Market Segmentation: Step-By-Step to Profitable New Business - Essay Example

MARKETING Table of Contents Table of Contents 2 Task Five: Marketing Research 3 Task Six: Strategies 3 Task Seven: Segmentation 5 Task Eight: Marketing Mix 6 Task Nine: Control 7 References 9 Task Five: Marketing Research Bayerische Motoren Werke AG (BMW) is considered to be one of the leading manufacturers of premium passenger cars and motorcycles. Apart from manufacturing automobiles the company is also engaged in the business of offering insurance, financing services and car leasing. BMW primarily operates in the continents of America and Europe. The company was founded in the year 1916 and is headquartered at Munich, Germany (Bloomberg, 2012). Marketing research information is believed to be critical towards the long term sustainability of any organisation and the automotive industry one of the biggest users of such information (Parasuraman, Grewal, and Krishnan, 2009, p. 2). BMW operates in the global automotive industry and targets a specific premium market segment in various geographical regions of the world. If we look at the global automotive market it can be observed that the buyer power in the industry is weak. It is so because dealers, who are considered to be the primary buyers, are forced to sell the product brands that are preferred by the consumers in a particular market. There are only few large players present in the automotive industry like BMW, Volkswagen, General Motors, Ford, etc. There is an intense rivalry amongst these competitors and each of them is aspiring to gain larger market share. BMW is considered to be a leading player in the luxury car segment but the new products and marketing campaigns designed by the close competitors of BMW like Audi, Lexus and Mercedes poses a threat to the competitive advantage enjoyed by BMW. Hence, the company needs to come up with new marketing strategies to regain its competitive advantage. Task Six: Strategies As discussed earlier BMW is known for its luxury cars and primarily targets the premium market segment to generate its revenues. In order to successfully develop an effective marketing strategy, satisfying the needs and requirements of the targeted consumers should be given the top most priority by any organisation (Ferrell, and Hartline, 2010, p. 1). Hence, the first step towards developing an effective marketing strategy of BMW would be to analyse the consumer behaviour patterns followed by the company’s potential target population. The key issues that are having a significant impact on the global automotive industry are the increasing rate of urbanisation, environmental issues and the changing nature of consumer behaviour. The two-tier concept of the industry is changing at a rapid pace. The mature automotive markets in US and UK are expected to converge with the emerging markets like that of China and India in terms of the needs and wants of the consumers regarding safety, reliability, and quality. Moreover, the automotive market segments comprising of low cost and premium prices vehicles are also expected to converge. This type of changing consumer behaviour and market trends indicates that the available opportunities for the automobile manufacturers would increase in relation to the increasing demand of mobility services and electric vehicles. As regards the targeted customers of BMW, they look for high standards of performance, luxury and quality in the products. There is an increasing demand for hybrid electric vehicles in the market as well. Hence, if we look at the marketing strategy to be developed by BMW to market its products the Ansoff’s strategic opportunity matrix would give us a better idea about the appropriate strategic alternative to be followed by the company. BMW is known for its innovation and has already launched various innovative products to differentiate itself from its competitors in order to create a competitive advantage in the market. Hence the core idea of the company would be to market its existing product line on a larger scale in the existing markets where it operates its business. This corresponds to one of the four strategic opportunities of the Ansoff matrix (Lamb, Hair, Jr., and McDaniel, 2012, p. 22). Hence, one of the best alternative marketing strategies that can be employed by BMW is the market penetration strategy. With the increasing demand for hybrid electric vehicles, it would be a great opportunity for BMW to penetrate into this market with its newly developed hybrid vehicles like the BMW ActiveHybrid 5 and the MINI E hybrid vehicles. It is a great opportunity for the company to capitalise on its existing position in this segment and increase its revenues. Task Seven: Segmentation The automobile market is found to be heterogeneous in nature and the consumers in the industry have diverse product needs (Pride, and Ferrell, 2011, p. 159). Hence, market segmentation would be appropriate to develop an effective marketing plan for BMW. Segmentation is the process of dividing the market into homogeneous groups where a particular type of product could be offered to them (Croft, 1994, p. 1). The consumers in a particular segment are characterised of having similar