AN ANALYSIS OF MARKET APPROACHES OF BMW
A Case Study of BMW-X5
Model
BY:- SURAJ VERMA
(PGDM-I)
The slogan Freude am Fahren explains the business mission of the luxury
car manufacturer BMW, which when translated means a high driving
experience.
In addition, the history of BMW as a manufacturer of premium cars is
directly related to its features reliability, sportive and superior quality.
BMW is ranked as the 3rd leading automobile manufacturer in the US, and
is ranked at the 11th position for the most popular brand in the world
category by the Forbes magazine (Forbes, 2013).
Although, BMW launches many popular cars year after year, their X-series
is touted as one of the most recognized brands of the world. In 1999, BMW
launched its X- series with its X5 later setting a standard for the other
automakers in building crossover SUV. Within a short period of its launch,
X5s two models sold like hot cakes worldwide, and this led to the
introduction of more X-series in the following years. However, the success
achieved by X5 was irrefutable as the later models were not as big of a hit.
Although, the X3 series introduced in 2011 had quite distinctive features,
which included custom-ordering, X5s success remains unchallenged. In
the first half of 2013, the German carmaker BMW sold 954,521 vehicles
worldwide, which is a 6 percent increase from previous year, and it is
directly attributed to the increase in sales in China and US (Guardian,
2013). BMWs X5 series was launched in the year 2006, and more than
500,000 X5s were sold globally within a span of 5 years, which makes the
X5 series, the market leader in the crossover SUV segment (BMW, 2011).
In 2013, BMW sold 52,651 X5s, which shows that this model commands its
market share even after 8 years of its launch (BMW,2013). BMWs efforts
to improve the model with new features and exciting offers are stated to be
the reasons behind the success of this model. What led to the success of
the X5 model and how BMW has achieved this feat can only be answered
by analysing the marketing techniques of BMW, and also through a close
introspection of the unique features of the model using the marketing mix
strategy.
An analysis of the elements of the marketing mix strategy has always proved useful
when it comes to identifying the true drivers of a top marketing performance. Using the
marketing mix, recognizing the various drivers that affect the performance of a business
namely advertising, promotions and loyalty can be done easily. In addition, the overall
success of the marketing strategies can be identified by analysing the external
influences competition, global market performance, economic and demographic
trends. Besides, how much money the organization has spent on sales and marketing
activities, how the financial changes has affected the revenue and profit of the company
can be explained using the marketing mix strategy. Now, to analyse the success of
BMWs X5 model, the researcher here intends to analyse thoroughly the 4Ps of
marketing namely Price, Product, Promotion and Place.
Price
Today, BMWs X5 costs around $52,288 to $67,296, and it is ranked at 3rd position out
of 19 midsize luxury SUVs currently available in USA. Although, the base price of the
vehicle globally is slightly higher than its rivals such as Acura MDX and Porsche
Cayenne, X5 still maintains its leadership position with its powerful engine, elegant
interior style and high-tech features. Several factors that affect the price of a product
include competition, demand for the product, manufacturing cost and regulations. While
analyzing the domestic as well as international pricing policy of BMW and its delivery
strategies, it became evident that the price of the product was fixed in such a way that it
is capable of attracting both the high as well the middle- income group. Further, the
elegant interiors and state-of-the-art technology are the features that attract the rich and
the reliability and on-road performance makes BMWs X5 the ultimate choice for many
middle-income consumers.
Product
A product is defined by its quality, design, brand popularity, product line, and product
range and after-sales service. BMW has achieved an apt combination of all these
features for its X5 model by offering the right USP to its consumers, which in turn has
earned the company many loyal consumers. The top-quality material used in the
interiors, high-tech design, comfortable front and back seats has earned praise among
its consumers. The iDrive controller, moon-roof navigation option, power adjustable
front seats, leather upholstery with 360-degree view camera and the night vision system
are the features that has kept the popularity of the brand intact even after so many
years of its launch. Besides, the slight modifications made every year to the vehicle has
improved its high-tech devices greatly thus satisfying the need of young consumers.
Other unique features that distinguish the X5 product from its competitors are
listed:
Fuel consumption of X5*
Urban in l/100 km 11.3-11.2
Extra-urban in l/100 km 6.9
Combined in l/100 km 8.5
CO2 emissions in g/km 199-197
Tank capacity, approx. in l85
X5 Performance
Top speed in km/h 235
Acceleration 0100 km/h in s 6.5
Weight
Unladen weight EU in kg 2,105
Max. permissible weight in kg 2,740
Permitted load in kg 710
Permitted in kg
axle load front/rear
1,280/1,540
Engine
Cylinders/valves 6/4
Capacity in ccm 2,979
Stroke/bore in mm 89.6/84.0
Max. output in kW (hp) at 225 (306) / 5,800-1/min 6,000
Max. torque in Nm at 1/min 400 / 1,2005,000
Promotion
BMW has earned its reputation by offering reliable after-sales services along with
warranties. BMWs X5 comes with a 4-year limited warranty, along with a 12-year
limited rust perforation warranty (BMWUSA, 2013). Other promotional programs like
BMW Assist, BMW Roadside Assistance and Real Time Traffic Information not only
offer its consumers timely help, but also helped the company to promote its products for
reliability and luxury. Further, BMW has always distinguished its products through
diverse advertisements, and for X5 the horse-trailer ads brought immense popularity.
