Marketing Seg Pos

8/12/2019 Marketing Seg Pos

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MSc

International Automotive Engineering

Report:Marketing

Market Segmentation and Positioning

Core Module 3Management in International Companies

Group 2: Ferry StevensKoldobika MardarazMatthias Heiser

Tutor: Prof. Dr. H. SeiderHand in date: 26.01.2004


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MSc - International Automotive Engineering

Core - Module 3, Management in International Companies

Executive Summary

The base of every marketing policy is the segmentation of the market. Segmentation isto divide a market which exists of heterogeneous products into homogeneous parts. The

advantages of segmentation for a company are to be more efficient, to be able to find aniche market and to have a more simplified marketing policy.

The segmentation process starts with defining the total market. After dividing the marketin segments a profitable market segment should be chosen. The last two steps are thepositioning of the product in the market and adjusting the right marketing mix. AccordingKotler, the next criteria are applicable to segment a market:

1. Geographical criteria2. Demographical criteria3. Psycho graphical criteria4. Behaviour criteria

Positioning refers to the place a product occupies in consumers minds regardingimportant attributes relative to competitive products. To position a product a companyneeds to be well informed about the competitors, target group and the own company.When there is enough knowledge acquired, a positioning matrix can be made.

The BMW 3 series is situated in the medium-size car middle class. Looking at thegeographical segmentation criteria, the 3 series is focused on the United States and theEuropean Market. Demographically, the customers are mainly male, in an age between30-39 years, living in a small household with an income a bit over average. Consideringthe Psycho Graphical segmentation criteria the customers of the 3 series are ambitioushard working, successful people who wants to distinguish themselves. The behaviour ofthe customers is described with loyal, determined and passionate.

The segment where the BMW 3 series is located is going to change. The middle incomeclass will become smaller so that should change the strategy decisions for the 3 series inthe future. BMW is situated between the middle and upper middle class so it is importantto move away up out of this middle class. This can be done by showing more exclusivity,reliability and other car preferences.

The positioning of the BMW 3 series is related to express emotion and social affirmationin consumers minds but it took a lot of effort to move away from the Audi A4. In theseaspects BMW should try to improve even more its image, positioning itself more awayfrom the competitors. Furthermore it is important to answer the wants and needs offemale potential customers because female are getting more and more important in the

purchase process of a vehicle.


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Table of Content

1. INTRODUCTION ....................................................... ............................................................ ................ 3

2. DEFINITION OF SEGMENTATION AND POSITIONING (THEORY) .......................... 32.1 WHAT IS SEGMENTATION AND HOW TO SEGMENT?......................................................... ................ 3

2.2 WHY MARKET SEGMENTATION.................................................... ........................................................ 3

2.3 SEGMENTATION CRITERIA.......................................................... ........................................................ 4

2.4 POSITIONING............................................................ ........................................................... ................ 6

2.5 SEGMENT STRATEGIES...................................................... ............................................................ ...... 6

3. SEGMENTATION OF A MEDIUM-SIZE CAR............................................................ ................ 8

3.1 SEGMENTATION IN AN EXAMPLE .......................................................... .............................................. 8

3.1.1 The BMW 3 series ..................................................................................................................... 8

3.1.2 The market segmentation of BMW 3 series.................................................................... 8

3.1.3 Comparison BMW 3 series to its Competitors ............................................................... 9

3.2 FUTURE DEVELOPMENTS IN THE MIDSIZE-CAR SEGMENT.......................................................... ...... 9

4. POSITIONING OF A MEDIUM-SIZE CAR.................................................. ............................ 11

4.1 MARKET POSITIONING BMW3SERIES.................................................... ...................................... 11

4.1.1 Clarity.......................................................................................................................................... 13

4.1.2 Consistency............................................................................................................................... 13

4.1.3 Competitiveness...................................................................................................................... 13

4.1.4 Credibility................................................................................................................................... 13

5. CONCLUSIONS .......................................................... ............................................................ .............. 15

6. REFERENCES ..................................................... ........................................................... ........................ 16


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3. Be more efficient: More efficient use of marketing resources by focusing on thebest segments for your offering product, price, promotion, and place(distribution). Segmentation can help you avoid sending the wrong message orsending your message to the wrong people.

