|Home||Student Resources||European Cases for Marketing Management||Chapter 8: Identifying Market Segments and Targets|
In 2006 BMW Group confirmed its position as the world's leading premium manufacturer in the automobile industry with record sales, and profits exceeding €4 billion1. Since its inception, the BMW brand has stood for one thing: sheer driving pleasure. For many BMW drivers, owning a BMW has symbolic meaning of quality, efficiency and engineering expertise. BMW’s long-standing marketing message has been simply “the ultimate driving machine”, which is now 33 years old, (Trout, 2005).
In 2000, BMW linked suggested future segments with the redesigns to its product line. The new cars reflected the predicted changes in consumer tastes and behaviour which they had found through commissioned consumer research. According to the then Chief Executive. Helmut Panke ‘The product initiative allows us to be focused on market segments that we see developing in the future. Tastes are changing. Customers are slicing the market into more focused pieces. It's becoming more differentiated…. The market is shifting. But satisfying the market's demand for new niche products is a strategic risk anyone in the industry has to take. To be successful, you have to fulfill 100% percent of customers' expectations.2
Matching future segmentation research to product development or product or line extensions can be difficult. There are strategies to execute line extensions without confusing, and losing, your customers (Trout, 2005). What these strategies have in common is rigorous attention to the brand's position matched to clear understanding of future customers needs.
BMW regularly undertakes research into their customer’s occupations and hobbies. The information is used across all areas of the business, from the design and development of the cars, through their premium pricing and all elements of the marketing mix. 3 In the late 1990’s, BMW sensed the attitudes and values of luxury-car buyers were changing with more emphasis on family and leisure time. These new upscale consumers included aging baby boomers, yuppies who had started families, and liberal-minded wealthy professionals. Research indicated they would want more vehicle choices and more eye-catching designs to suit their changing lifestyles. With its future at stake, BMW made an ambitious gamble: It invested heavily on broadening its single, narrow product line into a whole spectrum of upscale cars. It also acquired Rolls Royce and re-launched the Mini, the British cult car of the ‘60s. It put the BMW brand on sport-utility vehicles, convertibles, roadsters and, most recently, a compact car.4
BMW is very clear about its targeting. It only targets the premium-priced cars and does not strive to compete in every segment of the auto industry. It avoids the high-volume market of middle-of-the-road vehicles and focuses strictly on the luxury sector. The Mini, for example, is smaller than a Honda Civic, but is priced at about $3,000 (€2,300) more. This strategy has made BMW, despite its relatively small size, one of the world’s most profitable car makers.
SIGMA was the company charged with researching the market. Sigma4: a German research firm has pioneered a method of predicting shifts in consumer tastes. SIGMA looks beyond demographics such as age and income. It often interviews consumers for hours and even photographs their homes and offices to build a picture of the mindset of different consumers. Sigma predictions were that there would be significant expansion of the luxury car market.
What Sigma’s research found was the ‘I’ve made it’ attitude of the 1990s BMW driver, what they called the ‘social climbers’ was now changing to a more family friendly group. They foresaw that as the yuppies declined, other groups with different upscale mindsets would increase in number. They suggested four segments going forward and BMW reacted to the new segments by introducing a car to match 3 of them:
What did BMW do? For upper liberals, BMW added the X5. This is a SUV that the company prefers to call a “sports activity vehicle,” in a bid to appeal to this group’s active lifestyle.
What did BMW do? BMW-developed the Rolls Royce, Phantom, which sells for about $325,000, and is intended for the very wealthiest upper conservatives.
What did BMW do? In 2001, BMW launched the new Mini, aimed at upper-middle-class buyers who were not quite affluent enough to buy a real BMW. This group is also the target market for the new BMW compact, the 1 Series. The Mini brand provided the company with the opportunity to enter a very different segment of the automobile market whilst reducing the risk of affecting perceptions of their existing brand.
Matching product development to segmentation is the core requirement of marketing that many companies do not understand or undertake successfully (Christensen, et al., 2005). BMW is a very good example of excellent consumer research, matched to segments which were targeted by very suitable and successful cars. Not a feat that many have successful managed.
1 www.bmw.com back
2 www.businessweek.com/bwdaily/dnflash/jun2003/nf2003069_6720_db053.htm back
3 www.bmweducation.co.uk/coFacts/view.asp?docID=71 back
4 www.sigma-online.com/en/Articles_and_Reports/Wall_Street_Journal_New_York/ back