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BMW Burns Cash for What?

Date:04-06 11:56 Authour:He Lun

——Auto Market Hotspots Q&A (121)

BMW Brand Experience Center - perhaps the largest brand marketing project in Chinese automobile history - was unveiled in Shanghai on March 25th. Located beside the China Art Museum, the landmark of Shanghai Expo Site, and covering a floor area of 45,000m2, this experience center is intended to allow ordinary people to experience the joy of driving BMW cars, take driving lessons, understand the history and culture of BMW, and enjoy original German food and the country’s free lifestyle. No doubt this is a cash-burning move for brand marketing. On the other side of China Art Museum was the Mercedes Benz Arena (Expo Cultural Center named by Mercedes Benz). It is interesting to see these two – the strongest luxury brands in the world - put on a rival show in Shanghai.

Q: How much did BMW spend on this large experience center? How necessary is it?

A: Many third party agencies have rated BMW as the best luxury brand. Without this kind of heavy spend on marketing, it could not have achieved these results. As I said, luxury brands are built on piles of money - spent in the right way. When brand awareness, reputation and value are improved, a brand will definitely achieve higher sales. This is a virtuous circle.

I think the significance of the BMW experience center is not only limited to the BMW brand itself. It also demonstrates to newer and weaker brands that they really need to stop thinking that there is any short-cut to success when a brand as strong as BMW still needs to spend money and even burn cash on brand building (Please see the article “No Free Lunch for Brand Premium”).

BMW Burns Cash for What?


BMW’s Shanghai Experience Center


Q: But in fact other brands too have spent a lot on brand building. They have invited stars to endorse them and carried out large-scale promotion activities, but still there was no obvious improvement in their brand strength. What do you think?

A: The key lies in “the right way” to spend money. There are two parts to this: the first is to spend money on the brand concept and brand value, which is the foundation, and to make sure the star you use as your ambassador fits the brand; the second is to be persistent , and not to make the mistake of chasing quick success. In some state-owned carmakers, whenever a new sales leader takes office, the whole strategy will be re-invented and all previous efforts ae scrapped and go to waste. This is the biggest mistake in brand marketing.

BMW understands very clearly where to spend money. They attach great importance to corporate social contribution programs. For example, they have been running BMW Children’s Traffic Safety Education Camp for 11 years, BMW China Culture Journey for 10 years, and BMW Warm-Heart Fund for almost 10 years. These activities have played an essential role in improving both brand and user image.

When I visited Shanghai Experience Center, what impressed me most was that all the activities here were designed around BMW’s brand concept – “JOY”. They were very interactive with ordinary people, while the Mercedes-Benz Arena, in contrast, shows a cool and classy style. Here the two rivals are both displaying their distinguishing traits.

Q: Speaking of the best car brand, some say it’s BMW, some say it’s Mercedes Benz and some believe it’s Toyota. Which one is really the best?

A: It’s hard to say, because different brand rating agencies have different answers. Some are agencies specialized in market research, such as Brand Finance in the U.K. and JD. Power in the U.S.; some are media, like Forbes and Fortune in the U.S. and AMS and Auto Bild in Germany. There are other ratings produced by domestic agencies and media, although I’m not sure about their credibility. Among these agencies, some evaluate brands in all kinds of industries, and some only evaluate car brands or even luxury car brands; some target the global range and some the regional market; some focus on brand value and some on brand appeal. As far as I know, BMW is the most frequently rated as No. 1, and sometimes Mercedes Benz and Toyota also take turns to top the rank.

The most interesting brand is Audi. As this brand is under Volkswagen AG, it is inevitably deprived of some of its glitter by Volkswagen and often loses brand ranking points in consequence. However, in some ratings done by authoritative media in Germany, Audi has been rated as the best brand for years. According to the results of the 2017 annual car brand survey issued by Consumer Reports, the most credible third-party assessment agency in the U.S., Audi ranked first again. It is quite astonishing that Audi could win receive such high approval in the U.S. in the aftermath of the emissions scandal.

Q: How important is brand to car sales?

A: If you compare the pricing and sales performances of Borgward and Qoros, you will see how important brand can be (Please see the article “Opportunities for Latecomers in the Auto Market – Why Borgward/GAC Fiat Chrysler Can Succeed”)

Q: Some people think that Borgward is just a brand bought by Beiqi Foton and has little to do with Germany, and in terms of product, Qoros completely overwhelms Borgward. What do you think?

A: First, I don’t think Qoros can beat Borgward outright in products. Qoros is indeed high-standard, but it may be a little too German, while Borgward design caters more to Chinese taste; in terms of space and configuration, Borgward stands out more. I took the BX7 for a test drive for over 20km and felt that the compatibility between the gearbox and the engine and the cushioning of the suspension were better than the Qoros, and that braking and steering were smooth. The only shortcomings are that the accelerator felt a little light and the engine and chassis had poor sound insulation. I should say each of these two brands has its own strengths.

It’s true that the Borgward brand was bought, but they do have a good story to tell. The whole launch event of the Borgward BX5 was filled with German elements. Christian Borgward, the grandson of the founder of Borgward, addressed the event; multiple Borgward classic cars put on a T-stage show; Anders Warming, former MINI design director, appeared as the design director of Borgward and talked about the design philosophies of this brand; and Ulrich Walker, former Daimler China boss and now CEO of Borgward Group AG, explained Borgward’s global strategies. Was that not German through and through?


BMW Burns Cash for What?

Anders Warming, former MINI design director, appears as the design director of Borgward, and talks about the design philosophy of the brand at the ceremony.


BMW Burns Cash for What?


Christian Borgward, the grandson of the founder of Borgward, addresses the ceremony.


BMW Burns Cash for What?


Activate your lifestyle - Borgward BX5 Launch Ceremony

My only disappointment was that at the opening of the event, the screen displayed Borgward’s hometown of Bremen, crossed by the Weser river, but the background music was the “Vltava River” (which flows through Prague) composed by Bedrich Smetana, the Czech composer. That, and the fact that the music was too loud and unclear.

But as the old saying goes - “one flaw cannot obscure the splendor of the jade”. The Borgward launch event was still successful. They invited more than 300 journalists and spent a lot on the event, obviously because they have known the sweet taste of good brand marketing.

If a Chinese company buys a German brand and is willing to do whatever it takes to build this brand as its own, it will consciously or unconsciously discipline itself into using the standards of the brand and absorb its genes. This is not a bad thing.

Q: I remember you once said no Chinese-dominated JV was really marketing its foreign brands as its own in the way that SAIC-GM did (see the article “Who Is SAIC GM Building Brands for?”). Why SAIC-GM only?

A: Because from the perspective of a JV’s Chinese partner, the brand belongs to its foreign partner. If you spend a lot on branding, you will be regarded as working for the foreigner, which is politically incorrect (see the article “The Game between the Chinese and the Foreign Sides behind the Competition of Brands and Sales”). It is really difficult to overcome this obstacle, but SAIC-GM did it and reaped a high payoff from the market. Mercedes Benz also does a good job, probably because the brand culture and senior executives of the foreign side have gained high recognition from the Chinese side and are taking a dominate position in the JV sales company. Things are a little special for BMW. Here BMW China and BMW Brilliance are doing the branding together. The Shanghai Experience Center was funded by both parties. This seemingly complicated cooperation, after years of fine-tuning, is now smooth and effective, which perhaps can serve a reference point for the future restructuring of Jaguar Land Rover in China.

Volkswagen is also a strong brand, mainly because the wholly foreign-owned Volkswagen China has a strong presence in China - not only does it do import car business, but it also spends a lot of money on branding.  

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