SWOT Analysis of BMW
Content
SWOT Analysis of BMW:
1. Strong Brand Image 1. Because of its Germany Heavy base, 2. Perception of German Engineering fixed costs and labour costs are very and Quality high. 3. BMW makes some of the best 2. Productivity though improved, still lags engines in the world. behind its Japanese rivals like Lexus. 4. Strong commitment to R&D. 3. Less than perfect response to its new 5. Established presence and design direction. Economies of Scale in the big car markets of Europe and USA. 6. Promising presence in growing markets like India, China and Russia. 1. Strong growth of China and India 1. Threat of a long recession in the USA 2. Integration of European countries and Europe into the European Union has 2. Strengthening of the Euro against the created the world‟s biggest and US Dollar and other currencies can potentially richest trading zone undercut its top line and affect and EU is BMW‟s home. profitability. 3. Consumer trend towards cleaner 3. Fresh and aggressive new direction at and more fuel efficient high Mercedes Benz that is promoting performance engines which is a driver involvement along with comfort BMW speciality. for the first time in its history. Eg the 4. The percentage of rich people is new C Class. growing worldwide. (Straits Times Article)
Strengths
Weaknesses
Opportunities
Threats
Segmentation and Target Market:
BMW does not believe in a Geographical segmentation of its market. Instead BMW segments its market primarily on a Psychographic and Demographic basis. Societal values are changing rapidly. Society is increasingly taking its cue from the entrepreneurial instincts and self reliance of the Generation X‟ers and dot-comers rather than the baby boomers who have dominated its thinking for most of four decades. Members of the dot-com generation, now in their 20s, are proving to be even more business-oriented. Twice as many say they would prefer to own a business rather than be a top executive. By a factor of 5 to 1, they would rather own a business than hold a key position in politics or government. (Higher education BCS Wiley) BMW wants this segment. BMW‟s ideal customer profile has been 25-40 year olds, with a median income of $120,000 or more. BMW and Fallon research indicated that many were tech-savvy, and had fast, reliable access to the web. Most important, 85% of buyers had researched the vehicle on the
web before stepping into a showroom. And they would like to enjoy driving their cars and not be driven in. (Higher education BCS Wiley) The price segmentation BMW chooses limits its target market to individuals at higher levels of income. BMW realizes that their target market‟s financial status requires them to focus on a more educated customer, one that has completed college, and survey results confirm their success. (Grin.com)
BMW Brand Positioning:
The majority of BMW‟s success is attributed to the development of a consistent marketing policy, 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. (Higher education BCS Wiley) Its premium price is meant to guarantee the consumer a high level of quality engineering, which can display status or success in a visible manner for social approval. The car‟s driving ability combined with its looks and advertised image distinguishes BMW from its competition. (Grin.com BMW brand audit) BMW has positioned itself as a luxury car maker that offers oodles of driving pleasure thrown in along with the luxury. This is in sharp contrast to Mercedes Benz‟s positioning as a pure comfort and luxury oriented car and Audi‟s positioning as the brand with the best interior quality and understated styling. Its “Ultimate Driving Machine” campaign has been one of the most enduring and loved campaign in the entire Automobile Industry History. So much so that in a poll conducted by Autoblog, the tagline came out tops in terms of best phrase.
Marketing Mix Audit:
Let us now proceed with the audit of the company‟s marketing mix as we have all the basic building blocks necessary to analyze the 4 P‟s. Let us look at each one 1. Product: To analyze the product mix at BMW, we will use the BCG matrix.
Findings: The company has only two „Cash Cows‟ or products that fetch maximum profits for the company. They are the 3 series and the 5 series. The 1 series, 7 series and the Z4 roadster are not doing too well. The company has two star performers in the form of the X5 SUV and the X3 mini SUV. The stars do extremely well but they also cost a lot of money to promote and sell as their market segments are witnessing higher growth rates and competition will be intense. 2.Price:
When compared with its direct competition like Mercedes Benz, Audi and Lexus etc, BMW is competitively prices as all of these brands position their brands at more or less the same price in all the segments. 3. Place: Part of BMW‟s success comes from the unique way in which it gets cars from the factory to the consumer. Other automakers mass produce vehicles and ship them to local dealerships where they sit until a buyer comes along but BMW‟s unique ordering system reverses the process, allowing the customer to order a vehicle before it even exists. Customers can visit BMW showrooms to custom order vehicles, selecting from a broad range of customizable features. Once an order is placed, BMW‟s manufacturing facilities go to work. While it would be reasonable to suppose that BMW‟s process significantly slows vehicle production and delivery time, the company has streamlined its logistical processes, enabling its factory to churn out customer-specified vehicles within a mere 10 days of receiving an order. (David Maloney, Modern Material Handling) Findings: BMW has earned its reputation for producing the highest quality car with the highest level of customer service. It leads its competitors when it comes to these areas. 4. Promotion: BMW pursues a bold and aggressive marketing campaign that sometimes directly attacks competitors. A case in point is the advertisement below
BMW reaches its target audience of young well to do 20 something‟s through a mixture of intelligent and provocative advertisements that have been highly successful. It always actively promotes the fact that its cars have a high amount of sportiness and driving pleasure mixed with luxury. Below is another provocative ad from BMW. An advertisement that is actively attacking its competitor „Jaguar‟. Note how the leaping cat on the bonnet of the Jaguar has turned back when confronted by a BMW
To appeal to its extremely tech savvy and internet using customers and enthusiasts, BMW has launched BMW Web TV. It is a place where videos about BMW and its activities can be viewed online. Findings: BMW has its marketing strategy bang on target. There is no inconsistency between its positioning, its target audience and its advertising. Its cars are bold and so is its advertising.
