BMW ties CSI to dealer margin
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BMW has tied more of its dealer profit margin to customer satisfaction and is removing a link to used-car sales.
Peter Miles, head of operations for BMW of North America, said 1 percent of the dealer holdback margin now is tied to meeting various customer satisfaction criteria.
The bonus is based half on customer satisfaction, 40 percent on employee training and 10 percent on service customer transportation.
In 2010 and 2011, dealers needed to hit individual used-car sales targets to earn the 1 percent bonus that was paid on the invoice price of every new car they sold.
BMW placed ninth out of 12 luxury brands in the J.D. Power and Associates 2012 U.S. Customer Service Index Study. Lexus was No. 1.
Improving customer satisfaction is a major goal, said Ludwig Willisch, BMW of North America's CEO since October.
"We have made baby steps," he said "We have to make bigger leaps."
Willisch said BMW has also identified "quite a few areas where we can have quick fixes" to improve customer satisfaction. They include making it easier to get a service appointment online, making sure all cars are washed and the interiors cleaned after servicing and making it easier for customers to find parking places at a dealership.
"Some people at the dealerships are not as focused as they should be," he said. "We will have a lot of training, and we will measure this intensely and will make progress this year."
Chris Sutton, senior director of J.D. Power's automotive retail practice, said BMW's free 4-year/50,000-mile maintenance program scores highly with owners.
"On the negative side, they struggle with service capacity," he said.
BMW executives said the margin program changes were worked out with the company's dealer forum. Dealers complained that in recent years BMW changed margins and programs with little or no consultation. They retaliated by bashing the brand in National Automobile Dealers Association dealer attitude surveys.
Miles said BMW had tied part of the margin to used cars because used prices were "in free fall" during the industry sales slump and the recession that started in 2008.
"It was affecting our residual portfolio and the dealers' profitability because new-car sales were in decline," he said. "Now used-car values have recovered."
You can reach Diana T. Kurylko at dkurylko@crain.com. -- Follow Diana on 
