Monday, November 22, 2010

A marketer's guide to behavioral economics - McKinsey Quarterly - Marketing - Strategy

A marketer’s guide to behavioral economics

Marketers have been applying behavioral economics—often unknowingly—for years. A more systematic approach can unlock significant value.

Long before behavioral economics had a name, marketers were using it. “Three for the price of two” offers and extended-payment layaway plans became widespread because they worked—not because marketers had run scientific studies showing that people prefer a supposedly free incentive to an equivalent price discount or that people often behave irrationally when thinking about future consequences. Yet despite marketing’s inadvertent leadership in using principles of behavioral economics, few companies use them in a systematic way. In this article, we highlight four practical techniques that should be part of every marketer’s tool kit.

1. Make a product’s cost less painful

In almost every purchasing decision, consumers have the option to do nothing: they can always save their money for another day. That’s why the marketer’s task is not just to beat competitors but also to persuade shoppers to part with their money in the first place. According to economic principle, the pain of payment should be identical for every dollar we spend. In marketing practice, however, many factors influence the way consumers value a dollar and how much pain they feel upon spending it.

Retailers know that allowing consumers to delay payment can dramatically increase their willingness to buy. One reason delayed payments work is perfectly logical: the time value of money makes future payments less costly than immediate ones. But there is a second, less rational basis for this phenomenon. Payments, like all losses, are viscerally unpleasant. But emotions experienced in the present—now—are especially important. Even small delays in payment can soften the immediate sting of parting with your money and remove an important barrier to purchase.

Another way to minimize the pain of payment is to understand the ways “mental accounting” affects decision making. Consumers use different mental accounts for money they obtain from different sources rather than treating every dollar they own equally, as economists believe they do, or should. Commonly observed mental accounts include windfall gains, pocket money, income, and savings. Windfall gains and pocket money are usually the easiest for consumers to spend. Income is less easy to relinquish, and savings the most difficult of all.

Technology creates new frontiers for harnessing mental accounting to benefit both consumers and marketers. A credit card marketer, for instance, could offer a Web-based or mobile-device application that gives consumers real-time feedback on spending against predefined budget and revenue categories—green, say, for below budget, red for above budget, and so on. The budget-conscious consumer is likely to find value in such accounts (although they are not strictly rational) and to concentrate spending on a card that makes use of them. This would not only increase the issuer’s interchange fees and financing income but also improve the issuer’s view of its customers’ overall financial situation. Finally, of course, such an application would make a genuine contribution to these consumers’ desire to live within their means.

2. Harness the power of a default option

The evidence is overwhelming that presenting one option as a default increases the chance it will be chosen. Defaults—what you get if you don’t actively make a choice—work partly by instilling a perception of ownership before any purchase takes place, because the pleasure we derive from gains is less intense than the pain from equivalent losses. When we’re “given” something by default, it becomes more valued than it would have been otherwise—and we are more loath to part with it.

Savvy marketers can harness these principles. An Italian telecom company, for example, increased the acceptance rate of an offer made to customers when they called to cancel their service. Originally, a script informed them that they would receive 100 free calls if they kept their plan. The script was reworded to say, “We have already credited your account with 100 calls—how could you use those?” Many customers did not want to give up free talk time they felt they already owned.

Defaults work best when decision makers are too indifferent, confused, or conflicted to consider their options. That principle is particularly relevant in a world that’s increasingly awash with choices—a default eliminates the need to make a decision. The default, however, must also be a good choice for most people. Attempting to mislead customers will ultimately backfire by breeding distrust.

3. Don’t overwhelm consumers with choice

When a default option isn’t possible, marketers must be wary of generating “choice overload,” which makes consumers less likely to purchase. In a classic field experiment, some grocery store shoppers were offered the chance to taste a selection of 24 jams, while others were offered only 6. The greater variety drew more shoppers to sample the jams, but few made a purchase. By contrast, although fewer consumers stopped to taste the 6 jams on offer, sales from this group were more than five times higher.1

Large in-store assortments work against marketers in at least two ways. First, these choices make consumers work harder to find their preferred option, a potential barrier to purchase. Second, large assortments increase the likelihood that each choice will become imbued with a “negative halo”—a heightened awareness that every option requires you to forgo desirable features available in some other product. Reducing the number of options makes people likelier not only to reach a decision but also to feel more satisfied with their choice.