Gap Analysis and Recommendations:
The audit shows that the only area of concern amongst the 4P‟s for BMW is surprisingly, its product line up with only two cash cows. Shocked? Well so was I . After all BMW has always been known for the cars it makes. So what are the Product Gaps? 1. Flagship cars like the 7Series and the Z4 which were bestsellers earlier, are not selling well enough. 2. The two stars that the company has, the X5 and the X3, which should ideally turn into cash cows later are SUV’s. 3. Lexus has already commercially launched its hybrid cars and BMW does not yet have an entrant in this segment of the future. Let us analyze our gaps.
Why are the 7 series and the Z4 not selling as well as they should?
Mr. K. Bobby, the owner of G.N.Car Care, a prestigious luxury car servicing centre in India had this to say to us when we solicited his opinion.
“Many of my customers who have been with BMW for years do not like the design of the new cars under Chris Bangle. They find that the styling is not BMW like. Some of them are switching over to Audi and Mercedes Benz.” There is other data to support this theory
Many leading auto journalists also rubbished the new „design philosophy‟ adopted by Bangle and his team. There is another problem. When interviewed, Mr. K.S. Rao, the Regional Transport Authority officer for Andhra Pradesh, India who is responsible for issuing permits to new cars says that there is resentment among people who are buying the 7 Series about its extremely and needlessly complex „ i Drive‟ Navigation System. And it is flawed. Responding to a USA Today report that a bug in the „i Drive‟ system of the BMW 7 series and fuel pump problems could make the engine stall, BMW spokesman Gordon Kiel commented:
“certain cars stalled if the fuel tank was below 1/3″ “There is a not-uncommon shakedown period of one to two years with technology this new.”
Ironically, more than two years later, a number of electronic and „i Drive‟ problems continue to plague BMW‟s 7 series vehicles, and is not limited to those produced in 2001. (BMW Problems Forum) Recommendations for this gap: Stick to the BMW design DNA that was so successful for decades and which all the customers have come to love so much. Chris Bangle‟s radical new designs have caused too much bad blood. A mid life styling upgrade for both the Z4 and the 7 Series is necessary to make them more palatable.
Fix the „i Drive‟ system immediately or chuck it. This issue is seriously damaging BMW‟s reputation for quality. Mercedes Benz, in comparison, has a much simpler and user friendly navigation system called COMMAND that is a joy to use and is also reliable. Customers are loving it
X5 and X3 are the only two stars:
This is a major cause of concern. We have seen in the PEST analysis that the Governments all over the world are frowning upon big oil guzzling and relatively more polluting SUV‟s. Special additional taxes like the „Gas Guzzler Tax‟ and higher premiums are being slapped upon this category of vehicles to discourage the public. And there is a huge recession that is only promising to get even worse. When these two factors are taken into consideration, the future of the SUV segment does look bleak. So there is an immediate necessity of an alternative to take the place of these two star performers before they run the risk of dying out. Recommendations for this Gap: The 1 Series is selling very well and the segment it is targeting is going to grow bigger in the future as industry trends point out. Since this is a new segment for BMW, it may take some more time for it to capture more market share and become a star performer for BMW. But efforts have to be made to aggressively promote and establish this relatively new model so that it can quickly dominate the market and become a star performer for the company.
Lack of a Hybrid Car for sale:
sworn rival of BMW all over the world.
