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Lecture 04 market segmentation Lecture 04 market segmentation Document Transcript

  • UNIT I INTRODUCTION LESSON 4: CHAPTER 2: MARKET SEGMENTATION THE STUDY OF CONSUMER BEHAVIOURIntroduction A marketing manager who really understands a target market CONSUMER BEHAVIOURIn this chapter, we discuss how to find attractive target market may see breakthrough opportunities. But a target market’s realopportunities. We start by considering four basic types of needs—and the breakthrough opportunities that can comeopportunities—market penetration, market development, from serving those needs—are not always obvious.product development, and diversification —with special Identifying a company’s market is an important but difficultemphasis on opportunities in international markets. We will issue.also see that carefully defining generic markets and product- In general, a market is a group of potential customers with similarmarkets can help find new opportunities. We will also discuss needs who are willing to exchange something of value with sellersmarket segmentation—the process of naming and then offering various goods and/or services—that is, ways of satisfying thosesegmenting broad product markets to find potentially attractive needs. Marketing-oriented managers develop marketing mixestarget markets. Some people try to segment markets by starting for specific target markets. Getting the firm to focus on specificwith the mass market and then dividing it into smaller sub target markets is very vital.markets based on a few dimensions. But this can lead to poorresults. Instead, market segmentation should first focus on a What then is a company’s market? Breakthroughbroad product-market and then group similar customers into opportunities from understanding target marketshomogeneous sub markets. The more similar the potential To understand the narrowing down process, it’s useful to thinkcustomers are, the larger the sub markets can be. f w a i y e f r e s generic market is a market o t ob s ct p so ma k t .A with broadly similar needs—and sellers offering various—often-Objectives diverse—ways of satisfying those needs. In contrast, aAfter reading this lesson, you should be able to: product-market is a market with very similar needs and sellers• Understand the meaning of the term “markets” offering various close substitute ways of satisfying those needs.• Compare and contrast various types of marketing A generic market description looks at markets broadly and from strategies. a customer’s viewpoint. For example If you are seeking• Identify that lead to a market segmentation decision. entertainment you have several very different ways to satisfy• Distinguish between one variable segmentation and multi- your need. You as an entertainment-seeker might buy a new variate segmentation. home theatre system, sign up for a Caribbean tour, or reserve season tickets for a rock show. Any one of these very different1. What is a Market? products may satisfy this entertainment need. Sellers in thisWhat do you understand by the term market? generic entertainment-seeker market have to focus on the need(s) the customers want satisfied—not on how one seller’sTo a marketer, the term marketer means: product (home theatre system, vacation, live music) is better1. People as individuals or members of an organization. than that of another producer. It is sometimes hard to2. People with desires. understand and define generic markets because quite different3. People with willingness and ability or buying power to product types may compete with each other. For example, freelance satisfy their desires. journalists often need a fast, worry-free way to get articles to their editors. Sanyo’s fax machines, DHL’s overnight service,4. People who can become customers because they have been and VSNL’s Internet-based e-mail service may all compete to authorized to buy. serve our journalists’ needs. If customers see all these productsThus, in summarization we van say that a market is: as substitutes—as competitors in the same generic market—An aggregate of people who, as individuals or organizations, then marketers must deal with this complication. Suppose,have needs for products in a product class and who have the however, that one of our journalists decides to satisfy this needability, willingness and authority to purchase such products with a fax machine. Then—in this product-market—Ricoh,(conditions needed for an exchange). Hewlett-Packard, Samsung, and many other brands mayTypes of Markets compete with each other for the customer’s dollars. In this1. Consumer Intend to consume or benefit, but not to make a product-market concerned with fax machines and needs to reduce profit. worry, consumers compare similar products to satisfy their communication needs.2. Organizational/Business For: • Resale • Direct use in production • Or general daily operations. © Copy Right: Rai University11.623.3 25
