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BMW’s growth exploded in the 1980s and 1990s, when it successfully targeted the
growing market of baby boomers and professional yuppies who put work first and wanted
a car that spoke of their success. The result: sporty sedans with exceptional performance
and a brand that stood for prestige and achievement. The cars, which came in a 3, 5, or 7
Series, were basically the same design in three different sizes. The 1980s was also a time
when yuppies made Beemer and Bimmer, slang terms for BMW’s cars and motorcycles,
popular names that are still used today. At the turn of the century, consumers’ attitudes
toward cars changed. Research showed that they cared less about the bragging rights of
the BMW brand and instead desired a variety of design, size, price, and style choices. As
a result, the company took several steps to grow its product line by targeting specific
market segments, which resulted in unique premium-priced cars such as SUVs,
convertibles, roadsters, and less expensive compact cars, the 1 Series. In addition, BMW
redesigned its 3, 5, and 7 Series cars making them unique in appearance yet remaining
exceptional in performance. BMW’s full range of cars now include the 1 Series, 3 Series, 5
Series, 6 Series, 7 Series, X3 SUV, X5 SUV, X6 SUV, Z4 (Roadster), and M. The redesign
of the 7 Series, BMW’s most luxurious car targeted a group called “upper conservatives”.
These wealthy, traditional consumers traditionally don’t like sportier cars, so BMW added
an influx of electronic components such as multiple options to control the windows, seats,
airflow, and lights, a push-button ignition, and night vision, all controlled by a point-and-
click system called iDrive. These enhancements were created to add comfort and luxury
and attract consumers away from competitors like Jaguar and Mercedes.
BMW successfully launched the X5 by targeting “upper liberals” who achieved success in
the 1990s and had gone on to have children and take up extracurricular activities such as
biking, golf, and skiing. These consumers needed a bigger car for their active lifestyles
and growing families, so BMW created a high-performance luxury SUV. BMW refers to its
SUVs as sport utility vehicles in order to appeal even more to these active consumers.
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BMW created the lower-priced 1 Series and X3 SUV to target the “modern mainstream”, a
group who are also family-focused and active but had previously avoided BMWs because
of the premium cost. The 1 Series reached this group with its lower price point, sporty
design, and aspiration to own a luxury brand. The X3 also hit home with its smaller, less
expensive SUV design.
BMW uses a wide range of advertising tactics to reach each of its target markets but has
kept the tagline “The Ultimate Driving Machine” for over 35 years. During that time, US
sales of BMW vehicles have grown from 15,000 units in 1974 to approximately 250,000 in
2009. BMW owners are very loyal to the brand, and enthusiasts host an annual
Bimmerfest each year to celebrate their cars. The company nurtures these loyal
consumers and continues to research, innovate, and reach out to specific segment groups
year after year.
Last year, BMW Malaysia introduced the sixth generation of the BMW 3 Series in the country and
already, it has delivered more than one thousand units of the model, making the BMW 3 Series one
of the principal contributors to the premium carmaker’s current and continued success in Malaysia.
BMW Malaysia Sdn Bhd Managing Director Wolfgang Schlimme pointed out the reasons
for their continuing success in the country: "We are going in the right direction and setting
our priorities in terms of model line-up, availability and pricing." Schlimme continued:
"These are the reasons we are different from others. This has led us to continue growing
in the past few years against the trend in the auto industry."
QUESTIONS
1. What are the pros and cons to BMW’s selective target marketing?
(20 marks)
2. In Malaysia, BMW’s sales have been doing well in the premium non-national car
market. Is this due to a standardization or is it due to adaptation of the marketing mix?
mix elements? Contrast the theoretical concepts between the two and relate them with
the BMW situation in Malaysia in respect to the said question.
(20 marks)
(Total: 40 marks)
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Answer to Q1: What are the pros and cons to BMW’s selective target marketing?
Briefly define target marketing (5 marks) – Target marketing is the overall term for
directing your marketing endeavours toward a group of people.
Market segmentation is the breaking down of the market into smaller segments with
the intention of promoting your product or service differently to each of them. Market
segmentation allows your target marketing to become more specific; it divides broad
markets – such as male, female, teen and adult – into smaller segments in which
people are grouped by shared characteristics.
There are pros and cons.
Pros include:
Serving a specific target segment or market does not mean you can charge any price
you want; you can add a premium because you are considered a product that has a
value proposition. So, higher value sales.
Also there are higher chances to develop stronger brand value/equity because you
will stand for something very specific in consumers’ mind and this will appeal to
specific groups of potential customers.
