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Situation analysis

“Car advertising seems to be undergoing a renaissance at the moment. Gone are the winding road clichés of yesteryear; in their place are a host of more engaging campaigns, led by Honda’s ‘Power of Dreams’.” (Nairn, 2004) In what is now a savagely competitive marketplace the overwhelming aim of a marketing campaign, as ever, is to translate creativity into sales. Despite the resounding view that this would be the case for the BMW 1 series, Ritson (2005) claimed that BMW would be a brand that would face significant troubles and a potential decline over the course of this year. Although sales have grown in 2005, Ritson claims that, “with inconsistent offerings such as the X3 and 1 Series now leading the line, BMW is shaping up nicely as a case study in the dangers of line extension.” Yet even this depressing view of the long term success and viability of the BMW brand is not without hope, as Ritson claims that: “If BMW tracks its brand as well as it is supposed to, watch it make a spectacular U-turn toward the end of 2005.” However the question that must be asked is how can BMW track its brand, and in what areas must if focus its attention?

Market segmentation

The car market has long been seen as one of the most difficult to segment, due to rapidly changing consumer demands as technology grows and individual consumers’ demands and circumstances change. These fluctuations cause shifts in demand that have apparently no basis in traditional market segments, with new segments appearing and old ones disappearing, or completely changing, at a rapid rate. The main segments are best determined and separated along the seven alternative hypotheses, regarding the market partition, determined by Bauer and Herrmann. (1995) For example, “structuring based on the type of engine (diesel or gasoline) or a partition derived from the vehicle type (coupe, sedan or squareback). The “vehicle category”, “drive”, “transmission”, “production site” and “brand” also serve as points of departure for identifying submarkets:”

(1) Type of engine – petrol/diesel/LPG.

(2) Vehicle category — compact, mid-size, executive.

(3) Drive — two-wheel drive, four-wheel drive.

(4) Transmission — manual gear-change, automatic gear-change.

(5) Type of vehicle — coupe, sedan, station wagon/squareback model.

(6) Production site — domestic (German), foreign.

(7) Brand — Audi, BMW, Fiat, Ford, Mercedes Benz, Nissan, Opel, Peugeot, Toyota, Volkswagen.

The results of a subsequent test done in 1995 made it clear at the time that “the structure of the car market is dominated by three sub markets, namely “compact”, “mid-size” and “executive”. There is evidently a closer substitution relationship between cars belonging to the same vehicle category than between cars that, for example, belong to the same brand, have the same type of drive or were produced in the same place.” (Bauer and Herrmann, 1995) Over time, more and more segments have sprung up, and these are shown below, but consumers still tend to compare cars primarily by size.

Target market

The 1 series is classed in the entry premium market, in which the Audi A3 extended its lead over the Mercedes A class last year to 35,624 units compared w