4. Position your preferred option carefully

Economists assume that everything has a price: your willingness to pay may be higher than mine, but each of us has a maximum price we’d be willing to pay. How marketers position a product, though, can change the equation. Consider the experience of the jewelry store owner whose consignment of turquoise jewelry wasn’t selling. Displaying it more prominently didn’t achieve anything, nor did increased efforts by her sales staff. Exasperated, she gave her sales manager instructions to mark the lot down “x½” and departed on a buying trip. On her return, she found that the manager misread the note and had mistakenly doubled the price of the items—and sold the lot.2 In this case, shoppers almost certainly didn’t base their purchases on an absolute maximum price. Instead, they made inferences from the price about the jewelry’s quality, which generated a context-specific willingness to pay.

The power of this kind of relative positioning explains why marketers sometimes benefit from offering a few clearly inferior options. Even if they don’t sell, they may increase sales of slightly better products the store really wants to move. Similarly, many restaurants find that the second-most-expensive bottle of wine is very popular—and so is the second-cheapest. Customers who buy the former feel they are getting something special but not going over the top. Those who buy the latter feel they are getting a bargain but not being cheap. Sony found the same thing with headphones: consumers buy them at a given price if there is a more expensive option—but not if they are the most expensive option on offer.

Another way to position choices relates not to the products a company offers but to the way it displays them. Our research suggests, for instance, that ice cream shoppers in grocery stores look at the brand first, flavor second, and price last. Organizing supermarket aisles according to way consumers prefer to buy specific products makes customers both happier and less likely to base their purchase decisions on price—allowing retailers to sell higher-priced, higher-margin products. (This explains why aisles are rarely organized by price.) For thermostats, by contrast, people generally start with price, then function, and finally brand. The merchandise layout should therefore be quite different.

Marketers have long been aware that irrationality helps shape consumer behavior. Behavioral economics can make that irrationality more predictable. Understanding exactly how small changes to the details of an offer can influence the way people react to it is crucial to unlocking significant value—often at very low cost.

About the Author

Ned Welch is a consultant in McKinsey’s Toronto office.


The author would like to acknowledge Micah May’s contribution to this article.

Notes

1 Sheena S. Iyengar and Mark R. Lepper, “When choice is demotivating: Can one desire too much of a good thing?” Journal of Personality and Social Psychology, 2000, Volume 79, Number 6, pp. 995–1006.

2 Robert B. Cialdini, Influence: Science and Practice, New York: HarperCollins, 1993.

Why Business Plans Don’t Deliver

Entrepreneurship

Why Business Plans Don’t Deliver

By John W. Mullins

June 22, 2009

The five most common flaws—and how to fix them

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An economic downturn is a great time to start a business.

It sounds paradoxical, but think about it. Costs are lower, and more talent is available, thanks to layoffs. Prospective clients are more likely to try a new supplier who can help them cut costs or increase their competitiveness. Established players, too, are focused on cutting costs instead of increasing market share.

All of this helps clear the way for the next venture with the better mousetrap—but only if the entrepreneur can write a clear and convincing business plan.

Anything less is heading straight for the bin. Because, let’s face it, the intended recipients of such business plans—investors and lenders, family and friends, anyone with capital to invest in the project—are all much more wary of risk now in these turbulent times.

Truth be told, most business plans fail to make much impression on potential investors. Most aren’t even read in full. Their shortcomings tend to be obvious even in a two-page executive summary, largely because they are written before enough real work has been done to create a solid foundation.

