Marketing Management of BMW - Coursework Example

Marketing Management - BMW Executive Summary The use of a high range of marketing techniques can ensure the success of firms that operate in extremely competitive markets. Still, these techniques need to be appropriately aligned with the rest strategies of the organization. At the same time, it is necessary for adequate support to be provided so that the targets set are achieved. BMW is a firm that it is already well established in the international market. The success of the organization has been highly based on its unique marketing policies; the firm’s logo is an example of the firm’s capability to employ innovative marketing techniques in order to keep its sales high. The marketing policies of BMW in Munich have been examined in order to identify the key causes for the firm’s long term success. It is revealed that the firm has managed to secure its competitiveness primarily by keeping its customers loyal. At the next level, the use of appropriately customized techniques of customer segmentation has helped the organization to keep its customers loyal, a rather difficult target if taking into consideration the level of competition in global automotive industry. Table of contents Executive summary 2 Introduction 4 Question 1 - Marketing concepts at BMW in Munich 4 1.1 Types of Needs, Wants and Demands 4 1.2 Product, Sales and Marketing orientation 5 1.3 The Relationship Marketing Ladder 6 Question 2 – Customer segmentation at BMW in Munich 8 2.1 Marketing Mix 8 2.2 Positioning 9 2.3 Target Marketing 10 2.4 Customer Segmentation 12 Conclusion 13 References 14 Introduction Keeping organizational sales high is considered as a key priority for marketers worldwide. However, often, the responses of the public to the marketing techniques used by organizations are not the expected ones. Usually, the reason is the fact that these techniques are not aligned with the customers’ needs. Other factors, such as lack of an effective customer segmentation plan, can also negatively influence the efforts of a firm to improve its performance through marketing. In this paper the marketing concepts used at BMW in Munich are explored. Particular reference is also made to the customer segmentation techniques used by the organization’s marketers so that profits are kept at high levels. It is proved that existing marketing strategies of BMW are similar to those used by most firms in the automotive industry; still, BMW has managed to create a unique brand image which, combined with marketing techniques for securing customer loyalty, has offered to the organization a significant advantage towards its competitors. Question 1 - Marketing concepts at BMW in Munich 1.1 Types of Needs, Wants and Demands Meeting the customers’ needs is a key role of marketing. These needs are also described through the terms wants and demands. These three terms have similar role: to show the willingness of customers to acquire a product/ service. According to Stokes and Lomax (2008) the role of the three terms can be made clear through the following explanation: ‘in case that sufficient people want a product/ service then marketing has to match this demand with the supply of a product that meets this need’ (Stokes and Lomax 2008, p.66). This means that in the context of marketing the terms customers’ needs, wants and demands have similar meaning; simply, each one of them reflects a different aspect of customers’ desire to acquire a product/ service. On the other hand, Doyle and Stern (2006) make the following distinguish in regard to the above terms: a need is something that it is absolutely necessary for covering basic human needs; food is such need (Doyle and Stern 2006, p.32). When the desire of a customer is made specific, then the term ‘want’ should be rather used (Doyle and Stern 2006, p.32). Asking for ‘a burger of a particular fast food brand is a want’ (Doyle and Stern 2006, p.32). In case that a customer can afford to buy a product/ service that meets the characteristics of a ‘want’, then’ this ‘want’ becomes ‘a demand’’ (Doyle and Stern 2006, p.32). In the case of BMW, Marketing needs, wants and demands are used for keeping the sales of the firm at high level. Indeed, according to the case study, BMW’s strategic planners have been able to understand the needs, demands and wants of their customers; for example, for responding to the need of customers for ‘speaking of their success’, the firm has created in 1980s and 1990s a series of sport sedans. Then, the firm marketers had to face the demands of customers in regard to luxury cars; the SUVs series of BMW responded to the above customer demand. At the same time, the firm introduced a SUVs series of lower price for its customers who need a family car and who cannot afford the price of a SUVs model. 1.2 Product, Sales and Marketing orientation Sales orientation is a term used for describing the following phenomenon: consumers are more likely to prefer products and services of firms that make excessive use of marketing for reaching potential customers (Lamb, Hair and McDaniel 2008, p.5). Sales orientation, as described above, is differentiated from market orientation. At this point, the following issue appears: how are product, sales and marketing orientation related? When referring to product orientation reference is made to a firm’s efforts to promote a particular product, probably considering that this product is highly advantageous compared to other, similar in the market (Cant, Strydom and Jooste 2009, p.10). On the other hand, in sales orientation, a firm focuses on increasing the volume of its sales so that its profits are enhanced (Cant, Strydom and Jooste 2009, p.10). Moreover, marketing orientation denotes the firm’s efforts to give a particular message to the public in general (Cant, Strydom and