In the Premium Automobile Segment which BMW operates in, perception is everything. Lexus is the Lexus have launched their commercial Hybrid cars in many segments and the customer response has been enthusiastic. The shocking aspect is that BMW still hasn‟t come out with a commercial version of this product to compete with them. It‟s not as if BMW doesn‟t have the technology. BMW 7 series hybrid has been in development for many years now with a scheduled debut in the year 2010. And the company has previewed its X3 Hybrid concept vehicle that „may‟ debut this year. If BMW does not move soon, it stands the risk of being left to play catch up in this segment of the future. Recommendations: Launch the X3 Hybrid immediately in select markets like California and Germany and expand the presence slowly worldwide.Accelerate the development on the 7 Series hybrid. 2010 is too long a time to remain away from this market.Develop hybrid versions of the 5 Series and the 3 Series as well. Conclusion: For many decades, BMW was a company that could do no wrong. It had the best cars. It had the best marketing strategy and the management had the vision and leadership necessary.
Even now, most components of the Marketing Mix are just about perfect and the only gaps in the audit are disturbingly from the Products Component. Needlessly complex and unreliable technology like the „i Drive‟ and the extremely radical design themes of Chief Designer Chris Bangle are the primary causes of flagging sales. Mercedes Benz has also shifted gear and is now coming after driver enjoyment pretty hard. If Mercedes Benz succeeds in breaching that bastion of BMW, then things could be pretty bleak. But on a more optimistic note, all the gaps in the audit are surmountable with the strong technical base and the deep pockets BMW has. Once these gaps are filled, BMW should hopefully be “The Ultimate Driving Machine” once again.
Start This is a small project I did in July 2008. I thought I should put it up here. Its a brand audit for BMW to see what their market gaps are… Go ahead and read it, its quite interesting, especially if you are a BMW buff.
Company Background:
Sun Tzu in his book „The Art of War‟ says “Know thyself and thy enemies well and you shall win any battle anywhere”. So before we delve into the actual analysis and our findings, first let us take a look at the company‟s history. When you see a double kidney grill with the white and blue propeller in your rear view mirror, you will instinctively want to move over and let the bloke pass unless you are either a very brave soul or you are driving one of the white and blue propellers yourself. The blue and white propeller and the kidney grille is universally synonymous with BMW. When the company adopted the tagline „The Ultimate Driving Machine‟ in the 1970‟s for the American Market, little did they know that they were creating one of the most enduring and loved catchphrases of the Automotive Industry. BMW has this to say about their history in their web site “What started as an aircraft engine producer nearly a century ago has evolved through the years. In 1952, the first BMW cars were built in Munich, including the BMW Isetta and the BMW 1500. And then, in the late ‟60s, an unassuming little automobile made its U.S. debut that forever changed driving: the BMW 2002. Light, fuel-efficient, and agile like a sports car, it also had four comfortable seats and legroom. The 2002 embodied for Americans an entirely new concept: the sports sedan. And it laid down track that BMW has been running on ever since.
A little less than a decade after the BMW 2002 was introduced to the U.S., a new vehicle of performance and practicality was born, the BMW 3 Series. While the 3 Series remains the benchmark against which all other sedans are measured today, we have continued expanding our models. In 1996, the BMW Z3 was introduced, the predecessor of today‟s sculptural Z4 roadster. In 1999, we launched a whole new vehicle category with our X5: the Sports Activity Vehicle. And most recently, we‟ve introduced the BMW 335i Coupe, the most powerful 3 Series Coupe ever. Because we‟ve always been unwilling to compromise, we‟ve managed to build vehicles that thrill drivers. We have the autonomy to stand behind the leading-edge concepts of our designers and engineers. As an independent company, we make sure great ideas live on to become ultimate driving machines. “(BMW Website) BMW has always focused on the driver and his/her involvement in the driving experience. The company is so obsessive about driver focus that in all its cars until the very recent models, the facia of the car was slightly tilted towards the driver. BMW‟s are meant to be driven in and not chauffeured in. Perhaps this approach of the company explains why BMW has an extremely loyal following amongst auto enthusiasts. Their souped up 5 series, the M5, has regularly taken the fight to much more expensive Porsche‟s and Ferrari‟s in terms of pure performance.
Scope and Limitations:
For this audit and analysis of BMW‟s Marketing Mix, I have decided to limit myself to analyzing only the core BMW business. That is, the making and selling of high performance luxury cars. I have excluded the motorcycle operations, the motorsport division and the niche one off products like the BMW bicycles. I have not stuck to BMW operations of any one country, like BMW in Singapore. I have taken into account the performance of BMW models worldwide. So what is the „apparent truth‟ in the Singapore market may not be applicable for the BMW group as a whole worldwide. I have excluded new models like the X6 as the market response is yet to be gauged reliably from secondary data. I have also not taken into consideration the other brands of the BMW group, The Mini and Rolls Royce. As they are niche products with a very different target group, particularly the Rolls Royce, they would not gel very well with the strategies and positioning of the mainstream BMW models. They require an entirely different thinking perspective and positioning. Because of its Customer Privacy policy, BMW Singapore did not allow me to access its customer database. Therefore we had to rely on industrial data and previous market research to identify the customer perception of the brand. It is for this very reason that I have also refrained from creating my own perception map of the company.
