Executive SummaryThe marketing mix elements are the basic, tactical components of a marketing plan. Also known as the Four P’s, the marketing mix elements are price, place, product, and promotion. This report will compare the marketing strategies used by Mercedes Benz and BMW both of which are German car manufacturers.
Mercedes-Benz will discontinue the CLK model after 2010 and replace it with a coupe and convertible based on the new E-class. In comparison BMW has been extending its product portfolio by including smaller and less profitable cars. During 2008 Mercedes-Benz USA appointed 27 dealers to open special AMG performance centers. BMW created an import/export operation which is the only U.S. manufacturing plant, it is located in Spartanburg South Carolina.
For promotion during 2008 Mercedes Benz announced a 100 million dollar TV advertising campaign to promote its C-class and M-class premium SUV. BMW planned to do the exact opposite in the US, BMW announced they will heavily focus on the Internet, interactive marketing and print. Mercedes Benz has aggressively priced its new GLK class which is a premium medium SUV, with an entry price under $35,000. In contrast BMW is pricing its new diesels for profit, not volume, in the United States. BMW instead is shooting for higher profits, pricing its diesel vehicles above those of its major rivals.
BMW vs. MercedesMercedes BenzMercedes Benz is a German manufacturer of cars, trucks and vans and coaches and is a division of the parent company Daimler AG. This report will focus on the products supplied by the Mercedes-Benz Cars division range from the high-quality small cars of the smart brand to the premium automobiles of the Mercedes-Benz, Mercedes-AMG, and Mercedes-Benz McLaren brands and through to the Maybach luxury sedans.
Mercedes-Benz Cars has 17 production sites worldwide (reference www.daimler.com). Daimler bought out the Chrysler Corporation in 1998 to expand the company. Brand names such as Chrysler, Dodge, Plymouth, Jeep, and Mopar became part of the Daimler Company.
BMWBMW is a German automobile, motorcycle and engine manufacturing company and is a division of the BMW group who also own Rolls-Royce and Mini. This report will focus on the products supplied by the BMW car division. BMW now has 1, 3, 5, 6, 7, X, M, Z series and a sport version in the 3 and 5 series. BMW has a tradition of building excellent automobiles with a special emphasis on performance, style and technological advancements that are recognised through their product range.
BMW has future goals of a three phase strategy to produce clean energy across its vehicle range. The first phase is to reduce emissions across the entire product range sing efficient dynamics, secondly it works on hybrid cars by combining petrol engines with hydrogen fuel cell or electric power. Thirdly an engine powered by liquid hydrogen that only produces 2g/km of carbon emission. Marketing Mix
ProductMercedes-Benz will discontinue the CLK model after 2010 and replace it with a coupe and convertible based on the new E-class. Market segments for the CLK and E-class coupe are similarly sized, but Mercedes-Benz needed a two-door that could better compete with the larger coupes that are being launched by competitors. BMW’s earnings per car have been decreasing since early 2000 as the company has been extending its product portfolio by including smaller and less profitable cars. This has also considerably reduced the pricing power exercised by the company earlier.
For example 2008 BMW introduced a 1 series model, the 1 series will help BMW increase its customer base. Potential buyers for the 1 series are being drawn from various segments, ranging from BMW owners who want a smaller premium car to conquest buyers new to the brand.
Marketing management has to be careful not to extend the product line length too long, if BMW can make profits by taking models off the market then the product line is too long. BMW has traditionally entered the high end first to establish a quality image along side with Mercedes but now they have employed downward stretch and market a small car priced to compete with other brands in the lower end .In this case the new low end items might have cannibalized the higher end items leaving BMW worse off. Distribution
During 2008 Mercedes-Benz USA appointed 27 dealers to open special AMG performance centers which are Mercedes high end luxury sport models. They opened these performance centers in top selling markets this year to promote the high-priced range of Mercedes vehicles. By limiting the availability of AMG sport models Mercedes are creating a narrow product line, which makes this division of the brand more exclusive.
These dealerships are full service retailers because they offer slower moving specialty goods ,This type of good creates higher operating costs which are passed along to consumers as higher prices. The import/export operation of BMW’s only U.S. manufacturing plant in Spartanburg South Carolina plays a major role in the German company’s global strategy.
The plant builds approximately 50,000 Z3 roadsters for U.S. and overseas markets each year. In addition, it processes German produced 3, 5 and 7 series models that are shipped in through the Port of Charleston at the rate of 35,000 a year for sale in U.S. dealerships. This well planned marketing logistics network makes BMW more competitive.
The company can attract additional customers by offering better service, faster cycle time and lower prices through these logistics improvements. Logistics tradeoffs occur when giving cars that are sold a higher priority than cars that aren’t sold to achieve customer satisfaction at a cost that gives optimal profit. Promotion
During 2008 Mercedes Benz took announced a 100 million dollar TV advertising campaign to promote its C-class and M-class premium SUV. Money was to be shifted from local dealers to win more TV attention. In BMW planned to do the exact opposite in the US. BMW announced they will heavily focus on the Internet, interactive marketing and print. BMW will spend no more than 25 percent of its budget on TV advertising (reference Kurylko). Mercedes is using TV in an effort to boost the C class, which in the past has sold in smaller numbers than its main competitor, the BMW 3 series.
