der Bayerische November/December 2020 - 35

Mercedes Eliminates Seven Products

Will BMW Come To Its Senses?
By James Chew

eneral Motors wrote the book for the automobile business.
My Life With General Motors by Alfred Sloan, is a wonderful read. It should be a must-read for every business
school curriculum and a should-read for every car enthusiast.
One of Sloan's lasting foundational business practices was to
produce a "car for every purse and purpose".
Some would say that was a stroke of genius. In reality,
it was shrewd business move. It predates Lutz's Law of "When
Everyone Else is Doing It, Don't", and was done to counter the
automobile market leader of that time: Ford. Henry Ford's
philosophy was that the customer could buy any Ford they
desired, as long as it was a black Model T.
Not surprisingly, the American proclivity for excess never
sat well with German automakers. Growing up in Southern
California, the German vehicles I noticed on the road were the
Beetle (or the occasional Karmann Ghia), the Mercedes diesel
sedan, the BMW 1600 and 2002, the Porsche 911 and 914,
and the Opel Kadett.
In the mid-80s, I remember accompanying a friend to buy
his first BMW. That BMW dealer showroom featured only four
models: the 3 Series, 5 Series, 6 Series, and 7 Series.
However, today BMW has eleven distinct groupings (not
counting MINI) that, with various sub-models (Gran Turismo,
Gran Coupe) and powertrain combinations (gasoline, diesel,
hybrid, electric) result in over 100 distinct products.
Obviously, someone in Munich has taken Alfred Sloan's product
approach to heart.
Today, every Original Equipment Manufacturer (OEM) is
using niche marketing and niche products to increase sales
and market share. While many of those attempts have been
flops, the minivan and the crossover SUV are the two most
recent niche successes that motivate OEMs to keep
trying. And for reasons known only to the executives in
Munich and in Stuttgart, BMW and Mercedes have been

November I December

actively engaged in a product offering war. When one OEM
introduces a new niche product, the other quickly follows.
As examples, the Mercedes GLE and the Mercedes GLC were
direct responses to the BMW X6 and BMW X4, while the
BMW X7, the BMW 8/6/4 Gran Coupes and the BMW 2 Series
Gran Coupe were direct responses to the Mercedes GLC,
the Mercedes CLS/CLA, and the Mercedes A-Class.
Considering the expense that OEMs incur in the development
and maintenance of products, such undisciplined product
development is quite puzzling.
The OEMs sell their products to the dealers, who in turn
sell to the car-buying public. The dealers buy the products on
credit, hence the term "flooring costs". The dealers also must
invest in the training and equipment to service those
products, as well as purchase the parts to maintain and
repair them.
So for both the OEM and the dealer, a new niche product
can either be a short-term sugar high or a long-term success.
Considering the profit margin pressures that both BMW and
Mercedes face, it should be clear to all reasonable businesspeople that the "throw something on the wall to see if it
sticks" product planning approach it not wise.
Businesspeople themselves, the dealers carefully balance
their inventory with their sales. Inventory that is not selling
is discounted until sold and not replenished. When you visit
a BMW dealer today, you'll notice that "i" models are nonexistent. You'll also notice a lack of X2s, 8 Series, Z4s, and
2 Series Gran Coupes.
With the announcement that the A-Class will no longer be
offered in the US and that seven products (Coupes and
Convertibles) will be eliminated from their product line,
Mercedes has taken the first step to end this niche product
madness.
(When) will BMW come to its senses?

der Bayerische November/December 2020

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