Research Methodologies:
Secondary Research – For my research and industrial data, I have relied extensively on the resources of the University of Wales electronic Library as well as the National Library of Singapore. Automobile magazines like Top Gear, Autocar and Road & Track have given me valuable insights into the automobile industry. On the internet, I have extensively used the services of MBA specific sites like NetMBA.com and eBook sites like the Google Book Search. Though not entirely thorough, the online encyclopaedia Wikipedia was also a valuable source of trivia and background information. The BMW website as well as its Annual Report have been extremely helpful in providing company specific information Primary Research – As mentioned earlier in the Scope and Limitations section of this paper, BMW‟s customer privacy policy prevented me from accessing a reliable and substantial customer database. And because BMW is a premium brand and not a mass product, random sampling of people as to their perception of BMW would not have been reliable enough. So my Primary research for this paper was limited to Interviews of people in Key positions both within the BMW framework and outside who are in a position to give an accurate insight into the brand. To get a global perspective, I have tried to solicit opinions from as many geographically diverse locations as possible.
Branding:
In the “New World Order”, a term famously coined by former American President George W Bush Sr, marketing has a tremendous role to play in the success or failure of a product and more importantly, in the success and failure of a company. Marketing today is all about perception. About building the „Brand‟. And about how customers perceive the „Brand‟. Post World War II, companies began realising that efficient production and extensive promotion alone cannot guarantee success in the market. „With increased discretionary income, customers could afford to be selective and buy only those products that precisely met their changing needs. In response to these discerning customers, firms began to adopt the marketing concept, which involves:
Focusing on customer needs before developing the product Aligning all functions of the company to focus on those needs Realizing a profit by successfully satisfying customer needs over the long-term
When firms first began to adopt the marketing concept, they typically set up separate marketing departments whose objective it was to satisfy customer needs. Often these departments were sales departments with expanded responsibilities. While this expanded sales department structure can be
found in some companies today, many firms have structured themselves into marketing organizations having a company-wide customer focus. (NET MBA) The successful company is one which can identify the needs of the market, position itself correctly to fill that need and add value, and then stay true to what it stands for.
Case 6 - BMW
Premium car brand BMW has created strong associations within the minds of consumers over the years of quality and excellence in performance. While marketing strategies in coming years should continue to emphasize these associations, as BMW manages a growing portfolio of product lines, referred to by the company as “lifestyle product extensions,” an increasing number of core values and associations will need to be carefully created to successfully sustain these extensions and differentiate the BMW brand name, while further building BMW’s overall brand equity. The introduction of these products are hoped to not only prove successful financially, but to also strengthen BMW’s brand equity by creating new associations which, while new to those previously created by BMW marketing efforts, are consistent with BMW’s core associations with mobility, coolness, luxury, quality, and excellence. Extensions not consistent with the core brand image BMW has indelibly created over years will only serve to confuse consumers about the offerings of the new products and erode the strong equity BMW has established, but BMW seems to be careful in trying to create new associations that logically build upon the ones it has already created over the years. With its introduction of products targeted to the so-called “creative class,” BMW hopes to expand consumer associations with the brand to include things such as innovation, excitement, and creativity. The creative class consists of influential intellectuals, innovators, and entertainers – just the class I think BMW should be targeting, not only for their tastes, but also because they are looked to by others in society to determine what is cool or trendy. If these products prove successful and their marketing creates the intended associations, BMW’s equity will be further strengthened. I think BMW appears capable of successfully doing this. The acquisition of the MINI brand is consistent with BMW’s intent to create associations of creativity and innovation with the brand. Because the MINI motion shoe is consistent with associations of coolness, mobility and sportiness that for years have been connected with BMW, it will not erode BMW equity, but build upon it to include additional associations of creativity and to hopefully appeal to a market that would normally not be customers of BMW. The BMW X-Bike and the BMW Street-Carver have strong associations with innovation. Because MINI is regarded as being trendy and having a strong emotional appeal, it should increase the perception of humanity and an urban and a postmodern way of life with the BMW name, an association that for the most part has been lacking in previous marketing campaigns. The extensions also serve to differentiate BMW from other car manufacturers, such as Volvo and Mercedes-Benz, many of which are parts of large conglomerates, and therefore able to take on greater risks than their chief competitors (such as introduce new product lines). Some may be concerned about the effect of introducing smaller cars and cannibalism of existing cars that may result from BMW’s expanding portfolio. While at least some degree of cannibalism is unavoidable and there are concerns the 1 Series will take away sales from the more profitable 3 Series, I think BMW will continue to build its equity, a factor more important than initial cannibalism or short-term margins, provided BMW continues to offer product lines consisting of quality items, whether they are cars or not, consistent with its overall image that uniquely serve the needs of its target customers.
