Marketing Plan for the Next Three Years for BMW i3 - Report Example

An outline marketing plan for the next three years for BMW i3 BMW is a German car manufacturer catering to the luxury car segment based in Munich, Germany. The automaker operates under 3 different car brands namely, Rolls Royce, Mini and BMW. With a view to address the growing need for renewable energy powered cars; the company launched its BMW i3, a hatchback variety of electric car that promises a zero emission at the car tail. Reviews suggest that the car is the best in class variety among electric hatchbacks. The paper is a marketing research report that suggests a marketing plan for BMW i3 for 2014 through 2016. It highlights the positioning, product, pricing, distribution and marketing communication strategy based on a suggestive budget for the attainment of 190% growth over the 3 year period. Contents Abstract 2 Chapter 1 Introduction 5 Chapter 2 Current marketing situation 5 2.1 Internal Analysis 5 2.1.1. Market Description 5 2.1.2. Product Review 6 2.1.3. Competitive Review 7 2.1.4. Distribution Review 7 2.2 Macro Environment Analysis (Porter’s Five Forces analysis) 7 2.2.1. Bargaining power of buyers: Medium 7 2.2.2. Bargaining power of suppliers: Low 8 2.2.3. Rivalry: High 8 2.2.4. Threat from substitutes: High 8 2.2.5. Entry Barriers: High 8 Chapter 3 SWOT analysis 8 3.1 Strengths 8 3.2 Weaknesses 9 3.3 Opportunities 9 3.4 Threats 9 Chapter 4 Objectives and issues 9 4.1 Objectives 9 4.2 Issues 10 Chapter 5 Marketing strategy 10 5.1 Positioning 10 5.2 Product strategy 10 5.3 Pricing strategy 12 5.4 Distribution strategy 12 5.5 Marketing Communication Strategy 12 5.6 Marketing research 13 Chapter 6 Marketing implementation 13 Chapter 7 Budget 13 Chapter 8 Control 15 Reference List 16 Chapter 1 Introduction The rise in demand for renewable energy powered vehicles in the car industry spurred the invention and development of electric cars as a solution to the vehicle industry. The introduction of electric motors has presented a quantum shift in the automotive industry. It has changed the transportation system but can be said to be in its nascent stage of development. The electric car industry is plagued by issues like high costs of battery, lack of availability of recharge points, long duration required in refuelling at charging stations, high costs of vehicle maintenance and a new model required in financial forefront for the profitable sale of electric vehicles. It is expected that between the periods of 2012 to 2018, the electric vehicle industry shall grow at a CAGR of about 18% (Morkel, n.d.). BMW or Bayerische Motoren Werke AG is a German auto maker based in Munich. The company sells three brands, BMW, MINI and Rolls Royce under its umbrella. It also sells two wheelers under Husqvarna and Motorrad brands. The company earned the title of being one of the most reputed businesses in the Forbes magazine in 2012. It has recently launched BMW i3, an electric car that is aimed to be sold among the mid-range buyers and addresses the sustainability and mobility needs of individuals (Pistonheads, 2013). The paper is a report on the marketing plan for BMW i3 model for the next 3 years from 2014 to 2016. The aim of this marketing plan is to achieve an annual vehicle sales of 80,000 units and thereby a growth of 190% from the present scenario. Chapter 2 Current marketing situation 2.1 Internal Analysis 2.1.1. Market Description The electric car market is still in its infancy stage. The developers and early movers have achieved are mostly German car companies that have achieved some development in electric car manufacturing. The market has been dominated by Tesla and Nissan in USA. The global players include General Motors, Ford and Chevrolet as well (Justauto, n.d.). Market is segmented between the private owners of cars and the fleet buyers of car rental companies and corporate. Among the private players, the main target shall be the buyers of series 3 BMW cars who are the mid range buyers for second car ownership. The target segment shall also include mid range car buyers who are looking to satisfy sustainability needs. Figure 1: US Electric Car market share through July 2013. (Source: Landers, 2013) The Chevrolet Spark is the cheapest electric car model priced at $19995 while Tesla Model S is the most expensive electric car of the sports model variety priced at $69,900 (Cleantechnica, 2013). The main problems that plague the electric car manufacturers is the lack of availability of charging stations and the long time required in charging electric vehicles. Also the perceived value of one time battery buy is too expensive as compared to gas powered regular but small expenses. Electric cars generally do not offer much of cargo space. A huge deterrent to electric car buying patterns is its limited driving range. 