I set out to understand why most business plans don’t deliver. Drawing on the hundreds of plans and pitches that I’ve seen over many years of working with entrepreneurs and early-stage ventures, I searched for common patterns in plans that gained no traction. The result? Five oh-so-common varieties of plans that go quickly into the trash without further consideration.

JOURNAL PODCAST

John Mullins speaks with the Journal’s Jennifer Merritt on how entrepreneurs can divorce their passion for a big idea from the business sense required to build a strong business plan and put their idea to work.
[audio: /wp-content/blogs.dir/3/files/mp3s/pod-wsjjrmerritt.mp3]

To help budding entrepreneurs avoid these traps, I also identified the three key elements that go into a successful business plan: a logical statement of a problem and its solution; a battery of cold, hard evidence; and candor about the risks, gaps and other assumptions that might be proved wrong.

In what follows, I will expose the deal-killers found in the five most commonly rejected types of business plans, and share tips for creating plans that should get you invited back for a second meeting and, if all goes well, raise some capital and attract some initial customers.

Here I Am, Never Mind the Problem

In this kind of plan, the writer is smitten with the elegance of his or her technology. The plan begins not with the identification of a customer problem to resolve, but with a detailed explanation of how the technology works, why it is cutting-edge or state-of-the-art, and how it is better, faster and cheaper than current solutions.

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Innovations in management theory & business strategy – a collaboration with The Wall Street Journal

Such a plan is typically readable only by those already in-the-know in its particular technical realm. Even worse, seasoned investors know that the better technology does not always win. Remember Betamax?

A Me-First plan sends a clear signal that the writer’s priorities are misplaced. What matters more than great technology or a great idea is the problem or pain that the new solution or technology resolves.

There is a better way. A good business plan starts with a clearly defined problem—something that’s really troubling or compelling—supported by evidence from marketing research, testimonials, letters of intent, or whatever, that the pain is real.

If you can convince your readers that this problem is real, they’ll be hooked, at least for a while, as they read on to see whether you’ve found a solution that can resolve the pain. If the pain isn’t real, stop writing. There’s no need for a solution.

Next, identify exactly which customer group has that pain, even if the initial target market is a small one. Investors know that, if a sustainable beachhead can be established in an initial target market, success in a niche market can serve as a platform for taking the solution to other market segments as the business grows.

Consider Nike Inc., the leading maker of athletic footwear. Founders Phil Knight and Bill Bowerman, a distance runner and a track coach, respectively, addressed the quite literal pain of distance runners’ sprained ankles, shin splints and other injuries caused by the miles and miles of training on rough country paths in running shoes that just weren’t up to the task.

The new waffle soles of latex rubber that Nike came up with addressed runners’ pains head-on. The first shoes targeted elite distance runners, hardly a large market. But once distance runners started winning Olympic medals wearing Nike shoes, other runners—and sports—followed.

A Coke For Every Kid in China

Telltale Terms

Many business plans fail to deliver because they cloud the opportunity in a fog ofterms that make investors wince. Here are some words and phrases to avoid.

  • Huge (as in “Our market is huge!”)Translation: The writer hasn’t botheredto get reliable data on market size, orhas failed to think carefully about theinitial target market, which almostalways should be quite narrow. Nike’sinitial target market of elite distancerunners was minuscule, but it provided asolid foundation for growth.
  • Conservative (as in “Weconservatively forecast that…”)Investors know that the initial salesnumbers—never mind the profits—rarelypan out. So, let the numbers speak forthemselves, based on the evidenceyou’ve gathered.
  • Revolutionary (as in “Ourrevolutionary technology…”) Translation:“We are so enamored with our idea thatwe have not thought clearly about howto distinguish it from other approachesand are not interested in what thecustomer thinks of it. Customerssimply aren’t visionary enough to fullyappreciate our technology….”
  • Assumptions (as in “Assumptions forthe figures in our financial statements”)If you are “assuming” most of yournumbers, you’d better stop now. A farbetter notion is “Evidence that underlieseach of the figures,” set forth in a tablein front of the financial section so thefigures can be readily used to stresstestthe plan in advance as well as toupdate the plan as further evidencebecomes available.
  • We believe (as in “We believe that…”)Translation: “We haven’t botheredto obtain a shred of real evidence,because we’ve been too busy writingthis business plan to actually gather anyevidence, but it is our desperate hopethat…” If you don’t have any evidence,stop writing and go get it!
  • No competition (as in “We have nocompetition.”) If there’s a single phrasethat can send a business plan directlyinto the trash, this is it. Of course youhave competition! They just haven’theard of you yet. To prospectiveinvestors, perhaps surprisingly,competition may be a good sign, as itsuggests that there’s a problem thatsomeone besides you thinks is worthsolving.

