BMW Trims Free Service, Adds Dealer Bonus

BMW now offers free scheduled maintenance for 4 years/50,000 miles. The plan was reduced because dealers told management that more than half of their customers replace their cars after three years, so the longer program was unneeded, said Willisch, who also spoke last week at the Automotive News World Congress.

BMW also simplified its dealer incentive targets and will further change them in 2017 when dealership loyalty rates will replace customer satisfaction survey results.

"We had a bonus which is fairly complicated and we did not move the needle" on customer satisfaction, he said. "We needed to make it simpler."

Willisch added that dealers who get above threshold performance ratings "should get more" because "in some shape it is linked to additional cost."

Other highlights of the new program include changes in the dealer holdback on new vehicles sold. Holdback is a portion of the dealer discount that is retained by the manufacturer and paid to the dealer later. Starting with the 2017 model year, BMW's holdback will be 5 percent of a vehicle's full sticker price. Previously BMW's holdback was 5 percent of the base sticker price.

"Depending on vehicle options selected, this generous change will yield a noticeable increase in your payment per vehicle," Willisch wrote in a memo to dealers this month.

BMW also will let dealers transfer free scheduled maintenance to a new owner, which is now prohibited.

In the memo to retailers, BMW said it is changing dealer standards in part to improve customer satisfaction and boost dealership profitability.

BMW dealers averaged a 2.6 percent return on sales last year, according to the memo. Such a return puts BMW dealers among the most profitable in the industry, Willisch said.

On the service side, BMW has lagged the competition for years. In the J.D. Power 2015 U.S. Customer Service Index Study -- which measures customer satisfaction with dealership service -- BMW was rated below average, eighth of 12 luxury brands.

Before setting a loyalty standard, BMW will measure how many buyers repurchase or lease another of its vehicles because "what counts is loyalty," Willisch said.

Service customers are already asked whether they would come back or recommend the store to another customer, but BMW wants to measure buyer loyalty more accurately before it changes the dealer standard, Willisch said.

BMW has been working with its National Dealer Forum on the changes for about three years, he said.

A key message from dealers, Willisch said, was the top performers should not be treated the same as the "lowest 20 percent," and "those who do not play along and are not much of an asset to the brand."

Not all dealers will quality for the 1 percent bonus, he said.

BMW trims free service, adds dealer bonus
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