2.1.2. Product Review BMW i3 is a hatchback variety in the electric car segment of BMW products. This is a novel attempt by BMW in the manufacturing of electric cars. The car design is light weight and eco friendly urban car that is aimed at addressing the sustainability and mobility needs of the people. The car is deemed to be a huge achievement in the technological field. The company has had pre-orders of about 11000 cars across the globe while it planned to sell about 500 cars in 2013 alone. It is reported that the buyers have a waiting period of about 6 month before they can actually own a BMW i3. The company is to begin sales in United States in May 2014 but the pre-orders have already reached the 1200 mark (Automotivenews, 2014). The car has been reasonably priced at 29,370 Euros in Germany and about 42,275 in United States. Such pricing is however much highest among other hatchback electric car manufacturers (Dudovskiy, 2013). The car has been in great demand and the sales figures look impressive. It is estimated that if the present trend continues, the company shall make about 10000 BMW i3 sales in Germany alone. However, a striking fact is that 80% of the sales have come from first time car buyers of those who did not own a BMW car before. 2.1.3. Competitive Review The major competitors are Nissan Leaf and Chevy Volt which is priced at a lower rung than the new BMW. The popularity of BMW for an unexpectedly reasonable price has driven sales for its i3 model. Nissan leaf has had a history of being the best selling EV of all times. Tesla’s Model S is, by the best electric vehicle but it comes for e price. This car is also gaining huge acceptance because it is the only car that offers a 200 miles driving range in the electric vehicle segment (Winton, 2013). 2.1.4. Distribution Review Many of the electric cars are not available in all nations. In some cases like USA, cars like Chevy Spark EV and the GM EVs are available only in certain parts of the nations. This suggests that the electric car distribution channel is still nascent and needs huge developments. Nissan manufacturers, however, have adopted a nationwide distribution pattern and is making efforts is establishing charging stations to promote its electric vehicles. Honda’s distribution technique is quite unique in the sense that it is following a 3 year lease pattern where the manufacturers are covered under insurance for collision on a payment of $259 per month for liability insurance. The distribution channel for Tesla cars is the most popular yet. It employs dealers and franchisees to sell its cars (Andidas, 2003). 2.2 Macro Environment Analysis (Porter’s Five Forces analysis) 2.2.1. Bargaining power of buyers: Medium The bargaining power of BMW i3 buyers is medium because there are companies which have been producing electric cars and each car has a different set of product features. BMW i3 is the best in class electric car despite Tesla’s S model. BMW i3 scores high in terms of high engine quality in the 5 door small car category. Tesla’s Model S is a sedan car and hence caters to a different customer need (Porter, 2013). 2.2.2. Bargaining power of suppliers: Low The suppliers for BMW i3 have limited bargaining power. This is because BMW has got strong supplier networks and this strength in backward integration limits the suppliers to sell their produce to BMW alone. BMW’s supplier requirements are quite different from those desired by other car manufacturers. They have most of their part manufacturing units in-house (Pride and Ferrell, 2011). 2.2.3. Rivalry: High The rivalry in provision of electric cars is high. More and more number of car manufacturers is spending on research and development of electric cars owing to the growing demand for alternate fuel cars. Ford, Tesla, GM are few competitors. The rivalry is intense and to keep ahead of competition, the company has to resort to continuous innovations (Marini, 2013). 2.2.4. Threat from substitutes: High Substitutes in environment friendly cars have seen the emergence of the fuel efficient variety and fuel efficient cars as well. Gas powered engines are difficult to replace by electric cars because of the high investment costs involved in establishment of charging stations. Promotion of public transport usage is also deterring the ownership of second cars (Papamargariti, 2014). 2.2.5. Entry Barriers: High Manufacturing of electric cars requires high investments in research and development as well as manufacturing facilities. This involves significant costs and efforts. Technological development in the manufacturing of electric cars is rather limited. This makes barriers to entry far stronger. Chapter 3 SWOT analysis 3.1 Strengths Significant investments made towards research and development ensures that technology is continuously upgraded for BMW. Strong reputation of the brand in luxury cars assures of customer loyalty and brand recognition. Strong distribution as well as production network allows for high control over product inputs. 3.2 Weaknesses Strong competition in luxury car and electric car segment like Tesla Motors induces fight for market share Competitive advantage in electric cars can be short lived with huge R&D being done in the technology by other car companies (Baker and Hart, 2007). 