solution

BMW cars are typically associated with high status and success – a positioning that they have worked hard to achieve. Price is a key aspect of their positioning, with most of their vehicles retailing for $50,000 or more. The management team at BMW has noticed the increasing trend of younger car consumers in buying a new car as their first car. Previously, most first-time car buyers typically bought a used car. However, with a range of small new cars available at around $15,000, more and more younger consumers were pursuing this option. The concern at BMW is that a number of these consumers will become brand loyal. That is, if they are happy with their first car, say a Toyota, then they are more likely to buy a Toyota next time. Therefore, the concern is for the long-term erosion of BMW’s future customer base. Therefore, assume that a product/pricing recommendation that BMW’s management team is considering is the introduction of the “BMW-Junior” – a lower quality car that will retail at around $15,000. The goal of this new product would be to gain a major share of the young consumer market.

1. Does BMW pursue their goal of entering the lower-price end of the market?

2. What impact will these proposed decisions have on their overall positioning?

3. How important is the role of price in the firm’s marketing mix?