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 innovating.

In this post I will look at two premium car lines, BMW and Lincoln, which identified and adopted distinctly different strategies designed to further differentiate each from their competitors.

BMW is a World Class car company

BMW is the most popular premium automobile 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 premium services for individual mobility”?  The simple answer is that differentiation based on performance, styling, driver comfort and other traditional car attributes has a very limited 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 looks pretty much 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 only remains a differentiator for one or two years before it erupts into the rest of the group – try and find a luxury car without “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 means 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 for long trips.

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 its1990 peak and now significantly lags BMW, Mercedes, and Lexus.  In 2011, Lincoln eliminated approximately 35% of its US big city dealers and determined that both prospects and customers receive a significantly less compelling experience when they go to a Lincoln dealership then when they go to BMW, etc.

Lincoln Motors has a 3-pronged effort underway to upgrade the dealership experience while it also upgrades its products.  But it is quicker to upgrade the experience because of the multi-year lead-time to create and rollout a new model.  The 3-prongs are:

  1. 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 how to deliver “chocolates on the pillow” service.
  2. Dealers have been asked to invest as much as $2million in dealership upgrades to catch-up to their more exciting competition.
  3. Lincoln will launch a 24-hour on-line concierge service for shoppers and owners with live staff members available to answer questions and provided guided walkthroughs of new models.

I can only assume that Lincoln will upgrade their new models to further enhance their customer’s experiences.  Of course the big 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 German’s 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 5 year or so when current plans come to fruition.