There are three steps to targeting: , target choice, product .
BMW Segmentation
Market segmentation has always had a very important place in the marketing literature. Besides being one of the ways of operationalizing the marketing concept, market segmentation provides effective guidelines for firms’ marketing strategy development and resource allocation among their diverse product markets. As market segmentation simultaneously addresses the roles of both marketers and customers, the segmentation concept has captured the attention of many scholars and practitioners alike in the field. Accordingly, within the last few years, a number of new developments have emerged in market segmentation. Although different terms or concepts may have been used by different researchers, the basic idea behind these developments has been to create more effective and efficient ways of reaching individual consumers in order to satisfy their unique needs and wants.
BMW uses segmentation to identify specific buying characteristics. To do this BMW looks at the geographic, demographic, behavioral, socioeconomic, and beneficial characteristics of society.
With its three brands BMW, Mini and Rolls-Royce, the BMW group clearly focuses its efforts on selected premium segments of the international car markets. The group thus utilizes its strengths with a determination that is unique in the industry. From development to product and marketing, the company is uncompromisingly committed to the premium claim. The company’s strategy clearly aims at profitable growth, for the premium segments are expected to grow almost twice as fast as the mass segments over the next few years. However, this growth will not only take place in previously defined and familiar segments. Rather, new groups of customers will come to demand premium products, and new market segments will evolve and this will also be due to new vehicle concepts with which the BMW group will be expanding into new market segment. With its three brands BMW, Mini, Rolls-Royce which are among the most desired car brands in the world, addressing all the relevant market segments.
Geographically, the main markets for BMW are Europe & North America as these areas are both heavily industrialized and thus their residents are financially positioned to buy upper market cars (these areas account for 64% of BMW sales.). For the BMW group, production also plays a decisive role in the development of new markets. Where a market offers potential, the BMW group applies the principle “Production follows the market” and underpins its entry into the market by setting up its own production facilities in the region concerned. The United States is a prime example of the scope of opportunities offered by market development from the inside in conjunction with local production, starting with around 65,000 vehicles in 1992, and the BMW group’s car sales have quadrupled in US in the last ten years. Today, the US is the largest single market for the BMW group, with sales of around 277,000 cars in 2003.
Increasing demand for premium brands in the Asian market is another opportunity for them to expand their territory. According to market analysis, Asia will be the number one growth area for the automobile industry in 10 years time. China will be the dominant player in this context with a huge and booming market for BMW to penetrate.
The demographics of people able to purchase a BMW are men and women aged 30 – 50 years old. Behaviorally these people have a successful image, want a clean modern look, and the feel good factor of an established dealer network. The benefits required by these people are exclusivity, performance, reliability & quality.
Growing concern for environment pollution was an opportunity for BMW to gain the edge over the others by their research on environmental compatible methods of recycling end-of life vehicles, efficient waste disposal methods and research into alternative energy sources. They are the pioneers in innovative processes in final paint coating and for the introduction of power coating, which does not produce waste.
BMW Positioning
The image that BMW has positioned its self as is exclusivity, performance, technologically advanced, quality automobile producer. The markets BMW position them selves in are very competitive. This is due to the number of other automobile manufacturers that produce cars of a similar quality, price, and image. The main manufacturers that BMW compete with are Mercedes, Jaguar, Audi, VW, Alfa Romeo, Lexus, Ford, Range Rover, Porsche, TVR and Opel (Vauxhall in the UK). Most of these manufacturers use differentiated strategies to produce large ranges of cars as well. The difference is that each of the companies relies on different brand images to sell their cars. E.g. Mercedes is seen as a luxury, reliable and quality producer but does not have the ‘performance factor’ that BMW does but on the other hand Alfa Romeo is renowned for being stylish and performance breed but unreliable car. The positioning of these companies and their brands has been built up over many years but BMW has stamped their mark upon the public in a positive way. This has lead to continuing sales growth through out the international car markets. This has also allowed them to move into new markets to challenge the market leaders. E.g. Range Rover and the BMW X5(4X4).
BMW’s Marketing Mix
Marketing Mix is the combined elements of the product put together which will determine the success of the product. For example if the product has a very good marketing mix then that product is more likely to succeed it will do this by increasing potential customers and then converting them to actual customers. If the marketing mix is not carried out with long thought then the product may fail e.g. by not making any sales and profit and this is why having the correct marketing mix is a vital component when producing and selling a product
A company’s marketing mix is made up of four main points these are Price, Product, Promotion and Place.
