The marketing concept at BMW Essay Example

to control their share of the market?

This report would answer all the questions mentioned above in the context of BMW's marketing policy. Followed by the conclusion on whether the organization practices the marketing concept.

Discussion

"The marketing concept is essential because ultimately the judge of a company's performance is the customer. Customers decide whether you have satisfied their needs. If you are not meeting those needs, you are operating in a vacuum (a Toyota manager, Japan)".

"The marketing concept is an excellent idea. Our focus has to be directed toward customer satisfaction, and by customer I mean persons internal and external to the company. If we do not believe in doing this, we should get out of business. It's the reason we exist (a BMW manager, Germany)".

As suggested by the quotations, managers in different parts of the world value highly the marketing concept. This principle - the organizational focus on understanding and satisfying customer needs in a superior fashion - was advanced as far back as half a century ago as a "guiding philosophy for modern marketing thought and practice" (Barksdale and Darden, 1971, p. 30; Drucker, 1954; Viebranz, 1967).

More recently, the marketing concept and its effect, market orientation, have been broadened to encompass a concern not only with customers but also with competitors and the larger environment in which firms operate. Other dimensions have also been identified, including profitability as a goal and the need for inter-functional coordination (Day, 1994; Kimery and Rinehart, 1998; Kohli and Jaworski, 1993). When applied, this expanded marketing concept is said to lead to superior organizational performance. A growing stream of empirical work supports this view, linking use of the marketing concept

with enhanced sales, profits, new product success, product quality, customer satisfaction, and overall business performance (Baker et al., 1999; Caruana et al., 1999; Jaworski and Kohli, 1993; Lichtenthal and Wilson, 1992; Ruekert, 1992).

In order to form an opinion, if BMW practices all the facets of marketing concept one might glimpse on BMW's core marketing values to begin with. According to Kotler (2003), core values are belief systems that underlie consumer attitudes and behaviors and determine people's choices and desires over long term. One could argue that the majority of BMW's success is attributed to the development of a consistent marketing policy, and the 'market niche' strategy.

The company has built its brand on four core values, which are:

* Technology

* Quality

* Performance

* Exclusivity

BMW has maintained these core values since the company's inception. In addition to the message of these values being portrayed in advertising campaigns, the company explicitly expresses one or more of these values in all BMW advertisements. However, it is important to point out that BMW also relies on it's sensitively to the environment, which is clearly seen by how the company's advertisements evolved in response to economic, environmental and competitive changes.

BMW Targeting

A target market is the market segment which a particular product is marketed to. It is often defined by age, gender and/or socio-economic grouping. Targeting strategy is the selection of the customers you wish to service. The decisions involved in targeting strategy include:

* how many segments to target

* which segments to target

* how many products to offer

* which products to offer in which segments

Targeting can be selective (eg.: focus strategy, market specialization strategy or niche strategy), or extensive (eg.: full coverage, mass marketing,

or product specialization).

BMW use a differentiated strategy, this means that they target specific automobile markets. These markets suit different people within the segmentation stratosphere.

The markets that BMW actually target are Sports Convertibles (Z3, 3 series, and new Z4), Executive (3 series, 5 series), Super Executive (7 series), Touring / Estate (3 series, 5 series), Super sports (M series), and 4X4 (X5).

There are three steps to targeting: market segmentation, target choice, product positioning.

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.).1 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 old2. 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).3

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 Group4

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.