marketing strategies of BMW and Mercedes-Benz .
Introduction
Project Brief
This report is to analyse and compare the marketing strategies of BMW and Mercedes-Benz . Both companies are renowned market leaders in supplying automobiles.
The pair have a history of providing innovative cars for the past century. Over the years with the improvement of technology BMW and Mercedes-Benz have met customer needs by producing the most inspiring and well developed cars of their times. The BMW Group concentrates on selected premium segments in the automobile market. This means that they specialise in providing a high quality product and in return they can achieve higher revenues per vehicle sold. In contrast Mercedes-Benz which also provide to the premium segment of the market have concreted their name in history as manufacturers of luxury cars, have opened their doors to a range of more dynamic models targeting the slightly younger market.
This study aims to examine the marketing strategies of these two individual companies who both aim to deliver a similar yet unique product.
Brief Overview
BMW
On 21st July 1917, Rapp-Motorenwerke is renamed Bayerische Motoren Werke, (BMW) GmbH. Due to the ongoing war the company at the time the company grew quickly. With further expansion in mind, BMW decide to build a new plant next to the Oberwiesenfeld airfield in Munich, concentrating at the time on building aircraft engines for army planes until 1918.
After the War BMW struggles to stay independent and is saved by nimble, BMW 700. it carries an engine of a motorbike and was given the name 'lion- hearted weasel'. It becomes extremely popular amongst the car buying public. After 1923 the new era of car development and engages with new products and fresh ideas. However success being short lived by BMW due to the Second World War after which a three year ban was imposed any production activities.
BMW struggling to get a 'foothold' in the market later released the Isetta 250, a recognised success in the mini car era of the mid 1950's. However still not being strong enough to compete with its arch rivals of the time Mercedes, it released BMW 507 which quickly reached success. The evolution of the company in this way led to development of the BMW 1500, 1600, 1800, 2000 and were all classified under the first generation of the 5 series.
BMW success story continues into the 1990's as it took over Rolls Royce and at the split of Rover plc it also bought the rights to the Mini in 2000 and re-launched its now more dynamic range in 2001.1992 was another year-to-be-remembered for BMW when it, for the first time, outsold Mercedes in Europe.
BMW now has 1, 3, 5, 6, 7, X, M, Z series and a motor-sport version in the 3 and 5 series. BMW tradition of building excellent automobiles with a special emphasis on performance, style and technological advancements could now be recognised through their product range.
Mercedes-Benz
Mercedes has been the name of the world's most innovative car brand for more than 100 years now. When Daimler-Motoren-Gesellschaft (DMG) delivered its first Mercedes on 22 December 1900, it began an era of dynamic development of the automobile. Today Mercedes-Benz is the most successful premium brand. Its technical perfection, quality standards, innovative impact and numerous car legends such as the 300 SL Gullwing are unique. The Mercedes star became the most famous symbol of a car brand and is one the world's best known trademarks today.
The invention of a high-speed engine and an automobile, were considered by both Gottlieb Diamler and Karl Benz, both independently of one another worked to lay yhe foundations of motorisation of road transport, what we know today as 'cars'.
To gain publicity and distinction of one another they used 'Diamler' and 'Benz' as trademark. These trademarks would be used to show the origin and quality of the engines made.
The boost of car demand can be really related to Emil Jellinek, a progressive thinker of sport, realised that at the dawning era of modernisation and a key invention of the future was something he needed to be part of.
Jellinek had good contacts with the worlds of international finance and the aristocracy and became increasingly active as a businessman. In 1898, he began to promote and sell Daimler automobiles - in particular, within the higher echelons of society.
The name 'Mercedes' came from Jellinek, it was first used as the team racing name and later was patented in 1909. and the logo of the three pointed star was to symbolise Diamler's ambitions of universal motorisation 'on land, on water and in the air'.
As did BMW, Mercedes also struggled with the aftermath of War. The demand for luxury cars being non existent, in 1926 Diamler merged with its rival company Benz and Cie, to form Diamler- Benz AG.
Moving on into the more recent era Mercedes had secured their name as providers of standard luxury cars. But with growing competition Mercedes was falling behind as the market was becoming more diverse and the demand was changing from luxury to more fun loving automobiles.