  • 1.1 From Generic Markets to Product-markets middlemen as a customer type—unless middlemen actually useCONSUMER BEHAVIOUR the product in their own business. Broaden Market definitions to find Opportunities Broader market definitions—including both generic market The geographic area is where a firm competes—or plans to definitions and product-market definitions—can help firms compete—for customers. Naming the geographic area may find opportunities. But deciding how broad to go isn’t easy. Too seem trivial, but understanding geographic boundaries of a narrow a definition limits a firm’s opportunities—but too market can suggest new opportunities. A firm aiming only at broad a definition makes the company’s efforts and resources the domestic market, for example, may want to expand into seem insignificant. world markets. Here we try to match opportunities to a firm’s resources and A generic market description doesn’t include any product-type terms. objectives. So the relevant market for finding opportunities should It consists of only three parts of the product-market defini- be bigger than the firm’s present product-market—but not so tion—without the product type. This emphasizes that any big that the firm couldn’t expand and be an important product type that satisfies the customer’s needs can compete in a competitor. generic market. A small manufacturer of screwdrivers in Punjab, for example, Activity 1 shouldn’t define its market as broadly as “the worldwide tool Describe how Bajaj Auto Ltd. Has moved from mass marketing users market” or as narrowly as “our present screwdriver to product-variety to target marketing. Select some other customers.” But it may have the production and/or marketing examples of companies have moved from mass marketing to potential to consider “the handyman’s hand-tool market in segmented marketing North India.” Carefully naming your product-market can help you see possible opportunities. Product-related terms do not—by themselves—adequately describe a market. A complete product-market definition includes a four-part description. What: 1. Product type (type of good and type of service) To meet what: 2. Customer (user) needs For whom: 3. Customer types Where: 4. Geographic area We refer to these four-part descriptions as product-market “names” because most managers label their markets when they think, write, or talk about them. Such a four-part definition can be clumsy, however, so we often use a nickname. And the nickname should refer to people—not products—because, as we emphasize, people make markets! Product type describes the goods and/or services that customers 2. Market Segmentation want. Sometimes the product type is strictly a physical good or The method of identifying a group of consumers, within a strictly a service. But marketing managers who ignore the broader market, that has similar characteristics and needs. possibility that both are important can miss opportunities. Segments can be identified by examining demographic, Psychographic, and behavioral differences. Thus a car manufac- Product type should meet customer needs turer may identify different types of consumers preferring Naming Product-Markets and Generic Markets different styles of cars, so they will segment their car buying Customer (user) needs refer to the needs the product type markets accordingly. Perhaps identifying that younger car buyers, satisfies for the customer. At a very basic level, product types with high incomes, will be more likely to buy a sports car, while usually provide functional benefits such as nourishing, an older population of car buyers may be more apt to purchase protecting, warming, cooling, transporting, cleaning, holding, a town car. Once these segments are identified, marketers can saving time, and so forth. Although we need to identify such develop different marketing mixes that target each segment. “basic” needs first, in advanced economies, we usually go on to Again, the marketer may identify a number of specialty emotional needs—such as needs for fun, excitement, pleasing magazines that the young, affluent market reads, thus they will appearance, or status. Correctly defining the need(s) relevant to run their advertisements for sports cars in these magazines. a market is crucial and requires a good understanding of Individuals with diverse product needs have heterogeneous customers. Customer type refers to the final consumer or needs. user of a product type. Here we want to choose a name that Market segmentation is the process of dividing a total market describes all present (possible) types of customers. To define into market groups consisting of people who have relatively customer type, marketers should identify the final consumer or similar product needs, there are clusters of needs. user of the product type, rather than the buyer—if they are different. For instance, producers should avoid treating © Copy Right: Rai University 26 11.623.3
