Executive Summary
Due to the growing business competition and changing consumer trends, BMW had decided that the company needs to have a marketing program that is based on the principles of relationship marketing (RM). The program will be developed mainly to attain and obtain customers from the Australian luxury market. The situational analysis of the company indicated that the company does have the potential to support the program and its requirements. Based on the needs of the company and its objective, the RM program will involve the use of a strategy known as integrated marketing communication (IMC). This will allow the effective combination of various communication channels to satisfy the needs of the customers.
Three IMC tools had been included for the program. These include media promotion, product assistance and customer service hotline. Through these tools, the company will be able to address its market concerns with stronger customer relations, high rates of loyalty and better brand equity. The program would have to be monitored in order to ensure success. For this purpose, performance measurement, with both financial and non-financial indicators, will be used. Specifically, monthly sales reports, records of repeat orders and customer feedbacks will be used to monitor the program’s success.
Table of Contents
Title Page
Executive Summary 1
Introduction 3
Assumptions 3
Relationship Marketing Audit 8
Relationship Marketing Program 9
- Objectives 11
- Strategies and Implementation 12
- Monitoring Success 17
References 22
Introduction
Relationship marketing (RM) had long been applied by various businesses. Generally, this has been an effective strategy as it does not only help in attracting customers but in maintaining their loyalty as well. The use of this strategic move has been stressed even further as businesses become more and more customer-oriented. In addition to changing business trends, the increased level of competition, particularly in the automobile industry, had encouraged even strong brands like the Bavarian Motor Works (BMW), to adapt the same strategy. The BMW product has the potential to utilize the RM program. Specifically, the company has the resources to support its requirements. Despite the presence of strong competitors, BMW is virtually a global name and has been successfully marketing its designs to Australia’s luxury market. By means of employing a relationship marketing program, BMW can strengthen its hold on its target market and develop customer loyalty. The program basically aims to create customer satisfaction, build brand equity and maintain good customer relations.
Assumptions
Although the developed relationship marketing program for the chosen product can help the company build brand equity and create customer satisfaction, certain unforeseeable factors can affects its efficacy in the future. Thus, in this case, these unpredictable factors are not considered. The present situation of the company and its current status in the industry based on reports are the only ones taken into account in developing the RM program.
Situation Analysis
In order to stress the information found in the consequence analysis, a SWOT analysis may be appropriate. Situational analysis, where the SWOT technique is applied, is an integral procedure and a very powerful tool for businesses in an industry to develop effective marketing plans. As the initial procedure of creating a market plan, situational analysis aims to comprehend the environmental as well as the organizational influences that surround a particular business establishment. There are actually two types of situational analysis, both are equally significant. One is the external analysis and the other focuses on the internal environment. When conducting an external situational analysis, the business’ customers, market and competitors are analyzed. Relevant information regarding the company’s market segments, their competitor’s relative weaknesses and strengths as well as the industry as a whole.
An analysis of the external environment requires more than just a summary of what the competition is doing. The external environment is comprised of two elements — the societal environment and the industry. The societal environment includes a review of major trends in society affecting organizations across all industries. These trends include political, economic, social and legal. An analysis of the industry takes a look at factors that have a more direct bearing on the business. Hence, in addition to analyzing the competition other groups must be similarly evaluated to ascertain that no opportunities or threats within the environment are overlooked (Buhler 1994). On the other hand, internal situational analysis is concentrated on the identification of the company’s distinctive competencies, expected growth, their assets as well as their liabilities. The internal analysis also illustrates the core values of a company, and in what ways can these values be enhanced or beneficial to the market plan (Cooper 2002). Below is the SWOT analysis for the BMW company and its products; this will be the basis of the relationship marketing audit
Strengths
- BMW is well-established and strong brand name within the automobile industry, which has been achieved mainly through quality production. This strength is particularly useful in market positioning, gaining new buyers as well as increasing profit margins.