Mercedes- Benz reacting quickly wanted now to deliver a more fun loving and affluent make for the younger professionals and to cater for this market came forth with the idea of the C and E Class. Such revolutionary changes made by Mercedes who were still providing the same luxuries as the S class but now in more affordable packages re-invented the company as being open to all. Later on also releasing the A class for the 'baby bloomers' and the SL for the more dynamic and highly profound experience.
Such marketing strategies adopted by Mercedes Benz helped target a wider range of car buyers. Still being price competitive with BMW and Lexus it still provided the luxuries its founders originally set out with but now becoming a more approachable and user friendly.
Methodology
In preparation for the following report, I have highly focused my research from company websites and historic archives to receive an in depth knowledge of the two types of companies I will be getting my self involved with.
PEST ANALYSIS:
POLITICAL:
Both Mercedes and BMW are German manufactured cars ...
This is a preview of the whole essay
Such marketing strategies adopted by Mercedes Benz helped target a wider range of car buyers. Still being price competitive with BMW and Lexus it still provided the luxuries its founders originally set out with but now becoming a more approachable and user friendly.
Methodology
In preparation for the following report, I have highly focused my research from company websites and historic archives to receive an in depth knowledge of the two types of companies I will be getting my self involved with.
PEST ANALYSIS:
POLITICAL:
Both Mercedes and BMW are German manufactured cars but have units worldwide. However due to the aftermath of the World Wars the two German companies were unable to export cars to any parts of the world which led to a huge demand of luxury cars worldwide. There was no export of luxury cars for 3 years which resulted in a loss and decline in revenue for both companies.
ECONOMICAL:
In the BMW Group the 5 and 7 series cars are larger and more expensive saloons than the 3 series, and are placed within slightly less volatile sectors of the market. On the other hand for Mercedes the E-Class and S-Class are the more larger and expensive saloons compares to the C-Class hence are also placed within slightly less volatile sectors of the market.
The number of employment rate for BMW has slightly increased. The automobiles segment had a worldwide workforce of 99,919 employees at 30th September 2004, 3.8% more than one year earlier which was 98,003.
SOCIAL:
Due to a change in consumers' attitudes both companies are now focusing more on presenting a fun loving, approachable, and energetic side to their cars instead of producing luxurious and prestigious cars for example the SL 55 AMG for Mercedes has a similar approach whereas on the other hand the BMW Z8 Alpina also has a similar approach.
TECHNOLOGICAL:
Safety is one of the central issues in vehicle development and in this sector BMW Group is a market leader. To maintain its position as a worldwide technological leader in the automobile branch, transforming creative ideas into innovations is essential for the BMW Group. This is why BMW develop technologies for tomorrow's automobiles and motorcycles which hold a great deal of benefit for their customers, as their development and working structures are oriented accordingly.
SWOT ANALYSIS:
The purpose of SWOT analysis is to identify weak and strong sides of the companies and outline potential threats and opportunities.
STRENGHTH:
Both companies have similar strengths such as both have a strong brand names, extensive distribution channels, established roadside assistance and high resale value. Mercedes have a couple of strengths over BMW; firstly Mercedes have a higher resale value than BMW due to its cars being more reliable and secondly it has a good marketing team as they were able to turn the A-Class failure into a future success.
Mercedes and BMW have a great brand reputation simply by providing small cars such as the Smart cars and prestigious luxury cars such as the Rolls Royce Phantom by Mercedes. On the other hand BMW also provide a huge range of cars for the market from the Mini to the 7 Series.
WEAKNESSES:
The reputation of Mercedes fell with the launch of the A Class, as it came with a few common faults when launched.
Furthermore, due to targeting the premium segment of the market BMW and Mercedes both fail to appeal to the wider range of the market due to affordability being the main cause.
Another weakness would include the maintenance cost of the cars service. Consumers who can afford to buy a brand new car often do not intend to buy a second hand Mercedes or BMW car due to its high maintenance cost.
OPPORTUNITIES:
BMW and Mercedes both are companies which are growing continuously. BMW has recently taken over the company Mini Cooper and since then it has been a huge success. The whole image has been changed and proved to be very successful. On the other hand Mercedes took over the company Swatch and re-launched it under the name SMART cars. Both these companies which were taken over were companies which produced small cars, this was a great move by both Mercedes and BMW as their production didn't include any smaller cars although there was a huge demand for smaller cars which represent elegance and performance and was provided to them by both Mercedes and BMW. The Mercedes Group have taken over another two companies including the world wide recognized Rolls Royce and Chrysler.
