Hey Dave,
You trying to test my comprehension of Micro Economic Theory,
or what??
:dunno:
Your question is a good one... BMW is absolutely wise
in maintaing production levels which do not create a situation where the market
is flooded with their vehicles. No doubt there
is a very fine line between too few and too many...
Here is my take on BMW's Marketing strategy:
Strong resale value is key to keeping the current roll
going, to maintain the very strong market position that
the brand is currently enjoying.
Everything that the company
does to maintain this strong resale value will keep both the
manufacturer, and the dealer body "healthy" for many years
to come. You see it everwhere within the policies of the retail
organization.
Take for instance, BMW's CPO program. Here's how it works;
retailers sign an agreement to buy back the lion's share of
their lease portfolio as it matures. Off-lease BMWs then avoid
the auctions, which keeps the resale value high.
Now, with these higher resale values, we can set our
residual values higher for our leases (because the remarketing
values support it), and consequently, we can then offer our
new car buyers even lower payments, The cycle becomes
self-propelled...
Dave, if BMW "over-produces", and floods the market with
product (e.g. the current Porsche Boxster), the consequence
can be devastating... Gross profits slip, inventories stack
up, and the manufacturer has to start pouring on the incentives
just to move the product. Resale values take a shit, and
the next thing you know, the brand is in trouble...
**Brands lose their esteem in the marketplace when that
happens - BMW doesn't want to go there...
Dave, the 1 Series is the only carline that concerns me.
While there were some devout 318Ti lovers out there,
the car was not a retail success (you would think that Daimler-
Chrysler could have learned their lesson (the C Coupe)
vicariously, but they didn't... The X3 will be a huge hi
volume success, and the 6-Series, well.....
:thumbup:
Damn!!
DaveN323i said:
Hi Jon,
I am not sure whether you read the Business Week article regarding BMW. One of the points it made is that BMW tries to produce cars at a number it perceives to be below demand. In this way it keeps the prestige up. I wonder whether this strategy may work when more and more models show up (the 1 series, X3, 6 etc). For example with the 1 series, if a customer can't find the car in the showroom, he/she would be tempted to get a lot of available arternatives. What are your thoughts?