06 December 2006
It's been another strong year for the UK's biggest-selling premium brand. Paul Barker met with new sales director Tim Abbott and general manager, corporate sales Chris Brownridge to see how they're planning to extend BMW's domination
Paul Barker: 2006 has been a good year in the corporate market for BMW. What's been driving this success?
Chris Brownridge: Corporate year-to-date we're 14% up, which is a strong achievement in the context of last year [BMW finished 2005 28% up on 2004]. What's been different in 2006 compared with 2005 is that the 3-series was launched last year, but only with certain derivatives. This year we've added Touring, 318d, 318i, 325d, 335d and 335i. Although the 3-series is declining in terms of importance, it's still very important to the range.
We've also added 730d long wheelbase and continued to establish the 1-series. It was a brand new car in a brand new sector for us against some very established competition in terms of the Audi A3 and VW Golf.
What can we expect in terms of new product next year?
CB: There's the new X5 in April plus the 3-series convertible on March 24. In terms of share they're only 20% corporate sales but they're important in terms of desirability.
Judging by the orders we've already taken, the new X5 will be sold out for the whole of 2007 by the end of this year. Plus the 3-series Coupe was only launched with six-cylinder engines, and it's inevitable that we'll see four-cylinder engines.
Tim Abbott: And there'll be an expansion of the 1-series range into other model derivatives [which be will a three-door].
Why has it taken so long to add another bodystyle to the 1-series?
TA: If you look at what Audi did with the A3, the five-door came about 18 months behind the three-door. We've just taken a different route to market. But don't just expect the three-door to be a cheap version of the five-door.
BMW's rapid growth has seen it outselling several volume players in the corporate sector. Where's the natural level and is there a danger of losing the premium brand status?
TA: Where does a premium brand start and finish? When I was first here (chk1) we were at 2.5%, now we're at 5%. Is it 7%, 8%? We can be a volume player in the prestige segment. iPod is a brand: every consumer's got one but it's still a premium product.
CB: The other way of looking at it is that 95% of new car buyers don't have a BMW.
What's growth been like in corporate and retail?
CB: We've got a 50:50 balance between corporate and retail and that's where we like it. We've grown in both areas.
It's important we have a balance between corporate and retail - it's no accident we're balanced. If people are spending their own money they will consider a BMW because its got good whole-life costs. When these cars are three years old, people will buy them with their own money because they're still desirable cars and they will still be wanted at five years.
Our cars are very well suited to the corporate sector [too] because user-choosers want them. Next year we're looking for moderate corporate growth, although we've got significant new product coming. Next year will be like 2005-2006 where a lot of 2006 growth was driven by 2005 introductions such as the 325d.
What other activity can we expect from BMW next year?
TA: Next year we're going to look at local corporate business and exploit where we have opportunities: local accountancy firms, lawyers, estate agents. We're changing how we pay our dealers to put the emphasis on how they approach the local business market, how they handle enquiries, the test drive, the sale itself and the aftersales service, the whole process. We're very good - we've got the best dealers - but there will be a total of £150m of dealer earnings dependent on how they do those things. Every dealer will have a local business development manager, supported by Chris' team.
CB: We need to make sure people who enquire about a BMW are handled in the right way, irrespective of whether they're retail or corporate.
Most or all of our corporate volume is a person that has specified they want a BMW. It's important we treat them as an individual irrespective of the process they buy through. It's not entirely new - today, the majority of our dealers have corporate resources and they focus on local opportunities, but we can't afford to be complacent. The market is very competitive and we need to make sure we're out talking to local businesses.
How does that differ from how you currently deal with business enquiries at dealer level?
TA: It's a sea change. We're very good at taking enquiries but this method takes planning and doesn't get immediate results. A corporate executive in a dealer could do 200 cars through enquiries on the internet and fax - this way he'll do maybe 75 in the first year. It's a slow burn.
CB: We have lots of new niche products and we have to make sure we're exploring all routes to market.
TA: We're looking for people with specific skills to talk proactively with companies. It's different from someone handling enquiries, which is basically corporate admin. We're in a good position in terms of whole-life costs, we just need to deliver that message. Because our message is so strong, our ability to win new business is quite significant.
CB: We're putting head count behind it here, BMW UK is focussed on making local business a high priority. We're absolutely confident there's opportunity for us there.
Will the diesel growth continue?
CB: The market obviously made a beeline for diesel based on tax, although the removal of the 3% has taken away some of the advantage. The market will continue to be diesel-orientated but we'll see a shift. Unless you're doing the mileage, diesel doesn't necessarily make sense, especially with the difference in pump price.
The driving force behind the shift to diesel has now been in place for a full cycle of company car drivers and I think the current level will continue.
What's going to be the biggest single issue over the next 18 months?
CB: The most prevalent seems to be environmental impact, which is an important agenda topic for us. I think there will be organisations that have strategic objectives over the carbon impact of their fleet. We've got a lot of good technology that can help that, and the next step is further technology, mild hybridisation as we call it. The things we're doing are for the core models; there's no point just having it on niche products. The future is in bringing technology to the core models that takes cost out of the ownership equation, and that's what we will do.
One very important enhancement will be to the efficiency and emissions of our products. We'll be able to offer a 2.0-litre diesel engine delivering the performance of a 3.0-litre diesel with the economy of a 1.6.
Is that something customers are asking for?
CB: It's cropping up on agendas more and more frequently, just as duty of care has done over the last 18 months.
What about a longer term strategy?
CB: Looking further ahead, hydrogen is the sustainable fuel where we're putting our resources into. But it's a marathon not a sprint and there needs to be an infrastructure in place.