3.3 Opportunities Growing concern for the environment raises the demand for environment friendly fuel alternatives. High pollutions rates in cities is increasing car replacement demand specially in huge markets like China Emerging nations like UAE and strong presence in the BRIC nations assures a huge ready market (Strategicmanagementinsight, 2013). 3.4 Threats Strong competition in electric vehicle technology by competitors. Currency exchange risk in foreign markets Limited availability of charging stations in most countries Growing competition from hybrid cars and fuel efficient technologies. Present economic downturn offers limited demand potential (Baines, Fill and Page, 2011). Chapter 4 Objectives and issues 4.1 Objectives Going by the present demand scenario, the trend for BMW i3 growth appears quite promising. The company targets to attain about 30% of the market share over a period of next 3 years. In 2013, the highest monthly sales obtained for any electric car was 8000 units (Energypolicyinfo, 2013). The target for BMW is to make an annual sale of about 80000 units by 2016 expecting the growth rate to be around 190%. Year Market Share Profits Units 2014 15% 605631864 28070 2015 22% 1107391744 42105 2016 30% 2360550000 80000 4.2 Issues The key issues that BMW i3 popularity and sales could face shall be the common problems that plague the electric car industry. These include 1. Range Anxiety: Electric cars have a problem with long distance travel because their batteries might dry up. The availability of charging booths is also not as well established as gas stations. 2. Recharging issues: Unavailability of own garage by buyers also deters charging facility and hence might impact car sales. 3. High Costs: the price of BMW i3 is the highest within its category of hatchback electronic cars. Additionally one time battery cost might be perceived higher than the regular expenses incurred in gas powered automotives (Pisano and Duchemin, 2012). Chapter 5 Marketing strategy 5.1 Positioning The BMW i3 tries to position itself as an environment friendly, alternate fuel powered luxury vehicle. The small five door electric car can be compared to the Chevy Volt but it scores higher in terms of design, conception and materials used. It is figured out that the biggest competition for BMW i3 is going to be BMW cars themselves because the price and brand value that BMW i3 offers, none of the other car companies can match the standards set in terms of design, quality, technology and interiors. Tesla S, the best in the electric car segment falls within the sedan category and offers a different set of needs and benefits unlike those offered by hatchbacks like BMW i3 (Colditz, 2012). The car is designed to cater to environment friendly needs of mid range car buyers offering excellent technology and best in class benefits. 5.2 Product strategy BMW i3 is an electronic car that challenges to be the best of its kind in the electric small car segment. It is does not challenge the sedan class dominated by the Tesla’s Model S. It seeks to target a different buyer segment of second car buyers who are present owners of the series 3 cars. Also, for fleet owners, the car company tries to create own demand by way of introducing charging station offers with fleet buying (English, 2013). Figure: Ansoff Matrix (Source: Marketing Equity, 2011) This strategy can be clearly marked as a product diversification strategy. The company is trying to develop a new product and also enter the new markets by offering itself as a second car option for the series 3 owners. 5.3 Pricing strategy Pricing strategy for BMW has been quite off trend for BMW standards. The car is priced surprisingly low in Germany at 29,370 Euros before taxes. In US, the car is priced at $42,275 before tax incentives for electronic vehicles. BMW generally prices its cars much higher in home country than in United States. The rationale for such pricing strategy is that the sales for BMW i3 in Germany and rest of Europe are doubted to be bumpy (Voleckar, 2014). Overall, the car is more expensive than its hatchback competitors like Nissan Leaf and Honda Fit EV. Such penetration pricing strategy shall ensure that BMW maintains its reputation of being a luxury car while also not ruling out the possibility of becoming a potential second car buy for mid-range buyers. 5.4 Distribution strategy BMW maintains a closed network of supply chain. The suppliers are bound by contracts and this restricts competition on the supplier end for the car company. Closed supplier network also allows technology enhancement and continuous development in new technologies that helps to attain the competitive edge. Apart from the general sales programs through car shows, event sponsorships, dealerships and in-store retailing, a different sales strategy could be adoption of car sharing programs with car rental companies for minimum investments. This shall bring in fleet sales for BMW i3. 