  • The purpose is to design a MARKETING MIX(s) that more • Behaviouristic Variables - Regular users-potential users-non- CONSUMER BEHAVIOURprecisely matches the needs of individuals in a selected market users Heavy/moderate/light users, 80-20 rulesegment(s). Frequent User Incentives It is five x more expensive to attract a new customer, as it isA market segment consists of individuals, groups or organiza- to satisfy your current customers.tions with one or more characteristics that cause them to have Benefits segmentation-focus on benefits rather than onrelatively similar product needs. features.2.1 Criteria Needed for Segmentation Single Variable vs. Multi-Variable SegmentationFor segmentation to occur: • Single variable—achieved by using only one variable to1. Segments must have enough profit potential to justify segment developing and maintaining a MARKETING MIX • Multi-variable— more than one characteristic to divide2. Consumer must have heterogeneous (different) needs for market. the product. Provides more information about segment. Able to satisfy customers more precisely. More variables create more3. Segmented consumer needs must be homogeneous segments reducing the sales potential in each segment. (similar) We need to answer one question here. Will additional variables4. Company must be able to reach a segment with a help improve the firms MARKETING MIX. If not there is MARKETING MIX, little reason to spend more money to gain information fromFor example, how do marketers reach children? extra variables. • Cartoons Market Segmentation - bases of • Cereal boxes Segmentation • Sports illustrated for kids It is widely thought in marketing that segmentation is an art, not a science.Look at how media has changed recently due to changing The key task is to find the variable, or variables that split thedemographics etc. and therefore the need of marketers to reach market into actionable segmentsthese groups.Media must respond because they are essentially financed by the There are two types of segmentation variables:marketers or at least heavily subsidised 1. Needs5. Must be able to measure characteristics & needs of 2. Profilers consumers to establish groups. The basic criteria for segmenting a market are customer needs. To find the needs of customers in a market, it is necessary to2.2 Variables that Can be Used to Segment Markets undertake market research.Need to determine the variables that distinguish marketing Profilers are the descriptive, measurable customer characteristicssegments from other segments. (such as location, age, nationality, gender, income) that can be• Segmentation variables should be related to consumer used to inform a segmentation exercise. needs for, and uses of, or behavior toward the product. IE The most common profilers used in customer segmentation Stereo; age not religion. include the following:• Segmentation variable must be measurable. No best way to segment the markets. Selecting inappropriate variable limits Profiler Examples the chances of success. GeographicVariables for segmenting Consumer Markets include: • Region of the country• Demographic - age, sex, migration patterns, and mortality • Urban or rural rates, ethnic groups, income, education, occupation, family Demographic life cycle, family size, religion and social class. • Age, sex, family size• Geographic -Climate, terrain, natural resources, population density, sub cultural values, different population growths • Income, occupation, education in different areas. • Religion, race, nationalityCity Size Psychographic• Metropolitan Statistical Area • Social class• Primary Statistical Metropolitan Area • Lifestyle type• Consolidated Metropolitan Statistical Area • Personality typeMarket density-# of potential customers within a unit of land. Behavioural• Psychographic - personality characteristics, motives and • Product usage - e.g. light, medium, heavy users lifestyles • Brand loyalty: none, medium, high © Copy Right: Rai University11.623.3 27
  • Market Segmentation - Demographic Market Segmentation - BehaviouralCONSUMER BEHAVIOUR Segmentation Segmentation Demographic segmentation consists of dividing the market Behavioural segmentation divides customers into groups based into groups based on variables such as age, gender, family size, on the way they respond to, use or know of a product. income, occupation, education, religion, race and nationality. Behavioural segments can group consumers in terms of: As you might expect, demographic segmentation variables are amongst the most popular bases for segmenting customer a. Occasions groups. When a product is consumed or purchased. For example, cereals This is partly because customer wants are closely linked to have traditionally been marketed as a breakfast-related product. variables such as income and age. Also, for practical reasons, Kellogg’s have always encouraged consumers to eat breakfast there is often much more data available to help with the cereals on the “occasion” of getting up. More recently, they have demographic