1. Strong Brand Image 1. Because of its Germany Heavy base, 2. Perception of German Engineering fixed costs and labour costs are very and Quality high. 3. BMW makes some of the best 2. Productivity though improved, still lags engines in the world. behind its Japanese rivals like Lexus. 4. Strong commitment to R&D. 3. Less than perfect response to its new 5. Established presence and design direction. Economies of Scale in the big car markets of Europe and USA. 6. Promising presence in growing markets like India, China and Russia. 1. Strong growth of China and India 1. Threat of a long recession in the USA 2. Integration of European countries and Europe into the European Union has 2. Strengthening of the Euro against the created the world‟s biggest and US Dollar and other currencies can potentially richest trading zone undercut its top line and affect and EU is BMW‟s home. profitability. 3. Consumer trend towards cleaner 3. Fresh and aggressive new direction at and more fuel efficient high Mercedes Benz that is promoting performance engines which is a driver involvement along with comfort BMW speciality. for the first time in its history. Eg the 4. The percentage of rich people is new C Class. growing worldwide. (Straits Times Article)
Strengths
Weaknesses
Opportunities
Threats
Segmentation and Target Market:
BMW does not believe in a Geographical segmentation of its market. Instead BMW segments its market primarily on a Psychographic and Demographic basis. Societal values are changing rapidly. Society is increasingly taking its cue from the entrepreneurial instincts and self reliance of the Generation X‟ers and dot-comers rather than the baby boomers who have dominated its thinking for most of four decades. Members of the dot-com generation, now in their 20s, are proving to be even more business-oriented. Twice as many say they would prefer to own a business rather than be a top executive. By a factor of 5 to 1, they would rather own a business than hold a key position in politics or government. (Higher education BCS Wiley) BMW wants this segment. BMW‟s ideal customer profile has been 25-40 year olds, with a median income of $120,000 or more. BMW and Fallon research indicated that many were tech-savvy, and had fast, reliable access to the web. Most important, 85% of buyers had researched the vehicle on the
web before stepping into a showroom. And they would like to enjoy driving their cars and not be driven in. (Higher education BCS Wiley) The price segmentation BMW chooses limits its target market to individuals at higher levels of income. BMW realizes that their target market‟s financial status requires them to focus on a more educated customer, one that has completed college, and survey results confirm their success. (Grin.com)
BMW Brand Positioning:
The majority of BMW‟s success is attributed to the development of a consistent marketing policy, 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. (Higher education BCS Wiley) Its premium price is meant to guarantee the consumer a high level of quality engineering, which can display status or success in a visible manner for social approval. The car‟s driving ability combined with its looks and advertised image distinguishes BMW from its competition. (Grin.com BMW brand audit) BMW has positioned itself as a luxury car maker that offers oodles of driving pleasure thrown in along with the luxury. This is in sharp contrast to Mercedes Benz‟s positioning as a pure comfort and luxury oriented car and Audi‟s positioning as the brand with the best interior quality and understated styling. Its “Ultimate Driving Machine” campaign has been one of the most enduring and loved campaign in the entire Automobile Industry History. So much so that in a poll conducted by Autoblog, the tagline came out tops in terms of best phrase.
Marketing Mix Audit:
Let us now proceed with the audit of the company‟s marketing mix as we have all the basic building blocks necessary to analyze the 4 P‟s. Let us look at each one 1. Product: To analyze the product mix at BMW, we will use the BCG matrix.
Findings: The company has only two „Cash Cows‟ or products that fetch maximum profits for the company. They are the 3 series and the 5 series. The 1 series, 7 series and the Z4 roadster are not doing too well. The company has two star performers in the form of the X5 SUV and the X3 mini SUV. The stars do extremely well but they also cost a lot of money to promote and sell as their market segments are witnessing higher growth rates and competition will be intense. 2.Price:
When compared with its direct competition like Mercedes Benz, Audi and Lexus etc, BMW is competitively prices as all of these brands position their brands at more or less the same price in all the segments. 3. Place: Part of BMW‟s success comes from the unique way in which it gets cars from the factory to the consumer. Other automakers mass produce vehicles and ship them to local dealerships where they sit until a buyer comes along but BMW‟s unique ordering system reverses the process, allowing the customer to order a vehicle before it even exists. Customers can visit BMW showrooms to custom order vehicles, selecting from a broad range of customizable features. Once an order is placed, BMW‟s manufacturing facilities go to work. While it would be reasonable to suppose that BMW‟s process significantly slows vehicle production and delivery time, the company has streamlined its logistical processes, enabling its factory to churn out customer-specified vehicles within a mere 10 days of receiving an order. (David Maloney, Modern Material Handling) Findings: BMW has earned its reputation for producing the highest quality car with the highest level of customer service. It leads its competitors when it comes to these areas. 4. Promotion: BMW pursues a bold and aggressive marketing campaign that sometimes directly attacks competitors. A case in point is the advertisement below
BMW reaches its target audience of young well to do 20 something‟s through a mixture of intelligent and provocative advertisements that have been highly successful. It always actively promotes the fact that its cars have a high amount of sportiness and driving pleasure mixed with luxury. Below is another provocative ad from BMW. An advertisement that is actively attacking its competitor „Jaguar‟. Note how the leaping cat on the bonnet of the Jaguar has turned back when confronted by a BMW
To appeal to its extremely tech savvy and internet using customers and enthusiasts, BMW has launched BMW Web TV. It is a place where videos about BMW and its activities can be viewed online. Findings: BMW has its marketing strategy bang on target. There is no inconsistency between its positioning, its target audience and its advertising. Its cars are bold and so is its advertising.
