Section A
Answer ALL two (2) Questions
Case Study
(Total: 40 marks)
BMW is the ultimate driving machine. Manufactured by the German company,
BayerischeMotorenWerke AG, BMW stands for both performance and luxury. The
company was founded in 1916 as an aircraft-engine manufacturer and produced engines
during World War I and World War II. It evolved into a motorcycle and automobile maker
by the mid-20th century, and today it is an internationally respected company and brand
with €53 billion (about $76 billion) in revenues in 2008.
BMW’s logo is one of the most distinct and globally recognized ever created. The
signature BMW roundel looks like a spinning propeller blade set against a blue sky
background – originally thought to be a tribute to the company’s founding days as an
aircraft engine manufacturer. Recently, however, a New York Times reporter revealed that
the logo, which features the letters BMW at the top of the outer ring and a blue-and-white
checkered design in the inner ring, was trademarked in 1917 and meant to show the colors
of the Free State of Bavaria, where the company is headquartered.
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-andclick 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 introduced convertibles and roadsters to target “post-moderns”, a high-income group
that continues to attract attention with more showy, flamboyant cars. BMW’s 6 Series, a
flashier version of the high-end 7 Series, also targeted this group.
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?
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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
Total marks: 20 marks
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Answer to Q2: In Malaysia, BMW’s sales have been doing well in the premium nonnational 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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Briefly define the twin concepts of ‘standardisation’ and ‘adaptation’ – 4 marks
Those who support ‘standardisation’ view markets as increasingly homogeneous and
global in scope and scale and believe that the key for survival and growth is an
organisation’s ability to standardise goods and services (Fatt, 1967; Buzzell,
1968;Levitt, 1983; Yip, 1996).
The view that consumers needs, wants and requirements do not vary significantly
across markets or countries, especially for cars.
After all, Levitt (1983) had eloquently argued that standardisation of the marketing
mix and the creation of a single strategy for the entire global market, offers
economies of scale in production and marketing and moreover is consistent with
what he described as the “mobile consumer”.
On the other hand, proponents of ‘adaptation’ such as Kashani (1989) indicate
difficulties in using a standardized approach and therefore support market tailoring
and adaptation to fit the “unique dimensions” of different international markets
(Thrassouand Vrontis, 2006).
More specifically, supporters of the international adaptation school of thought argue
that there are insurmountable differences between countries and even between
regions in the same country (Papavassiliou and Stathakopoulos, 1997). It is argued
that marketers are subject to a number of macro-environmental factors, such as
climate, race, topography, occupations, taste, law, culture, technology and society.
The above discussion is required and will earn students 2 x 5 marks = 10 marks
Given the Malaysian experience, the success of BMW in that country is due to the
adaptation of the marketing mix, particularly in pricing and to a lesser extent,
promotion.
Students should be specific in terms of what BMW has implemented in terms of
marketing mix adaptation.
Marks allocation: 6 marks
Total marks: 20 marks
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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
QUESTION 1: Children’s exposure to unhealthy food advertisements is widespread and
this leads to impressionable children being negatively influenced. Discuss this from a
marketer’s perspective.
(20 marks)
ANSWER:
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This is an open-ended question that has no right or wrong answers. Students
however must justify their position(s) with supporting arguments that reflect the
appropriate theories and concepts.
It can be notes that advertising to children is a continuing controversy in
marketing. A question of whether we should advertise to this vulnerable group?
From a marketer’s perspective - why not?
Children represents a tremendous level of spending and buying power, and
according to Clow & Baack (2012, p 396), over $20 billion annually.
A question of freedom of choice.
Students can adopt any assenting or dissenting view.
As Mary Pipher, clinical psychologist and author of “The Shelter of Each Other”
(1996) suggested “No one ad is bad”.
Anyway, she went on to add that “the combination of 400 ads per day creates in
children a combination of narcissism, entitlement, and dissatisfaction”.
Advertisements targeted at children employ multiple tactics that seduce them to
say “yes’ by offering toys and collectibles as premiums, developing tie-ins with
television programmes and movies.
Therefore, children have been robbed of choice because they had been unfairly
influenced.
And it is deemed unethical to promote to children because they don’t know any
better!
The fact that the marketing of food products to children is usually unhealthy.
Besides marketers should be socially responsible - and if they adopt this
perspective, surely they would exercise caution when promoting their products.
Students may even suggest that their companies would desist from producing
unhealthy food products - and instead offer healthier versions.
Students can highlight health issues such as obesity, etc that are afflicting a
good percentage of the population
Students are expected to give 3 points with explanations - in order to earn 3 x 5
marks = 15 marks.
Students who define “advertising” shall obtain 3 marks and when they offer an
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example of children’s advertising, they too will also earn 2 marks.
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:
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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
Total marks: 20 marks
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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
selling orientations? Provide one example of specific companies you see currently
operating under each of these orientations. Justify your selections)
(20 marks)
ANSWER:
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Explain the marketing concept - 4 marks
i.e. The marketing concept arises out of the awareness that a business should start with
the determination of consumer wants and end with the satisfaction of those wants.
The concept puts the consumer at both the beginning and end of the business cycle.
Also define product and selling orientations, i.e. 2 x 2 marks = 4 marks
Product concept: The idea that consumers will favor products that offer the most quality,
performance, and features, and that the organization should therefore devote its energy
to making continuous product improvements.
Selling concept: The idea that consumers will not buy enough of the firm’s products
unless it undertakes a larger-scale selling and promotion effort.
Explain why – Issues like technology-based products; products where demand exceeds
supply; etc. – 3 points
Marks awarded are 3 x 4 marks = 12 marks.
Total marks: 20 marks
QUESTION 4: How does the demand for industrial products differ from the demand of
consumer products?
(20 marks)
ANSWER:
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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.
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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.
These 3 points will earn 3 x 3.5 = 10.5 marks
Total marks: 20 marks
END OF PAPER
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