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BMW: Company Analysis

Consumer-Buying Process for BMW

The consumer buying process is a framework designed to describe customers’ paths on their way to making a purchase. With BMW, the consumer-buyer process begins with recognizing the need to have a vehicle that facilitates day-to-day transportation. At this stage, a particular problem may arise, for example, a family of two may have a child, and now they need a more spacious vehicle for everyday use. Next, the consumer collects information, including descriptions of available models, both from BMW and other luxury-segment manufacturers. Kotler (2016) identified several sources of information, for example, family members.

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It should be noted that BMW’s customers are very loyal to the brand, according to the case study, and therefore it is likely that they will recommend BMW cars to their friends and relatives. Other sources of information include commercial, for example, advertising, and public, such as safety or reliability ratings (Kotler, 2016). Alternatively, the experiential method implies that a potential buyer examines the vehicle or even test drives it.

Due to the fact that this manufacturer offers a great variety of vehicle types, it can satisfy the needs of different consumer segments. Next, a consumer typically contacts a distribution center to have a test drive and to see the vehicle in real life. At this stage, they might consider alternatives, such as a comparable car with a lower price or a special offer from a competitor. Afterward, the contract for purchasing the vehicle is signed, and the buyer can either receive it at once or has to wait until the vehicle is manufactured and delivered to them.

The final stage is the consumer using the car and evaluating whether the experience corresponds with their expectations.

Therefore, the steps of the consumer buying process at BMW are “problem (need) recognition, information search, evaluation of alternatives, purchase decision, and post-purchase behavior” (Kotler, 2016, p. 247).

The steps of the consumer buying process assist the marketing team of BMW because they use advertising to attract potential buyers and disseminate information about new products. Next, BMW can be seen in a variety of rankings, such as CO2 emissions or reliability. Therefore, this process assists the BMW marketing team because it allows them to examine each element of the decision-making process and tailor the advertising efforts towards them.

Analytics at BMW

Data analytics can be used to collect and examine information about a brand and consumers’ perceptions and preferences. For BMW, the main benefit is in understanding how their vehicles fit into the lifestyle of different consumer segments and how the brand is perceived. For example, traditionally, BMW established itself as a luxury and sports car manufacturer, which appealed to the population of yuppies and baby boomers.

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One example of the successful data analytics use by BMW is the change in consumer’s perceptions towards owning a luxury vehicle, which happened after the 1990s. Through research and analysis, BMW understood that the customers cared less about the brand value and brag about having a luxury car. Instead, the focus shifted towards having a variety of choices relating to design and size, as well as the price.

BMW used this information to create a set of SUV, roadsters, and other types of cars, adding to the line that previously only had models 3,5, and 7. Therefore, analytics can be used to research the consumer to enable an understanding of overall business and marketing outcomes at BMW by establishing clear metrics and monitoring consumer behavior. As a result of this analysis, BMW changes its processes, designs new vehicles, and new strategies to satisfy the needs of different consumer segments.

Target Markets

BMW does well in terms of marketing its products to different target groups because the company expanded its product line to have a vehicle that appeals to different consumer segments. The process of segmentation allows dividing the broad selection of potential and existing customers into smart groups based on shared characteristics (Kotler, 2016).

For example, 1-series and X1 SUV were created for the audience titled “modern mainstream” – family-oriented individuals who did not purchase BMWs previously because of its premium cost. Alternatively, the 7 series targets “upper conservatives” with its luxury price, design, and capabilities, and the focus is on comfort rather than the sports capabilities of these vehicles.

Next, BMW also created cars for “upper-liberals” who need a spacious vehicle and “post-modernists” who prefer sportier-looking cars. As a result, BMW seems to have created a vehicle for each of the main target segments. BMW can do better by analyzing whether such a diversification towards lower-priced cars is beneficial or adverse for the brand’s luxury image since currently, it is unclear if the company is able to attract customers that can potentially purchase its higher-end cars, or whether such strategy depreciates this brand.

Situational Analysis

For the purpose of this assignment, a PEST for BMW’s operations and marketing efforts in the United States will be conducted, disregarding the global tendencies despite the fact that the manufacturer sells its vehicles in many countries. In terms of the political environment, car manufacturers are facing regulatory issues, which pressure them to increase the mileage per gallon and decrease CO2 emissions continuously.

For example, in the United States, President Obama developed a plan to ban all vehicles have to be able to travel for at least 50 miles per gallon by 2025 (Plumer & Popovich, 2016). Another issue is the trade war that affects the global community, mainly the disagreement between the United States and China. In the future, these states will impose restrictions on the imports of brands that are also sold in other country.

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Economic factors were favorable for the BMW in recent years since the United States experienced economic growth and a decrease in unemployment. However, the current governmental regulations for ensuring safety due to COVID-19 have affected a large number of businesses and individuals, causing a financial crisis for many. Although currently, the full-scale economic effect of these events is unclear, it is possible that the United States will face an emergency, which can affect the purchasing ability of BMW’s potential consumers.

