21 July 2008

BMW vs Audi real world brand engagement exercise part 5

One point I forgot to mention last week was that 3 weeks ago, I sent my 3 series in for a service at BMW. This is the dealer I purchased the 3 series from about 6.5 years ago. They have a record of the service history of the car as it has been serviced there since new. By default they therefore have a record of the fact that the car is nearly 7 years old. A simple piece of software, bought off the shelf should allow them to integrate both sets of data.

Just to recap, I bought the car there, have serviced it there and have sent it there for other repairs (It's my wife's car so they see it quite often, expecially to fix dents!) for nearly 7 years. Surely I'm the first place the sales force should be looking when they want to make another sale?

So, when I sent the car for the service, I asked him what the trade in value of my 3 series would be. He explained that he couldn't help but would get one of the sales force to contact me.

No body has called.

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16 July 2008

BMW vs Audi Real world brand engagement exercise part 4

It's almost a week since the second call from the BMW dealer. Judging his character from his voice, I predicted that he would call a third time and then give up. It looks as if I may have been wrong and he's given up after 2 calls. Still, we'll give him another couple of days. If he does call, I'll give him the chance to get me to his showroom.

In the meantime, I've not heard anything from the Audi dealer. No response to my email that requested information using the website advertised in one of the print ads that have been all over the print media for the last 2 or 3 weeks.

We'll send the MD a letter and see how we get on. Meanwhile, we're going to try this approach with other brands in the automotive industry.

11 July 2008

BMW vs Audi Real world brand engagement exercise part 3

The good news is that the salesman from BMW called again today and left a clear, concise message on my mobile. He did sound like he'd had a few last night but who am I to judge!
Anyway, I will of course ignore him and see if he follows up. My guess is that he he'll try one more time then give up.
Sadly I have not heard anything from Audi which is a real shame because they have invested heavily in print, outdoor and digital marketing but appear to be let down by their inability to process leads. Makes one wonder why they bother implementing the marketing campaigns unless they expect people to call and place orders.

04 July 2008

BMW vs Audi Real world brand engagement exercise part 2

Although I did not receive a confirmation email from BMW or Audi. I have been contacted by BMW so it is first blood to BMW.
Yesterday I received a call from a salesman at a nearby BMW showroom.
He was very pleasant and polite and asked me what I was interested in. He told me where his showroom is located and suggested I come and visit. I said I would come however I was vague and he did not try to make me commit to an appointment.
Also, although he has my number, he did not ask if I had his or what was my prefered communication method.
He did not give me a timeframe to reply and did not ask if it is alright for him to call me in a week.
We'll see what happens.

02 July 2008

BMW vs Audi Real world brand engagement exercise part 1

My wife would like to buy a new car. And who can blame her? She bought her BMW 3 series new, nearly 7 years ago so she is overdue a new one.
Now, she's always been a BMW owner and our experiences with my Mercedez Benz have been such a nightmare that she has no intention of changing to a Mercedez.
The trouble is, our experiences over the last 6 months with BMW sales personnel have also been disapointing. Then I saw an ad in the NST for the new Audi A4 and suggested we at least go and have a look at it. Surprisingly, she agreed.
So I decided to make the whole experience a little more interesting. I decided to carry out a sort of anecdotal mystery shop or brand audit. Create a play off featuring two iconic automotive brands with the winner taking all, well, getting our business anyway.
And that's significant because these days, with WOM increasingly important, we entertain and socialise a lot and can definately become brand Ambassadors or advocates and influence purchases of friends, colleagues and acquaintances.
So, on 1st July 2008, I went to the websites of both Audi Malaysia and BMW Malaysia and filled out the "request for information forms".
Over the next days, weeks and months, I'll report on the sales process, how & when they contact me, how I'm dealt with, if I'm invited to meet how they sell to me and so on.

18 March 2008

Luxury brands target Malaysia

The relentless development of the retail sector in Malaysia continues. Passing almost unnoticed however is the proliferation of international luxury brands. Familiar international names such as Asprey, Giorgio Armani, TOD’s, Van Cleef and Arpels and so on, have all entered the local market in recent years, encouraged by the success of exclusive names such as Bulgari, Cartier, Hermes, Louis Vuitton, Rolex and other famous names already familiar to KL shoppers.

Unusually in Malaysia, KL’s newest mall, The Pavilion, is clustering its luxury boutiques into a high profile area facing Bukit Bintang. Globally, this clustering of stores is nothing new. For centuries stores have organized themselves into districts based on what they sell - think Saville Row in London (tailors), Faubourg Saint-Honore in Paris (designer boutiques), Deira in Dubai (jewelry), and so on. The cluster approach allows the rich and famous to be dropped off in front of the store, rush in and make a purchase that would make a small African country drool and then rush out into the safety of the limousine without having to rub shoulders with the rakyat.

