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

Marketing Plan for the next three years for BMW i3 Executive Summary The project is prepared in order to create a successful marketing strategy for the launching of BMW i3. The paper studies the recent market scenario of electric cars and the way in which countries are accepting them. The project also talks about the different competitors of BMW in this segment and how are they presently placed. An empirical study on the macro-environment required for BMW i3 is presented. The research proceeds with the SWOT and PEST analysis of BMW i3. An effective marketing plan has been suggested with the help of the Marketing Mix. The project sets a smart objective of the percentage of sales expected after three years of launch and has ended with an estimation of the budget. The desired marketing implications are discussed in details and few control strategies are enumerated for the new product in its way to achieve the objective. Contents Contents 3 Introduction 4 Current Marketing Situation 4 Internal Analysis 4 External Audit 7 SWOT Analysis 8 Marketing Objectives 9 Issues 9 Marketing Mix 10 Budget, Implementation and Control 12 Financial Aspects of Marketing Implementation 12 Marketing Implementation 13 Financial Expense Projection 14 Control 15 Reference List 16 Introduction BMW with their latest SUV i3 has redefined the urban mobility by thinking far beyond agile driving and environmental-consciousness. BMW with their visionary design in i3 has given birth to the automobile of next generation (Newcomb, 2014). The BMW eDrive power train was innovatively designed in the scope of BMW Efficient Dynamics technology and offers an incomparable emission free near silent driving experience. BMW ConnectedDrive carries people conveniently to their destinations. The inspiring design of the car is visionary and is tailor made for electronic vehicles. LifeDrive architecture along with carbon passenger compartment provides adequate room in the interior. The exterior design of the car with opposing doors is called black belt (BMW USA News, 2014). This feature along with the large wheels gives a dynamic look and gives an impression of driving agility of the car. BMW aims to tap the electronic car market, which is still untouched, through the i3 model. This paper would focus on outlining the marketing plan that BMW must consider in order to successfully launch the product and effectively tap the market (BMW, 2014). Current Marketing Situation Internal Analysis Market Description The demand for Plug-in Electronic Vehicles (PEV) and the Hybrid Electronic Vehicles (HEV) has increased in recent years. Research states that the demand would be reaching 3.8 million annually by 2020 (McCue, 2013). With a sale of more than 120000 units in 2012, the market is showing positive momentum towards the sales of electronic vehicles (EV). China has recently formulated new fuel efficiency rules, which would make life difficult for petrol engine car importers (International Energy Agency., 2013). Society of Motor Manufacturers and Traders figure show a steep rise in the sale of electric cars in Britain. The Britain government has been providing the electric car makers with grants so as to encourage car makers to produce electric cars; this innovative measure has been accredited to the rise recently. The US government has also planned measures and offer grants to encourage development of EV’s market (The Economist, 2014). The following graph gives a forecast of the US electric car sales from 2012 to 2020 by region. The forecast for the west coast region comprising of California, Oregon, Washington, and Hawaii has began in 2012, while for rest of the US, it has begun from 2013 (Vardera and Stamford, 2010). Figure 1: Forecast of US electric car sales from 2012 to 2020 (Source: Vardera and Stamford, 2010) Product Review BMW i3 is a hatchback that comes under the plug-in hybrid electric vehicles segment (PHEV) (Detwiler, 2014). According to reports of BMW published in 2008, i3 has components like, Lithium-ion battery, electric engine, active cooling and carbon fibres, in order to render the car carbon emission free and light weight that will satisfy the requirement of target market and environmental sustainability (BMW, 2008). Reports stated that BMW is expecting to sell 500 units in the pre-launch phase, but the ordered unit so far has already crossed 10000 marks. The German automobile giant has set its launch date in the mid-2014, when the expected retail price would be at US$41,350. Competitive Review TESLA Motors, American manufacturer of electronic cars, has tasted resounding success in their business (Porter, 1985). With the Model S outselling its rival, Mercedes’s petrol S-Class by 30%, they are looking good to efficiently compete with the German car manufacturer (Motavalli, 2013). BMW i3 is introduced to compete in this segment (Smith and Brower, 2012). Tesla is a market leader in electric car segment. It is presently eyeing the Chinese market that has formulated new fuel efficiency rules, which might make the importing of petrol engine cars impossible. Tesla is about to launch Model