segmentation process. tried to extend the consumption of cereals by promoting the product as an ideal, anytime snack food. The main demographic segmentation variables are summarized below: b. Usage Some markets can be segmented into light, medium and heavy a. Age user groups Consumer needs and wants change with age although they may still wish to consumer the same types of product. So marketers c. Loyalty design, package and promote products differently to meet the Loyal consumers - those who buy one brand all or most of the wants of different age groups. Good examples include the time - are valuable customers. Many companies try to segment marketing of toothpaste (contrast the branding of toothpaste their markets into those where loyal customers can be found for children and adults) and toys (with many age-based and retained compared with segments where customers rarely segments). display any product loyalty. The airlines market is a very good example in this case. Most of these airlines run very good b. Life-cycle Stage frequent fliers programme to retail customer loyalty. A consumer stage in the life cycle is an important variable - particularly in markets such as leisure and tourism. For example, d. Benefits Sought contrast the product and promotional approach of Club 18-30 This is an important form of behavioural segmentation. holidays with the slightly more refined and sedate approach Benefit segmentation requires marketers to understand and find adopted by Saga Holidays. the main benefits customers look for in a product. An excellent example is the toothpaste market where research has found four c. Gender main “benefit segments” - economic; medicinal, cosmetic and Gender segmentation is widely used in consumer marketing. taste. The best examples include clothing, hairdressing, magazines and toiletries and cosmetics. Market Segmentation - Geographic Segmentation d. Income Geographic segmentation tries to divide markets into different Many companies target affluent consumers with luxury goods geographical units: these units include: and convenience services. Good examples include Louise Phillip • Regions: e.g. in India these might be North, South East, shirts, Hush Puppies shoes, mango and American Express. By Northeast and West. contrast, many companies focus on marketing products that • Countries: perhaps categorised by size, development or appeal directly to consumers with relatively low incomes. membership of geographic region Examples include Nirma detergents, Lifebuoy soap, and discount clothing retailers such as Megamaart. • City / Town size: e.g. population within ranges or above a certain level e. Social Class • Population density: e.g. urban, suburban, rural, and semi- Many marketers believe that consumers “perceived” social class rural influences their preferences for cars, clothes, home furnishings, • Climate: e.g. Northern, Southern leisure activities and other products & services. There is a clear Geographic segmentation is an important process - particularly link here with income-based segmentation. for multi-national and global businesses and brands. Many such companies have regional and national marketing f. Lifestyle programmes, which alter their products, advertising and Marketers are increasingly interested in the effect of consumer promotion to meet the individual needs of geographic units. “lifestyles” on demand. Unfortunately, there are many different lifestyle categorization systems, many of them designed by advertising and marketing agencies as a way of winning new marketing clients and campaigns. © Copy Right: Rai University 28 11.623.3
  • Firms need creative strategy planning to survive in our increas- 2.3 Criteria for segmenting a broad product-market CONSUMER BEHAVIOURingly competitive markets. and/or service)Once a broad product-market is segmented, marketing manag- Effective market segments generally meet the following criteria:ers can use one of three approaches to market-oriented strategy 1. Homogeneous (similar) within—the customers in aplanning: market segment should be as similar as possible with1. the single target market approach, respect to their likely responses to marketing mix variables and their segmenting dimensions.2. the multiple target market approach, and 2. Heterogeneous (different) between—the customers in3. the combined target market approach. different segments should be as different as possible with respect to their likely responses to Geographic Demographics Psychographic Product marketing mix variables and their related consumer segmenting dimensions. characteristics 3. Substantial—the segment should Potential Nation/Regio Age, Sex, Buying Social class Amount of be big enough to be profitable. Consumer n Power, Personality Usage 4. Operational—the segmenting Segments State/region expenditure Life Cycle Type of usage Climate/Terra patterns, Brand Loyalty dimensions should be useful for in Occupation, Benefits identifying customers and deciding on