Earlier in the year, I had a problem with my car. A few months past the warranty, at less than 60,000 miles, the transmission on my BMW 5 series malfunctioned. My car dealer could not simply repair it and the entire transmission needed replacing. On the advice of the heralded service department, I authorized the replacement, after being told they would work with BMW North America to see if they could help out with the cost. In prior instances, they assured me, BMW of North America, had stepped in to offset all or most of the cost. As all maintenance was carried out, on schedule, at the car dealer, I expected a positive outcome.
After the repairs were completed, I was shocked to learn that there would be no reimbursement or support of any kind from BMW. I wrote and called the President of BMW North America, and was told by his staff there was nothing BMW of North America could do, as I already decided to replace the transmission. In a Kafkaesque moment, I realized that following the advice of BMW’s trained and authorized representatives was a bad idea. The front line guys were wrong.
This seemed out of context with how BMW positions its own brand. According to a North American Marketing Executive: “…BMW does not like to have any products in the maturity or decline stage of the product life cycle. “If a product is declining, we would prefer to withdraw it from the market, as opposed to having a strategy for dealing with the declining product. We’re kind of a progressive, go get ’em company, and we don’t think it does our brand image any good to have any declining products out there.”
Other than real estate, automobiles are usually the second most expensive purchase most consumers make. Moreover, they represent a transaction that is part practical need (transportation) and part personal statement (how people see themselves). Moreover, automobile manufacturers stress “lifetime relationships.” BMW, here is your wake-up call:
- You sell expensive luxury cars with faulty parts (what transmission goes at 55,000 miles, the equivalent of $1000/mile driven, I wonder). My prior BMW had 125K miles with no transmission issues
- You made their dealers look like fools. In addition to charging me an arm and a leg to change the transmission, you were completely off message with the kool aid they were pouring. Moreover, I got a used part (rebuilt)
- You are losing a customer for life. Load that in the lifetime value model. Expect additional negatives from my friends and family.
This represents the ultimate arrogance of incumbency (in a future blog, I will share the “seven deadly sins of incumbency”). The worst part is BMW cracked open the door for a challenger brand, a nightmare event in the marketing game. In my case, it was Audi, a choice I am very happy with. Challenger brands like Audi:
- Study the market position of incumbents
- Identify and exploit gaps in the whole product strategy (price, features, experience, service)
- Innovate one or more steps past the incumbent
- Deliver value
- Just try harder.
Incumbents almost always seem susceptible to good challenger brands, but it usually takes a poor customer experience to open the door. It took me decades of working before I could afford my first BMW. So it was an emotional decision to bid BMW adieu for future purchases.
But I am sanguine about Audi’s prospects and happily made the buying decision after reading an interview with their Chairman Rupert Stadler. As he told CAR magazine
“You can never stop or be satisfied as an entrepreneur unless you innovate. We have given ourselves really ambitious targets for our 2015 strategy – but that’s good. You have to set yourself ambitious targets for your future – because then you really push your organisation. Look at what we’ve done in past few years: Audi has really done a great job in improving its image, increasing its prestige and growing the product portfolio. And this was a big stimulation for our dealer body, because we invested in new products and they saw them before the public did. Dealers said to me: ‘If this is true, then I will invest in this brand.”
If anything goes wrong with my new A5, I hope and pray I will not get a runaround from the dealer and the manufacturer.