- The company holds a significant share in the Australian market and is considered the number 1 brand in the country as well as around the world. This has been stressed further as BMW models continue to attract several customers. It has been reported that the BMW product brand has been the luxury market in Australia; its status was even higher as compared to the 2004 findings. The Australian luxury market customer totaled to about 1.1. million (AutoWeb 2006). With this market positioning status, the company can continuously gain profit as well as acquire the capital to support its project plans and business strategies.
- The models introduced by the company had been supported continuously by the customers. One favorite Australian brand was the company’s 4WD which still outsells rivals’ models. The BMW X5 is another famous model within the Sports Activity Vehicle line; the model had been enhanced with high-tech features, yet the model remains unchallenged mainly through BMW’s pricing tactic.
- BMW has an access to major distribution channels which allows it to market its products in the most effective way as well as distribute its designs to several foreign markets.
- Years of successful business operation strengthens its capability to overcome past and even new challenges with tried and tested strategies. This capability also allowed the company to introduce its new products and implement strategies at the right time and place.
Weaknesses
- The development of new product models of the company produces indefinite outcomes. BMW continuously strive to produce new models that would meet the needs and satisfaction of the customers; however, it is not certain whether these designs will make it to the market. It is then likely that company is wasting its valuable resources to a model that will not elicit significant return of investment.
- The price of the product is another weak factor. Although the company has obtained a significant market share in the industry, the luxury market is relatively smaller as compared to the general masses. Even if the BMW cars have been equipped with the latest technology, the final product will be very expensive for the customers to buy. Moreover, manufactured vehicles are shipped from its main factories in Germany, the shipping rate further adds to the cost of the cars.
- The company is very vulnerable to bad publicity; negative company image can greatly affect the loyalty not only of the affected market but also its customers worldwide.
Opportunities
- The company can make use of other marketing means, which could promote greater customer satisfaction and loyalty.
- The ability of the company to produce quality products can be an effective marketing tagline that could support future market growth.
- Based from its strengths, the company has the resources and channels that could help in developing and conducting various marketing efforts.
Threats
- BMW is operating within a highly competitive industry. In addition, the industry is made up of equally strong brand names such as Mercedes Benz and Jaguar.
- Various marketing risks are also considered as threats for the company. Though BMW can apply any marketing strategy, its effect on the market can vary.
- Unexpected crisis in the economy can greatly affect the profitability of the introduced models; this could also affect the marketing efforts of the company.
Relationship Marketing Audit
Based from the situational analysis done for BMW, the weaknesses and threats surrounding the company emphasize its need to develop a new marketing program, one that would build better brand equity as well as create greater satisfaction and loyalty from the customers. Specifically, the status of the business is significantly threatened by the strong competition within the industry; considering that the company has a smaller concentration of luxury markets due to its high-priced products, gaining more patrons become even more difficult. Nonetheless, the company has a strong brand name and resources to market its new model effectively. As the customers are the main providers of opportunities and profit for the company, applying a relationship marketing program will be most effective. In particular, this strategy directly addresses the needs of the company for its new product, which include effective promotion and customer satisfaction.
The Relationship Marketing Program
Relationship marketing (RM) is the concept used to describe the contact between the company and the consumers. Berry and Thompson (1982) had defined this as the strategy for business organizations to attract and maintain customers through relationship enhancement. Studies indicated that relationship marketing has been used by businesses either through salesperson management or business-to-business relations. Previous researches had also noted that certain factors such as situational influences, customer or salesperson character and pairing dynamics affect the use of relationship marketing. According to Waring and associates (1980), the effective application of RM actually revolves within 5 C’s. These include communication, caring, commitment, comforts and conflict resolution. Though these RM features, businesses are able to employ various marketing or advertising activities, which in turn facilitates relationship-building with the customers.