E, which would be directly competing with BMW i3, but would be priced lesser than BMW (Rauwald, 2013). Nissan, the Japanese car company who are also in the same segment for long, is presently being threatened by heavy weight German car makers like, BMW, as they are gradually entering into the market and trying to win away the share from Nissan by producing updated versions with inspiring design. Also, goodwill associated with their brand is making it increasingly difficult for Nissan to hold on to the market (Lane, 2014). Audi has also laid plans to roll out electric cars by 2015 to compete with TESLA and BMW in the EV segment (Cremer, 2014). Distribution Review In some countries, cross-channel transfer of electric cars is restricted. Along with this, it is a recently developing market and niche category; so, distribution channel for the electric cars has not yet developed fully. Hence, the owners have to wait several months to get the product (Porter, 1991). Companies like, Audi, Nissan and Honda, have invested a lot in establishing retail stores and franchisee based distribution channels. They have also set up charging stations to facilitate EV ownership among the target market. The reason behind TESLA’s success is innovative distribution channel, where there is no dealer or commissioned sales executives for selling their cars. The transactions are mostly made online. The new model S is delivered through built to order mode (Loveday, 2014). External Audit In order to create a marketing strategy, the macro-economic factors are needed to be considered. This environmental scanning is done through PEST analysis. The macro-environmental factors of BMW i3 is also analysed through this analysis. Political Chinese government has formulated new rules regarding carbon emission by automobiles, which would be making lives of the petrol engine car manufacturers very difficult. This would encourage the electric car market to successfully enter in this emerging country and access a huge base of prospective customers (AEA Technology Plc., 2009). The governments of Britain have provided grants to the car manufacturer to support this new technology (Vidal, 2014). Even in America, the government has been very supportive and is investing heavily in promotion of fuel efficient and light weight cars. These findings reflect that BMW i3 would have an effective business environment (Cardenal and Garcia, 2013). Economic BMW i3 is aiming at markets that are developed or are rapidly developing. The US and the UK markets, which are most powerful economies with huge per capita income of individuals, make way for a bright future of the car. In addition to this, they are also targeting emerging markets like, India and China. Both of them have impressive per capita income of individuals, which would provide them a huge customer base. With the government of these countries being very supportive towards electric cars, they are expected to have a good prospect. Social The markets that are being targeted by BMW i3 have huge population in the urban region with high per capita income. This population are highly literate and wants to get associated with premium brands, which define their status. BMW generally targets urban literate customers, who occupy higher positions in their respective professional fields. These people have a flamboyant lifestyle and are more inclined towards using plastic money and avail credit facilities while purchasing luxury items (Gerzema and D’Antonio, 2011). BMW, like all other companies, would allow credit purchases in order to gain the most out of the market. Technology Being a technologically updated car, BMW i3 would require huge technical support from the market in order to work efficiently. The target markets must have huge technological advancement, which would make their task easy as they can avail technology of the local market (Wollaston, 2014). The US, the UK, China and India are the biggest targeted markets of BMW and all these countries have superior technical advancement. SWOT Analysis This qualitative analysis tool should be used while analysing viability of the product in the present market (Jurevicius, 2013). This analysis helps to formulate marketing strategies for the new product. Through this analysis, the researcher can figure out external factors that would require proper pre-planning and the internal factors that would help in the process of planning (Jurevicius, 2012). Strength BMW brand has always been associated with technology and innovation. They have an immense brand value and a huge base of loyal customer (Porter, 1980). BMW spends significantly in their R&D efforts, which facilitate updated designing of products, which would satisfy requirement of the target customers. According to reports of International Energy Agency (2013) and BMW (2008), the brand is about to spend huge amount in order to develop the project I, which would be a part of their “Number One” strategy. BMW has been able to keep their customer base loyal with the help of effective distribution channels (International Energy Agency, 2013). Weakness Although the electric car segment is broadening, the actual