Section A - ALC UoG Resources

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Section AAnswer ALL two (2) QuestionsCase 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-and-click 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.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."QUESTIONSWhat are the pros and cons to BMW’s selective target marketing? (20 marks)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)Answer to Q1: What are the pros and cons to BMW’s selective target marketing? 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 marksCons 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 marksTotal marks: 20 marksAnswer to Q2: In Malaysia, BMW’s sales have been doing well in the premium non-national 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.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 signi?cantly 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 dif?culties in using a standardized approach and therefore support market tailoring and adaptation to ?t the “unique dimensions” of different international markets (Thrassouand Vrontis, 2006).More speci?cally, 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 marksGiven 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 marksTotal marks: 20 marksSection BAnswer all THREE (3) questions. Each question carries equal marks.This section is worth a total of 60 marks.Questions2QUESTION 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: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 example of children’s advertising, they too will also earn 2 marks. Total = 20 marksQUESTION 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: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 marksMarketers 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 marksTo 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 marksTotal marks: 20 marksQUESTION 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:Explain the marketing concept - 4 marksi.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 marksProduct 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 pointsMarks awarded are 3 x 4 marks = 12 marks.Total marks: 20 marksQUESTION 4: How does the demand for industrial products differ from the demand of consumer products? (20 marks)ANSWER: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 marksBasically, 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 marksAlso the market behavior which affects the demand for industrial products and services, is generally quite different from that experienced in consumer markets.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 marksTotal marks: 20 marksEND OF PAPER ................
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