The main focus of RM is the long-term retention and satisfaction of the customers through the provision of products or services that directly suit their needs. While RM had been used for various purposes within the customer life cycle, obtaining and maintaining customers remain its prime objectives. Currently, the use of RM had increased as businesses give more priority to their markets. In addition, changes in the consumer trends had caused the increased interest of businesses for the RM strategy. Specifically, customers nowadays prefer their vendors or distributors to act as product consultants – one who would provide assistance while choosing a product in order for them to purchase the one that will give them the most advantage. Customer assistance can also be provided by instructing consumers how a certain product is used or explaining the purpose of the item. Providing this assistance will in turn result to customer satisfaction and loyalty (Rempala 1998). The use of this strategy benefits both the company and the customers – the company obtains greater profit and market growth while the customers are able to acquire the products that fit their standards. In other words, this strategy works well as it promotes a two-way benefit effect.
The use of RM in business had even been popularized through the introduction of a business strategy known as customer relationship management (CRM). According to Cohen and Moore (2000), CRM is concentrated on the use of information technology so as to aid the organization to stay abreast of its customers’ needs and concerns. Customer Relationship Management also helps the organization to respond in time and appropriately to their customers’ calls. The approach on CRM covers all business processes that an organization employs so as to determine, select, obtain, enhance and retain its customers. Indeed, at present, CRM is regarded as the integration of business processes, technological solutions and advanced analysis, which enables companies to understand clients from a multifaceted perspective. Through this understanding, companies are able to establish deeper and more profitable customer relations.
CRM had been applied by businesses as it enables the formation of intimate customer relations. Lim (1997) noted that committed consumers are considered valuable assets to the company as they are more that just simple repeat purchasers. The company considers committed customers as assets as they can possibly be a source of favorable word-of-mouth referrals. These customers are also more resistant to competitors’ offers. In addition, this type of customers has already established an emotional connection with the company and the seller. Fournier (1998) further supported this claim by citing that CRM facilitates the generation of various emotions such as trust and liking as the company effectively and instantly responds to the concerns of the customers. The application of the CRM has also been applied by businesses due to its ability to reduce costs. In particular, when CRM is applied to the operations of the company, the strategy enables the reduction of customer churn or turnover (Reichheld 1996).
Objectives
As the description of the RM strategy clearly imply its suitability to the case of BMW, a relationship marketing program to promote its new product would be appropriate. This program specifically aims the following objectives:
Strategies and Implementation
In order to carry out the following objectives, a relationship marketing program would have to be developed. The main strategy which would be used for this program would be the integrated marketing communication (IMC). Through IMC, companies are able to combine core strategies with other forms of communication to gain more marketing advantages and generate better business effects. IMC is the strategic coordination of multiple communication voices. Its aim is to optimize the impact of persuasive communication on both consumer and non-consumer such as trade and professional audiences by coordinating such elements of the marketing mix as advertising, public relations, promotions, direct marketing and package design (Moore & Thorson 1996).
For several years, companies had concentrated their promotional functions through the use of mass media advertising. In almost all aspects of marketing communication, companies depend on expertise of advertising agencies. Although, most marketers have already introduced and used other marketing communication and promotional tools, package design firms, direct marketing agencies and sales promotion were generally considered as supplementary services and were only used on specific projects. Agencies on public relations were employed to handle the affairs, publicity and image of a company to the targeted public. However, these services were not regarded as vital processes in marketing communication. Traditionally, marketing practices were founded within strong barriers wherein various functions on marketing and promotion are planned and managed separately, with specific market views, budgets, goals and objectives. During this time, marketers failed to realize the importance of coordinating all marketing tools in order to enhance communication and image to target markets (Moore & Thorson 1996).
By 1980s, several organizations have understood and realized the effective strategy behind the integration of various promotional tools. Later, this marketing approach was termed as the integrated marketing communications or IMC. This involves the incorporation of different promotional elements and marketing activities used in communicating with the company’s clients (Moore & Thorson 1996). A significant transition on marketing approach occurred as marketers were no longer concentrated on solely using media advertising for marketing. Moreover, several companies began to go beyond conventional practice and used other promotional specialists to improve and implement their market plans.