market share is still very less. BMW i3 would face fierce competition from market leader, TESLA and Nissan, who are already operating successfully since a decade and are aware of all nuances of the market. These competitors have their brands established in this niche segment, where BMW is approaching (McKay, 2010). As this is a new emerging segment, there always is an uncertainty regarding sustainability of demand in the long run. Opportunities BMW has opportunities with their i3 model in the global arena because demand for Electric Cars is growing (Lee, 2011). In order to get rid of environmental concerns, the governments of developed and developing countries are formulating new measures for motivating car makers to manufacture electric cars (Haytko and Matulich, 2008). Countries like, Britain and the United States, provide grants to such companies to encourage the EV production. Also, the growing per capita income in many of the emerging nations has made the customer base of BMW broader. Threats With many critics considering that the recent trend of growing market in the electronic car segment may come to a halt in near future, BMW i3 encounters a threat. The entry of all automobile giants can even make this segment come to a saturation point. Due to high volatility in the exchange rate, the prices of these high technology cars cannot be arrested. The high cost required in order to establish retail shops and charging stations can also de-motivate the auto manufacturer. Marketing Objectives BMW plans to achieve 25% market share in the electric car segment. The report of Krix and Reinking (2014) stated that BMW aims to sell out 500 units in their pre launch phase. The sell has reached to more than 1000 units. Owing to this phenomenal response, a marketing plan is being formulated so as to achieve 25% of the market in the coming three years (Krix and Reinking, 2014). Issues There are certain issues related to BMW i3, which would negatively affect the predetermined marketing plan. The car is not built to carry heavy loads or cover a long distance. Therefore, it is required to establish charging stations at intervals by the company to charge the car. Most of the car garages do not have charging stations, which might become an issue (Winton, 2013). The car has also been priced in the premium range, which is higher than many of the hatchbacks of the same segment. The owners have to pay an additional $925 for handling and destination, thereby further increasing the price. These are the issues that might pose an obstacle in implementing the marketing strategies successfully. The marketing plan and issues are discussed comprehensively through marketing mix below: Marketing Mix Through the marketing mix, we can formulate the specific marketing strategy for BMW i3 (Martin, 2009). Product BMW is about to launch their newest product i3 into the market shortly. This car is of the latest technology. They are aiming to target the electric car segment, which is new and rapidly emerging (Lorette, 2014). The product is influentially designed to sport a trendy look in order to appeal to the present consumer base. With a spacious interior, large wheels and light weight i3 makes a sophisticated model and the use of different carbon efficient components makes it environmentally friendly (Ginsberg and Bloom, 2004). The company needs to harp on the environmental benefits of using this car and must sponsor big environmental events held by well-known organisations in the targeted markets (Finisterra, et al., 2009). Price As this product will be featuring in introduction phase of the product life cycle (PLC), they must adapt to the slow skimming strategy (Ansoff, 1987). According to the slow skimming strategy, BMW i3 would be priced high owing to presence of updated technology. Besides that, brand value will add to the price (Gutman, 1982). Tentatively BMW is priced at $41,350 in the US and $33,260 in India pre launch. This pricing strategy would allow them to recover their costs and reach their break even within short time (Olson, Slater and Hult, 2005) As it is a new product in premium segment coming under a newly emerging sector, there always lies a doubt regarding formation of the market and acceptance of change shown by the customers (Business Case Studies, 2014). Figure. 2. Marketing Strategies during Introduction Phase. (Source: Ansoff, 1987) Place BMW i3 must target those countries that have huge per capita income of individuals. This is because it is a luxury product with a premium price tag. Also, countries that have their government formulating regulations to bring down air pollution would be targeted (Brown, 2013). China and India, the biggest developing nations, along with developed nations like, the US and the UK, could serve the above criteria mentioned (EMC-MEC, 2010). As i3 is a technologically updated car, the target markets should be suitable for technological advancement; this criterion is also fulfilled by above mentioned countries (Fan, 2008). The said countries already has BMW supply chain network, which can efficiently be used in order to bring down waiting time of the consumers by making the