THREATS:
Mercedes and BMW both had a marketing strategy which concentrating on safety, luxury and precision engineering of its cars but due to increased competition in the car luxury industry and change in consumers' attitudes both companies are now focusing more on presenting a fun loving, approachable, and energetic side to their cars. Hence the car luxury industry was a huge threat to both companies which is why an early move of diversifying into a slightly different approach proved to be successful as revenues increased.
COMPARING BMW AND MERCEDES MODELS:
Majority of the cars produced by each company are quite similar. For each class or series of a company the other has a product/car which is a key competitor. Below is a list of each series and then its competitor i.e. BMW vs Mercedes.
BMW
MERCEDES
Series
A Class
3 Series
C Class
3 Series Compact
C Class Sports Coupe
5 Series
E Class
7 Series
S Class
X5
M Class
M Range
C55, E55
Z4/Z8
SL, SLR
MARKETING ANALYSIS:
BMW:
The BMW 3 Series is placed within a very crowded sector of the automobile industry hence is known as the small luxury saloon. The 3 Series is positioned just below the Star, in the Cash Cow quadrant in the matrix, however the 3 series is a market leader in the mature market sector due to its high market shares.
The BMW 5 Series is also a Cash Cow as it also is a mature product. The 5 Series has an extremely high profitability due to its high level of sales and low level of expenditure needed to maintain the sales level.
However the 7 Series is a model in decline in terms of its lifecycle i.e. 'a dog'. The performance relative to its competitors i.e. the Mercedes S Class is not what it once was. BMW do intend to re-launch the 7 Series in the near future.
MERCEDES:
In comparison to the BMW 3 Series the Mercedes C Class is also known as a small luxury saloon presenting elegance. It is also positioned just below the Star, in the Cash Cow quadrant in the matrix. However the C Class is not a market leader anymore due to the fact that it had to change the image of the C Class. C Class had to change its image due to change in consumers demands to a smaller, loving and energetic car.
The Mercedes E Class is also a Cash Cow and a mature product just like the BMW 5 Series. The E representing Elegance is certainly doing the job by producing a high level of sales.
The ultimate however has to be the S Class. A car that represents pure luxury, comfort, elegance, performance and class. The S Class is a 'Star' and a market leader.
MARKET SEGMENTATION AND TARGETING
Both BMW and Mercedes-Benz, with their premium vehicles and luxury brands, target wealthy consumers. However, since both brands have a well thought-out marketing mix, the wealthy consumers can be further divided into more specific groups.
The first group includes those people who buy an automobile simply for the aesthetic, as opposed to the practical, value. For example, most buyers of the BMW M5 series sports cars do not purchase the car simply because it is powerful; they are also concerned with the overall design of the car. These are people who usually do not have children, or are single. They are usually middle-aged, as opposed to being in their early twenties or late fifties, or older.
The second group includes those who want practicality in their vehicles, but also want luxury and comfort. These are people who usually have families that include children, and are therefore just as concerned with safety and reliability as with the look of the car. These people usually purchase the luxury sedans or station wagons.
BMW's and Mercedes' customer groups can also be divided according to other criteria, such as the following:
- Geographic Segmentation: Both brands market themselves to the countries and regions in the developed world, such as the United States and the European Union, as well as to the richer citizens of the developing countries, some of which lie in Asia. Neither brand spends much time or effort marketing to South America or Africa.
2- Demographic Segmentation: Both brands, on average across their wide marketing mix, target consumers between the ages of thirty and fifty-five. These people have high incomes, and have usually completed higher education. The family life cycle that the brands market themselves to differs, depending on the particular model of the car. (See above.)
3- Psychographic Segmentation: BMW markets itself to the upper middle, as well as both the lower and upper upper class. Mercedes-Benz markets itself mostly to the upper class.
4- Behavioural Segmentation: People usually buy cars on special, as opposed to regular, occasions. The buyers of BMW's and Mercedes' expect extremely high quality and service.
MARKET POSITIONING
BMW and Mercedes both put much effort into making sure that their respective products leave enthusiastic impressions in the hearts and minds of their customers. They both developed slogans that they hoped would stick in customers' minds; Mercedes-Benz is known for its "quality engineering," while BMW markets itself as "the ultimate driving machine."
