In April, BMW North America named Jim O’Donnell, a gritty, hard talking Scotsman, president. O’Donnell took over from the elegant, diplomatic, and also Scottish, Tom Purves, who is now the CEO of BMW-owned Rolls Royce. While Purves was known for never breaking a sweat, O’Donnell is a rough-riding executive who cracks wise often and speaks bluntly. In his previous post as managing director of BMW U.K., O’Donnell spoke out against the government’s plan to reduce carbon dioxide emissions from cars and in 2004 told a reporter that bonuses taken by four execs at MG Rover, a one-time BMW property, were “the unacceptable face of capitalism.” Three years ago, O’Donnell called out his dealer body, damning some of them as “lazy” and “not hungry enough.” And his view of marketing was evident when last year he said: “Product, product and more product is the way to maintain your position at the head of the premium sector.” One of his first moves has been to increase prices across the board in the U.S. by 2.1%, and he did so with no apologies even as the American economy went through some corrections. This has been a prolific year at BMW. In addition to the 1-Series, BMW has introduced a small crossover, the X6, as well as the M3 series of performance sedans. A slightly tweaked 3-Series goes on sale next month, and two diesel models will hit the market later this year or early next year. Only Lexus sells better than BMW in the U.S. luxury car category, which is down overall 12.3% through August, per Autodata, Woodcliff Lake, N.J.. BMW’s car line has fared better than the industry, off 7.1% and 7.4% for cars and trucks, respectively, not counting Mini. With its line of smaller, better mileage offerings, BMW is pacing to overtake Lexus and again become the king of sales in luxury, behind now by around 7,000 units. O’Donnell and marketing vp Jack Pitney, a veteran of the company and the man behind BMW’s latest “fun to drive”-themed marketing communications, recently fielded some questions from Brandweek.
Brandweek: Are you comfortable with the 2.1% price increase even as car sales are down?
Jim O’Donnell: We are seeing inflation and we just can’t keep absorbing those costs. Materials are going up and it’s just something we have to do. I don’t expect that it will have any effect on our sales.
Jack Pitney: The increase is not out of step with what our competitors are doing. Cadillac announced a 3.7% increase not long ago.
BW: You have stated product is paramount. Where does marketing fit in?
JO: Product is what has kept us ahead this year; it’s always the product. The X6 and the 1-Series have done very well for us. So [pointing across the table at Pitney] he has to make sure we sell those even on the miserly budget we give him. He has to bring across what great vehicles they are. Besides, our marketing efficiency has grown amazingly over the years. It should be easy.
BW: Your ad spending for cars like the X6 has dropped. Why?
JP: For the X6 especially, it was a very niche audience and in the end we have sold to the alpha male, which means we do things like the takeover of the screen on CNBC. When you have such a focused vehicle, you have to have focused marketing. So it was a small, narrow, focused ad buy. But remember when we launched Mini, we had no TV at all and people were saying, ‘Wow, how innovative.’ The truth was, we had no money.
JO: The vast majority of people in that segment, we would rather have them stay in the X5 [SUV]. And the 1-Series, that was just good timing.
JP: We did a mostly online campaign for the 1 and it worked. The best barometer of a successful campaign is how well the product is doing. And it is two-thirds presold.
BW: How have the effects of the emissions standards affected BMW?
JO: Which ones? You have [federal] standards, then you have California. What would be nice is if everyone, Europe, the U.S., the states, got together and decided on a standard. Europe set a pretty high benchmark, and all of this various engineering is expensive. We are coming with diesel to the U.S. and I think that if we had the same penetration on diesel in the U.S. as we have in Europe, you could halt imported oil.
BW: How do you market diesel in the U.S. with the price about 60 cents higher than regular unleaded. Plus, people have an image of it as a smelly, clattering engine?
JO: You know Tom Purves and I argued against bringing diesel into the U.K. 15 years ago. But look at it now. You need to get people into the [diesel] car and test drive it, have a strong dealer demonstrator program. I also think the press will do a very good job of describing what diesel can do and how clean it can be.
JP: We will invest tremendously in Web activities. We will have a diesel as the lead vehicle in the Ultimate Drive for Susan G. Komen for the Cure. And we will rely heavily on experiential.
BW: You called out execs at MG Rover a few years ago for taking bonuses as the brand was failing. What about the chiefs at ‘The Big Three’?
JO: It was the way the government bailed them out, and I was referring to what I thought was an abuse of the system. I think that anyone running a company the size of, say, General Motors, deserves fair pay.
BW: Is the BMW that was behind the film series The Hire still in place? How about alliances with tech companies like Apple?
JP: We are operating under a different paradigm. The Hire was a tremendous hit for us, but it came at a time when we were more able to spend on things like that. Things have changed and this is an engineering brand. At the time, it was very revolutionary, very progressive. It would be much less so today.
BW: I take it you’ve seen the new Audi ads featuring the BMW 328? How do you like being portrayed as old luxury?
JP: Any time a competitor mentions you in a spot, it means you are the benchmark. I’m flattered and I hope they do more of it.