2.3 Segmentation CriteriaThe consumers can be divided in many ways. Within this report there is chosen for theclassification of Kotler, namely:

1. Geographical criteria2. Demographical criteria3. Psycho graphical criteria4. Behaviour criteria

Geographical criteria

Geographic segmentation calls for dividing the market into different geographical unitssuch as nations, states, regions, counties or neighbourhoods. The company can decide tooperate in one or a few areas or operate in all but pay attention at to local variations ingeographical needs and preference.

Demographical criteria

Demographical segmentation consists of dividing the market into groups on the basis ofdemographical variables such as age, gender, family size, family life cycle, income,occupation, education, religion, race and nationality. Demographical variables are themost popular bases for distinguish customer groups. One reason is that consumerswants, preferences, and usage rates are often highly associated with demographical

variables. Another is that demographic variables are easier to measure than most othertype of variables and the data is easy to acquire at certain agencies and give a concreteindication of the size of the segment and the position were the segment is located.The demographical and the geographical criteria are most of the time used incombination with the other two criteria.

Psycho graphical criteria

In psychographic segmentation buyers are divided into different groups on the basis ofsocial class, life style and personality. People within the same demographic group canexhibit very different psychographic profiles.

Behaviour criteria

In behaviour segmentation, buyers are divided into groups on the basis of theirknowledge, attitude towards the product, the user status, the usage rate, the loyaltystatus or response to a product.In the table below shows the major segmentation variables for consumer markets. It alsoshows a typical breakdown.


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Variable Typical Breakdown

Geographical

Region

Pacific, Mountain, West, North, Central, South, East, South

Atlantic, Middle AtlanticCity or Metro size Under 5000, 5000-20000, 20000-50000, 50000-100000 etc.Density Urban, Suburban, RuralClimate Northern, Southern

Demographical

Age Under 6, 6-11, 12-19, 20-34, 35-49, 50-64, 65+Gender Male, FemaleFamily Size 1-2, 3-4, 5+

Family life cycleYoung, single; young, married, no children; young, married,youngest child under 6; older married, with children; older,married, no children under 18; older, single; other

IncomeUnder 10000, 10000-15000, 15000-20000, 20000-30000, 50000-100000, 100000 and over.

OccupationManager, officials, craftspeople, foremen, farmers, students,retired, housewife, unemployed.

EducationGrade school or less, some high school, high school graduate,college graduate.

Religion Catholic, Protestant, Jewish, Muslim, Hindu, other.Race White, black, AsianNationality American, Dutch, Spanish, Italian, Japanese.

Psychographic

Social class Lower lowers, upper lowers, working class, middle class, uppermiddles, upper uppers.

Lifestyle Straight, swingers, longhairs.Personality Compulsive, gregarious, authoritarian, ambitious.

BehaviouralOccasions Regular occasion, special occasion.Benefits Quality, service, economy, speed.User status Non user, ex-user, potential user, first time user, regular user.Usage rate Light user, medium user, heavy user.Loyalty status None, medium, strong, absolute.

Readiness stage Unaware, aware, informed, interested, desirous, intending to buy.Attitude towardsproduct

Enthusiastic, positive, indifferent, negative, hostile.


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2.4 PositioningPositioning is the technique in which marketers try to create an image or identity for aproduct, brand, or company. It is the 'place' a product occupies in a given market asperceived by the target market. Positioning is something that is done in the minds of the

target market. A product's position is how potential buyers see the product and isexpressed relative to the position of competitors.To position a product a company needs a lot of knowledge about the competitors, targetgroup, competition and the strength and weakness of the own company. When there isenough knowledge acquired, a positioning matrix can be made shown in chapter 3.1.3.

