Remember the auto industry? You know, the one that almost died in the U.S. in the 2007-2008 recession. The good news is that it is alive, well, and innovative.
In this post, I will look at two premium auto lines, BMW and Lincoln, which identified and adopted distinctly different strategies to differentiate themselves from their competitors further.
BMW is a World Class auto company
BMW is the most popular premium auto brand in the world. Fortune Magazine named BMW number 14 on its list of the World’s Most Admired Brands, just ahead of Proctor & Gamble and Nordstrom. Its market capitalization is twice as large as Mercedes. So, why did BMW recently rewrite its mission statement and say it aspires to become the “world’s leading provider of premium brands and services for individual mobility”? The simple answer is that differentiation based on performance, styling, driver comfort, and other traditional car attributes has a minimal future. For example, consider styling and how difficult it is to identify a car make by looking at a car profile. Both the Hyundai Elantra and the Mercedes CLA are swoopy! A boxy SVU from any manufacturer seems like any other in its class.
While BMW provides a great driving experience, so do Mercedes Benz, Lexus, Audi, and the rest of their class. Technology remains a differentiator for one or two years before it erupts into the rest of the group – try to find a luxury car without a “large” touchscreen display, Bluetooth, Sirius radio, and who knows what else. Therefore, car manufacturers, like most other businesses, are evolving their portfolio to include value-added services.
To BMW, premium services mean connectivity. Here are a few of the new services that BMW is rumored to be creating:
- An app that helps you locate a parking space when you arrive at your destination
- Another app to rent out your parking space at home while you are gone
- Another app to locate the most convenient lithium-ion battery charging station (for its not yet released advanced hybrid) or, in an emergency, arrange for a mobile boost to get you to a charging station if none are readily available.
- And finally, for long trips, BMW plans to arrange a short-term swap of a hybrid for a gasoline-powered car.
So, for BMW, the path to differentiation leads through interconnectivity and value-added apps.
Lincoln Motors is trying to reverse a 20-year slide
Lincoln is in a very different situation than BMW. Its volume has been reduced by nearly 2/3 since its 1990 peak and significantly lags BMW, Mercedes, and Lexus. In 2011, Lincoln eliminated approximately 35% of its U.S. big-city auto dealers. They determined that prospects and customers receive a significantly less compelling experience when they go to a Lincoln dealership than when they go to BMW, etc.
Lincoln Motors has a 3-pronged effort to upgrade the dealership experience and its products. But it is quicker to elevate the experience because of the multi-year lead time to create and roll out a new model. The 3-prongs are:
- Lincoln Motors hired Les Clefs d’Or, an association of upscale hotel concierges, to help create an online Academy to train customer-facing employees on delivering “chocolates on the pillow” service.
- Dealers have been asked to invest as much as $2 million in dealership upgrades to catch up to their more exciting competition.
- Lincoln will launch a 24-hour online concierge service for shoppers and owners, with live staff members available to answer questions and provide guided walkthroughs of new models.
I can only assume that Lincoln will upgrade their new models to enhance their customer’s experiences further. Of course, the significant risk is that Lincoln is “a day late and a dollar short”; they may be so far behind their German and Japanese competition that even as Lincoln improves itself, the Germans and Lexus will also continue to improve and at a faster rate since they have momentum behind them.
This will be an interesting case study in five years or so when plans come to fruition.
A related article about differentiation – U-Haul and Differentiation Through Value-Added Services
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