selling vehicle, the RX 300 sport-utility, at 48. The estimated $32 million campaign for the car broke recently on national TV and will continue for the next six months. Team One, El Segundo, California, created the two national TV commercials as well as ve TV spots for regional dealer ad groups and two magazine ads. The agency also created billboards and six commercials that will be projected on buildings in three cities. Their online presence even for this campaign is limited, though Lexus is one of the advertisers launching a rich-media campaign on the Excite Network, which includes WebCrawler and Classieds 2000. Audi Audi is an international developer and manufacturer of highquality cars. In 2000, the company sold more than 650,000 Audi models. The sales revenues of the Audi Group totaled 39 billion Deutsche marks. The Audi Group has slowly but surely been encroaching on the BMW and Mercedes markets. It has been trying to promote the exclusivity of its cars. Recently, Audi of America has embarked on its most ambitious online marketing effort ever. The European car importer kicked off the Double Take advertainment online sweepstakes as part of its $25 million launch of the redesigned 2002 A4 sedan. Visitors to the site can try to solve mysteries after viewing clues from three short episodes involving the A4. They can also register to win prizes while learning about the car and its features. The grand prize is a three-day trip for two to the Audi Driving Experience at the Panoz Driving School in Atlanta, Georgia. The sweepstakes, run by Don Jagoda Associates, Melville, New York, allows prospects to enter up to eight times. The main thing is to educate and entice users to go to dealerships, said Steve Glauberman, president-CEO of Enlighten, the privately held Ann Arbor, Michigan, creator of the site and sweepstakes. DISCUSSION QUESTIONS 1. Should BMW be using a uniform global promotion strategy? 2. Should BMW show its new marketing campaign on the Internet exclusively, or should it be part of the media mix? 3. What are the implications of marketing for dot.comers and Generation Xers?

ASE 18

HERMAN MILLER, INC. VS. ASAL GMBH

In early May 1999, Vreni Sahli, international sales manager for ofce furniture manufacturer Herman Miller, Inc. (www.hermanmiller.com), received a call from John Paul Fournier, manager of Herman Miller Ltd.s German operation. According to Ms. Sahli, Mr. Fournier informed me that they had become aware of a company by the name of ASAL showing and selling chairs, Aeron chairs, in the German market. The Aeron chair, one of Herman Millers most successful new product lines with a patent list as long as your arm (www.hermanmillered.com/catalog/), is