2.5 Segment strategiesWhen the market is segmented, the company has to develop a segmentation strategyhow to approach the different segments. The most extreme form is the individualapproach. That means that every segment consists out of one customer. The other

extreme form is the mass approach, were the market is not segmented and all theconsumers are treated with the same marketing policy. In between is the group-approach where the market is segmented in different consumer groups with the samerecognizable wants and needs. In practise the three strategies are:

1. Undifferentiated marketing

2. Differentiated marketing

The company will approach thetotal market with onemarketing mix. The undifferen-tiated marketing is the massapproach where the product isadjusted to the average taste ofthe consumers.

The company will treat some orall segments in the total marketwith for each segment his ownmarketing policy. The customer

is served better so the marketpenetration will be better andthe revenues higher than withthe undifferentiated marketingpolicy however the costs of thisstrategy are higher.


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3. Concentrated marketingConcentrated marketing meansthat a company the marketingpolicy concentrates on one or some

carefully chosen segments. This ismost of the time used by small ornew entering companies. It is anefficient way to achieve a lastingposition in the market but the risksare higher than with the othersegment strategies.


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3. Segmentation of a medium-size car3.1 Segmentation in an exampleA task for this report is to show the segmentation and positioning process for a carproducer which offers a medium-size car to a broad consumer market. Therefore BMWand its BMW 3 series were chosen. It is a medium-size car which fits to the givenrequirements. How it matches will be shown in the following chapters.

3.1.1The BMW 3 seriesThe chosen BMW 3 series model is just an economy model which is sufficient for theexecuted investigations. This car is about 4,5 meter long, costs about 26.000,- andoffers enough space for five adult persons. As already mentioned it is medium-size carwhich is situated in the middle class. Its competitors are:

Audi A4 Volkswagen Passat Mercedes Benz C-Class Opel Vectra Volvo V40 Ford Mondeo Mazda 6 Renault Laguna etc.

3.1.2The market segmentation of BMW 3 seriesGeographical Segmentation

The geographical segmentation is for the BMW 3 series an important factor. The mainmarkets are the United States and Europe. Namely it doesnt matter where a carproducer sell its cars, the important thing is to sell cars at all. Limitations are mostlygiven by the legislation. Laws differ from country to country, especially betweencountries from different continents. Once adapted to the according laws, factors like citysize or living density are very important to reach the broadest customer shift as possible.The more potential customers can be found in a certain area the more cars can be sold.In the globalisation manner nowadays the assimilation of laws moves forward. Thisdisadvantage could be negated in a few decades.

Demographical Segmentation

The typical customer or also the target group of the BMW 3 series are mainly malepeople in an age about 30-49 years. They live in households of two persons (not veryoften they have children) and have an average income of ca. 40.000 - 70.000 a year.They have mostly a good education with a college graduation, are academics working upto a middle management position and search for a company car or just a car to feel with.The religion, nationality or even the race doesnt matter; their way of life is their impulseto force for such a car.

Psycho graphical Segmentation

BMW 3 series customers distinguish themselves from the mass by their personaldistinction. They are ambitious, hard working and successful and meet their common

needs of sportive and dynamical driving for example in a BMW 3 series. They want to beas sporty as their car. Therefore they live very healthy, go to gymnastics and do a lot


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In our throwaway and fun society, life-style becomes more and more important.Unfortunately results this in a growing gap between the rich and poor society shift,shown in the figure below.

Figure 3:Future changes in income classes (Source: Volkswagen)

In a few years the middle income class will become smaller. To reach as much customersas possible the car producers have to align their strategies and to define their newtargets. BMW is situated between the middle and upper middle class. Not to be put aside,BMW has to move more into the upper middle income class. This can be done by showingmore exclusivity, reliability and other car preferences. Each OEM has to define its new

segment to sell its cars. Skda for example will move its Oktavia more to lower middleincome class, the Audi A4 thereagainst will, because of its generally better image, try tomove into the upper middle income class as well.