From a sociocultural perspective, the perception of BMW as a luxury brand should be considered, as well as the recent trends and changes in consumer behavior. Deloitte (2020) reports that people now expect cars to be more technology-oriented and pay additional attention to safety measures. Moreover, the popularity of electric vehicles is increasing, as brands such as Tesla introduce affordable versions of such vehicles. Finally, the consumers are more environmentally conscious, and they pay more attention to the emissions and the corporate social responsibility (CSR) of a brand.

Next, Table 1 presents the SWOT analysis for BMW in the United States and includes external and internal factors. The main issues are associated with the threat of not being able to address the demand for electric cars. However, BWM has experience in creating hybrid vehicles, which can help further develop the technology and introduce a series of electric vehicles. The needs of the consumers are changing, which is likely to force BMW to improve its product line and add other types of cars based on these demands.

Strengths Weaknesses
  • An established brand that exists since 1910
  • A reputation of a luxury vehicle manufacturer
  • Consumer loyalty
  • Variety of cars for different consumer segments
  • Lack of electric vehicles
  • Mileage per gallon efficiency is relatively low
  • Perception of the brand as a luxury sports car manufacturer
  • Series 1 and X1 that can depreciate the value of the brand for premium buyers
Opportunities Threats
  • Demand for vehicles in the United States
  • Experience in creating hybrid cars with an increasing demand for fuel efficiency
  • Changing consumer demands including the element of distribution
  • Consumer interest in technology and safety
  • The growing popularity of electric vehicle manufacturers, such as Tesla
  • Economic decline due to COVID-19
  • Government regulations regarding the mileage per gallon
  • Trade wars that can threaten imports to the United States or China

Table 1. SWOT analysis for BWM (created by the author).

Problem

One organizational problem that BMW will have to face in the future is the increasing demand for electric vehicles and a need to restructure the processes in order to meet the demand. This is also supported by the governmental regulations in the developed states that aim to maximize the mileage per gallon to minimize emissions. From a marketing perspective, this problem may mean that the consumer will be pickier when choosing a vehicle manufacturer, and the environmental consciousness of the brand will become a central element considered when purchasing a new car.

Another organizational problem is the one that was already addressed by Tesla – the issue of distribution centers. These entities act as a middleman between the manufacturer and the consumer, however, usually, the brand does not have full control over the distributor. Moreover, it creates additional costs and constraints, hindering the experience of the buyer. This is an element of the changing perception of the consumer regarding their cars, the purpose of owning a car, and the use of digital technology to collect information and purchase it.

Alternatives

The first potential alternative is to focus the marketing efforts on the energy-efficiency and technologies that allow saving fuel. This is consistent both with the threat of the external environment where Tesla is successfully selling its cars and the political environment issue because the government aims to adopt stricter regulations regarding car mileage. However, this does not address the potential threat of electric vehicles becoming more widely used by consumers.

The second potential alternative is to emphasize the car series that have a lower price – BMW 1 and BMW X1. This can help address the inherent problem with the economic crisis because the two vehicles are more affordable when compared to other cars that BMW manufactures. Due to the fact that it is unclear how the consumers will react to the pandemic crisis, BMW can focus on its car series that is the most affordable.

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The third alternative is to focus on promoting the BMW’s electric vehicles with an emphasis on efficiency and the cost-saving associated with the lack of need to purchase fuel for these cars. This option is the most cost-intensive and will require close cooperation of the BWM marketing department and its designers and engineers to determine how the premium brand can address the demand for electric cars. With this alternative, the possible threats of regulations and consumer behavior changes are discussed. However, it leaves the customers who prefer to use diesel or petrol cars out of the picture.

Recommendations

The alternative recommended to BMW is to focus on developing and promoting eclectic vehicles. This alternative was chosen because, according to Plumer & Popovich (2016), the regulations regarding the mileage per gallon in the United States are relatively liberal, with many European or Asian countries requiring manufacturers to adhere to t stricter standard.

This means that BMW will have to continuously invest in improving its engines both for the American and global markets. Next, Deloitte (2020) reports that North Americans demonstrate an “increasing interest in electric vehicles” (para. 5). As a result, consumer preferences are changing, and if BMW is unable to address these changes, they will lose a notable consumer segment.

Another issue is that developing technology to produce electric cars is both cost and time consuming, meaning that BMW should address this trend as soon as possible. Finally, in accordance with Kotler’s (2016) consumer-buyer process, as electric cars become more affordable and accessible, the potential buyers will choose them over petrol or diesel options.

This can happen at the stage of collecting information and comparing the performance of different types of cars or at the stage of examining alternatives. Therefore, BMW should address the changing consumer demand and focus its marketing efforts on promoting electric vehicles.

References

Deloitte. (2020). 2020 global automotive consumer study. Web.

Kotler, P. (2016). Marketing 4.0: Moving from traditional to digital. Wiley.

Plumer, B., & Popovich, N. (2018). How U.S. fuel economy standards compare with the rest of the world’s. The New York Times. Web.

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