“The truth is that innovation is a key element for BMW’s

success in the premium market and one of the key

motivations to buy a BMW”

----- BMW Group

THE ULTIMATE DRIVING MACHINE

MINI CASE ANALYSIS

CHAPTER 7: IDENTIFYING MARKET SEGMENTS AND TARGETS

MINI CASE: MARKET EXCELLENCE IN BMW

Evolution of BMW’s marketing strategies

BMW founded as Aero-engine

manufacturing company in 1917

Motorcycle and passengers cars

Restrictions b/o world war

Series of acquisitions & joint venture

First motorcycle model BMW R32 in 1923

4

Followed by…..

Dixi (1929)

315/1 (1934)

..success in international racing events b/o lightweight construction,

outstanding aerodynamics, high performance and elegance….

Company prestige crossed Germany

BMW 238 sports in 1936

Rainy Days……

In 1950’s despite sustained effort to emerge asmanufacturer of prestigious vehicle faced bankruptcy onaccount of decline in motorcycle market

With the help of an industrial financer, Herbert QuandtBMW was able to thwart takeover bid by Mercedes

Quandt exercised majority of BMW’s shares and initiatedrestructuring exercise to bring company back on track

BMW 700, a small car, came as the much needed boostboost and BMW regained its position in the market

As part of restructuring initiative, BMW focused on sports sedan leading tothe launch of its first of ‘New Range’ BMW’s in 1961

Greater emphasis on advertising & sales support, combined withimproving engineering and performance related aspects.

During 1970’s and 1980’s BMW expanded its operation in the USA Asia andAustralia… cars got perceived as more stylish brand than other Germanbrands like Volkswagen and Mercedes and became serious competitors tothese brands in the premium car business.

In 1989 BMW appointed Karl Gerlinger (master marketer) to leadmarketing division in the USA

Sales in the USA 1991…53,000 units. in 1992…. 66,000 units

Announced to set up new plant outside Germany … Spartanburg, SouthCarolina (US) in 1992

In 1992 succeeded in outselling Mercedes in Germany

Acquired “ROVER” in 1994, production capacity increased by 3% to503,526 units in 1995

By 2002 BMW significantly decreased the ‘time-to-market’ new products and linked its revenue to the introduction of leading-edge product

Focus on strengthening its position as market leader in the premium segment

Adopted product offensive strategy, increased R&D expenditure by 53%,

reduced time b/w idea generation and product development, complaints came down drastically, i-Drive technology, Active Steering

Revenue in 2002 $49.5 billion (9.9% increase compare to 2001), profit $2.36 billion (8.3% increase compare to 2001)

10

The result…..

The Result…..

$29,400

$75,600

Product

BMW 3Series : Sedan, Coupe, Convertible, Touring, Compact

BMW 5Series : Sedan, Touring

BMW 6Series : Coupe,

BMW 7Series : Sedan

BMW Z4 : Roadster

BMW X3

BMW X5

BMW M : Sedan

Mini One

Mini Cooper

Price

BMW price range are from £ 16,000 to £ 60,000

Place

Globally

Promotion

Same advertising company WCSR since 1979

James Bond film - The World Is Not Enough (Z8 before its launch)

Austin Power 3-Goldmember -( Mini cooper)

“VIRAL MARKETING”

BMW Films (e.g.. ‘The Hire’ - increased sales

by 12.5% in 2001 compare to 2000

Marketing campaign ‘The Ultimate Driving Machine’

Golden Eye: BMW Z 3

Tomorrow Never Dies: BMW 750iL, R1200 Motorbike

Geographic

Region Globally

Density of area Urban

Demographic

Age-above 30

Income-$ 25,000 and above annually

Occupational-professional, Businessmen

Psychological

Personality Extrovert, Novelty seeker

Learning involvement high

Perception low risk

Attitude positive

PsychographicLifestyle segmentation ---status

seekerSocioculture

Social class ---middle and upper

BehavioralBenefit ---safety,

elegance, technologyLoyalty status ---Readiness stage ---aware,

interested

What are the pros to BMW’s selective target marketing?

PROS:

Could give customers various types of designs, size, price and style choices.

Specific type cars for specific class people ex.1series for those who earlier avoided BMW for premium price and launched X5 to ”upper liberals” for their active life style and big famillies

What are the cons to BMW’s selective target marketing?

CONS:

Cars only for the ones who could afford

Sales Dipped During Recession.

What has the firm done well over the years and where could it improve ?

ATTENTION TO NEEDS:

After knowing customers desire of having cars of design, size, space and style choice immediately launched many new products x5,x3,x1 etc.

IMPROVEMENTS SUGGESTED :

It could have come up with Lower Segment of Cars where the Market is bigger with more opportunities especially in Developing Nations like India, Brazil , and south ASEAN countries.

BMW’S sales slipped during the worldwide recession in 2008 and 2009 . Is it its segmentation strategy too selective ? Why or why not?

The segmentation strategy of BMW is too selective, It’s target segments are mainly the “Modern

mainstream” & “Post moderns” high income group people.

The BMW is an epitome of Luxury, Loyalty , Success and High esteem hence the segmentation strategy has to be selective.

DISCLAIMER Created by Reema Mathew, IIT Madras, during a marketing internship by Prof. Sameer Mathur, IIM Lucknow.