Gap Analysis and Recommendations:
The audit shows that the only area of concern amongst the 4P‟s for BMW is surprisingly, its product line up with only two cash cows. Shocked? Well so was I . After all BMW has always been known for the cars it makes. So what are the Product Gaps? 1. Flagship cars like the 7Series and the Z4 which were bestsellers earlier, are not selling well enough. 2. The two stars that the company has, the X5 and the X3, which should ideally turn into cash cows later are SUV’s. 3. Lexus has already commercially launched its hybrid cars and BMW does not yet have an entrant in this segment of the future. Let us analyze our gaps.
Why are the 7 series and the Z4 not selling as well as they should?
Mr. K. Bobby, the owner of G.N.Car Care, a prestigious luxury car servicing centre in India had this to say to us when we solicited his opinion.
“Many of my customers who have been with BMW for years do not like the design of the new cars under Chris Bangle. They find that the styling is not BMW like. Some of them are switching over to Audi and Mercedes Benz.” There is other data to support this theory
Many leading auto journalists also rubbished the new „design philosophy‟ adopted by Bangle and his team. There is another problem. When interviewed, Mr. K.S. Rao, the Regional Transport Authority officer for Andhra Pradesh, India who is responsible for issuing permits to new cars says that there is resentment among people who are buying the 7 Series about its extremely and needlessly complex „ i Drive‟ Navigation System. And it is flawed. Responding to a USA Today report that a bug in the „i Drive‟ system of the BMW 7 series and fuel pump problems could make the engine stall, BMW spokesman Gordon Kiel commented:
“certain cars stalled if the fuel tank was below 1/3″ “There is a not-uncommon shakedown period of one to two years with technology this new.”
Ironically, more than two years later, a number of electronic and „i Drive‟ problems continue to plague BMW‟s 7 series vehicles, and is not limited to those produced in 2001. (BMW Problems Forum) Recommendations for this gap: Stick to the BMW design DNA that was so successful for decades and which all the customers have come to love so much. Chris Bangle‟s radical new designs have caused too much bad blood. A mid life styling upgrade for both the Z4 and the 7 Series is necessary to make them more palatable.
Fix the „i Drive‟ system immediately or chuck it. This issue is seriously damaging BMW‟s reputation for quality. Mercedes Benz, in comparison, has a much simpler and user friendly navigation system called COMMAND that is a joy to use and is also reliable. Customers are loving it
X5 and X3 are the only two stars:
This is a major cause of concern. We have seen in the PEST analysis that the Governments all over the world are frowning upon big oil guzzling and relatively more polluting SUV‟s. Special additional taxes like the „Gas Guzzler Tax‟ and higher premiums are being slapped upon this category of vehicles to discourage the public. And there is a huge recession that is only promising to get even worse. When these two factors are taken into consideration, the future of the SUV segment does look bleak. So there is an immediate necessity of an alternative to take the place of these two star performers before they run the risk of dying out. Recommendations for this Gap: The 1 Series is selling very well and the segment it is targeting is going to grow bigger in the future as industry trends point out. Since this is a new segment for BMW, it may take some more time for it to capture more market share and become a star performer for BMW. But efforts have to be made to aggressively promote and establish this relatively new model so that it can quickly dominate the market and become a star performer for the company.
Lack of a Hybrid Car for sale:
sworn rival of BMW all over the world.
In the Premium Automobile Segment which BMW operates in, perception is everything. Lexus is the Lexus have launched their commercial Hybrid cars in many segments and the customer response has been enthusiastic. The shocking aspect is that BMW still hasn‟t come out with a commercial version of this product to compete with them. It‟s not as if BMW doesn‟t have the technology. BMW 7 series hybrid has been in development for many years now with a scheduled debut in the year 2010. And the company has previewed its X3 Hybrid concept vehicle that „may‟ debut this year. If BMW does not move soon, it stands the risk of being left to play catch up in this segment of the future. Recommendations: Launch the X3 Hybrid immediately in select markets like California and Germany and expand the presence slowly worldwide.Accelerate the development on the 7 Series hybrid. 2010 is too long a time to remain away from this market.Develop hybrid versions of the 5 Series and the 3 Series as well. Conclusion: For many decades, BMW was a company that could do no wrong. It had the best cars. It had the best marketing strategy and the management had the vision and leadership necessary.