BMW and Mercedes-Benz also have to differentiate themselves from each other in order to draw customers to their respective brands. One example of how Mercedes tried to do this was when it developed the CLS model. 1This model was positioned against the BMW 645Ci,2 while at the same time being positioned between the E- and S-Class sedans. The CLS was close enough in price to the BMW 645Ci so as to appeal to the same group of consumers, so in this way, Mercedes-Benz was directly challenging one of their major competitors. When tested by drivers, some concluded that the 645Ci was a better drive, but the CLS was more comfortable. From this, it is clear that Mercedes-Benz succeeded in positioning itself in customers' minds as separate from BMW.
MARKETING MIX
Product
Both BMW and Mercedes-Benz offer customers a wide range of products. Mercedes-Benz has twelve separate "classes" 3 of automobiles just within the passenger car sector. BMW, meanwhile, has nine "series." 4 The way in which both brands try to differentiate themselves from each other is evident even in the dissimilar names they have given their line of products.
Price
Mercedes-Benz does not place much emphasis on keeping prices down. Indeed consumers expect both Mercedes-Benz and BMW, being in the luxury automobile market, to be priced higher than the average car. Therefore, Mercedes has to concentrate more on how its prices compare with its competitors rather than on how high its prices are in absolute terms.
BMW, as part of its "premium brand strategy," (see Promotion) wants to maximize its revenues per vehicle; they think that their strong brand recognition and the excellent quality of their products will help them achieve this goal. This means that they do not focus their efforts on keeping prices down; instead they want to sell exactly the right number of well-produced cars so as to attain a targeted profit. 5
Both Mercedes-Benz and BMW have relatively low price elasticity. This is because the consumer who can afford to buy the car in the first place will most likely not be deterred from making the purchase simply because the price went up by a few thousand dollars. However, since BMW markets itself to the upper-middle class, which is more price conscious than the upper class that Mercedes-Benz focuses on, it has higher price elasticity. People in the upper-middle class might change their minds about the purchase of a car if the price went up by a few thousand dollars.
Promotion
BMW promotes itself using a highly selective strategy. It has chosen certain segments in the automobile market, and it does not involve itself in the mass market, otherwise known as the volume segments of the automobile market. BMW calls this selectivity "premium brand strategy." This means that BMW does not promote itself to all segments of car buyers; instead, it concentrates on targeting those consumers who it thinks will be interested in automobiles from their specifically chosen markets.
Mercedes-Benz promotes itself as "the world's leading luxury brand." Within its target market of upper class middle-aged people, it is not as selective about who exactly to promote itself to as BMW is. It wants to attract and keep as many customers as it can. It promotes itself as innovating products rather than simply designing new versions of the same old product. For example, in promoting the Compact Sports Tourer, Mercedes-Benz said it: "is the astounding response to a new zest for life: athletic, distinctive and versatile. For people who wish to live out their individuality." 6 It is promoting itself as a company that makes cars for people who are not afraid to stand out from the crowd; in much the same way, Mercedes- Benz Brand wants to stand out among its competitors.
Place
Most sales for both BMW and Mercedes-Benz take place at car dealerships. However, oftentimes consumers research the vehicles on the Internet before coming to the dealership, so the companies' websites are also an important "place" where they can connect with consumers. It is therefore in the best interests of both brands to foster a strong presence online. To this end, Mercedes-Benz worked with iProspect, a search engine marketing firm, in order to "increase its website's visibility within the major search engines." 7
Recommendations for futures strategies
Both BMW and Mercedes-Benz want to build up a good relationship with female buyers, car buyers especially, and then the overall objective is to keep these buyers buying their products. Female buyers may feel nervous or even scared when going to look far a new car, especially if they are alone and do not have much knowledge or any confidence in their knowledge about cars, and with this nervousness they probably will be approached by an aggressive salesman, who may feel has got an easy target to sell a car to that they may not necessarily want or need, the salesman would just be trying to get a sale and get their commission. This may mean that many potential female customers to these two company's may feel overwhelmed and put off going to the dealer, which may result in a loss of a customer. Female buyers may feel a lot more comfortable when approached by a female sales representative at the dealership. BMW and Mercedes-Benz may want to look into employing more female sales representatives, especially in areas where they feel or know there are numerous prospective female buyers of their products.