transaction swift (Gerke, 2014). The prevalence of technological advancement would enable the company to start online ordering system, which is generally well-accepted in these countries. This would ensure an efficient distribution system, which is one of the key aspects for any business to succeed (Smith, 2010). The urban population needs to be checked in the prospective market because the product is for individuals who feature in the upper middle class section. These countries do have huge urban population with affordability for a luxury car brand. Promotion The slow skimming strategy would allow BMW to price i3 in premium range and keep the promotional cost limited, which would enable them to recover the expenses and reach the break even fast. This is also help them to create demand through word-of-mouth, which is the best way of promotion as it is free and more credible in the act of generating more trust about the brand among prospective customers (Allsop, Bassett and Hoskins, 2007). In fast developing country like, India, where competition in this segment has not yet began, BMW must adapt this strategy in order to create an environment of trust towards the brand, which is difficult for the competitors to affect (Hood, 2012). This would give them a first mover advantage, which is a requirement of every brand who wants to gain an edge over the competition. BMW can take up below the line (BTL) promotional strategy. This would include point of purchase (POP) displays, organising road shows and sponsoring in big environmental programmes. This would be the best way of promoting the coming of age car in an effective manner. Budget, Implementation and Control Financial Aspects of Marketing Implementation Total budget for Year 1: US$ 35,000,000, Year 2: US$ 45,000,000 and Year 3: US$ 55,000,000 Sales Target for Year 1: 18,000 (US$ 7, 200, 000, 00), Year 2: 38, 000 ((US$ 15, 200, 000, 00), and Year 3: 60, 000 (US$ 240, 000, 000, 0), [per unit price of BMW i3= US$ 40, 000] Advertising Expenditure: 15% of the total expenditure, research & development expenditure: 25% of the expenditure, other marketing and operational expenses= 50% of the expenditure. The advertising expenditure must comprise of the BTL techniques, which would include road shows and promotions by sponsoring environmental events by big organisations. The expenditure for promotion must be reduced every year. The expenses also include strategic partnerships with dealers. Marketing Implementation Table 1: Gantt chart: process of marketing implementation Year 1 Year 2 Year 3 ID Task Name Predecessors Duration Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1 Target market identification and Market Research. 3 months 2 Launching 1 3 months 3 Promotions 1,2 12 months 4 Newer model in i3 series 1, 2,3 6 months 5 15% of market share 1,2,3,4 6 months 6 Diversification and identification of new segment 5 3 months 7 Achieving 15% market share through promotions and word of mouth. 5,6 3 quarters 8 Marketing objective fulfilled 6,7 0 [Note: Q= Quarter] Financial Expense Projection Description 2013/14 Cost US$ million 2014/15 Cost US$ million 2015/16 Cost US$ million Developing New Product R&D and evaluation of final product 70 75 80 Roll out of BMW i3 15 18 20 Subtotal 85 93 100 New market development Market research 6 8 10 Marketing activities 20 25 30 Subtotal 26 33 40 Sales Services Process Design 5 8 11 Roll out of the services 10 14 18 Subtotal 15 22 29 Grand total 126 148 169 Return on Investment Control In order to address the uncertainties in marketing of BMW i3, the following control intervention mechanisms can be used. The supply chain network must be centralised and redundant steps in the value chain must be avoided in order to reduce marketing cost. 8-10% of the budget must be kept as buffer to counter irregularities in marketing plan. In order to increase process profitability, proper streamlining of non-revenue generating expenditures is required. In order to improve return on investment made in marketing activities, statistical process control (SPC) must be applied. Reference List AEA Technology plc., 2009. Market outlook to 2022 for battery electric vehicles and plug-in hybrid electric vehicles. [pdf] AEA. Available at [Accessed 24 June 2014]. Allsop, D. T., Bassett, B. R. and Hoskins, J. A., 2007. Wordof- mouth research: Principles and applications. Journal of Advertising Research, 37(4), pp. 398-411. Ansoff, H. I., 1987. Corporate strategy. 2nd ed. London: Penguin. Newcomb, D.,2014. 2014 BMW i3: First drive review. msn. 22 March. BMW USA News, 2013. BMW i3 Pricing Announced. BMW USA News. 22 July. BMW, 2008. The future of sustainable mobility. leading (e)-mobility into a new era. [pdf] BMW. Available at [Accessed 24 June 2014]. BMW, 2014. BMW Insights. [online] Available at: [Accessed 24 June 2014]. Brown, R., 2013. BMW’s i3 moves sustainable mobility into new territory. [online] Available at : [Accessed 24 June 2014]. Business Case Studies, 2014. Marketing theory. [online] Available at: < http://businesscasestudies.co.uk/business-theory/marketing/the-marketing-mix.html#axzz35XnO0OYO > [Accessed 24 June 2014]. Cardenal, A. P. and Garcia, F. C., 2013. Qualitative and quantitative analysis of BMW group. [pdf] Universitat de Barcelona. Available at [Accessed 24 June 2014]. Cremer, A., 2014.Audi draws up plans for range of electric cars: Sources.