Even now, most components of the Marketing Mix are just about perfect and the only gaps in the audit are disturbingly from the Products Component. Needlessly complex and unreliable technology like the „i Drive‟ and the extremely radical design themes of Chief Designer Chris Bangle are the primary causes of flagging sales. Mercedes Benz has also shifted gear and is now coming after driver enjoyment pretty hard. If Mercedes Benz succeeds in breaching that bastion of BMW, then things could be pretty bleak. But on a more optimistic note, all the gaps in the audit are surmountable with the strong technical base and the deep pockets BMW has. Once these gaps are filled, BMW should hopefully be “The Ultimate Driving Machine” once again.
Start This is a small project I did in July 2008. I thought I should put it up here. Its a brand audit for BMW to see what their market gaps are… Go ahead and read it, its quite interesting, especially if you are a BMW buff.
Company Background:
Sun Tzu in his book „The Art of War‟ says “Know thyself and thy enemies well and you shall win any battle anywhere”. So before we delve into the actual analysis and our findings, first let us take a look at the company‟s history. When you see a double kidney grill with the white and blue propeller in your rear view mirror, you will instinctively want to move over and let the bloke pass unless you are either a very brave soul or you are driving one of the white and blue propellers yourself. The blue and white propeller and the kidney grille is universally synonymous with BMW. When the company adopted the tagline „The Ultimate Driving Machine‟ in the 1970‟s for the American Market, little did they know that they were creating one of the most enduring and loved catchphrases of the Automotive Industry. BMW has this to say about their history in their web site “What started as an aircraft engine producer nearly a century ago has evolved through the years. In 1952, the first BMW cars were built in Munich, including the BMW Isetta and the BMW 1500. And then, in the late ‟60s, an unassuming little automobile made its U.S. debut that forever changed driving: the BMW 2002. Light, fuel-efficient, and agile like a sports car, it also had four comfortable seats and legroom. The 2002 embodied for Americans an entirely new concept: the sports sedan. And it laid down track that BMW has been running on ever since.
A little less than a decade after the BMW 2002 was introduced to the U.S., a new vehicle of performance and practicality was born, the BMW 3 Series. While the 3 Series remains the benchmark against which all other sedans are measured today, we have continued expanding our models. In 1996, the BMW Z3 was introduced, the predecessor of today‟s sculptural Z4 roadster. In 1999, we launched a whole new vehicle category with our X5: the Sports Activity Vehicle. And most recently, we‟ve introduced the BMW 335i Coupe, the most powerful 3 Series Coupe ever. Because we‟ve always been unwilling to compromise, we‟ve managed to build vehicles that thrill drivers. We have the autonomy to stand behind the leading-edge concepts of our designers and engineers. As an independent company, we make sure great ideas live on to become ultimate driving machines. “(BMW Website) BMW has always focused on the driver and his/her involvement in the driving experience. The company is so obsessive about driver focus that in all its cars until the very recent models, the facia of the car was slightly tilted towards the driver. BMW‟s are meant to be driven in and not chauffeured in. Perhaps this approach of the company explains why BMW has an extremely loyal following amongst auto enthusiasts. Their souped up 5 series, the M5, has regularly taken the fight to much more expensive Porsche‟s and Ferrari‟s in terms of pure performance.
Scope and Limitations:
For this audit and analysis of BMW‟s Marketing Mix, I have decided to limit myself to analyzing only the core BMW business. That is, the making and selling of high performance luxury cars. I have excluded the motorcycle operations, the motorsport division and the niche one off products like the BMW bicycles. I have not stuck to BMW operations of any one country, like BMW in Singapore. I have taken into account the performance of BMW models worldwide. So what is the „apparent truth‟ in the Singapore market may not be applicable for the BMW group as a whole worldwide. I have excluded new models like the X6 as the market response is yet to be gauged reliably from secondary data. I have also not taken into consideration the other brands of the BMW group, The Mini and Rolls Royce. As they are niche products with a very different target group, particularly the Rolls Royce, they would not gel very well with the strategies and positioning of the mainstream BMW models. They require an entirely different thinking perspective and positioning. Because of its Customer Privacy policy, BMW Singapore did not allow me to access its customer database. Therefore we had to rely on industrial data and previous market research to identify the customer perception of the brand. It is for this very reason that I have also refrained from creating my own perception map of the company.