This gambit rests its case on a plethora of secondary data to show how large and fast-growing a market is. The plan then makes a heroic leap and assumes that the new venture will grab X percent of that market—it could be 1%, 10%, 30% or whatever. “Surely,” the plan argues, “with the large number of customers in our market, we’ll easily get enough. We only need a small fraction to have a very nice business.”

Plans like this reveal that the writer isn’t sure what the initial target market is. It’s much easier to win a large share of a carefully targeted but narrow market—think Nike again—than it is to win a small share of a very large market.

Further, penetrating a new market requires customers who are aware of the new product, and distribution systems that allow them to buy it. Coke-for-Every-Kid plans gloss over these details. They ignore the difficult work—not to mention the expense—of crafting a strategy to gain market awareness, persuade customers, and set up distribution.

This kind of plan also often signals that the writer is reluctant to get out from behind his or her Internet connection and actually talk to prospective customers. Talking to customers is harder work, but brings all kinds of benefits and insights, not only to the business plan, but also to the business itself. Such conversations can reveal what customers really want—and help tailor the offering to meet those needs.

You can probably find secondary data that support such things as the size of your market and trends that suggest your market will or won’t grow. All such evidence should be cited, with its source, to show that the data are reliable and credible, and that you are, too. But that’s just the start. You’ll need primary data, too, from interviews you carry out or a survey you conduct, to demonstrate the likelihood that customers will buy what you have to offer.

Conduct some experiments, even a market test. The more hypotheses you can test before writing your business plan, the more convincing you’ll be. One caveat, though: If you wait for all of the evidence before you get started—analysis paralysis—the opportunity may well be lost, as someone else may beat you to market.

Every assertion in your plan should be backed up by evidence. If it’s not, take it out, or stop writing while you gather the evidence you need.

Just Look At Our (Paper) Profits

Of our five fundamentally flawed business plans, this one is perhaps the most difficult to spot.

See Also
  • Closing the Gap Between­ Strategy and Execution
    Donald N. Sull
    In fast-paced industries, companies should think of strategy as an iterative loop with four steps: making sense of a situation, making choices, making things happen and making revisions.
  • Should You Build Strategy­ Like You Build Software?
    Keith R. McFarland
    The strategic planning model is due for a “new release,” one that enables companies to keep pace with changing environments, quickly create and adapt strategy, and empower people throughout the organization to make effective choices.
  • A New Strategy Framework­ for Coping With Turbulence
    Bala Chakravarthy
    In turbulent environments, market leaders must repeat innovations, establish customer networks, sense the flow of new products, and share responsibility for new strategy throughout the company.

The archetype is the failed Internet business Pets.com, which offered pet supplies via the Internet. Simply put, the economics of delivering large, heavy bags of dog food one at a time could not compete with the economics of putting pallet-loads of the same bags of dog food on supermarket or discount-store shelves and letting the customers do the delivery.

Such business plans often contain detailed spreadsheets showing why the numbers would work. That’s why these kinds of plans are difficult to spot—the numbers look like they work. As one entrepreneur told me, “With a couple of beers and an Excel spreadsheet, you can make a lot of money in no time,” or so it will seem. While consumers certainly liked the idea of having Fido’s dog food delivered, they were not prepared to pay a price that would enable the economics to work.

