The battle for supremacy of the world’s largest luxury carmaker has been a tough battle between BMW and Mercedes Benz. Both automobiles are engineered and developed by German car makers. Mercedes Benz falls under the helm of the Daimler Group while BMW is produced by Bavaria. The Daimler Group has other automobile brands under its helm such as Smart, Serta, Freightliner, Bharat Benz, Western Star, Fuso, and Thomas Built Buses. Bavaria also produces other vehicle brands such as Rolls Royce and the Mini. However, the BMW is their leading brand and main source of revenue.
1. Compare and contrast the promotional strategies used by two different companies for a similar product within the category that you selected.
Both Mercedes Benz and BMW deal with luxury automobiles that fall within the same range of operational capability, price and efficiency. The social status perceived from driving either of the automobiles is nearly the same and customers can only choose depending on the basis of loyalty. The performance of these vehicles is high standard with both companies investing heavily in research and development for more efficient engines, safer vehicles and sleeker designs.
Mercedes Benz has launched a sales and marketing strategy dubbed Mercedes Benz 2020. The strategy is an operational charter that states their goals, strategy and focus in the production of vehicle. The main focus of the strategy is to increase customer involvement in the design, production and selling of vehicles in order to create the best customer experience.
BMW currently hold the top position for sales in the luxury automobile industry. In 2012, BMW produced and sold 1,845,186 vehicles, with a global market share of thirty eight per cent in the premium vehicle segment. The company’s success is founded on clear, consistent core values of technology, quality, performance and exclusivity.
2. Recommend 2 ways in which a company within the selected product group could use marketing information to differentiate itself in the marketplace to gain an advantage over its competitors. Provide a rationale to support your recommendations.
For BMW to gain competitive advantage over its rival and hold the top position in luxury car sales, it had to focus a lot of marketing information. Its greatest focus is to produce luxurious motor vehicles that have the latest, cutting edge technology at pocket-friendly prices. BMW motors emphasize on the concept of harmony in the creation of their technologies. The vehicles are an embodiment of the spirit of creative designers, hardworking industry workers and marketing efforts of the sales team.
The luxury automobile segment is filled with vehicle enthusiasts who have a lot of information regarding the inner working of vehicles. They take a lot of time to compare the specifications of different vehicles and demand top value for their bucks. This means that the company has to exercise a competitive pricing model and ensure that products are differentiated in terms of design, character and function. For instance, the M range of motors was created from scratch with diverse shifts from the traditional building design, conceptualization, engine build, suspension and transmission modes.
Marketing research thus becomes an important function for luxury automobile producers. The information gathered from clients is incorporated to the conceptualization, design, research and development of vehicles. The twenty first century being the information era grants users and customers a lot of information regarding products. This information can be used to compare between products thus creating a competitive advantage or disadvantage. BMW has however taken advantage of the free flow of information to create vehicles that provide a holistic, customer-based experience.
3. Propose 2 uses for consumer oriented promotions that could assist a company in both the short and long term for the product group that you selected. Provide a rationale for your response.
Sales promotion refers to a combination of activities beyond the features of a product that are used to provide extra inducement to customers to make a purchase. Customer oriented promotions are directly targeted at specific customers. Luxury automobile builders have very narrow distribution chains meaning that most times they deal directly with customers or have national outlets. In case the geographical area is very expansive, the producers may permit the use of vehicle dealerships to promote their products. Customer oriented sales promotions may take different forms such as; price discounts, retail coupons, special displays double coupons, features, manufacturer’s coupons, rebates, premiums, bonus packs and test drives.
Mercedes Benz has recently launched a tour of Europe in a bid to promote their latest flagship project; the Mercedes A-class. This campaign is aimed at changing the perception of users about Mercedes as being a vehicle for individuals above forty years. The A-class was specifically designed for young individuals who have high earnings and seek a luxurious mode of transport. The campaign involves a lot of customer interaction through vehicle exhibitions, fairs, social media competitions and offering test drives. The effect of this intense customer oriented promotion is to change customer perceptions regarding the product.
Retail customer oriented sales promotions such as price discounts, coupons and special displays are used as short term fixes for sales shortages. However, when these techniques are overused, they may actually result in negative returns over the long term. They may be perceived as inability to build market equity and loyalty in the customers. Luxury vehicle builders such as Mercedes Benz and BMW would rarely use retail consumer promotions since they depend on exclusivity to market their products.
Marketers of luxury vehicles are focused on using customer oriented sales promotion techniques that build brand loyalty and increase their market share. Some of the popular methods earmarked by luxury automobile companies include; customer involvement, emphasis on quality of products, social media interaction and use of digital platforms to promote their products.
4. Analyze the strategic manner in which the leading company in this product group has made its pricing decisions by using one or more of the four pricing objectives. Suggest 2 actions that other companies within the same a product group may take in order to differentiate themselves and gain a competitive advantage. Provide a rationale for your response.
BMW, the leading company in the luxury motor vehicle brand has achieved this position through a collection of combined efforts in pricing, sales promotion, effective distribution channels and place decisions. The company uses a premium pricing model to set the price for its products. The premium pricing model refers to a method whereby the producer sets higher than cost prices on products. To achieve this pricing model, BMW had to conduct intense research and establish the boundaries for its products. BMW targets its products to young and older individuals who fall in the upper or middle income economic classes. This audience has a lot of disposable income and are willing to pay a premium for the comfort, class, safety and prestige that is associated with driving a luxury car such as BMW.
BMW has had to adopt other pricing models in other parts of the world such as developing nations. All luxury vehicle companies such as BMW, Mercedes Benz, Audi and Lexus are fighting for a slice of the growing market in the Middle East and China. These markets are populated by rapidly growing middle class populations who have recently acquired a taste for high end luxury items. BMW was the latest entrant into this market but has quickly earned the top spot in terms of sales volume and revenue. BMW uses an aggressive pricing model that consists of penetration pricing techniques.
In the initial stages of market testing, BMW used penetration pricing strategies that involved selling at lower prices than the eventual market price of vehicles. The impact of this strategy was to increase the number of vehicles bearing the BMW logo on the roads, thus increasing the company’s visibility in a previously untapped market. The company employed intense sales promotion campaigns and created partnerships with other brands to improve its visibility. BMW has a policy of encouraging sports and entertainment activities thus creating a buzz about its existence.
Competitive advantage in the luxury automobile segment can only be gained by investing in customers and creating brand equity. Research and development initiatives must not only take place in the labs, but also be proudly announced as differentiating features.
5. Determine the most effective advertising medium for a company in the selected product category. Support your response with 2 examples of the effectiveness of the chosen medium.
Promotion plays a major role in the success of a business, even in the luxury automobile segment. However, marketing such products does not follow the traditional route using popular advertising mediums such as television and radio. The users of these luxury vehicles are assumed to know of their existence, and thus focus is spent on building quality products and differentiating the customer experience.
In recent times, luxury automobile companies have adopted the use of digital platforms to reach customers. Social media interaction is one of the most popular mediums to interact with customers. This method is highly preferred for the ability to easily profile users, create a mail list and get quick feedback about products. Companies like Mercedes Benz have built a fanatical fan base on social media platforms. Traditional advertising techniques such as large, splash advertisements in luxury magazines still play a major role in promoting the sales of these products.
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