[online] Available at: [Accessed 24 June 2014]. Detwiler, P., 2014. BMWs i3: A new kind of electric vehicle. [online] Available at: < http://www.forbes.com/sites/peterdetwiler/2014/01/29/bmws-i3-a-new-kind-of-electric-vehicle/ > [Accessed 24 June 2014]. EMC-MEC, 2010. Encouraging the rapid adoption of electric vehicles in Canada.[pdf] emc-mec. Available at : [Accessed 24 June 2014]. Fan, Y., 2008. The rise of emerging market multinationals and its impact on marketing. Marketing Intelligence & Planning, 26(4), pp.353 – 358. Finisterra Do Paco, A. M., Barata Raposo, M. and Filho, W., 2009. Identifying the green consumer: A segmentation study. Journal of Targeting, Measurement & Analysis For Marketing, 17(1), pp. 17-25. Gerke, G., 2014. Does BMW’s i3 lap the electric car field in 2014?. [online] Available at : < http://www.electricvehicleparade.com/blog/2014/1/21/does-bmws-i3-lap-the-electric-car-field-in-2014.html > [Accessed 24 June 2014]. Gerzema, J. and D’Antonio, M., 2011. Spend shift: How the post-crisis values revolution is changing the way we buy, sell, and live. San Francisco, CA: Jossey-Bass. Ginsberg, J. and Bloom, P. N., 2004. Choosing the right green marketing strategy. MIT Sloan Management Review, 46(1), pp. 79-84. Gutman, J., 1982. A Means-End Chain Model Based on Consumer Categorization Processes. Journal of Marketing, 46(2), pp. 60-72. Haytko, D. L. and Matulich, E., 2008. Green advertising and environmentally responsible consumer behaviors: Linkages examined. Journal of Management & Marketing Research, 1, pp. 14-15. Hood, M., 2012. The big shift: The next generation has arrived. Direct Selling News, January, pp. 10-14. International Energy Agency., 2013. Global EV outlook: Understanding the Electric Vehicle Landscape to 2020. [pdf] International Energy Agency. Available at [Accessed 24 June 2014]. Jurevicius, O., 2012. SWOT analysis of BMW. [online] Available at: [Accessed 24 June 2014]. Jurevicius, O., 2013. SWOT analysis of BMW. [online] Available at : < http://www.strategicmanagementinsight.com/swot-analyses/bmw-swot-analysis.html > [Accessed 24 June 2014]. Krix, P. and Reinking, G., 2014. BMW i3 buyers face six-month wait for their cars. [online] Available at: [Accessed 24 June 2014]. Lane, R., 2014. Nissan LEAF sales under serious threat from premium rivals.[online] Available at :< http://ecomento.com/2014/06/19/nissan-leaf-sales-under-serious-threat-from-premium-rivals/> [Accessed 24 June 2013]. Lee, K., 2011. The green purchase behavior of Hong Kong young consumers: the role of peer influence, local environmental involvement, and concrete environmental knowledge. Journal of International Consumer Marketing, 23(1), pp. 21-44. Lorette, K., 2014. Marketing plan for a new product launch. [online] Available at : < http://smallbusiness.chron.com/marketing-plan-new-product-launch-1475.html> [Accessed 24 June 2014]. Loveday, E., 2014. BMW CEO explains why he thinks BMW i3 is superior to Tesla Model S. [online] Available at : [Accessed 24 June 2014]. Martin, D. M., 2009. The entrepreneurial marketing mix. Qualitative Market Research: An International Journal, 12(4), pp.391-403. McCue, TJ., 2013. Worldwide electric vehicle sales to reach 3.8 million annually by 2020. [online] Available at : [Accessed 24 June 2014]. McKay, L., 2010. Generation green: Why Gen Y and the Millennials are greener than you’ll ever be. CRM Magazine, 14(4), p. 12. Motavalli, J., 2013. Tesla leads way as electric car sales double in 2013. [online] Available at: [Accessed 24 June 2014]. Olson, E. M., Slater, S. F. and Hult, G. T., 2005. The importance of structure and process to strategy implementation. Business Horizons, 48, pp. 47-54. Porter, M. E., 1980. Competitive strategy. New York, NY: The Free Press. Porter, M. E., 1985. Competitive Advantage. New York, NY: The Free Press. Porter, M. E., 1991. Towards a dynamic theory of strategy. Strategic Management Journal, 12, pp. 95-117. Rauwald, C., 2013. BMW Sees i3 Spending Weighing on Automotive Profitability. [online] Available at: [Accessed 24 June 2014]. Smith, K. T. and Brower, T. R., 2012. Longitudinal study of green marketing strategies that influence Millennials. Journal of Strategic Marketing, 20(6), pp. 535-551. Smith, K. T., 2010. An examination of marketing techniques that influence Millennials’ perceptions of whether a product is environmentally friendly. Journal of Strategic Marketing, 18(6), pp. 437-450. The Economist, 2014. Electric cars fully charged. The Economist. 27 February. Vardera, L. and Stamford, F.,2010. The electric vehicle market in the USA. [pdf] Finnode. Available at : [Accessed 24 June 2014]. Vidal, J., 2014. Electric car sales speed up as UK plugs in to global trend. [online] Available at: [Accessed 24 June 2014]. Winton, N., 2013. New i3 electric car trickles to market as BMW worries about quality. [online] Available at : [Accessed 24 June 2014]. Wollaston, S., 2014. BMW i3: Car review. The Guardian, 22 March. Read More