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BMW Program Aims To Raise Owner Loyalty Rate

German maker targeting increased leasing, but sees a decline in incentives.

by on Sep.24, 2010

BMW wants you to trade in early.

BMW is betting on a new, high-tech marketing system to build both sales and owner loyalty rates.

The new program is designed to increase contact between the company and its customers – and to convince them to trade in their current BMW products sooner and more often, explains Shaun Bugbee, vice president of sales and marketing for the German maker’s American captive finance subsidiary.

Currently, about 55% of the customers who borrow money through BMW Financial pay off their loans ahead of schedule – typically at around 33 months on a 60-month contract, notes Bugbee.  A key reason is that BMW has, for the last several years, been offering heavily subvented, or subsidized, loans, often with interest rates of just 0.9% or 1.9%.  That makes it easy to pay down equity in a hurry.

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But the automaker has come to realize that when customers pay off their loans early they are more likely to trade in—often on a competing brand.  Retail owner loyalty rates, Bugbee says, have been running just 20%.  But a pilot program tested in BMW 12 dealerships has bumped that by as much as 12 percentage points.  So, it is now being rolled out nationwide.