Every year, BMW changes its marketing strategy of X5 by changing its promotional
tactics. Following the horse-trailer advertisement, BMW came up with please do not
repair, Eagle and Serengeti promotional campaigns. In 2012, the company came up
with the ultimate driving machine advertisement, which again made the brand a
sensation among young consumers (Nytimes, 2012). BMW has achieved wide web
presence using social media platforms such as Google+ and Facebook, and through
these portals the company constantly informs its global users about its new products,
services and the improvements it has made to its older versions. The colorful
photographs of its products along with the description of its various campaigns have so
far attracted thousands of visitors to its social pages.
Place
Based on a systematic analysis of the storage facility, transportation, warehousing,
inventory control and location of BMW, it can be said that the company gains an edge
over others with its global infrastructure and delivery services. The multiple channels of
delivery along with the presence of international dealers at almost every part of the
world has allowed the company to deliver its products to the consumers at the right
place and within the promised time. For example, BMW promises to deliver its X3 within
a period of 1 week, even when the consumer custom orders the vehicle. This clearly
shows the availability of international dealers and factories in all the corners of the
world, which also matches the tagline promoted by the company.
Analysis of the marketing approach of BMW
Based on the above findings, the researcher here intends to analyse the marketing
Approaches of BMW with respect to consumer behavior, branding and global
Marketing.
Consumer Behavior
BMW reaffirmed its position as the worlds top premium car manufacturer in the year
2006, when it made record sales and its profits exceeded 4 billion euros. For many
BMW users, buying a BMW car means investing money on quality, engineering
expertise and efficiency. The age-old marketing tagline of BMW the ultimate driving
machine, which was coined some 33 years back and used till today reflects how
consumers behave when it came to purchasing a BMW vehicle (Trout,2005).According
to former Chief Executive of BMW Helmut Panke, the tastes of their customers are
undergoing a constant change, and they are slicing the marketplace into more focused
segments. The market is shifting continually, and satisfying the consumers demand
with new products or brands is a strategic risk, which anyone in the market has to take.
To remain successful, one has to fulfill the customers expectations fully. In 1990,
through research BMW found out that the values and attitudes of luxury car users were
undergoing change as they started paying more emphasis on leisure and family time.
The upscale consumers comprised of open-minded wealthy professionals, yuppies with
families and baby boomers. Research showed that they may want vehicles that are eye-
catching and also which suit their lifestyles. Thus, BMW decided to invest heavily on a
whole spectrum of luxury cars, and also acquired Rolls Royce. The company added X5
to its products to satisfy the requirements of the upper liberals. Earlier, these liberal-
minded people owned Volvos, Suvs and Saabs, and they simply started buying X5 for
the comfort it offered. Being a sports activity vehicle, X5 matched the active lifestyle of
this group, thus becoming the optimum choice of these open-minded professionals
(Pearson, 2006). According to Sigma, the company hired by BMW for research, they
divided the social climbers in the 1990s into four segments namely Upper liberals, Post-
moderns, Modern mainstream and Upper conservative (Pearson, 2006). While upper
liberals were active professionals who want to spend quality time with their families,
post-moderns were high-earning individuals like architects, artists and entrepreneurs.
The traditional and wealthy individuals came under the category upper conservative.
The upper conservative individuals usually bought luxury cars like Mercedes and
Jaguars, and they started switching to BMW for its comfort and driving performance.
The Rolls Royces Phantom is priced at $325,000, and is built for the very rich upper
conservatives. To satisfy the needs of the modern mainstream individuals who
purchase not-so-premium brands like Volkswagen and Honda, BMW introduced its Mini
cars, which are again priced expensive than any normal upper-class car available in the
market. All the above data clearly indicates that BMW understands the consumer
behaviour thoroughly, and only aims at achieving the attention of rich and upper-middle
class individuals. This can also be stated as the reason behind why BMW is rated as
one of the most profit-earning organizations for more than 3 decades.