With its double story street facing façade the luxury section or ‘couture precinct’ of the Pavilion is an exciting development in the evolution of the retail sector in Malaysia. But there is one thing missing from this development. That is a luxury Malaysian brand.

And as Malaysia moves from an Original equipment manufacturer (OEM) economy to an Original brand manufacturer (OBM) economy, the retail sector, where so many Malaysian OEM cut their teeth, should be at the forefront of this step up the value chain. Especially as according to the MasterCard Worldwide Insight report released recently, the value of the market for luxury products and services in the Asia-Pacific region will jump from US$83.3 billion last year to US$258.7 billion in 2016. Not a bad segment.

What’s more, there’s already a ready made market because the largest number of tourist arrivals to Malaysia is from ASEAN countries, followed by Japan and China with India and the Middle East not far behind. And the burgeoning middle classes from these countries are notoriously brand conscious.

This interest almost obsession with brands is likely to continue according to Radha Chada, author of “The cult of the luxury brand”. She believes that the Asian interest in luxury products is because of the massive changes - social, cultural, economic and political that have been affected by the traditional attitudes to who you are and where you are in the societal food chain.

She believes that over the past 50 or so years, many of the traditional cultural indicators of social standing in Asia – profession, family, clan, caste have been eroded by the onset of globalization, migration and education. Free of rigid social hierarchies, mass migration and the development of urban areas, more people are making money and making it faster. The way to differentiate oneself is by purchasing a luxury product that shouted, “I’ve got money, respect me.”

Displaying one’s status through outward appearances of rank and wealth is nothing new but Asians seem to have taken to it like the proverbial duck to water. And those LV bags, Channel suits, Jimmy Choo shoes aren’t simple female indulgences, they are part of a new world order that identifies the wearers position in society. Indeed, these luxury brands are a modern set of symbols that Asian consumers are using to redefine their identity and social position.

Japanese have been devouring brands for years (see sidebar). But what about China? According to the China Brand Strategy Association, 175 million Chinese people can now afford to buy luxury products. By 2010 their number is projected to reach 250 million.

Bentley, the iconic British luxury brand expects to sell 300 cars in China this year, up from 70 in 2003. Not bad considering each car costs over US$250,000 each.

So, with all this new found wealth in Asia, the time is ripe for the development of Malaysian brands. And the good news is, Malaysian firms know how to manufacture quality products. They’ve been doing it for years for iconic brands such as Boeing, GAP, Guess, Ralph Lauren and other well known global brands.

But developing a luxury brand is also like raising a family – it requires a long-term commitment and investment, attributes that don’t sit well with corporate Malaysia. It also requires limited production, value over volume, even with a successful line. It also requires quality, not only in production but also in marketing. Training of staff is key. Walk into the Cartier store in KL and the staff will assess you based on a number of pre-determined factors. Pass the test and they’ll offer you a bottle of champagne to anesthetize the pain of the purchase!

Ongoing research is also critical to the long-term success of the luxury brand. Back in 1837, when Hermes was building its brand, the founders lent new products to customers to get feedback on how the products could be improved. Zara applies the same tactics today. If a new line doesn’t sell, it is pulled off the shelves immediately and replaced with a new range based on customer feedback on styles.

One mistake many brands make is that they ignore existing customers, preferring to always acquire new customers. The successful luxury brands have an ongoing relationship with their best customers who become brand ambassadors and grow the family.

And for those who don’t think there is any money in luxury brands, think of Jimmy Choo, the closest Malaysia has come to a luxury brand. Six years after Jimmy Choo sold his 51% stake in his own company for US$25 million, TowerBrook Capital Partners recently paid more than US370 million for ownership of the iconic brand named after the charming cobbler born in Penang in 1961. And with annual sales that have grown since 2001 at a compounded rate of over 45% to more than US130 million today, the purchase looks like good value.

Another British based private equity group, Permira, paid US$3.5 billion late last year for the Valentino Fashion Group. This was one of the most talked about acquisitions of 2006 because although Valentino is a well respected brand in Europe, it does not have the penetration in Asia of say Giorgio Armani. This is reflected in the global sales of US$340 million for Valentino compared with US$2.1 billion for Giorgio Armani.

So, as the average tourist spends only 22% of his budget on shopping in Malaysia compared with 50% in Hong Kong and Singapore, the time is ripe for Malaysian firms to start building brands that can take pride of place alongside Canali, Ermenegildo Zegna, Jean-Paul Gaultier and Versace in places like the Pavilion, Star Hill and other malls in KL.

12 August 2007

Will Nokia make the same mistakes it made in 2004?

At the end of 2003, Nokia had 34.6% of the global handset market. By the end of the first quarter, 2004, that share had slipped to 28.4%. This 20% drop in market share was despite a year-over-year increase of mobile shipments of 29.3%. Nokia found itself in this desperate position because it was slow to introduce clamshell style phones and colour displays.

