Starting situation
Today, many markets have reached such a degree of saturation that market potential is often virtually exhausted. Increasingly, growth can be achieved only at the expense of competitors. Increasing internationalization and the market entry by new competitors result in brand and product inflation. Dramatically shorter product life cycles and constantly accelerating product aging are another challenge for companies that they must deal with.2
Hence, in order to make a company’s products stand out from the diverse range available, suppliers are attempting to hone competitive edge through increasing differentiation of their brands, emphasizing how they meet the specific needs and wants of their target customer groups and market segments. The overall goal of this approach is to build up brands that are unique in the market place – brands that promise a unique value. A strong brand can reach high rates of loyalty among existing customers; it can “more easily” gain new customers, due to its characteristic position; and it can therefore charge a premium price. Marketers have several means to work with in order to reach this goal. Generally, the corporate strategy “might specify a premium position or a massmerchandiser/ discount approach. These obviously have direct impact on the pricing”3. Price is only one of the marketing variables, but for the case of premium brands it is important. The pricing position is one determinant for the development of a brand identity, incidentally, not only among customers and potential customers, but also among society, employees, etc.). As part of the company’s target market and positioning objectives (that largely determine the pricing strategy) price reflects the quality of the branded product and likewise the prestige that the user gains through this brand. In this paper it will be shown, which role pricing plays in the brand concept of premium cars and what the case of the cars says about the theory and practice of premium brands.
Table of Contents
1 Starting situation
2 Definitions
2.1 Pricing
2.1.1 Pricing as part of the marketing mix
2.1.2 Pricing approaches
2.2 Brands
2.2.1 Role of the brand
2.2.2 Premium brand
2.3 Pricing of premium brands
3 Pricing of premium cars
3.1 The case of BMW – History, structure, goals
3.2 BMW in context of other companies in the automotive industry
3.3 Pricing of premium cars
4 Synopsis – What does the case of the cars say about the theory of premium brands and in what way is it special
Research Objectives and Core Themes
This paper examines the strategic role of pricing within the brand concepts of the premium automotive sector, analyzing how pricing contributes to brand identity and market positioning. By using the BMW Group as a primary case study, the research investigates the relationship between premium pricing, brand heritage, and consumer value perception compared to volume manufacturers.
- Theoretical foundations of marketing, branding, and value-based pricing strategies.
- Distinctions between premium brands and volume brands regarding brand identity and instrument usage.
- The automotive industry as a high-involvement market requiring trust and emotional differentiation.
- Case study analysis of BMW's corporate strategy, market positioning, and pricing logic.
- Competitive benchmarking and the challenges of moving brands upmarket (e.g., VW Phaeton, Audi, Lexus).
Excerpt from the Book
3.1 The case of BMW – History, structure, goals
BMW (which is an abbreviation for “Bayrische Motorenwerke”, or in English, “Bavarian Motor Works”) was founded as an aircraft engine manufacturer, in October 1913 by Karl Rapp and Gustav Otto, two pioneers in aircraft manufacturing. Today, it is the parent company of two other brands, MINI and Rolls-Royce. BMW’s logo indicates a spinning white propeller on a blue-sky background and alludes to the blue and white chequered flag of Bavaria.
In 1923, BMW started with the production of motor cycles. BMW’s first car was produced in 1929. Already in the 1930’s, BMW became very famous for its driving pleasure, its high quality and its successes on the race tracks.
In 1952, BMW produced its first passenger car after the war. Soon thereafter, the company was again one of the technologically leading car manufacturers with its models 501 and the 507 roadster. Anyway, the company was still not commercially successful. The breakthrough finally followed in 1962. BMW’s “new class”, the 1500 combined a strong engine and great driving performance with everyday suitability and was sold very successfully. Corresponding to this model’s philosophy, which in retrospect might be seen as the foundation of BMW’s success, the company started to expand its product portfolio.
Chapter Summaries
1 Starting situation: Provides an overview of saturated market conditions and the strategic necessity for strong branding and differentiation to justify premium pricing.
2 Definitions: Establishes fundamental marketing terminology, including the definitions of marketing, pricing approaches, and the psychological role of brands in creating value.
3 Pricing of premium cars: Analyzes the specific dynamics of the automotive industry, using BMW as a case study to discuss the importance of tradition, identity, and complex pricing structures.
4 Synopsis – What does the case of the cars say about the theory of premium brands and in what way is it special: Summarizes the key insights, reinforcing that successful premium brands rely on consistent identities, exclusivity, and non-functional values.
Keywords
Pricing, Premium Brands, Automotive Industry, BMW, Brand Identity, Marketing Mix, Brand Equity, Customer Value, Exclusivity, Brand Tradition, Competitive Differentiation, Value-based Pricing, Market Positioning, Consumer Perception, Brand Management
Frequently Asked Questions
What is the primary focus of this research paper?
The paper explores the role of pricing as a key strategic variable in maintaining the identity and market position of premium brands, specifically within the automotive industry.
What are the main thematic areas addressed?
The core themes include value-based pricing theories, the distinction between premium and volume brands, the construction of brand identity, and competitive strategies in the car market.
What is the core research objective?
The objective is to identify how pricing contributes to the "brand concept" and to determine what successful premium automotive manufacturers can teach the market about long-term profitability and value creation.
Which methodology is applied in this study?
The author employs a case study approach, focusing on the BMW Group to benchmark its history, strategy, and pricing models against other industry participants.
What is covered in the main body of the work?
The main body covers definitions of marketing variables, the specific drivers of premium versus volume brands, the historical and strategic evolution of BMW, and a comparison with competitors like Mercedes-Benz, Audi, and Lexus.
How would you describe this work using keywords?
It is best described by terms such as Brand Equity, Premium Pricing, Automotive Marketing, BMW, Brand Identity, and Value-based Management.
Why did the VW Phaeton fail as a premium product according to the author?
The author argues that the VW Phaeton failed because the VW brand lacked the necessary premium heritage and consistency; it remained associated with mass-market vehicles, making the high price point incompatible with consumer perception.
What role does brand tradition play in the automotive sector?
The paper highlights that tradition serves as a source of credibility and trust that is difficult for competitors to imitate, thus acting as a primary driver for both brand identity and the ability to charge premium prices.
- Quote paper
- Gunnar Klaming (Author), 2006, The Role of Price for Premium Brands - The Case of the Automotive Industry, Munich, GRIN Verlag, https://www.grin.com/document/52094
