213-Reliability in High End Cars
Several years ago, BMW ran into a problem with its technologically advanced automobiles. It found that some customers were reluctant to buy their cars because the customers were concerned about the cost of maintaining products with such high technology. But BMW believed in its product and felt that the customer should believe equally. So, for more than the last ten years, BMW has offered free maintenance with its new cars. For four years, or 50,000 miles, a BMW customer will not pay for maintenance except for gas and tires. BMW continues to gain share and profitability in the North American market. (See “Audio Tip #160: How Do We Segment Customers by Emotional Needs?” on StrategyStreet.com.) Competitors have noticed.
Now, competition is beginning to offer free maintenance of its own. As always, the devil is in the details of “free maintenance.” The “Gold Standard” BMW covers everything but gas and tires. Competition offers “free” maintenance, but their version of free maintenance does not match BMW’s. Volvo’s “Safe + Secure Coverage Plan” covers five years or 60,000 miles and includes oil and filter changes and replacement of brake pads and rotors and windshield wipers. Cadillac’s “Premium Care Maintenance” doesn’t cover brakes and is limited to scheduled oil changes, tire rotations, replacement of engine and cabin air filters and a multi-point vehicle inspection.
Other competitors cover what BMW covers, but charge for it. Audi sells a maintenance plan separately with the list price of about $790. Mercedes Benz offers prepaid service packages.
All of these competitors to BMW fall short of the mark. If you were a customer deciding on an automobile to buy, and you cared about the Reliability of the vehicle during the time you owned it, who would you trust more? On the one hand, you have the company that promises true “free maintenance.” On the other hand, you have competitors who qualify, or charge for, their promise of “free maintenance.” If you want to compete with the standard, you have to be at least as good as the standard. BMW still leads the pack in Reliability when it comes to “free maintenance.” (See “Video #14: Definition of Reliability” on StrategyStreet.com.)
At the end of 2021, three competitors controlled over 50% of the luxury car market in the US. The market shares of all three were very close, with BMW holding a slight lead over Tesla and Mercedes-Benz. It seems likely that Tesla will overtake BMW in 2022.
From 2010 to 2012, BMWs US market share increased on double digit increases in sales. From that point on, BMWs market share has varied from 2.05% of the US market to 2.47%. The company continued to gain share on the basis of its superior Reliability compared to its competitors, at least until its competition began to close the gap. The company enjoyed its initial success by eliminating the reason for some of its hidden negative volatility. See HERE for more perspective.
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