Fast forward to 2007 and Nokia is currently humiliating Motorola in the handset stakes. In the first quarter of 2007, Nokia shipped 92 million units, a 20.6% growth compared with Motorola’s 47.5 million units shipped during the same period. Since then, Nokia’s global market share has climbed to 38% whilst Motorola’s slumped to a dismal 13%. Analysts think that Nokia’s share of the global market could climb to an all-time high of 40% by the end of 2007. On 2nd August, the Finnish behemoth announced an astonishing 57% increase in second quarter operating profits to US$3.2 billion. And when the definitive metric for measuring brands is profitability, Nokia sizzles again with operating margins for the combined mobile device business of 20.9%. The company also has US$9.5 billion in cash and no debt.

Nokia’s success is based on its rapid expansion into emerging markets, in particular here in Asia where Nokia sold 23.7 million phones in 2Q07. Much of this expansion is at the low end where Nokia offers phones for as little as US$45. However, also key to this continued dominance in the handheld market has been the launch of the Nokia N series. Nokia shipped close to 8 million units of the N series during this period.

At first glance, the N series are nothing short of extraordinary. Way ahead of the competition due to a list of features that includes integrated GPS functionality, a 5 megapixel camera (N95) and support for high-speed mobile networks and impressive functions that make it easy to record and later watch video, take still pictures, listen to songs, browse the internet, or even catch up with email while on the move. Throw in a provocative tagline, “It’s what computers have become” and you have what can technically be called multimedia computers in the palm of your hand. Nokia really is way ahead of the competition. The Apple Mac of the cell phone market. The problem is that it also puts the N series way ahead of Nokia. And herein lies the problem.

One of the unique features of the N series, and the N95 in particular, is the GPS feature. For anyone traveling to foreign lands, the opportunity to hire a car, key in the destination address and then be told how to get there is irresistible. In fact, in Kuala Lumpur, where I’ve lived for 14 years and still get lost, I’ve calculated that it could improve my productivity due to a reduction in lost time on the road by as much as 15%.

As Nokia prepares to launch the exciting N800 and the Apple iPhone stutters over its ridiculous battery policy and limited availability, there is a real chance for the Finnish company to take control of as much as half of the mobile market. This could possibly drive Motorola to extinction and rain heavily on the iPhone and other handset makers’ parades for good. But whilst Nokia’s skills in the logistics and distribution areas are legendary, it must get all of its peripheral ducks in a row to create a truly global brand that can dominate for a significant period.

And right now it isn’t doing so. Once the novelty factor of the GPS capability has worn off, one realizes that, well it seems to take forever to get a GPS fix. Nokia has promised a patch to speed the process up but it hasn’t arrived yet. Assuming it does fix this problem, the next step is the ability to integrate your N series phone into your vehicle. This is a logical next step because the screen on the N95 is only about 2 inches wide so it’s impossible to view from a distance of more than a foot. Squinting at a 2 inch screen when you should be focusing on the road is not in the highway code.

And this is where the wheels, so to speak, fall off. Once you are in your vehicle, where does the device sit? To be at its most effective, it needs to have the keyboard visible and be held at a 45 degree angle. This rules out any of the windscreen holders currently on the market. Anyway, this option isn’t practical because the battery life of the N95 is no more than 2 hours with the GPS running which rules out a stand-alone position on your windscreen. Plus, that 2-inch screen is not designed to be viewed using peripheral vision.

Surely the N95’s Bluetooth capability will allow the user to integrate it with the in dash screen of your in car system? Negative. There is nothing on the market that will allow the user to sync the N95 with the in car audio/visual system of any car. In fact there isn’t even a cable that allows the N95 to be plugged into the in car audio/visual system, unlike the fully integrated ipod and, when it finally arrives, the iphone.

Nokia needs to take a leaf out of the Apple book and start licensing the development of third party peripherals. Nokia makes good, no, great phones. It doesn’t do peripherals. My local Nokia store offers a charger that plugs into my lighter jack. That’s it! My Apple store offers numerous peripherals for my ipod video to enhance the in car experience. By licensing the development of peripherals Nokia can quickly integrate its great phones into cars and consumers lifestyles, thereby taking it even further ahead of the competition.

Nokia must work with partners, especially in the automotive industry, to integrate phones with the on board entertainment systems, especially those with VCD screens.

This is critical because, as global sales of handsets are forecast to slow in 2008, the successful brands, and by successful I mean profitable, are going to be those that produce cutting-edge technology, neat features and the ability to integrate the handset with consumers' cars, homes and PC’s. Nokia needs to understand that it needs to provide more than just phones or multimedia experiences some of the time. Nokia must provide the complete package or we will see a repeat of that dismal end to 2003.

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