Product
The core element in the marketing mix is the company’s product because this provides the functional requirements required by customers. For example: a car that does not start in the morning will rapidly be rejected by consumers. Marketing managers develop their products into brands that help to create a unique position in the minds of customers. One could argue that brand superiority leads to high sales, the ability to charge price premiums and the power to resist distributor power.
The products produced by BMW are prestigious, high performance, technologically advanced automobiles. These start from mid-range cars up to the most prestigious and luxurious.
The present models are:
BMW 3 Series – Sedan, Coupe, Convertible, Touring, Compact
BMW 5 Series – Sedan, Touring
BMW 6 Series – Coupe, Convertible
BMW 7 Series – Sedan
BMW Z4 – Roadster
BMW X3 – SUV
BMW X5 – SUV
BMW M –Convertible, Coupe
Mini Cooper – an independent brand within the BMW Group
Rolls-Royce
According to GM of BMW the management of products and brand is a key factor in marketing success. (Sold of rover)
Further important vehicles will follow in 2004: the BMW brand will launch the new 1 Series and the 6 Series Cabrio, and the Mini brand will add Convertibles to its market range. The BMW group will then have three brands and ten model ranges.
However one can argue that products also go through what is known as a life cycle or phase. When exploring what mix is best suited to your product, you should also consider where in the life-cycle your products lie:
Depending which phase you felt your products were at - introductory, growth, maturity or decline, you would be able to make further decisions at to what price to charge, where to sell your product and what type of promotion would be most effective. Although it is attractive to have all the products within a portfolio at the peak of their sales at the same time, this does create problems. BMW knows the importance of making sure that not all of its products are at maturity at once, as this might result in the products beginning to decline at the same time.
It is clear from the time scale chart above, that BMW has staggered the lifecycles of three products. These are the 3, 5, and 7 Series saloons. This staggering not only helps to ensure a more constant income, but also allows for the development of replacement products, such as the imminent replacement of the 7 Series. BMW has also been expanding its portfolio recently and this can be seen by the presence of some new product launches in the last few years. The Mini being the most recent, and the Mini Cooper convertible still to be launched.
In order to classify BMWs products, an analysis of the portfolio is needed. The first formulated, and most simple is the Boston Consulting Group Growth-Share Matrix.
The Boston Matrix shown over the page consists of four quadrants derived from Market Growth rate and Market Share. BMW has a fairly settled portfolio of products. Each product is more a family of slightly different models, varying by specification. The BMW 3 Series is placed within a very crowded sector of the automobile industry; the ‘Luxury small saloon’. The 5 and 7 Series are larger and more expensive saloons than the 3 series, and are placed within slightly less volatile sectors of the market. The 3 Series is positioned just below the Star, in the Cash Cow quadrant in the matrix. The current 3 Series model is a market leader in a mature market sector. Its high market share leads to a high cash flow rate, and its position in a mature market means that investment supports in areas such a product and process development is low. The 5 series too, is comfortably positioned as a Cash Cow. It is a mature product, placed and sold in a less volatile market than the 3 series. This means that the 3 and 5 series family of products have extremely high profitability, due to their high level of sales, and the low level of expenditure needed to maintain the sales levels.
The 7 series however is a model in decline in terms of its lifecycle. It is found at the ultimate destination of all products, a ‘dog’. The product does have market share, but its desirability is waning and its performance relative to its competitors is not what it once was. The market for the 7 series however, is still performing well. This means that BMW should, and will review the model with a view to re-launch in the near future.
The above products are all fairly settled. Many of them have been being manufactured for many years now with several re-designs and re-launches. BMW has however recently begun expanding its portfolio, and the result of this is some new star and problem children. One of these stars is the X5. The X5 is a new market area for BMW. The 4x4 market can be extremely profitable, especially the ‘On-road’ 4x4 products. This market is very large and growing, and BMW have made an attempt to get a slice of the cake with the X5.
The Z3 and Z8 are very similar products. They are both small sports cars, differing in the Boston Matrix in terms of market share and price. The Z3 is a star, but the Z8 could be described a problem child. More affordably priced than the Z8, and with a larger share of the growing market, the Z3 is a product beginning to mature and generate a good positive cash flow. The Z8 however has a tiny share of the same market. This is not due to overpricing, or poor performance. It is because BMW has taken the step of deliberately limiting production to ensure a high level of prestige and desirability for the product. Why do this?