Savvy investors not only tear apart the spreadsheets but ask fundamental questions. Does the revenue model depend on making a large number of small transactions (think Amazon.com) or a small number of large ones (automobile manufacturing)? Do its profit margins depend on high gross margins to cover high product-development costs (think Microsoft), or lower margins to cover slimmer operating costs (Costco)? Is a large investment in development or other fixed assets required (a manufacturing facility, for example)? Is the working capital cycle favorable or unfavorable (do you expect to be paid in advance), or will you have to carry inventory and receivables that can tie up scarce cash (manufacturing and distribution businesses)? Some combinations of these factors are clearly attractive. Others are obviously flawed from the start.

Our Team Walks on Water

Investors won’t be snowed by top-tier diplomas or past employment with a leading company. Investors care first about the main challenges of the industry in question, and whether the proposed team has hands-on experience tackling those challenges.

Every industry has critical success factors—typically two or three—that, when addressed effectively, are likely to bring success even if less-important challenges aren’t handled well. Location, for instance, is a critical success factor in much of retailing.

Journal Video


Watch Jerry Engel, executive director of the University of California, Berkeley, Lester Center for Entrepreneurship, on how to get your in-person pitch right at business-plan competitions

A business plan that identifies its critical success factors and shows how the team’s expertise and experience are suited to addressing them is much more likely to attract capital—or at least a second look.

Here’s where candor helps, as well.

Surprisingly, plans that point out the lack of a key skill or capability in the management team can fare quite well, by acknowledging the missing link and encouraging the prospective investor to fill that slot with a qualified person whom he or she favors.

Plans that succeed in attracting capital often include one or more members of a team who have failed in a prior venture. When that failure is accompanied by lessons learned, it’s often viewed, as one investor told me, as “an education on someone else’s nickel.”

Everything is Wonderful

The most common type of business plan, and the one that goes most quickly into the trash, is the one in which the writer can’t find anything but good things to say about the opportunity and plans to pursue it.

Investors know that in the real world most opportunities, even good ones, have weaknesses. Typically, it’s not yet clear in an early-stage business whether the customers will buy, or buy at the price that’s been proposed. Most industries are not filled with infinite possibilities, either, especially given the overcapacity in today’s global economy.

Experienced entrepreneurs know better than to assert that everything is wonderful about their opportunity. They know there are potential pitfalls in their market or industry. The facts are that most opportunities are highly uncertain. Most new ventures will fail. Of the few that do succeed—winning capital, customers and positive cash flow—it’s usually not because of the original plan, “Plan A,” about which the business plan is written, but because of an as-yet-unknown “Plan B.”

Candor, again, is key. There probably will be some questions implicit in your business plan that have not been answered. Will your solution actually work? Will customers buy it? How much will they pay? How will competitors react to your entry? Does your entrepreneurial team have what it takes—the experience and expertise—to deliver on the critical success factors that apply in your industry?

Rather than attempt to paper over the rough spots and uncertainty, identify them yourself and deal with them candidly in your plan. A solid dose of candor will go a long way, compared with describing risks and then stating why they won’t occur.

Illustration: Craig Frazier

Dr. Mullins is an associate professor of management practice at London Business School and holds the David and Elaine Potter Foundation term chair in marketing and entrepreneurship.

The above article content © copyright 2010 Dow Jones & Company, Inc. All Rights Reserved

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7 Responses to “Why Business Plans Don’t Deliver”

  • navindu Says:
    June 22nd, 2009 at 11:54 am

    VERY INSIGHTFUL FOR PREPARING 10 SLIDE PRESENTATION TO VENTURE CAPITAL FIRM TO BE DONE IN 20 MINUTES. THANKS.

  • srinin Says:
    June 22nd, 2009 at 12:03 pm

    I am happy that someone is here to bring sanity to the perspectives on the making of a business plan.

    Over seven years in a state owned SME funding institution I had wondered about how a ‘proposal’ (the then Indian word for biz plans) so good on paper floundered on the ground! Yet advisor after advisor had 9mis)guided entrepreneurs to say only the good things about their plans!