Population education, Race or sought. marketing mix variables. Density, Nationality, family It is especially important that segments be Market Life Cycle operational. This leads marketers to include density demographic dimensions such as age, income, location, and family size. In fact,Fig 1.1 Segmentation variables it is difficult to make some Place and Promotion decisions without such information. Avoid segmenting dimensions thatMarket segmentation is a two-step process of: have no practical operational use. For example, you may find a1. Naming broad product-markets and personality trait such as moodiness among the traits of heavy2. Segmenting these broad product-markets in order to select buyers of a product, but how could you use this fact? Sales- target markets and develop suitable marketing mixes. people can’t give a personality test to each buyer. Similarly,This two-step process isn’t well understood. First-time market advertising couldn’t make much use of this information. Sosegmentation efforts often fail because beginners start with the although moodiness might be related in some way to previouswhole mass market and try to find one or two demographic purchases.characteristics to segment this market. Customer behavior is The combined target market approach—combining two orusually too complex to be explained in terms of just one or more sub markets into one larger target market as a basis fortwo demographic it would not be a useful dimension for one strategy.segmenting Note that all three approaches involve target marketing. They allActivity 2 aim at specific, clearly defined target markets. For convenience,Define how you think MacDonald’s; Pizza Hut and a local we call people who follow the first two approaches therestaurant have segmented the market. “segmenters” and people who use the third approach the “combiners.” Customers can be described by many specific dimensions. A few are behavioral dimensions, others are geographic and demographic. Regardless of whether customers are final consumers or organizations, segmenting a broad product-market may require using several different dimensions at the same time. To select the important segmenting dimen- sions, think about two different types of dimensions. Qualifying dimensions are those relevant to including a customer type in a product-market. Determining dimensions are those that actually affect the customer’s purchase of a specific product or brand in a product-market. By differentiating the marketing mix to do a better job meeting customers’ needs, the firm builds a competitive advantage. When this happens, target customers view the firm’s position in the market as uniquely suited to their references and needs. Further, because everyone in the firm is clear about what position it wants to achieve with customers, the Product, © Copy Right: Rai University11.623.3 29
  • Promotion, and other marketing mix decisions can be blended Chapter 1CONSUMER BEHAVIOUR better to achieve the desired objectives. Although the marketing manager may want customers to see The study of Consumer Behaviour the firm’s offering as unique, that is not always possible. Me- Lesson 1.05 too imitators may come along and copy the firm’s strategy. Further, even if a firm’s marketing mix is different, consumers Tutorial on Segmentation may not know or care. They’re busy and, simply put, the firm’s 1a. Suppose you are the marketing manager for a new Maruti product may not be that important in their lives. Even so, in sports car that is going to be launched. How would you looking for opportunities it’s important for the marketing use intermarket segmentation to develop marketing manager to know how customers do view the firm’s offering. It’s strategies for Maruti? also important for the marketing manager to have a clear idea about how he or she would like for customers to view the firm’s offering. This is where another important concept, positioning, comes in. 3. Positioning Positioning refers to how customers think about proposed and/or present brands in a market. A marketing manager needs a realistic view of how customers think about offerings in the market. Without that, it’s hard to differentiate. At the same time, the manager should know how he or she wants target customers to think about the firm’s marketing mix. Positioning issues are especially important when competitors in a market appear to be very similar. For example, many people think that there isn’t much difference between one brand of TV and another. But Sony wants TV buyers to see its Trinitron brand screen as offering the very best picture. Once you know what customers think, then you can decide whether to leave the product (and marketing mix) alone or reposition it. This may mean physical changes in the product or simply image changes based on promotion. For example, most cola drinkers can’t pick out their favorite brand in a blind test—so physical changes might not be necessary (and might not even work) to reposition