Monday, May. 25, 1987

Saying Hello To BMW-San

By Barry Hillenbrand/Tokyo

The effort seemed destined to become one of the most futile and foolhardy moves in marketing history, as ridiculous as trying to sell snow to Eskimos or coals to Newcastle. Six years ago BMW, the West German automaker, decided to start a major drive to increase its exports to the land of Honda and Toyota. Walter Sawallisch, director of marketing for BMW Japan, recalls vividly the reaction his company got from industry experts: "When we began, people told us there was no chance at all. They said the Japanese would never buy foreign- made cars."

But the naysayers were wrong. BMW Japan has carved a still small but fast- growing market niche for its high-price, high-performance cars. Since 1980 Japanese sales of the BMW have nearly quintupled, to more than 15,000 a year, making it the top-selling foreign car. Although the company declines to release its earnings report, it claims to have made a profit from the very beginning.

To be sure, Toyota and Nissan have little reason for nervousness. Imports accounted for only 2.2% of the Japanese market last year, and the giant American auto manufacturers were virtually absent. BMW's success, however, has encouraged several foreign carmakers, including Sweden's Saab and Volvo and West Germany's Mercedes-Benz, to push harder in Japan. As a result, car imports to Japan jumped 36% in 1986, to more than 68,000.

BMW's story is a casebook study in how, with patience and the proper strategy, a foreign company can penetrate the allegedly impenetrable Japanese market. For more than 20 years prior to 1981, BMW had sold a few thousand cars annually through a network of 33 dealerships owned by a Japanese company. The BMWs were almost casually displayed in large showrooms that also contained such disparate products as imported cameras and audio equipment. Convinced that sales could be much higher, BMW made the bold decision to buy the dealerships and start a full-scale Japanese subsidiary. The company chose Yoji Hamawaki to direct its new offensive. He is a marketing whiz who spent 14 years selling Kawasaki motorcycles in the U.S. before moving to BMW Japan as president.

Hamawaki knew well what Japanese consumers demand: a quality product, good service and a wide variety of models and features. To back up its already strong reputation for quality and service, BMW spent more than $10 million on a Japanese distribution center, which rushes spare parts to the company's dealers within 24 hours. Since 1981, the number of BMW models offered has increased from seven to 21. And each model, from the basic 318i ($26,000) to the top of the line M6 ($90,000), is laden with "standard features" that are usually options in Europe or the U.S.: air conditioning, automatic transmission, power windows, sporty hubcaps and, of course, a Sony AM-FM radio complete with tape deck, CD player and four speakers.

An extensive advertising campaign molded the image of success and quality for BMW in the minds of Japanese. BMW sweetened the cars' high prices by reducing the interest rates on its auto loans. The company has found ready buyers in a new breed of consumers, who, as BMW Salesman Akio Iio puts it, "want to express their individuality in the vast mass of Japanese car owners." Often BMW buyers are professional people, doctors or dentists, or such entrepreneurial types as designers and inventors. Many are women who want a second family car or their own auto to indicate their success in the business world. "Surprisingly," says Hamawaki, "the Japanese automakers were not marketing to this new and growing segment of individualists. We nurtured and stimulated this demand."

The local giants are starting to respond. Honda, among others, is adding sportier, more expensive cars at the top of its line, a development that does not seem to concern BMW. "We welcome the competition," says Hamawaki, "because it generates interest in the prestige cars. The more they sell, the more we sell."

BMW's brisk sales in Japan make the performance of American automakers seem $ all the more dismal. U.S. models were once the leading imports, but Japanese consumers became dissatisfied. Explains a dealer who used to sell American cars: "At one time an American car was a statement of quality, but sadly it is no longer." In 1980 U.S. companies sold 11,058 cars in Japan, but by 1986, the total was down to 2,345, or just about equal to the number of BMWs snapped up in March alone. To reverse that trend, Americans may have to take a few lessons from BMW on how to sell snow to Eskimos.