During 2007, Mercedes sold 63,701 C-class vehicles in the US, while BMW sold 142,490 3-series vehicles (reference Kurylko). In 2009 to launch the GLK, Mercedes-Benz spent most of its first-quarter marketing dollars on TV advertising, including events such as the Super Bowl pregame show, the Academy Awards and the upcoming NCAA men’s basketball tournament. Since the economy is in a recession many people are now choosing the stay home and as a result watch more TV.
In 2008 BMW started focusing on social networking websites such as face book and MySpace to target car buyers. With the massive increase in consumers using these sites it seems BMW to capitalize on this growth. BMW is using one to one communication to learn more about the customer’s and their buying pattern. By using social network sites such as Face book and MySpace they are able to tailor their message and apply a one to one interaction more easily with a select group more effectively than mass communication.
Mercedes is launching the GLK therefore it is important for them to use informative and persuasive advertising, because it builds primary demand. Persuasive advertising is important as competition is increasing in this category and the company’s objective is to build demand. The announced 100 million dollar TV advertising budget will address this with expensive TV ads. Price
Mercedes Benz has aggressively priced its new GLK class which is a premium medium SUV, with an entry price under $35,000. Mercedes-Benz expects its new GLK class to have a competitive edge in the US over four new competitors due later this year. Mercedes has priced the GLK at $34,775 which undercuts the BMW X3, which has a price of $40,225 and both prices include shipping (reference Kurylko). BMW of North America is pricing its new clean diesels for profit, not volume, in the United States. BMW instead is shooting for higher profits, pricing its diesel vehicles above those of its major rivals.
BMW will charge a premium, The pricing decision comes on the heels of a 63 percent drop in third-quarter net earnings, production cuts and a 40,000-unit reduction in U.S. allocation in favour of more profitable markets. The X5 diesel crossover will cost $52,025, compared with $47,925 for the X5 petrol version. And the 335d diesel will cost $44,725, up from $40,925 for the comparable petrol version.
Prices include shipping. In contrast, Mercedes-Benz chose to charge less in an effort to increase demand for its diesels. Mercedes’ ML320 Bluetec crossover costs $49,475, compared with $47,974 for the ML350 gasoline model, only a $1,501 premium.
Mercedes has set a low initial price in both instances to penetrate the market quickly and attract more buyers. This strategy has allowed Mercedes to achieve a leadership position and may help delay competition from BMW and other competitors. But BMW has decided to adopt market skimming pricing for its new diesel model, BMW will get maximum revenue from segments willing to pay this high price but the company will make fewer profitable sales.
This can be effective because the brands quality and image are consistent with high price and there are enough buyers in other markets to purchase the car at this price. BMW uses product line pricing with each successive model offering additional features, the diesel model offers about 30 percent more fuel-efficiency than premium gasoline, which explains why it is priced slightly higher. Conclusion
BMW’s marketing strategy reigns supreme over Mercedes Benz, BMW has been more effective at maintaining its prestigious brand quality and image, it has succeeded in doing this by adopting market skimming on the diesel models and maintaining a higher price in response to Mercedes strategy to penetrate the market with the GLK model. BMW is taking advantage of the social networking sites and capitalizing on the massive increase in growth of these websites. Unlike Mercedes they are able to tailor their message to specific user groups online and learn their customers buying patterns.
This is not possible with indirect mass marketing BMW has a better logistics network setup, orders can be processed and shipped out faster than before and meet demand more easily, especially for the Z3 roadsters which are locally produced for the US market. It has further helped transform the company into a worldwide organization. However BMW’s earnings per car have been decreasing since early 2000 because the company has been extending its product portfolio by introducing smaller and less profitable cars.
Mercedes Benz also has down rolled its product line by introducing the two seater smart car, I have found this to be the only area of the marketing mix where Mercedes was more triumphant and I believe it is not enough for Mercedes to have a more successful marketing mix.
M-B: E class will use GLK ad strategy.Kurylko, Diana T.Automotive News; 3/9/2009,Vol. 83 Issue 6350, p4-4, 1/5p, 2 colour
M-B to spend $100m on TV ads in US.Kurylko, Diana T.Automotive News Europe; 2/18/2008, Vol. 13 Issue 4, p13-13, 1/2p, 1 color
Mercedes GLK class to cost about $5,500 less than BMW X3 in US.Kurylko, Diana T. Automotive News Europe; 1/19/2009, Vol. 14 Issue 2, p21-21, 1p
BMW sees new models as sales saviors.Kurylko, Diana T.Automotive News; 3/31/2008, Vol. 82 Issue 6301, p26-26, 1/8p
BMW diesels: Priced for profit. Kurylko, Diana T. Automotive News; 11/17/2008, Vol. 83 Issue 6334, p6-6, 1/5p For BMW, building vehicles is the easy part. Dalton, Robert W. Automotive News; 05/24/09, Vol. 73 Issue 5820, p8n, 3/5p, 1 color Daimler AG
http://www.daimler.com/dccom/0-5-535019-1-1224454-1-0-0-0-0-0-8-7145-0-0-0-0-0-0-0.html BMW Grouphttp://www.bmwgroup.com/bmwgroup_prod/e/nav/index.html?http://www.bmwgroup.com/bmwgroup_prod/e/0_0_www_bmwgroup_com/home/home.html