a cola. Yet, ads that portray Pepsi drinkers in exciting situations help position it as the “choice of a new generation.” Conversely, 7-Up reminds us that it is the uncola with no caffeine, “never had it and never will.” Figuring out what customers really think about competing products isn’t easy, but there are approaches that help. Most of them require some formal marketing research. The results are usually plotted on graphs to help show how consumers view the competing products. Usually, the products’ positions are related to two or three product features that are important to the target custom- ers. Managers make the graphs for positioning decisions by asking consumers to make judgments about different brands— including their “ideal” brand—and then use computer programs to summarize the ratings and plot the results. The details of positioning techniques—sometimes called “percep- tual mapping”—are beyond the scope of this lesson. Remember that positioning maps are based on customers’ perceptions—the actual characteristics of the products as detected by chemical tests might be quite different. Positioning is based on customers’ views Differentiation and Positioning Take the Customer Point of View Opportunities Can Begin by Understanding Markets © Copy Right: Rai University 30 11.623.3
  • 1b. In reference to the question above, how would you best 4. Developing a Target Market Strategy CONSUMER BEHAVIOUR communicate to the target audience? Describe your Developing a target market strategy has three phases: promotion campaign for Maruti. 1. Analyzing consumer demand 2. Targeting the market(s) • Undifferentiated • Concentrated • Multisegmented 3. Developing the marketing strategy 4.1 Selecting Target Markets (Analyzing Demand) Need to aggregate consumers with similar needs. Demand patterns: Do all potential customers have similar needs/desires or are there clusters? Types of demand patterns are: • Homogeneous Demand-uniform, everyone demands the product for the same reason(s). • Clustered Demand-consumer demand classified in 2 or more identifiable clusters. • Diffused Demand-Product differentiation more costly and more difficult to communicate IE Cosmetic market, need to offer hundreds of shades of lipstick. Firms try to modify consumer demand to develop clusters of at least a moderate size. Or uses one MARKETING MIX. 4.2 Targeting the Market 4.2.1 Undifferentiated Approach (Total Market approach) Single Marketing Mix for the entire market. All consumers have similar needs for a specific kind of product. Homogeneous market, or demand is so diffused it is not worthwhile to differentiate, try to make demand more homoge- neous. Single marketing mix consists of: • 1 Pricing strategy • 1 Promotional program aimed at everybody • 1 Type of product with little/no variation • 1 Distribution system aimed at entire market The elements of the marketing mix do not change for different consumers; all elements are developed for all consumers. Examples include Staple foods-sugar and salt and farm produce. Henry Ford, Model T, all in black. Popular when large-scale production began. Not so popular now due to competition, improved marketing research capabilities, and total production and marketing costs can be reduced by segmentation. Organization must be able to develop and maintain a single marketing mix. © Copy Right: Rai University11.623.3 31
  • Major Objective is to Maximize Sales 5. Market Segmentation StrategiesCONSUMER BEHAVIOUR There are two Market Segmentation Strategies Market segmentation - why segment markets? There are several important reasons why businesses should 5.1 Concentration Strategy. attempt to segment their markets carefully. These are summa- This strategy talks of single market segment with one market- rized below ing mix. Better matching of customer needs Market Customer needs differ. Creating separate offers for each | segment makes sense and provides customers with a better solution |A Market Segment Enhanced profits for business |————————— Customers have different disposable income. They are, One marketing mix—————————>A Market Segment therefore, different in how sensitive they are to price. By |————————— segmenting markets, businesses can raise average prices and |A Market Segment subsequently enhance profits | Better opportunities for growth Market segmentation can build sales. For example, customers PROS include can be encouraged to “trade-up” after being introduced to a • It allows a firm to specialize particular product with an introductory, lower-priced product • Can focus all energies on satisfying one group’s needs Retain more customers • A firm with limited resources can compete with larger Customer circumstances change, for example they grow older, organizations. form families, change jobs or get promoted, change their CONS include buying patterns. By marketing products that appeal to custom- ers at different stages of their life (“life-cycle”), a business can • Puts all eggs in one