The Z8 could be described as an exercise in marketing itself. It is not about making profit for the company in terms of direct sales, but about raising awareness of the BMW brand and the values BMW wants its customers to believe the brand stands for. Even the placement of this product in a recent James Bond film reiterates this point. An exciting, debonair character, using a BMW during his technology packed adventures. These are all characteristics of the brand that BMW want to imprint upon the psyche of its customers.
Price
BMW price ranges are from US$28,100 to $117,200. There are many options that affect their car prices such as engine size, equipment levels and motor sport versions. This means you can purchase a base model (which is the cheapest) and then add options or customize it with your taste. The prices also differ from country to country, as the cost of the vehicle is based on the production cost. For instance: BMW’s Z4 series are relatively expensive in Europe than in US as it is manufactured in South Carolina plant (US) and shipped to its different target market.
The pricing strategy that has been used by BMW for the 3-series is competition-orientated pricing. Research shows that all other competitor such as VW, Audi, Alfa Romeo and etc. in the 3-series market is based around the same price. This is because the car industry is large and production costs are not so important and creating the largest profit is not as necessary as it would be for a smaller company. All it matters for the giant group is to acquire the higher market share compare to the competitors.
Examples of price:
**Prices are in US Dollars
Promotion
BMW use a variety of different promotion techniques, most obviously advertising. BMW advertising has always focused entirely on their cars with same advertising company, WCRS being the used since 1979.
A broad range of advertising is used by this agency such as television for branding campaigns and new car launches, the press with Tabloid weekend colour supplements, regional publications and magazines.
Outdoor campaigns such as high impact motor shows are used for product launches and branding. Sales literature, brochures, price lists and POS materials are other marketing activities that they are involved in. They have also started advertising online with pop-ups and web links to related pages. 2002 has seen BMW use the radio for national advertising for the first time which in turn has helped local Dealerships hold individual campaigns in their local press, on the radio and with bus advertisement
BMW also uses other promotion techniques. They employ methods such as associating the BMW brand to a variety of films, TV plays and documentaries. In these the heroes only drive the best-equipped cars, in this particular case, BMWs. This agreement is mutual where the producers want to use certain brands of cars and the car manufacturers want to achieve a greater degree of publicity.
This mutuality allows BMW to obtain global publicity reaching millions of viewers as well as utilizing subliminal communication. A perfect example is the BMW association with the ‘James Bond’ films from 1983, 1994, 1997 and 1999. E.g. In ‘The World in not Enough’ James Bond drove the new Z8 before the car had been launched and in ‘Austin Powers 3 – Goldmember’ the Mini Cooper was used.
Other ways they place their products include up market dealer showrooms, association to Formula 1 (giving an impression of being dynamic and innovative), and the Americas Cup (standing for high performance and technology).
Place & Distribution
Place (or placement) decisions are those associated with channels of distribution that serve as the means for getting the product to the target customers. The distribution system performs transactional, logistical and facilitating functions. Distribution decisions include market coverage, channel member selection, logistics and levels of service.
It might seem that the more places your product is available, the more money you'll make. Well - do you see BMW dealerships on every street corner? The Technological side of marketing internationally is strictly dependent upon location. There are numerous resources available in researching the current market situation in particular countries to help aid in the decision-making department. Market size, buying power, purchasing patterns etc. are many marketing teams make the mistake of thinking they know a market like the back of there hand by reading. It is necessary to physically visit and evaluate a market prior to entry.
BMW is one of the most successful vehicle manufactures in the world, although by no means the largest. Most of BMW’s manufacturing plants are located in Germany, but BMW AG has extended their plants to South Africa, the USA and other countries. The vehicles produced by theses plants are sold by around 4,900 dealers in over 100 countries. In many of these countries the vehicles are distributed by independent importers and in Malaysia, Thailand, Indoneasia the Philippines, Egypt, Vietnam and Mexico, vehicles are assembled in completely knocked down form to avoid import restrictions.
In key markets, BMW has set up its own subsidiaries to support the dealer network. There are 21 subsidiaries and they account for 90% of all new BMW sold outside Germany. BMW Great Britain Ltd is the second largest selling subsidiary behind the USA. New and used BMW are sold through a network of 156 authorized dealers throughout the UK.
BMW used level one distribution this is where it comes from the manufactures to independent dealers who then sell to the consumers.
The channel that BMW use is called Exclusive this is because there are only the amounts of BMW that are ordered are built. This makes the BMW cars are speciality goods. The channels are chosen on the price of the product the cars being expensive makes it an exclusive product and door to door selling is not an option this mean people need to find a dealer of BMW cars to buy an BMW.
