Every year, 15,000 potential buyers test their racing skills at the BMW (NASDAQOTH:BAMXF) Performance Driving School. As a recent participant in the school, I can attest to the performance-centered aspect of the experience, though my attention was focused more on what BMW gets from hosting the school than what the participants gain from attending it. Performance driving is something that BMW can sell with more success than any of its competitors, and the BMW Performance Driving School is the perfect tool to generate more sales.
A week ago I was red-lining a 575-hp BMW M5 at over 100 mph. Now, I'm sitting in an office chair staring at a computer screen.
The BMW Performance Driving School experience is intense, and the company needs it to be. As the leader in commercial motorsports cars, the company needs a safe and legal outlet for the pent-up torque of American BMW M-series owners. It comes as little surprise then that half of the drivers in the One-Day M School I attended were already BMW drivers, a few of whom owned M-series vehicles.
These owners, along with the rest of the class participants, used and abused high-performance vehicles in a way that could not be done outside of the BMW Performance Driving School. Owners would not push their own vehicles to the same extremes as are encouraged at the school, and even if they were willing to do so, they would risk conviction for reckless driving. In the end, the one overarching takeaway is that these BMW vehicles are designed for performance.
The exit survey
Outside of the obvious instructor evaluation questions and suggestions for improving the experience, the exit survey given at the end of the day is aimed to gather information on brand perception. Brand is what enables BMW's success. From designing high-performance Olympic bobsleds to realizing some of the highest margins in automotive manufacturing, brand is at the core of every directed decision made by BMW. Forbes ranks BMW as the world's 11th most valuable brand, the highest ranking for any automobile manufacturer. The BMW Performance Driving School is one more way the company establishes its performance-focused brand, and they are quick to ask for feedback on how the school affects brand perception. Though brand is front and center in the exit survey, following completion of the course BMW ultimately wants to know if the participant is more likely to purchase one of their vehicles.
As BMW tries to regain the title of the best-selling luxury brand in the U.S. from Daimler (NASDAQOTH:DDAIF)-owned Mercedes-Benz, the Performance Driving School can play a notable marketing role in the process. Already interested consumers (numbering about 15,000) who are able to pay over $1,000 per day for the school make up the exact market that BMW is focused on: car-interested Americans with a high disposable income. What BMW may lose in the luxury vehicle market share to Mercedes may be compensated for in the lower-end sedan market by pushing higher-margin, high-performance vehicles. Volume is great, but it shouldn't completely overshadow earnings.
As an outsider, it is difficult to calculate how much profit, if any, is realized from the $1,450 fee for the One-Day M School. Having witnessed firsthand the need for frequent tire and brake replacement paired with instructor and mechanic salaries, insurance, fuel costs, and facility expenses, the margins achieved by the school appear less important to the company than the corresponding affirmation of its brand image. In the long run, the $30 million dollars in total sales generated by the BMW Performance Driving School pales in comparison to revenue generated from the over 300,000 vehicles sold yearly in the U.S., regardless of the school's margins. If the school can be run at break-even, increased sales and word-of-mouth will be more than enough to justify the effort. With classes filled through this November, the marketing for the school appears to be working, which can only be a good sign for the company as a whole.
The downside to attending the school is the realization upon leaving, especially if one already owns or has had their interest kindled to own an M-series BMW, that all of the potential for high-performance built into the vehicle will go largely unrealized driving in the real world. That said, as a consumer I walked away a much more likely future Bimmer, and I'm confident I was not alone among my classmates.
Shamus Funk has no position in any stocks mentioned. The Motley Fool recommends BMW. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.