basket. retain customers who might otherwise switch to competing • Small shift in the population or consumer tastes can greatly products and brands effect the firm. Target marketing communications • May have trouble expanding into new markets (especially Businesses need to deliver their marketing message to a relevant up-market). Haggar having problems finding someone to customer audience. If the target market is too broad, there is a license their name for womens apparel, even though strong risk that (1) the key customers are missed and (2) the women purchase 70% Haggar clothes for men. cost of communicating to customers becomes too high / Objective is not to maximize sales; it is efficiency, attracting a unprofitable. By segmenting markets, the target customer can large portion of one section while controlling costs. be reached more often and at lower cost Examples include ROLEX, Anyone wear one. Gain share of the market segment Who are their target markets?? Unless a business has a strong or leading share of a market, it is unlikely to be maximizing its profitability. Minor brands suffer 5.2 Multi-segment Strategy from lack of scale economies in production and marketing, 2 or more segments are sought with a marketing mix for each pressures from distributors and limited space on the shelves. segment, different marketing plan for each segment. This Through careful segmentation and targeting, businesses can approach combines the best attributes of undifferentiated often achieve competitive production and marketing costs and marketing and concentrated marketing. become the preferred choice of customers and distributors. In Market other words, segmentation offers the opportunity for smaller firms to compete with bigger ones Marketing mix——————————>|a market segment |_______________________ Marketing mix——————————>|a market segment |_______________________ Marketing mix——————————>|a market segment |_______________________ Marketing mix——————————>|A Market Segment | © Copy Right: Rai University 32 11.623.3
  • Example: Marriott International: d. Demographics CONSUMER BEHAVIOUR1. Marriott Suites...Permanent vacationers2. Fairfield Inn...Economy Lodging3. Residence Inn...Extended Stay4. Courtyard By Marriott...Business TravelersPROS include• Shift excess production capacity.• Can achieve same market coverage as with mass marketing. Case on Segmentation• Price differentials among different brands can be Satish: The Meatwalla maintained Contact Lens!! Introduction• Consumers in each segment may be willing to pay a Satish Sehajpal was an officer in the air force. He belonged to the premium for the tailor-made product. administrative and special duties branch and had specialized in• Less risk, not relying on one market. catering. He had undergone many courses and trainingCONS include programmes to prepare himself for the onerous responsibilities of looking after the dietary needs of airmen located at various• Demands a greater number of production processes. bases. Sehajpal had studied hygiene, nourishment, diet• Costs and resources and increased marketing costs through planning, quality assurance of food products, cooking tech- selling through different channels and promoting more niques and so on. He enjoyed his work and his fatherly figure brands, using different packaging etc. (he looked older than is 42 years) evoked respect from all those• Must be careful to maintain the product distinctiveness in whose food he looked after. His seniors listened to his advice each consumer group and guard its overall image (Contact and his colleagues loved his helpful nature, laughter and lenses) hospitality.The core product is the same, use different Packaging, Brand Life look a turn when Satish Sehajpal lost his father. SehajpalName, Price to differentiate and create a different marketing mix. was very fond of his parents and realized that the responsibilityWhat will happen if consumers find out?? of looking after his mother had fallen fully on him. His fatherObjective: Sales maximization, but can remain a specialist. Can had left a substantial amount of investments. Satish Sehajpalget firmly established in one segment, then pursue another. had to reluctantly leave the air force and settle in Hyderabad.Activity 3 The IndustrialistWhat major differences do you observe amongst the users of Satish went in search of a suitable occupation. A number ofSurf and Nirma in terms of various life-style dimensions? friends suggested that he set up a 5-star eating place because ofLife-style dimension Surf Vs. Nirma his background in catering. He was examining various alterna- tives when he came across an advertisement for the sale of aa. Activities meat processing plant and an abattoir. The company, M/s Bindu & Gautam, exported meat to the Middle East in ready to consume packaging for a family. Satish Sehajpal studied the details and conclude that: 1. M/s Bindu & Gautam had set up this industry from the scratch. It had been consistently returning profits from the time it started commercial production. 2. The company had a turnover of approximately Rs 8 croreb. Interests per annum, though the capacity of the processing plant and the abattoir was 12 tonnes of finished product per day. 3. The sale of the plant could be considered a distress sale to some extent since the owners, Bana and Girish were migrating to Cananda to settle with their children. The owners would be happy to get the total price in their hand at one go. This would enable them to leave the countryc. Opinions quickly. Instalment payments were not satisfactory from them. 4. Satish Sehajpal could afford to buy the plant from the assets left by his father. © Copy Right: Rai University11.623.3 33