Operational costs are lower because you need fewer resources to serve the market.
Same rule applies to your marketing costs as a total, since your budget will be
allocated into channels that serve only this target segment or market.
However, targeting advertising is usually more expensive (per channel). But this can
result in a higher return on your marketing budget.
With a premium car like BMW, you are likely to serve much fewer customers (as
opposed to say, the Proton market. It is just simple mathematics, so sales are
probably lower than if you served a broader market; however, your profit margins will
be higher.
At least three ‘pros’ – this is worth 3 x 2.5 = 7.5 marks
Cons include:
It may be costly to develop a target market. E.g. There is a need to regularly conduct
primary research to determine who buys BMW products, especially when servicing
regional or national markets or as in the case of Malaysia, a small and competitive
non-national premium car market.
There is the risk that you might be wrong about who your customer is. Just because
a target group is well-defined does not necessarily mean that is the right group to
aim for. If you narrow your focus too far, you may actually be missing potential
customers in a group you haven't thought of. Marketers should be prepared to
change their strategies if you find a target market is not responding the way you
predicted it would.
As hinted above, target marketing may overlook secondary customers, which means
that BMW may potentially lose significant sales.
Limited growth potential. Marketing to a targeted segment of customers may have
limits because you can only grow so far. Beyond that, you will need to either identify
new target markets or find a way to appeal to the broader market.
At least three ‘cons’ – this is worth 3 x 2.5 = 7.5 marks
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Answer to Q2: In Malaysia, BMW’s sales have been doing well in the premium non-
national car market. Is this due to standardisation or is it due to adaptation of the marketing
mix? Contrast the theoretical concepts between the two and relate them with the BMW
situation in Malaysia in respect to the question.
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Section B
Answer all THREE (3) questions. Each question carries equal marks.
This section is worth a total of 60 marks.
Questions
(20 marks)
ANSWER:
Total = 20 marks
QUESTION 2: (a) Market segmentation can be taken too far – what are the potential
disadvantages of over-segmenting a market? (b) What strategy might a firm pursue when it
believes that the market has been broken into too many small segments?
(20 marks)
ANSWER:
Briefly explain “market segmentation” – the idea behind this is to not only identify
clusters of customers with common characteristics but to also deliver unique messages
to these clearly defined groups. Each group is defined by a common set of criteria that
distinguishes them from other types of customers (or market segments) – worth 3
marks
Marketers can certainly go overboard with over-segmentation. The reasons given:
Marketers may segment a market for the sake of segmenting without understanding
whether a market opportunity really exists. Not every perceived opportunity becomes a
profitable opportunity.
Marketers may lack the time and resources to adequately communicate the relevant
messages to all of them and still be profitable.
Marketers identify segments that are large enough to bring profitability. But when
considering this, there is a trade-off between customer homogeneity and scale effects.
Marketers assess the degree to which market segments respond differently to different
marketing mix elements, such as product features. Segmentation becomes frivolous if
the segmentation variables do not maximize behavioral differences between segments.
The market may be already too small that marketing to a portion of it is just not
profitable.
There may be other factors to consider.
Students are expected to offer 3 points to earn 3 x 3 marks = 9 marks
To address the second question, i.e. Q(b) – students need to focus on the 5
requirements for effective market segmentation: Adequate size, measurability,
accessibility, responsiveness and compatibility.
Students are expected to offer 4 points - this works out to 4 x 2 marks = 8 marks
QUESTION 3: Not all companies have adopted the marketing concept, let alone the
societal marketing concept. Why might some companies still operate under the product or
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selling orientations? Provide one example of specific companies you see currently
operating under each of these orientations. Justify your selections)
(20 marks)
ANSWER:
QUESTION 4: How does the demand for industrial products differ from the demand of
consumer products?
(20 marks)
ANSWER:
Briefly describe and contrast between industrial products and consumer products.
Students can also refer to B2B marks versus B2C markets.
The above is worth 5 marks
Basically, industrial products or organizational markets refer to products and
services which are used in the production of products and services demanded by
others.
This demand for products and services arises because of a derived demand for the
finished products and services that the company produces.
In other words, derived demand is demand for a product or service that depends on
demand for another product or service.
Give an example.
This is worth 3.5+ 1 = 4.5 marks
Also the market behavior which affects the demand for industrial products and
services, is generally quite different from that experienced in consumer markets.
The differences arise mainly in regard to the behavior of industrial buyers, the types
of product and service purchased, and the purposes for which they are purchased.
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These 3 points will earn 3 x 3.5 = 10.5 marks
END OF PAPER