The IMC approach has been beneficial to several companies as it helps in identifying the most useful and appropriate methods in communicating and establishing good customer relations, including good relationships with stakeholders like the employees, investors, suppliers interest groups and the public in general. During the 1990s, the introduction of the integrated marketing communications has been one of the most important developments in marketing, which continued on up to the present. From here on, the IMC approach is being applied by large and small companies alike, and has been well-known among companies marketing consumer goods and services, including business to business marketers (Moore & Thorson 1996). With these features, the IMC strategy for BMW’s relationship marketing effort will be the most appropriate. IMC tools that will be used by the company for its product should include media promotion and public relations; these tools will then allow the achievement of the cited program objectives. Specifically, the following activities will be the main components of the RM program:
- Media Promotion
This IMC tool will comprise mainly of television and print advertisements. In addition, the company’s Australian website will feature the new product. This will make it easier for the potential consumers to learn more about the product; this will also facilitate the development of buying decisions among the customers. The aim of applying this tool is to build the BMW product to the customers as a number one brand in the country manufactured in topmost quality. In addition to brand-building, this tool will also be used for obtaining customers from the luxury market. Using various media forms will increase customer awareness as well as sales possibilities.
- Product Assistance
It has been mentioned earlier that positive emotional responses is a prime component of relationship marketing and is actually one of the concepts that make the strategy work. This principle will then be applied in BMW’s case. Specifically, this will be done by assigning trained and skilled salespersons in every showrooms of the company. These salespersons will be the one who will help the customers in making their product choices. Furthermore, the salesperson can also be used to promote the new model of the company. By personally explaining the main features of the new product, customers can be convinced easily to purchase the new product. Helping the customers with their product choices can elicit the positive emotional response, which could contribute to customer satisfaction and good company-customer relation.
- Customer Service Hotline
The principles of CRM will be integrated in this tool. The main purpose of having this in the program is to combine various communication channels that would handle the concerns or feedbacks of the customers. Main communication tools to be used for this activity would include telephone hotlines, post and online help. These instruments will be used by the customers in voicing out their concerns with the product, which will be handled by competent customer service staff. The goal of providing customer services to the employees is to maintain company-customer relation.
The RM program for BMW is actually comprised of two main features: communication and commitment. Through the IMC strategy, the company can easily communicate with the consumer of its products while the consumers can communicate with the company regarding their major product concerns. Usually termed as sympathetic listening, the communication feature in the IMC strategy helps the company in conveying its respect for the customers’ feedbacks; in turn, this helps in establishing a more positive attitude among consumers towards the company or the product. Marketing or promoting a product with the communication feature is said to be significant in giving the consumers the sense of mastery, competence and well-being (Reis & Shaver 1988). By means of providing assistance to the consumers who will buy the new BMW product, consumers become more willing since their decision had been supported by others’ considerations. Waring and colleagues (1980) noted that this effect is actually brought about by the tendency of people to become accustomed to positive emotional responses.
As the communication feature of the IMC strategy is the one that establishes the relationship between the company and the consumers, the commitment or bond factor is the one that strengthens this relation. Bonding is actually a known marketing strategy wherein companies try to establish long-term relations with their customers so that current ones can be retained. Rapp and Collins (1994) had even noted that having more regular patrons is a more cost-effective strategy compared to the ones that aims for acquiring new customers continuously.
In order to implement the RM program, Rempala (1998) stated that companies must conduct an initial research of the customers’ needs and preferences as well as the status of their competitors in the market. This is then followed by the collection of the responses from the customers; the results of the customer research will then be the basis of the specific customer services that the BMW can integrate in its RM program. By doing so, the program’s chance of success is increased.