taste and preferences towards a particular product. In relation to BMW, it segmentation strategy would be to target the high level income group individuals. It is so because the products of the company in the form of hybrid vehicles would be offered to those consumers who sought for premium quality cars and can afford to spend high amount to obtain such products. Positioning map or sometimes referred to as perceptual mapping technique is based on different qualitative or mathematical approaches which are used to position or describe the perceptions of customers related to certain products or brands on a special map. Thus, it is a method of visually depicting the perceptions of the consumers towards a product offered by the company (Dibb, Simkin, 2008, p. 81). The positioning of the proposed product of BMW, i.e. Hybrid Vehicles can be presented through a positioning map as shown below (Figure – 1). Price and quality have been taken as the two attributes to represent the positioning map. Figure – 1 Positioning Map BMW Hybrid Vehicle Low High Task Eight: Marketing Mix Marketing mix comprises of the 4Ps of marketing. They are product, place, price and promotion. Once the target market is identified for a particular product to be offered to them, the next marketing strategy of any business organisation is to develop a marketing mix that can best satisfy the needs and requirements of the targeted consumers (Gitman, and McDaniel, 2008, p. 295). The marketing mix for developing a marketing plan for BMW has been discussed below: a. Product: The product to be offered to the target consumers of BMW is the hybrid vehicles. BMW has a strong focus on developing hybrid vehicles. The company has been successful in launching its MINI E hybrid vehicles. Recently, BMW also launched a new fully hybrid Sedan class car named as BMW ActiveHybrid 5. These products would be offered to the targeted consumers of BMW. These types of products have been chosen to focus on capitalising on the existing opportunity of increasing demand of hybrid vehicles in the market. b. Price: Now, since the company’s strategy is to target the premium market segment, its pricing strategy would be a premium pricing strategy. The company would rely on delivering high quality products to the consumers who can afford high price to obtain luxury cars of high performance levels. Focusing on quality would help the company to set high price for its products that would be acceptable for the targeted consumers. c. Place: As discussed earlier the primary buyers in the automotive industry are the dealers. Hence, the place or the distribution system for offering the proposed product would be through the existing dealers of the company. Moreover, BMW can utilise its presence worldwide to offer its product globally. Hence, the company would try to implement a global marketing strategy to offer its products to the targeted market segments in varied geographical regions of the world. d. Promotion: Promotional strategy would be a key element of the marketing mix of the company. In order to make consumers aware of the products offered by the company, it would mostly make use of digital media. Apart from this sales promotions would also used by BMW. Implementing a good promotional strategy would result in increased revenues for the company because it would ensure that a strong relationship is developed with the public who are actually the end consumers of the products. Task Nine: Control An effective performance measuring system is necessary to ensure that the marketing strategy employed by BMW is working well for them. The marketing performance of the company can be assessed by the use of certain marketing metrics. Therefore to develop useful and more insightful marketing metrics, the company must focus on five fundamental aspects. The five aspects are customer-acquisition metrics, product "wow" metrics, essential metrics criteria, customer-retention metrics, and strategic accountability. However in this context of measuring the marketing performance of BMW, the major metrics that has been chosen is break-even analysis for financial performance, revenue market share competitor analysis, and brand development index. Use of this metrics with predefined target levels can be helpful in comparing the effectiveness of the marketing plan developed by BMW. References Bloomberg, 2012. Company Profile for Bayerische Motoren Werke AG (BMW). [online] Available at: [Accessed 15 December 2012]. Croft, M. J., 1994. Market Segmentation: A Step-By-Step Guide to Profitable New Business. London: Routledge. Dibb, S., Simkin, L., 2008. Marketing Planning: A Workbook for Marketing Managers. Connecticut: Cengage Learning. Ferrell, O. C., and Hartline, M. D., 2010. Marketing Strategy. 5th ed. Connecticut: Cengage Learning. Gitman, L. J., and McDaniel, C., 2008. The Future of Business: The Essentials. 4th ed. Connecticut: Cengage Learning. Lamb, C. W., Hair, Jr., J. F., and McDaniel, C., 2010. MKTG. 4th ed. Connecticut: Cengage Learning. Parasuraman, A., Grewal, D., and Krishnan, R., 2009. Marketing Research. New Delhi: Dreamtech Press. Pride, W. M., and Ferrell, O. C., 2011. Marketing. 16th ed. Connecticut: Cengage Learning. Read More