Marketing function
Introduction
The marketing function has undergone a remarkable transformation over the past few years. Cailleux, Mignot and Kapferer (2009) assert that marketing is moving from the transactional or sales-driven approach to a relational or bonding approach. This transformation is evidenced by the emergence of different marketing concepts such as lifelong customer value, customer-driven marketing, and customer equity. Bettencourt et al. (2014) assert that ‘firms must build close customer relationships’ (p.99). Thus, customer relationship management has become a fundamental component of the marketing function. Benning (2012) defines customer relationship management as an enterprise-wide business strategy that is designed with the purpose of maximizing the level of customer satisfaction by organizing their operations around customers hence improving the success with which businesses maximize the level of profit.
Firms that specialize in the production of luxury brands have been reluctant to employ the concept of CRM. On the contrary, they were mainly concerned with premium pricing, attractiveness, and the fame of their brand as the sole source of competitive advantage. However, luxury brands are increasingly changing their approach to marketing by entrenching the concept of CRM. Bayerische Motoren Werke AG is one of the renowned and best-selling German luxury automobile companies. The firm has entrenched relationship management in fostering business-to-customer transactions. This paper entails an analysis of the application of the concept of CRM in BMW AG.
Analysis
Reasons behind BMW AG’s development of long-term relationships with customers
Customers constitute an integral component in businesses’ long-term growth strategies, product development, sales, and marketing efforts, and in fostering a business’s overall profitability (Peppers & Rogers 2011). In line with this assertion, BMW AG has been motivated to entrench customer relationships as one of its key strategic issues.
New product development and continuous product improvement
The luxury automobile car market segment has become very competitive due to the high market potential. Subsequently, luxury automobile car manufacturers are increasing their investment in research and development in an effort to improve the competitiveness of their brands. According to Akhilesh (2017), undertaking market research is one of the most important sources of market intelligence that firms can rely on in undertaking new product development and continuous improvement. Customer relationship management constitutes one of the most effective approaches that businesses can leverage in sourcing market intelligence from customers. This arises from the fact that fostering a positive relationship between a firm and its customers can create an impetus for customers to share ideas and opinions regarding a particular brand.
Establishing a relationship with customers constitutes a valuable strategic resource that can contribute to business success (Payne & Frow 2005). Sofianti et al. (2010) assert that ‘customer knowledge has been increasingly accepted as a key strategic resource in any company’s success’ (p.2). In an effort to gain a competitive advantage in the luxury car market segment BMW AG has appreciated the importance of understanding the customers’ opinion as one of the key aspects in undertaking research and development. In order to gather market intelligence that is valuable to its research and development, BMW AG has appreciated the importance of developing strong and long-term relationships with customers. The firm’s rationale in developing customer relationships is to provide them an opportunity to share ideas and opinions on the firm’s brand. BMW’s commitment to developing long-term relationships with customers is aligned with the relational theory, which emphasizes the significance of establishing a mutual and authentic connection with other stakeholders in society (Walsh 2014). The firm has optimally entrenched customer relationships as a key element in its co-creation process. Frow and Young (2011) emphasize that co-creation increases the effectiveness with which a firm creates value which is valuable to the firm and its customers. Through this approach, BMW intends to achieve a competitive edge by providing customers with value for their money. For example, the firm is able to undertake continuous product improvement hence increasing the customers’ level of satisfaction.