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4. Positioning of a medium-size car4.1 Market Positioning BMW 3 seriesAs told before Positioning refers to the place an offering occupies in consumers minds onimportant attributes relative to competitive offerings. Furthermore, the marketpositioning constitutes the last step in the marketing process:

Figure 4:Process of market segmentation, targeting and positioning.

After the segmentation of the market and the selection of the target segment, in thiscase the target segment is the medium-size car segment, the question is:

How can we convince consumers in this segment to choose our offering?

In general the consumers have to be convinced that the products, in this case the BMW 3series:

1. Meets, or even exceeds, their expectations.2. Does it better than competitive offerings.

The segment of medium-size cars is a wide segment with different consumer shift. Manydifferent brands are involved in this segment, as well as, many different kind of needstake part in it. As already been seen before BMW 3 series is a car related to expressemotionand social affirmationin consumers minds.

However, in the last years BMW has been focused on environmental issues. Consistently,at the moment, the BMW 3 series sets the standards for recycling-optimised vehicles inthe future. This car can be virtually 100% recycled in compliance with economic andenvironmental guidelines. The recycling concept is integrated into the design of many ofthe cars components and assemblies. This way, the positioning strategy of the BMW 3series is not changing; the company is adding a new message for the consumers not onlyfrom the BMW 3 series but also from the BMW Group, BMW Group recycling.

In the following picture all the recyclable plastics of the BMW 3 series can be seen:

Market Segmentation

1. Identify bases forsegmenting the market

2. Develop segmentrofiles Market Targeting

3. Develop measure ofsegment attractiveness

4. Select target segmentsMarket Positioning

5. Develop positioning fortarget segments

6. Develop a marketingmix for each se ment


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Figure 5:BMW 3 series recyclable plastics.

The main reason why BMW made a big effort in reasserting the BMW 3 series as anexpressing emotions car suitable for social affirmation is that the team wanted tomake sure that the new 3 series would surpass the Audi A4 and compete head-on withthe Mercedes C-class in buyer satisfaction.

At this point, it can be important to mention that when BMWs new 3 series prototypewas about to be completed, Audi, one of its major competitors, introduced its new

benchmark model for 1996, the Audi A4. Car and Drivermagazine named the A4 one ofthe Ten Best 1996 cars. In fact, Car and Driver gave the new A4 a one-point higherrating than BMWs 3 series of 1996, which continued to set the benchmark for styling inits class. This model was central to Audis strategy of directly attacking BMWs productline. Having hired away several of BMWs marketing executives, Audi was nowintroducing series with numbering systems similar to BMW but always symbolically onenumber higher. The Audi A4 was targeting the BMW 3 series, the Audi A6 was targetingthe BMW 5 series and the A8 was doing the same with the BMW 7 series.

The Audi A4s design was very competitive with the BMW 3 series. So when the new 3series was 24 months from launch, BMW group saw a new competitor, the A4 that was awell-developed car, apart from its original benchmarks Mercedes C-class and Lexus

CS300.

Because of these reasons BMW Group made an extra effort when positioning the thirdgeneration 3 series trying to differentiate itself from Audi, which was trying to overlapBMWs position in the market.

The ABCs of the BMW 3 series positioning strategy have been, first, understanding theattributes of the product (Attributes); secondly, strong differentiation from itscompetitors (Benefits); and finally, developing effective advertising message, channels ofdistribution, etc. (Communication of Value). The main attributes, benefits andperceptions of the BMW 3 series are identified by the consumers because of itspositioning strategy.


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Figure 6:Attributes, Benefits and Perceptions of BMW 3 series.

When developing a positioning strategy for a new product/service, there are always someimportant points to fulfil for every kind of market or segment. These concepts composethe key to a successful positioning: Clarity, Consistency, Competitivenessand Credibility.

BMWs success in the medium-size car segment can be explained by studying these fourpoints:

4.1.1ClarityThe message must be clear and understandable. Concerning the BMW 3 series, it is amedium-size car that is directly linked to social affirmationby everybody. In addition,the relation between the BMW 3 series and the emotionsis also very close. So it can bedefined as a high level medium-size car for those who are fascinated in driving.