Research Methodologies:
Secondary Research – For my research and industrial data, I have relied extensively on the resources of the University of Wales electronic Library as well as the National Library of Singapore. Automobile magazines like Top Gear, Autocar and Road & Track have given me valuable insights into the automobile industry. On the internet, I have extensively used the services of MBA specific sites like NetMBA.com and eBook sites like the Google Book Search. Though not entirely thorough, the online encyclopaedia Wikipedia was also a valuable source of trivia and background information. The BMW website as well as its Annual Report have been extremely helpful in providing company specific information Primary Research – As mentioned earlier in the Scope and Limitations section of this paper, BMW‟s customer privacy policy prevented me from accessing a reliable and substantial customer database. And because BMW is a premium brand and not a mass product, random sampling of people as to their perception of BMW would not have been reliable enough. So my Primary research for this paper was limited to Interviews of people in Key positions both within the BMW framework and outside who are in a position to give an accurate insight into the brand. To get a global perspective, I have tried to solicit opinions from as many geographically diverse locations as possible.
Branding:
In the “New World Order”, a term famously coined by former American President George W Bush Sr, marketing has a tremendous role to play in the success or failure of a product and more importantly, in the success and failure of a company. Marketing today is all about perception. About building the „Brand‟. And about how customers perceive the „Brand‟. Post World War II, companies began realising that efficient production and extensive promotion alone cannot guarantee success in the market. „With increased discretionary income, customers could afford to be selective and buy only those products that precisely met their changing needs. In response to these discerning customers, firms began to adopt the marketing concept, which involves:
Focusing on customer needs before developing the product Aligning all functions of the company to focus on those needs Realizing a profit by successfully satisfying customer needs over the long-term
When firms first began to adopt the marketing concept, they typically set up separate marketing departments whose objective it was to satisfy customer needs. Often these departments were sales departments with expanded responsibilities. While this expanded sales department structure can be
found in some companies today, many firms have structured themselves into marketing organizations having a company-wide customer focus. (NET MBA) The successful company is one which can identify the needs of the market, position itself correctly to fill that need and add value, and then stay true to what it stands for.
Case 6 - BMW
Premium car brand BMW has created strong associations within the minds of consumers over the years of quality and excellence in performance. While marketing strategies in coming years should continue to emphasize these associations, as BMW manages a growing portfolio of product lines, referred to by the company as “lifestyle product extensions,” an increasing number of core values and associations will need to be carefully created to successfully sustain these extensions and differentiate the BMW brand name, while further building BMW’s overall brand equity. The introduction of these products are hoped to not only prove successful financially, but to also strengthen BMW’s brand equity by creating new associations which, while new to those previously created by BMW marketing efforts, are consistent with BMW’s core associations with mobility, coolness, luxury, quality, and excellence. Extensions not consistent with the core brand image BMW has indelibly created over years will only serve to confuse consumers about the offerings of the new products and erode the strong equity BMW has established, but BMW seems to be careful in trying to create new associations that logically build upon the ones it has already created over the years. With its introduction of products targeted to the so-called “creative class,” BMW hopes to expand consumer associations with the brand to include things such as innovation, excitement, and creativity. The creative class consists of influential intellectuals, innovators, and entertainers – just the class I think BMW should be targeting, not only for their tastes, but also because they are looked to by others in society to determine what is cool or trendy. If these products prove successful and their marketing creates the intended associations, BMW’s equity will be further strengthened. I think BMW appears capable of successfully doing this. The acquisition of the MINI brand is consistent with BMW’s intent to create associations of creativity and innovation with the brand. Because the MINI motion shoe is consistent with associations of coolness, mobility and sportiness that for years have been connected with BMW, it will not erode BMW equity, but build upon it to include additional associations of creativity and to hopefully appeal to a market that would normally not be customers of BMW. The BMW X-Bike and the BMW Street-Carver have strong associations with innovation. Because MINI is regarded as being trendy and having a strong emotional appeal, it should increase the perception of humanity and an urban and a postmodern way of life with the BMW name, an association that for the most part has been lacking in previous marketing campaigns. The extensions also serve to differentiate BMW from other car manufacturers, such as Volvo and Mercedes-Benz, many of which are parts of large conglomerates, and therefore able to take on greater risks than their chief competitors (such as introduce new product lines). Some may be concerned about the effect of introducing smaller cars and cannibalism of existing cars that may result from BMW’s expanding portfolio. While at least some degree of cannibalism is unavoidable and there are concerns the 1 Series will take away sales from the more profitable 3 Series, I think BMW will continue to build its equity, a factor more important than initial cannibalism or short-term margins, provided BMW continues to offer product lines consisting of quality items, whether they are cars or not, consistent with its overall image that uniquely serve the needs of its target customers.
