Quote:
Originally Posted by Bluenose-2er
I understand the business mechanics. My point is that the investment needs to pay off... in increased sales of the target offering to offset the lost profits of the sacrificial (or bait) offering. Merchandising is a business decision, and business decisions are always to ultimately achieve profit that outweighs the cost... at a percentage that is equal to or greater than other opportunities to invest that money. Not sure I see that with the M2 Comp as a vehicle to increase M3/M4 sales... at least to the degree that points to very aggressive M2 Comp pricing.
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True in the P&L view in finance department, COM must be always at certain level. This also is usually an average in given portfolio segment (like 2-series with ex. 25%, 3-series with ex. 34% etc.). Within that series you have various models with different margins.
As for marketing standpoint, some of the products might have lower margin (which is to some extent mitigated by low volume) but these, like the M2 can have the halo effect boosting overall sales for given series. They 'earn' more in free (unpaid for) consumer reach (publicity, reviews, tests, general buzz on the Internet, this forum, etc.). This usually is not taken into consideration by any finance department into ROI calculation or margin.
The regular cars and M Performance have probably higher margin than M cars in general. But M division is all about building aspiration. Everybody would like to drive an M car, to be in the club but the aggressive pricing doesn't allow this. People who cannot afford or justify an M car go for other (better for BMW) option - like M240i or M140i (building profitable volume and keeping the margin on an acceptable level for the whole range).