5.5 Marketing Communication Strategy The customer segments can be distributed broadly into the fleet buyers and the private owners. With a view to target both these segments, BMW plans to have a separate communications strategy for the segments. In case of fleet buyers, BMW plan to target those companies which have sufficient parking space ownership. This shall be useful in carefully segmenting the BMW fleet buying community. Marketing shall begin with big corporations like the European Commission because these companies usually have a budget set aside for the purpose of establishment of charging stations. To pitch sales, offers for charging stations can also be considered in combination with fleet buying. The product display and visibility shall come through road shows for fleet managers where they can experience the car and also know more about the services associated with it. In case of private buyers of BMW i3 models, the early owners shall be the ones who can afford to buy and maintain electric vehicles as their second car. This segment shall also consist of retirees who do not travel by car for work and live within the city and own a garage. The users of series 3 cars which falls within the mid range segment of BMW cars is the main target customer set. The message that shall be sent across for this segment for ownership of BMW i3 model is assuring mobility to be the luxury of convenience. Such client class shall be sought in sports show. Car showcase at golf shows etc should be a viable option to introduce product visibility and marketing message. The use of social media can also come in handy to target the private consumers. The i-Ventures service provided by BMW will also act as an essential tool for spreading the news about mobility services (Pisano and Duchemin, 2012; Barker et al., 2013). 5.6 Marketing research In terms of marketing research, BMW plans to conduct research on the customer needs and wants in electric car segment. It is undoubted that the present BMW i3 is the best in class but in the absence of continuous research on demand situation within the electric cart segment, the car company may face threat to obsolescence by competing car companies. Additional research on the buying patterns of other electric car buyer will allow BMW to know what makes other electric cars rank higher in demand than the BMW i3 and develop and enhance those features that are allowing for customer switches (Clakins, 2012). Chapter 6 Marketing implementation The total budget overlay for the first year is Euro 3000000 and its increases to Euro 4250000 by 2016 with a major portion of expenses being made in advertising and promotions. A sound strategy also calls for regular investments in research and developments and hence, the budget sets aside a rational sum for research on the i3 model as well such that any technological competition is challenged through continuous development in BMW i3 through such research investments. The marketing plan essentially aims to employ marketing personnel who would be responsible in handling different segments of marketing like road shows, online and web promotions, events sponsorships, media advertisements, print advertisements and social networking promotions. The online platform has also become a huge component of the marketing technique and hence the company has allotted about 15% of its total marketing expenditure to this important segment (Chaffey et al., 2009). Through concentrated efforts on promotion, the company plans to reach out to the second car buyers. Formation of social media groups for those who own series 3 and try to sell the new electric car via promotion efforts on these groups (Chaffey and Smith, 2013). In order to source in the second car buyers for other users of BMW cars, the customers can be reached out via systematic email program (Close, 2012; Bird, 2007). Road shows and event sponsorship[s shall assist in providing product visibility. Chapter 7 Budget Expenditure Matrix 2013 2014 2015 2016 Personnel Salaries 110000 150000 180000 Allowances 8000 9000 10000 Other expenses 4000 5750 6000 Total 122000 164750 196000 Manufcaturing Costs 300000000 400000000 500000000 Research Primary Resarch 25000 27000 4100 Secondary research 2000 5000 600 Total 27000 32000 4700 Marketing Media 1221938.6 86148.6 1735934.91 Web 135707.6 9567.6 192746.68 Roadshows 271415.2 19135.2 385493.36 Events 814530.7 57425.7 1156885.01 Print 135707.6 9567.6 192746.68 Social Networking 271415.2 19135.2 385493.36 Total 2850714.9 200979.9 4049300 Grand Total 302999714.9 400397730 504250000 Response matrix Growth # of booking 11000 28070 42105 80000 Growth rate 120% 150% 190% Value per booking 29370 32370 35810 35810 Gross revenue growth 323070000 908631578.9 1507789474 2864800000 Profits 323070000 605631864 1107391744 2360550000 (Source: Westwood, 2002; Luther, 2013) Chapter 8 Control The plan also incorporates a quarterly review of the actual achievement against planned achievement such that deviations are spotted and checked early. 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