After sales customer service is a major area in which a customer will buy or re-buy their products. If for whatever reason, the customer, is not completely satisfied with the service they have received or they feel or have heard by word of mouth that they can get better service from another company, they may buy from that company, even if they feel the car is not as good as one from BMW or Mercedes-Benz. In a survey carried out by the BBC television show 'Topgear', where the general public with cars no older than three years where asked to write in or vote for how satisfied they where with the after sales service from the dealer and overall reliability of their car. In this vote there were a total of a hundred and forty two different cars included written in about or voted for. From these 142 cars the Mercedes-Benz M-Class was voted one of the most unreliable cars, and was also one of the cars that would be least recommended to someone else, or bought again. Also, from this list of 142 cars there were a total of six Mercedes-Benz models in the bottom third of the list, showing a general dissatisfaction of the service received after the initial sale of the car, and more worryingly for Mercedes-Benz none of their models made the top ten of the list.
Even though none of BMW's models made the top ten list for the overall after sales service, BMW did have two cars in the 'buy again' top ten with the BMW Z3 and 5-Series. The rest of BMW's models may not have made any other of the top ten lists; none of their models made the bottom ten lists, therefore according to the survey, the general public prefer the service offered by BMW than Mercedes-Benz. Although both companies may provide a friendly, professional looking service, they may want to look at the structure of their service, as the consumer that have purchased their products clearly are not greatly satisfied with the service they have received, according to the survey carried out by 'Topgear', shown on the next page. One reason why the Mercedes-Benz range of cars and especially the M-Class may have done so badly in the Topgear survey is because the consumers who purchased these cars are likely to have had experiences with other companies and there dealers and may have thought that Mercedes being classed as a 'luxury' brand expected more than the other brands offer, which may have not been the case and therefore, the customers may feel that even though they spent more money on the car, they did not receive a better service, and may have been disappointed by this.
2004 Top Gear Survey - the Last 10
(Ranking: Model - Score out of 100)
33: Fiat Stilo - 73.7
34: Renault Megane - 73.6
35: Citroen Xsara - 73.5
36: Peugeot 206 - 73.5
37: Citroen Saxo - 73.4
38: Fiat Bravo - 70.7
39: Renault Espace - 70.6
40: Renault Laguna - 70.3
41: Peugeot 307 - 69.8
42: Mercedes M-Class - 69.8
The 10 most unreliable cars
There were 142 cars listed in the final survey, of which the following 10 were ranked as the most unreliable.
Citroen C3 (133rd)
VW Polo (New) (134th)
Citroen Xsara (135th)
Citroen C5 (136th)
Fiat Stilo (137th)
Renault Megane (New) (138th)
Mercedes M-Class (139th)
Peugeot 307 (140th)
Renault Laguna (141st)
Renault Espace (142nd)
Would you buy this car again?
Top 10 who said 'Yes, I'd buy this car again!'
Jaguar XJ (100%)
Honda S2000 (99%)
Subaru Forester (99%)
Honda Jazz (98%)
Skoda Fabia (98%)
Skoda Octavia (97%)
Seat Toledo (97%)
Honda CR-V (96%)
BMW 5-Series (96%)
BMW Z3 (96%)
Taken from www.bbc.co.uk/topgear website under the car survey link
Another area which both companies may want to look is the cost of maintaining their cars. Many customers that can afford to buy a BMW or Mercedes-Benz, be it brand new or second hand, may not necessarily be able to afford to maintain the car. The labour charge that is incurred by both these companies is around the £90 per hour, which is about three times more than if you were to go to a private mechanic. The labour charge does not include parts which are added on top. Some parts have to be specially ordered from Germany as authorised dealers do not carry all the parts, this means that the customer will have to wait until the part is shipped over to have their vehicle repaired. Therefore both companies may want to look at maybe reducing their labour charges, as this may attract less wealthy customers to the range. In the Topgear survey (shown above), the Mercedes-Benz M-class may have done so poorly in the reliability section because it did not have a proper target audience, it was not targeted at the wealthy customers nor the poorer customers, and therefore the wealthier customer may have expected more from the car than it delivered, and the poorer customers may not have been able to afford to maintain the car as Mercedes-Benz cars ought to be maintained. The two companies should also look into carrying all the parts, even if its one or two of the less 'popular' parts that are required, this would mean that customers would have their vehicles repaired back to them sooner.
BIBLIOGRAPHY
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5 http://www.unb.ca
6 http://www.mercedes-benz.com
7 http://www.iprospect.com