Monitoring Success
The RM program would naturally require resources from BMW, specifically time, finances and people. As the program is an investment in itself, it is necessary that the company ensures that strategy is producing the expected outcomes. For this purpose, it is essential that the company also include a system that would measure the performance of the program. Conducting a program evaluation will be useful not only in ensuring that its outcomes are aligned with the objectives but also in identifying the strong points of the strategy as well as its problem areas. This will then facilitate immediate resolution of the problems as well as the development of better marketing programs in the future.
In order to monitor the outcome and progress of the program, the principle behind performance measurement will be employed. According to Neely and associates (1996), performance measurement may be defined as the process measuring the competence and efficacy of purposeful action. Performance measurement may also be used to assess whether the strategic objectives are achieved or not. This system allows the use of double-loop learning to test the strength of the strategies as well. Finally, performance measurement let the company visualize the overall contribution of the employees in the achievement of its objectives (Neely 1998; Simons 2000).
Usually, performance measurement is carried out through certain performance measurement systems containing several individual measures. So as to construct these systems, several frameworks may be used. The most common examples include the Balance Scorecard, the Performance Pyramid and the Performance Prism (Neely & Adams 2000). These systems are applied to the organization depending on its vision and strategies (Kaplan & Norton 1996). These measures are chosen to evaluate success factors from various points of view including those of the employees, customers, financial success and business operations. View of past, present and future performances may also be measured. Thus, through performance measurement, various aspects of the company’s performance may be evaluated and managed.
According to Neely and colleagues (2000), the process of performance measurement undergoes four major phases. First, the company must choose which specific performance measure or system to apply. After which, the selected system will then be applied to the organization. Within this phase, how the system results are collected, reported and used is taken into consideration. After the design and implementation procedures, the system will now be used. Finally, the system will be redesigned in accordance to the changes of the organizations objectives.
Considering that the RM program for BMW aims to achieve both customer satisfaction and loyalty, performance measures to be used should directly measure these two factors. In particular, financial and non-financial indicators will be used for monitoring the success of the RM program. The traditional or conventional measures of performance are based on periodic profitability indicators without the consideration to particular variables that drive these measures (Daroca & Nourayi 2002). Performance in the past is mainly based on conventional accounting and measures based on market performance. Specifically, these measures include the evaluation on net income, return on equity/capital employed, earnings per share as well as share-price return.
Measuring performance based on financial indicators provides a more direct assessment as compared to other performance indicators. This in turn, results to a better and easier evaluation for the company. The financial indicators may be an effective tool to measure the progress of the company; however, this indicator does not precisely show how well a company performs in terms of strategic planning, product development as well as its capabilities for growth and development. Due to the evolving trends and practices in business, various organizations have recognized the possibility of measuring performance that is not solely based on traditional measures. Although, price and financial indicators are still significant factors for performance measurement, particularly in the intense competitive environment, these indicators are no longer the main determinant of profitability.
Product quality, customer and employee satisfaction, business operations as well as shareholder satisfaction, collectively known as non-financial indicators, have become important measures in performance as well. According to Pedersen and Lidgerding (1995), non-financial indicators of performance measurement is heavily based on common sense, intelligence, creativity as well as the participants’ personal values. Due to the decentralized nature of these factors, internal controls are required for the new system, which in turn increases the integrity of the organization. Moreover, this system promotes consistent, meaningful, reliable and relevant measuring mechanism that is vital to an operation’s success.
In the case of BMW, monthly sales report of the product can be used as the main financial indicator for monitoring the success of the program. This can directly represent the total amount of products purchased by the consumers. Records of repeat orders can also be used to determine consumer loyalty. On the other hand, the customer satisfaction must also be measured to determine program success. For this, a non-financial indicator in the form of customer feedbacks can be utilized. This can be measured in the RM program’s customer service hotline.
With the development of the RM programs along with BMW’s inherent strengths, the company will be able to successfully launch its new product and achieve both customer satisfaction and loyalty. The inclusion of the performance indicators to the program can also contribute in ensuring the success of the RM program.
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