The Australian Automotive Market is one of the largest and fastest growing industries in the Australian economy. BMW is a world renowned automotive manufacturer and one of the leading designers of luxury and luxury sport vehicles. This report aims to identify the market that BMW is involved in and to further investige some of the target market and market segmentation strategies that BMW uses to claim its market share.
It will also examine two specific target markets that BMW operates in and the typical customers contained in that target market. This report should allow us a better insight into BMW marketing strategies and enable us to continue on with more indepth reports if necessary.
Market Definition
A market is defined as “a group of individuals and/or organisations that have needs for products in a product class and have the ability, willingness and authority to purchase those products” (Pride et al, 2006, pg 38). This report aims to take that definition of a market and use it to analyse the marketing strategies and positions maintained by the Bavarian Motor Works Group, commonly known as BMW.
According to a report published by Frost & Sullivan (2005), the Australian Automotive Market has emerged as an integral part of the Australian economy, contributing to increases in the labour force and research areas while also providing much needed work for Australian manufacturing firms. With a “vehicle ownership rate of 675 per 1000”, it is not difficult to see why. According to the Federal Chamber of Automotive Industries (FCAI) (2006) database, a total of 962,666 new vehicles were sold to the Australian public by the 2006 year end.
The total vehicle market encompasses all vehicles sold during 2006, broken down into 4 distinct categories, Passenger, SUV, Light Commercial and Heavy Commercial. This report will focus mainly on the Passenger vehicle market and, as such, BMW’s involvement and marketing strategies in that sector. As noted by the BMW Group website (n. d), BMW was founded in 1916 and has continued to produce high quality, premium automobiles and motorcycles for over 90 years. The company strategy, located on the BMW Group website (n. ), emphasises BMW’s commitment to the outstanding development and continued improvement of the BMW design while maintaining the highest quality.
Market Targeting
A target market refers to specific groups of consumers that an organisation or company will attempt to cater a specific product towards (Pride et al, 2006, pg 6). Selecting a target market is one of, if not the most important aspect that a company must consider as it is impossible to create a marketing strategy that caters to an entire market.
Breaking down the market into smaller sections allows companies to target a specific group and to design a product based entirely on their specific needs and wants (Pride et al, 2006, pg 6, 38-40). To relate the concept of target marketing to BMW, we look at the differing products offered by BMW and the specific customer they are marketed towards. BMW accomplishes the market segmentation by producing a differing range of products in the same product class.
This allows them to appeal specifically to different segments of the market depending on the customer’s needs and wants. BMW has a general target market of affluent men and women between 25-50 but within that target market, the market is further broken down into segments that BMW can specifically target its products towards.
Segment 1
The first segment that BMW promotes its products towards is older men and women who are looking for a very high-quality luxury car. This segment generally comprises professional men and women between the ages of 35-50.
This is a very lucrative market but a market that requires companies to produce products of the absolute highest calibre to attempt to gain market share. This market satisfies all criteria necessary to make it viable. The target market consumer base is similar enough in that, many people who are looking to buy very luxury cars have similar desires however the market is also “heterogeneous” in that the characteristics of a product that satisfy someone looking for a low budget family car would be very different from someone wishing to purchase a luxury car. Pride et al, 2006, pg 125-125)
The luxury car market is also a substantial enough to support BMW as, according to the 2001 Australian census taken by the Australian Bureau of Statistics (ABS) (2001), over 400,000 Australians currently claim and income of over $100,000 a year, thus giving them a high enough disposable income to enable them to purchase a luxury car. Finally, while there is fierce competition in the luxury car market, BMW’s highly regarded brand name and customer confidence allows them to confidently attack this market segment.
Segment 2
The second segment that BMW has ventured into is the production of high-quality and high-performance sports cars, specifically targeted at a younger, more adventurous customer, generally ranging from 25-35 and more commonly male. This is a market that BMW have put forward very radical marketing strategies to attempt to gain a market share and have succeeded, as the BMW Group website (2006) states, with an increase to profit of more than 25%. Once again, this market satisfies the criteria necessary to make it a viable market for BMW to engage in.
The target market consumer base again is similar in its desires for high-quality, high performance sports car to enable BMW to create a product that caters to them however the characteristic differences between a customer looking to purchase a low budget family car compared to a high performance car are again large enough to allow BMW to promote its product specifically to its target market. BMW’s highly regarded brand name and radical marketing strategies have allowed BMW to break away from its signature product and introduce fresh ideas. These are just two of the segments that BMW specifically targets with its products. Each product that BMW designs is created with the characteristics of its target market in mind.
Market Profiling
Market profiling is an important step in the target market selection process. Market profiling will be used to enable marketers to recognise the similar needs and wants between customers within their market segments while outlining the differences between customers in different market segments (Pride et al, 2006, pg 123). Marketers use different variables such as “geographic, demographic, psychographic and behavioural variables” to enable them to gather an accurate profile of a market segment (Pride et al, 2006, pg 115)
This section of the report aims to examine the profiles of a typical customer in the previously mentioned market segments.
Segment 1
Older Affluent Professionals The first market segment that BMW targeted can be profiled using the above mentioned variables to determine the average characteristics for a customer in the market segment. An average customer in this segment would be a man or woman between the ages of 35-50 years of age. They would be expected to have a large disposable income, generally greater than $100-200,000 per year.
It would be assumed that they are a well educated person, almost certainly completing university level education. Their occupation would reflect their salary and almost certainly be a professional of some persuasion, the most common being a lawyer, executive or any other high-paying occupation. Their family size will vary but one would generally expect them to have a wife or husband with children who are approaching adulthood. They would also be of a high social class with the desire for their car to become a “status symbol”, and as such, this would be one of the deciding factors in regard to whether or not they would purchase a BMW.
It is unlikely that this customer would reside in a rural area, much more likely that they would reside in a major city, either in the urban heart of the city or in a high class suburban area. The true motives behind their purchase would be more in regard to the style and design of the car than its performance. As mentioned earlier they would have a high disposable income and their lifestyle would reflect that, generally living in the upper class.
Each customer would have very minor differences in the benefits expected of the product but the majority would expect a very high-quality vehicle with many extra features such as GPS, Cruise Control etc and they would also expect a very high-level of professional service. The customer would also be sensitive about the price, but not to the extent of a customer who is in a lower quality, less expensive product class.
Segment 2
Young Affluent Male Professionals. The second segment, while maintaining some similarities to the first, differs mainly in regard to the psychographic and behavioural variables.
An average customer in this segment would be a male between the ages of 25-35 with a large disposable income, generally greater than $100-200,000 per year. The customer would be assumed to have a high level of education, either currently completing a university degree or already obtained. Their occupation would generally be related to a high-paying, time consuming career, most likely relating to some kind of economic or commerce profession. The customer would most likely be either single or a couple but without children. Once again, the customer would not live in a rural area. Generally they will live in an urban area, close to a major city.
The customer would be energetic and adventurous and the car they buy should accommodate that. The main motives behind a purchase would be in regard to the high performance of the car, however the style and design of the car would also be a high priority. The customers lifestyle would be time-short and they would generally be living in the upper class. The benefits expected of the purchase would be that of a high-performance vehicle. Some customers may want the extras stated above such as GPS, Cruise Control etc but the main focus would be on the performance and design of the vehicle.
Once again, the customer would be sensitive to the price but not to the level of a customer in a lower product class. Also, the brand loyalty of the customer will directly reflect the company’s market positioning. As stated above, there are many variables companies must take into consideration when targeting a market segment.