In order to ensure that BMW practices marketing activities, it would be recommended to check the sales growth and market share index in comparison to its major competitors.
Even without a great knowledge in microeconomics, it is easy to get a sense of the relative advantage among various manufacturers by examining the sector chart below. The chart plots relative automobile unit share and growth rates of the major manufacturers.
In order to enjoy greater cost advantages as well as research and development, distribution, and marketing synergies, volume players are compelled to defend their positions by consolidating tertiary brands (for example, Mazda, Volvo, Land Rover, and Jaguar under Ford Motor Company), or joining forces (for example Nissan and Renault).
Moreover, when measured by relative unit growth, the BMW group (helped recently by the introduction of the new MINI) has enjoyed the most success in serving and aggregating loyal and new customers around its brands.
BMW succeeded in differentiating its product line to address the growing needs of its target audience, introducing the Z3 roadster and the X5 sport utility in the late 1990s. By the end of 2003, fully ten percent of all BMW sales were in the “light truck” category. The new MINI, launched in 2001 as a separate master brand yet arguably benefiting from the halo effect of its parent brand, was a phenomenal success, reaching estimated sales of over 120,000 units in 2003, or ten percent of the BMW Group’s unit sales. Nonetheless, isolating pure BMW unit sales reveals respectable five-year unit growth of 30 percent, a virtual tie with the growth of Mercedes-Benz.
BMW wants to attack the small ‘Lifestyle’ car market gap. This gap has customers such as young professionals with a high disposable income. BMW has limited opposition, and as such there is a large usage gap, which means there is good potential for high sales. This market gap has the potential for giving BMW the growth it is striving for.
BMW should target this gap using the Mini brand, as the Mini has the right image unlike any BMW branded products. The main risks for BMW are its limited knowledge of the market sector, and its limited financial resources. The main sector rivals of BMW, Mercedes and Volkswagon (Smart and Beetle), both have more sector experience and greater financial resource. These rivals will simultaneously attempt to out-price the Mini, and develop replacement products.
The core established products of BMW, the 3, 5, and 7 Series, provide a stable cash flow, enough to develop and introduce replacement models. BMW is however an ambitious company and wants to grow. To do this BMW has been expanding its portfolio and attacking new markets, a risky, but profitable strategy. This strategy began with the launch of the Z3 sports car, X5 SUV’s and MINI brand. The latest stage of this strategy is the launch of 1Series and X3 SUV’s to be done late this year.
BMW has not produced a small, affordable, ‘lifestyle’ vehicle since the days of the bubble car. The introduction of the mini range is the most risky of all BMWs strategies for growth. BMWs ability to inject personality, eccentricity, and fun into the Mini is the big risk.
BMW is a not just a company, it is a brand. The BMW brand manufactures automobiles built on engineering precision, manufacturing excellence, and being German. As the adverts tell us all, a BMW is ‘The Ultimate Driving Machine’. The Mini is also a brand. The Mini brand is built on personality, eccentricity, and being British. BMW cannot just re-badge, re-engineer and re-sell the brand as the ‘BMW Mini’. The very appeal of the Mini brand would be lost.
Conclusions
The BMW Group is a broad scope of investigation, its widespread distribution of production plants and the supreme after service besides the one-up technology, the future for BMW Group is very optimistic.
As a car producer, the BMW Group has to be ware and be wise to the current situation of car market. At recent day, cars are becoming one of the most primary transports in the society; this condition indicates that the car market will become more furious. As long as the prevalence of private cars, car sales are increasing sharply, this could be good or be bad for the BMW Group. The BMW Group can gain more profit from the increasing sales if it produces its cars with high quality and good service constantly, people will be loyal to the BMW and wish to purchase its cars even though there is various different brand cars can be chosen. A good reputation is the principle of business. Otherwise, if the BMW Group fails to be high quality of its cars but produce overfull cars, it may harm its prestige and affect its stock control.
Moreover, the BMW cars are considered as the high—class cars, most products are applied to rich people but not the poor people. If it can produce some normal car that can apply to the middle-class people, its market share can be expanded. On the other hand, its accessories and hardware of cars are expensive for maintenance, which can reduce the desire of people purchasing its cars.
In conclusion, the BMW Group has an efficient management and high standard production; its future depends on the external environment and internal activities. The potential opportunities are not just from outside environment but also the internal factors.
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