4.1.2ConsistencyThe company must be coherent in all its decisions and strategies. The BMW 3 seriesmodels are all perfectly coherent with BMWs brand image, as well as the positioningstrategy and marketing strategy always appealing to the sporty spirited performance.

4.1.3CompetitivenessThe product must be competitive in its segment. This is one of the best strength of BMW.BMW cars are always competitive in the way that they provide best quality, excellentreliability and safety.

4.1.4CredibilityThe message must be credible. In this point a brand like BMW always have thecompetitive advantage of its brand image, and the consequent strong position of thebrand in the market and in consumers minds.

Suspension

Engine Capacity

RearWheelDrive

Technology

Wheelbase

Headroom

Recyclability

Sportiness

Roominess

Environmentallyfriendl

EXPRESS

EMOTION

SOCIAL

AFFIRMATION

ATTRIBUTES BENEFITS PERCEPTIONS


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Changes for the Future

Finally, some ideas looking forward, the future positioning strategy of the BMW 3 serieswill be studied. Furthermore, the necessity of some changes in BMW 3 series currentpositioning strategy will be discussed. About the current positioning strategy, BMWprincipal objective is identifying the 3 series with express emotions and socialaffirmation. In these aspects BMW should try improve even more its image, positioningitself further away from cars like for instance Mazda-6.

Figure 7:Future positioning of BMW 3 series

On the other hand, the typical BMW 3 series buyers are not women. This results in one ofthe most important weaknesses of its positioning strategy. Women dont usually basetheir needs in purposes like social affirmation as much as men do; they are usually moreinterested in the design, safety, reliability and utility.

In the recent years, women are becoming an important car buyers group and their needsalso have to be met. The modern and fashionable car designs are at the moment one ofthe principal interests of young women when buying a car; designs such as the RenaultTwingo and the new Megane are fulfilling women needs. About this topic, BMW 3 seriesshould try to improve its conservative design not only with the Compactmodel as theyvedone but also with the Convertible, Touring, Coupand especially with the Sedan. TheBMW 3 series Sedanhas a quite conservative design. In the future, BMW should remodelit like theyve already done with the 5 series and 7 series; this way, trying to identify the3 series into a more fashionable designin their future positioning strategy.

Another important concept that BMW should try to emphasise more in its positioningstrategy is the environmental issue. Although in the last years BMW has been focused onthe environment when developing new models, unfortunately it is not really clearly

explained in its positioning strategy. At the moment even if BMW cars, in this case theBMW 3 series, are provided with ecological equipment, the consumers do not identify thiscar as an environmentally friendlycar.

BMW3

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Sportive cars Functional/Expressive cars

Functional cars

expressemotions

socialaffirmation

socialintegration

controlemotions

Class/Statuscars

1. Audi A42. Volkswagen Passat3. Mercedes Benz C-Class4. Opel Vectra5. Volvo V406. Ford Mondeo7. Mazda 68. Renault Laguna etc.


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6. References[1] Wolters Noordhoff Groningen, Basisboek Marketing, p65,66; 2000

[2] TV America Inc., Excecutive Overview ISO 9000

, 08.12.2003

[3] Francisco Veloso, MSL Materials Systems Laboratory., MSL Steering Committee

[4] Wallentowitz, Univ.- Prof. Dr. -Ing. H., Automotive Technology in 2010 Potentials for passenger car applications,1./2. July 2003, Wolfsburg

[5] Homepage of Volkswagen, Volkswagen (8.12..2003)

[6] American Iron and Steel Institute, Automotive Steel Works (8.12.2003)

[7] U.S. Steel Automotive Site Map, 8.12.2003

[8] Prentice Hall International, Inc, Marketing Management, Analysis, Planning,Implementation, Control, Philip Kotler, p 306-313; 1994

[9] Homepage of BMW http://www.bmwgroup.com

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