Creating brand loyalty and generating high sales revenue
BMW’s motivation to pursue long-term customer relationships as one of the key goals in undertaking the marketing function entails the need to develop a strong and loyal customer base. On the basis of this approach, BMW is of the view that it will succeed in generating revenue. According to Switt (2011), customer relationship is positively correlated with an organization’s success in developing customer loyalty. According to Hillary (2015), ‘customer service is moving into an era of engagement where customer loyalty is focused more on long-term relationships than loyalty cards and points’ (p. 60). This view is supported by Fournier and Jill (2011) who affirm that businesses should think beyond loyalty and focus on establishing a two-way relationship. Furthermore, fostering a long-term relationship with customers is critical in improving the effectiveness with which customers develop loyalty towards a particular brand. On the basis of this aspect, the firm is able to maximize sales revenue because of the repeat purchase behavior. Hollebeek (2011) emphasizes that customer loyalty has become a key determinant in businesses’ quest to achieve long-term sustainability. Focusing on the development of a strong and long-term relationship with the clients further increases the probability of customers recommending the firm’s brand to their colleagues (Mouzas, Henneberg & Naude 2007). This might result in a significant increase in the firm’s customer base. The overall effect of repeat purchase behavior is that BMW AG will be able to generate high sales revenue.
Managing customer relationship
In order to derive the intended value from customer relationships, BMW AG has appreciated the importance of ensuring that the customer relationship is optimally managed. In pursuit of this outcome, BMW AG has integrated the Identify, Define, Interact, and Customize (IDIC) framework. According to Srivastava (2013), the framework stipulates that ‘the foundation of effective CRM is built on an iterative process of learning and customization’ (p. 2).
i. Identify; in implementing customer relationship management, BMW AG has identified a niche market, which is comprised of consumers who are enthusiasts of high-end and luxury cars. To interact with the target customers, BMW AG has integrated different channels of communication that include broadcast, print, and social media. Social media enables BMW AG to interact with customers hence gaining insight on their needs.
ii. Differentiate; to offer customers value, BMW AG is focused on differentiating its brand in order to satisfy their needs. Thus, the firm is able to tailor and design its brand in line with and beyond the customers’ expectations.
iii. Interact; According to Fournier and Jill (2011), ‘relationships are two-sided and evolve through interaction’ (p.63). BMW AG is focused on establishing and maintaining strong relationships with target customers. Thus, the firm evaluates the opinions raised by the clients in an effort to determine their relevance (Parvatiyar & Sheth 2001). Additionally, the firm ensures that it responds to the complaints raised by customers. Through this strategy, the firm has been able to establish a learning relationship with the customers. BMW AG considers interaction as a key component in developing customers’ opinions. Subsequently, the firm has entrenched a customer complaint procedure in an effort to ensure that it understands and acts on the issue raised (Ocean Group Falmouth 2017).
iv. Customize; the firm diligently and impartially examines the product ideas and complaints raised by customers. This enables the firm to gain intelligence and insight on how to undertake continuous product improvement. For example, the firm is able to undertake continuous improvement on its brand in order to align with the customer’s product needs.
BMW AG’s future approach to CRM; e-CRM
Considering the growing relevance of customer relationships in enhancing businesses’ future sustainability, it is imperative for BMW AG to focus on how it can optimally leverage the relationship developed with its customers. To foster its future sustainability, BMW AG should apply an electronic customer relationship management approach or e-CRM. Botha, Bothma, and Geldenhuys (2008) assert that e-CRM involves the use of technology to enhance the effectiveness and efficiency with which a firm interacts with its customers.
In implementing e-CRM as an approach to CRM, BMW AG should consider employing diverse direct-to-customer channels such as the web, e-mails, and social media. The use of social media as one of the interactive technologies will enable the firm to gather market intelligence from consumers in society who might not even be direct consumers of the firm’s brand. For example, the firm can use social media to create an online community that it can consider as a source of insight into the customers’ perception of its brand (Al-Rabayah et al. 2017).
One of the fundamental challenges that is likely to affect the usability of the implemented e-CRM technologies entails ineffective configuration of the technologies. This aspect might limit the ease with which customers use the technology in interacting with the firm. To deal with this challenge, the firm should also ensure that the selected e-CRM technologies are optimally configured and implemented in order to improve their functionality.
Conclusion
Developing long-term relationships with customers is a vital approach through which BMW AG can achieve future sustainability despite the changing business environment. However, this outcome can only be achieved if the firm employs effective CRM practices. Moreover, the firm must ensure that it continually improves its CRM practices for example by entrenching the e-CRM approach.
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