Jooste 2009, p.10). Marketers in BMW tend to use the concepts of product, market and sales orientation. This fact is reflected to the following organizational practices: a) the firm’s marketers had identified the different needs of customers in various social groups; in this context the firm has introduced a high range of products, each one of which meets the needs of a particular customer group. For example, SUVs series has been introduced for customers who aim to have a luxury car that it is able to achieve a high performance (case study). Since certain customers could not afford the price of SUVs the firm introduced the SUV 1 Series, which is of lower price (case study). It is made clear that the performance of the firm in terms of product orientation has been high; b) the firm has also used sales orientation; a high range of advertising policies has been employed for keeping the sales of the firm high (case study). By retaining an aggressive advertising strategy, the firm has managed to secure its profits; c) the firm has also used mark orientation for keeping its market position. Through the message ‘the Ultimate Driving Machine’ (case study) and through its unique logo (case study), the firm manages to keep the relationship with its customers continuously active. 1.3 The Relationship Marketing Ladder The relationship Marketing Ladder is a concept that promotes the following idea: each firm needs to help its customers to move from ‘one level of loyalty to the next one’ (Marandi and Little 2003, p.66). The above concept which was first introduced in 1998 (Marandi and Little 2003, p.66) aims to show the importance of customer loyalty for the development of organizational performance. It is implied that by keeping its customers moving on the ladder, in the sense of the continuous increase of their loyalty towards the organization, a firm is able to keep its competitiveness within the local or the international market. The steps of the Marketing Ladder refer to particular roles; each role reflects different level of an individual’s willingness to cooperate with the organization (Brink and Berndt 2009). Having its customers as higher as possible in the ladder, a firm is able to secure its market position. The Marketing Ladder is presented in Graph 1 below. Graph 1 – Marketing Ladder (Brink and Berndt 2009, p.49) In BMW, the concept of marketing ladder is extensively used; in fact the emphasis on customer loyalty has become a key element of the firm’s marketing strategy. As noted in the case study, the firm uses a variety of advertising strategies to communicate with the public. After informing the potential customers for the advantages of its products, at the level of Prospect as included in Marketing Ladder, the firm ensures that these individuals can afford to pay for their wants, i.e. that they will move on to the Purchaser step of the Ladder (Graph 1). Then, a strong relationship is developed between the firm and its customers; customer loyalty becomes a key advantage of the organization (case study). Then, customers are often like to move to the Supporters level, as indicated in the case study. Many of the firm’s customers tend to host events for celebrating their cars (case study), an initiative which is quite rare in the modern market. Moving on to the Marketing Ladder becomes then quite easy since the loyalty to the organization has been well established. Question 2 – Customer segmentation at BMW in Munich 2.1 Marketing Mix The 7Ps framework has been introduced in marketing theory in order to support businesses that aim to establish an integrate plan for keeping their competitiveness high (Kotler 2009). The 7Ps framework focuses primarily on services firms but it can be also used for firms that offer products and not services (Kotler 2009). The 7Ps framework is based on the marketing mix model, which includes four elements: ‘product/ service, price, promotion and place’ (Kotler 2009, p.9); in addition, in 7P’s model, the following three elements are also taken into consideration: ‘process, physical evidence and people’ (Kotler 2009, p.9). The 7Ps model could be used by BMW so that its new model, the BMW Z4 and its Services Package are appropriately positioned in the marketplace. The potential use of 7Ps for BMW Z4 and BMW Service Package is made clear in Table 1, below. The Table shows the use of each of 7Ps’ elements for securing a high positioning BMW Z4 and BMW Service Package. Marketing Mix, 7Ps model BMW Z4 BMW Service Package Product/ Service Sport car/ 7 models Two different packages/ the BMW Service Inclusive and the BMW Service Inclusive Plus Price £29,485-£45,350 £300-£3400 Promotion Media/ Online/ Personal selling Media/ Online Place In authorized dealers worldwide At a BMW Service Authorised Workshop Process Order Physical evidence In all countries where an authorized dealer is established In all countries where a BMW Service Authorised Workshop exists People All employees of BMW contribute in different phases of the selling process BMW Approved Technicians 2.2 Perceptual Maps/ Positioning Positioning is a critical concept of marketing. For marketing, positioning reflects the place that a product or service has managed to occupy in a consumer’s mind (Lamb, Hair and McDaniel 2011, p.279). In other words, positioning reflects the potentials of a product or service to be preferred by consumers compared to another product/ service (Lamb, Hair and McDaniel 2011, p.279). At this point, reference should be also made to perceptual maps. In marketing, perceptual maps are used in order to help consumers to understand the advantages of a product/ service compared to a similar product/ service of a competitor (Ferrell and Hartline 2010, p.210). In such map, the product/ service are positioned side by side so that consumers can combine the characteristics