    This is a good reality check indeed!
    Thanks for bringing back realism and pragmatism into what was otherwise a piece of fiction.

    I used to say “I stopped reading fiction. I now read financial statements and business plans instead.”

  • neeti Says:
    June 23rd, 2009 at 12:28 am

    Some how I am not fully convinced there is something more to it.

  • acarreira Says:
    June 23rd, 2009 at 2:55 am

    “Business plans” are not plans. They are the (dominant) marketing approach to get funding. And even for this purpose they are less and less useful.

    If they were plans they would be the blueprint of the business, the project plan, the sailor map: used everyday to track,correct or even change the course of the ship (even changing the target harbor if required). They are often put in the last drawer as soon as financing has been secured (and forgotten). After that come “business as usual” practices. Cynic? Realistic?

  • Louis Says:
    June 23rd, 2009 at 8:51 am

    As Vc, I just can confirm these flaws. Here’s my point of view. First, we expect a two-pager that is crystal clear. If our neighbor or brother-in-law read it and don’t understand the opportunity, you missed it. Second, have a 10 to 15 slides simple Powerpoint (not to much text, pictures, no animations). Third, a 10 to 20 pages Business plan that support the two first pieces. Four, get introduced by someone who who knows us well. Fifth than you could finish in the less than 2 % that we invest in.
    Good luck!

  • phillb Says:
    October 3rd, 2009 at 4:40 am

    Paradoxical for sure. Insights, strategy, plan, execution and, at least once a year, review and, if need be, adjust the plan. These are the pillars that result in it being much more than a proposal - a solid blueprint that justifies funding to anyone and aims all business resources.

    Phill Barufkin

  • Phill Barufkin Says:
    October 1st, 2010 at 5:11 pm

    Paradoxical for sure. Insights, strategy, plan, execution and, at least once a year, review and, if need be, adjust the plan. These are the pillars that result in it being much more than a proposal - a solid blueprint that justifies funding to anyone and aims all business resources.

    Phill Barufkin is a strategist, planner and researcher who works with businesses to deploy integrated marketing programs.

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    My Ex-Wife's Wedding Dress

    16Nov/104

    Dress Use #64: Bib

    I sell boxes. I have been selling boxes for over 13 years. As a young boy I dreamed of being either an FBI agent, a firefighter, or a box salesman. The first 2 options ultimately seemed a bit drab for me which is why I have been busy peddling paper and plastic products for the last number of years. Why do I do it? Perks and adrenaline. What do others do when they want a large box for their kids to play in? . . . they have to buy an appliance. I just bring a big box home. And bubble wrap and tape . . . I get all the samples I want. I'm everybody's buddy at moving time. And I can't really explain the rush I get when I get a massive order for plastic bags or TP or staples. There is nothing like it in this world (except maybe leaf blowing or cleaning baseboards).

    As exciting as selling boxes is the truth is that this project I started with my ex-wife's wedding dress has been fun for me. I have never done anything like this before so the entire experience has been fascinating. I remember a long time ago I got an e-mail from a woman who told me that she came across my website by googling "coffee filter." I was shocked. I don't have the time to pay too much attention to it but Google Analytics can tell me everything about the visitors to my site: what city, state, country they reside in, how much time they spent on my blog, you name it. I can even see what people were searching for when they found my blog. I decided to take a moment to check out some of the search words that were used by people who found my website. Some of them are pretty amusing and these are some of my favorites. These are actual google searches that brought people to my website.  I don't think I could make some of this stuff up if I tried.

    • I share my wife with my brother
    • Can I dress my fish
    • How to get a guy to wear a wedding dress
    • My ex stole my clothes
    • My wife caught me wearing her wedding dress
    • Fly fishing wedding
    • My wife dress me like a woman
    • How to get a guy to wear a wedding dress
    • Uses for beer to get over my ex-wife
    • Husband wears wife's clothes and forced to do household chores
    • Women forcing husbands to dress as females
    • Korean Washcloth

    After I strained some Sponge-Bob mac 'n cheese a while back I used the wedding dress as my bib when I ate it.  My ex-wife's wedding dress makes a fine bib.