Branding
Branding is defined as the marketing practice of building a symbol, name or design that
differentiates and identifies the product from a lot of other products (Entrepreneur,
2003). BMWs branding policy is very clear about the customers that it targets. It does
not endeavour to compete in each segment of the automobile industry, and only targets
the premium segment. By avoiding the high-volume middle-priced road vehicles, BMW
has established a distinctive brand image for itself in the global market. Although, the
Mini, the small car aimed at upper-middle class individuals, it is priced more than its
competitor Honda Civic at $3200. According to a report released by BMW, the cars that
are developed by the company have the same target of return on investment (ROI),
irrespective of its size or price. Besides, the target ROI pushes the company to increase
efficiency in all their processes, thus improving the brand image of its products year
after year. However, for maintaining the brand image, the company is not making any
major changes to the basic build of its cars they are using the same 6-cylinder engine
for all their models like X5, 3, 5,7 and Z4 as engine development demands large
amounts of money, and hence they only invest in segments that makes sense (BMW,
2013). To keep its products in all stages, from the introductory level to growth stages,
BMW constantly experiments with new models, while trying to keep intact the freshness
of the series. For example, in its 3 series, it introduced the sedan model the first year,
then the coupe model in the next year, and then the station wagon, and then the
convertible and finally the sport hatchback (Stealing share, 2013). Within the 5-7 years
of the product life-cycle, BMW constantly tries to make cars different and new once in
every 3 years. This also includes adding distinctive features and other additional fittings.
Due to the constant brand image modification, BMW often witnesses increased sales in
the 6thor the 7th year after the introduction of the models. However, while branding its
products BMW has also found out that the life-cycle may be longer or shorter for some
of the products in the global market, and hence is adopting new strategies almost every
year to keep pace with the changing market scenario.
Global Marketing
BMWs worldwide marketing activities are controlled by its head office located at
Munich. BMW has its operations in 150 countries, and it has 28 production facilities in
13 countries. The company focuses on political regulations and the domestic industrial
policies while formulating the marketing techniques for every country. BMWs Strategy
Number ONE, the strategy that drives its global market share focuses on two important
aspects remaining profitable and enhancing long term value even during volatile
situations. BMWs global marketing initiatives in line with its strategies are based on 4
pillars namely Shaping the Future, Profitability, Growth and Access to Customers and
Technologies. However, BMWs marketing activities have been formulated in such a
way that it remain firmly focused on only the luxury car segments of the international
auto markets. The mission statement of BMW till the year 2020 clearly defines its global
marketing strategy - to remain the leading provider of premium services and premium
products for individual mobility. In addition, the experimental marketing and one-to-one
marketing techniques adopted by BMW showcases how the product can enrich the life
of the users rather than focusing on selling the product.
Luxury car manufacturers in US, Europe and Japan are the direct competitors of BMW.
The global marketing strategies of BMW undergoes constant change based on the
marketing strategies created by its US competitors like Cadillac, Ford, Chrysler,
Japanese manufacturers like Toyota, Honda and Lexus, European Union companies
such as Audi, Mercedes Benz and Jaguar. Besides, the brand elements of BMW such
as logo and name are easy to remember for the global automobile users, although only
very few can recollect the abbreviation of BMW, which stands for
BayerischeMotorenWerke AG. With its three brands BMW, Rolls Royce and MINI the
BMW Group rules the premium sector of the international market, and the promise of
quality and commitment can be stated as the factors behind the international success of
the brand.
BMW Global Sales
Recommendations
An analysis of the marketing strategy of BMW in general, and with respect to its product
X5 has given the researcher, a deep insight into the different marketing approaches of
BMW in the global market. Besides, the evaluation of operational and strategic
orientation along with the strength and weakness of the product has allowed the
researcher to arrive at definite conclusions. Based on the analysis, recommendations
have been made here for future direction and implementation of the global marketing
mix techniques.
In the competitive global market with its increasingly demanding consumers, BMWs
image as a premium sports car manufacturer can be improved using the following
strategies:
Highly priced products such as X5 in comparison with its rivals poses a threat to the
profitability of the organization. Moreover, the lower consumption of luxury cars and the
increase in the inflation rates will surely affect the profitability of the company in the
coming years. To ensure a sustainable top position, the company has to adjust its price
according to the demands of its customers.
Domestic political policies will have an influence on the automobile industry in the
near future. For example, the increase in VAT in Germany from 16 to 19 percent and
the increase in health service contributions will escalate the financial burden on the
consumers, which may affect the demand for automobiles. Therefore,strengthening the
dealer relationships, identifying new distribution channels and new promotional
measures on target groups only can retain as well as bring new customers to the
company.
Availability of multiple BMW products under series of alphabets and numbers makes
it difficult for the consumer to remember a product with its brand name. Besides, the
constant changes in the advertising techniques of the products such as X5 creates
confusion in the minds of consumers as they are unable to relate the product with a
specific set of specifications or brand image. During the launch phase of X5, the model
was promoted using the horse-trailer ads that emphasized on its 6-cylinder engine
power. However, in recent times, the model was portrayed as a sporty machine capable
of running in sands and damaged roads. A mix of both the old and new strategies will
prove useful as the consumer can relate the model with its original as well as the
transformed brand image.