and benefits of each one, as compared to the other’s (Ferrell and Hartline 2010, p.210). It is important that the product/ services compared to be of similar value/ characteristics otherwise the comparison would have no value (Ferrell and Hartline 2010, p.210). It should be noted that the axes of a Perceptual map can refer to issues that need to be explored through the map; the characteristics that are set opposite need to be also opposite in their meaning (Ferrell and Hartline 2010, p.210). In the particular case the positioning of BMW in the global market will be evaluated through a Perceptual map where 6 major competitors will be also placed; these competitors are: Mercedes, Porsche, Chrysler, Volkswagen, Ford, and Toyota. The Map is presented in Graph 2 below. Low price Conservative Sporty High price 2.3 Target Marketing The target marketing strategy of the organization would include four stages. Primarily, the firm’s marketers would take into consideration the factors that tend to influence the decisions of customers in regard to the automotive industry (Graph 3). Graph 3 – Factors influencing the decisions of customers in global automotive industry (KPMG 2012, p.7) Then, the target marketing strategy of the organization could be developed. This strategy is presented in Graph 4 below. In the particular graph a brief explanation is given for the potential role of each stage in promoting the firm’s products/ services in the global market. Target Market strategy for BMW - stages Analysis of stages Identification of market opportunities Identifying markets that have prospects for further growth or those that show increased trends in regard to the buying of cars Selection of target markets Choosing target markets after comparing the markets’ needs to the firm’s objectives, needs and culture Designing and implementing a marketing mix strategy Identifying the potentials of the firm to support the various phases of marketing strategy. Developing an extensive research on target market consumer trends, especially in regard to the automotive industry Evaluating organizational performance Make an evaluation of the expected benefits, as compared to the resources required for supporting the particular marketing plan Graph 4 – Target Market strategy for BMW (based on the views of Zikmund and Babin 2009, p.13) 2.4 Customer Segmentation In marketing, segmentation is used in order to identify marketing strategies that can meet more effectively customers’ needs. Most commonly, segmentation is developed using the following four bases: ‘a) demographics, b) psychographics, c) product benefits and d) product usage’ (Mullin, Hardy and Sutton 2007, p.133). The role of these bases could be made clear if they were used for identifying an ideal customer profile to target for one of BMW’s models: the BMW Z4 Convertible Sport Car. The profile of such customer would be the following one: a) in terms of demographics, the customer would be male, aged between 30 and 50 years; in terms of income, the customer would be rather of high financial status, so that he is able to afford the specific model. In terms of ethnicity, the customer would live in a country with highways, where the value of the specific model can be made clear; reference is made for example to one of the Western Europe countries, America or Australia; b) in terms of psychographics the customer would belong to one of the following categories: ‘Experiencer, Thinker, Innovator or Striver’ (Mullin, Hardy and Sutton 2007, p.140), as these categories have been developed by the Stanford Research Institute (Mullin, Hardy and Sutton 2007, p.140); c) in terms of product benefits, the ideal consumer for the specific model of BMW would focus on status (Mullin, Hardy and Sutton 2007, p.141) and d) as of the product usage, the ideal consumer for this model of BMW would use the car rather for leisure and not as a means for covering his daily transportation needs. Conclusion The potentials of the firms to compete their rivals usually depend on their ability to identify marketing strategies that are appropriate for promoting their products/ services. As noted above, successful marketing strategies are rather difficult to be implemented and monitored, due to their complexity and the continuous changes in global market trends. Still, the use of marketing frameworks that have been already tested minimizes the risks involved. In BMW also, the use of these frameworks could highly benefit the firm’s efforts to expand its customer base and enter new products in the market. One of the above firm’s major advantages is its ability to keep through the decades its customer loyalty at extremely high levels. This characteristic of the organization would be also an important factor for the success of its marketing strategies. It should be noted though that in the long term the update or the alteration of the firm’s marketing strategies could be unavoidable depending on the rivals’ marketing tactics and performance. References BMW, 2012. Organizational website. Available at http://www.bmw.com/com/en/index.html [Last accessed at 28 November 2012] BMW, 2012. BMW Z4 – Overview. Available at http://www.bmw.com/com/en/newvehicles/z4/overview.html [Last accessed at 28 November 2012] Brink, A., Berndt, A. and Brink, A., 2009. Relationship Marketing & Customer Relationship Management. Cape Town: Juta and Company Ltd. Cant, M., Strydom, J. and Jooste, C., 2009. Marketing Management. 5th ed. Cape Town: Juta and Company Ltd. Doyle, P., Stern, P. and Stern, P., 2006. Marketing Management And Strategy. 4th ed. Essex: Pearson Education. Ferrell, O. and Hartline, M., 2010.Marketing Strategy. 5th ed. Belmont: Cengage Learning. Kotler, P., 2009. Marketing Management: European Edition. Essex: Pearson Education. KPMG, 2012. 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