    Monday, November 8, 2010

    Dyslexics of the world UNTIE!

    1991 BMW 318i E30 M42 Repair / DIY Procedures by Michael Pincott

    CARS

    1991 318i:

    I purchased this car with 140k miles in March 2004 with the intent of using it as a daily driver to replace my Neon. Finding an E30 in good shape was not easy and finding a perfect E30 is very tough.

    I decied to get a 318i for several reasons. I wanted a 4 cyl. engine for the better fuel economy, I wanted a light car, and a model that was one of the last E30s built. The 1991 318i (and 318is and 318ic) all have the M42 engine. The M42 is a more high-tech engine than that in older 318 and 325. Unlike other E30s, the M42 based 318 doesn't need to have it's valves adjusted. They are self adjusting hydraulic valves. The M42 also has a timing chain instead of a timing belt. The timing belts in the 325 need to be replaced every 60K miles. A timing chain will go for hundreds of thousands of miles.

    The car I finally decided on was a 1991 E30 318i. I would have preferred a 318is but I intend on upgrading the suspension and the car is equipped with a limited slip differential, so there isn't much allure in a 318is. The fact that I wanted a sedan also ruled out a 318is.

    The car came with some problems including no radio (just a bunch of wires hanging out of the dash) and the previous owner had added a bunch of wires and cut the factory stereo wires. The passenger side door hinge was broken and the 6 button on board computer/clock has a broken screen.

    A car of this age requires a lot of maintentance and repairs. I bought it knowing that it will require work, parts, and patience. You must enjoy working on cars and restoring cars to daily drive an E30 - or any car of this age.

    Over the months the 318i has really responded to the work and attention. It handles 100% better since I've replaced most of the rubber bushings in the car and installed new shocks and springs. The roar from the dead rear wheel bearings is gone. After more and more miles, the engine seems to run smoother and more efficient. I typically get over 30 MPG and on one occasion, I was able to go 400 miles on one tank with the fuel light not coming on!

    While the M42 doesn't put out amazing power numbers, it seems peppier than the numbers would suggest. It is a rev-happy little motor and the torque is great after 3.5K RPM. It has plenty of passing power and climbs steep hills without trouble.

    318i Repairs and Modifications:

    Electrical: Clarion CD/MP3 Headunit, Alpine Amp, 12" Sub
    Antenna Mast Replacement
    Adding $25 Keyless Entry
    V1 Hardwire
       
    Lighting:   Fog Light Lens Replacement
    Map Light Rear View Mirror
    Dash and Cluster Light Replacement
       
    Exterior:   Rims and Tires
    Door Hinge Replacement
    Euro Grill Installation
    Roundel Replacement
       
    Interior:   OEM Center Arm Rest / Cup Holder
    On Board Computer Retrofit
    Rear Arm Rest Seat and Rear Headrest Install
       
    Engine: Accessory Belt Replacement
    K&N Air Filter
    Spark Plug Replacement
    Ignition Wires
    M44 Chain Tensioner
    Fuel Filter Replacement
    Engine Oil Change
    Thermostat and Coolant Replacement
       
    Suspension: Contol Arms and M3 Offset Control Arm Bushings
    Sway Bar Link Replacements
    Front Subframe Sway Bar Tab Reinforcement
    Tie Rod Replacement
    Front Sway Bar Bushing Replacement
    Front Springs, Shocks, and Strut Mounts
    Rear Springs, Shocks, and Rear Shock Mounts
       
    Driveline: Front Wheel Bearing Replacement
         

    Links:

    BMW Car Club of America - Boston Chapter
    Bimmer.org
    Bimmerforums.com


     

     

    This guy is awesome. He documented the repairs and modifications he made to his '91 318i with images and great how-to's. I'll be checking in with him off and on with questions about Rolf!