  • The deal went through quickly and smoothly. Satish Sehajpal SegmentationCONSUMER BEHAVIOUR was happy at having become an industrialist ‘Satish Sehajpal, Satish Sehajpal showed his inclination to consider the sugges- Industrialist’ sounded great. However, his friends gave him the tion unanimously put up by his senior team. He, however, felt title ‘Satish: The Meatwalla’. This angered Satish and in protest, that the local meat market was too wide to be covered at one he gave up eating meat. stroke. A detailed study was to be conducted by Dastidar, as per the directions of Mr Sehajpal, during the following 4 weeks. The Problems After the study, Dastidar’s findings were presented to the Slowly, Satish Sehajpal started understanding the problems. The management team consisting of Satish, Nikhil, Jyoti, Samir etc. most difficult area of working was kickbacks, speed money, Dastidar proposed that initially M/s Bindu & Gautum should ‘tips’, etc. His 2 decades in the air force had prepared him for concentrate on selling their product in the states of Maharashtra many things, but not these facets of working. Second, there was and Andhra Pradesh only. The market could be divided as the problem of purchasing proper inputs and organizing timely follows: transportation. He had a good materials manger named Nikhil, who made all the arrangements economically and efficiently. The 1. An upper segment of the market where the customers third and most important problem was that of quality control. were willing topay additional prices for high quality, Satish Sehajpal realized that M/s Bindu & Gautum would hygienically produced and packed meat. This segment continue to make good profits as long as there were no would like fat-free meat without any spices, since about 15- rejections of meat consignments abroad. He was quick to 20 per cent of the buyers in this category were liked to be understand that though the processing plant and the abattoir foreigners. This segment could consume all the additional were fairly modern, there were so many reasons for the consign- production being planned at M/s Bindu & Gautaum. The ments not being accepted. The reasons could be products for this segment would have to be the same as non-conformance with stringent quality requirements, rejections those being exported and thus the investment would be due to delayed delivery, temporary cancellation of order for brief low and waste of time to change from one product to period due to political or religious reasons, labour trouble in another would be avoided. However, there was little chance various organizations, etc. Disposal of non-accepted consign- of the Middle East. Selected outlets in high-income group ments or those returned from abroad or not sent there at the areas would have to be approached to retail the meat. Some last moment was a real problem. This had tobe tackled with advertising would be needed. minimum losses. 2. Institutional sales to hotles, restaurant, hospitals, hostels, There was also the problem of exports being reduced or orders etc., could absorb not only the increased output but a being cancelled altogether. Other Asian and African countries substantial (say up to 30-40 per cent) portion of the meat had been viewing the meat markets of the Middle East M/s being exported. The packaging would have to be changed Bindu & Gautum were, therefore, seriously worried about to bulk packaging and the institutions would insist on losing their sole market or the market shrinking due to various regular and assured supplies at lower prices. The product reasons. would have to be changed to suit Indian cuisine. Not Satish Sehajpal was, one day, approached by 3 of his senior much advertising would be needed. managers; Jyouti, who headed financ, Samir, who was in charge 3. Middle level bazaar sales would require product change to of production and Dastidar, the marketing in charge. They had suit Indian cuisine, though the packing could continue to come up with a proposal. Samir suggested that with marginal be the same as that used for export consignments. A large additional investment, the turnover could be increased by 20-25 number of retail outlets would have to be approached. per cent. The previous owners had been keen to wind-up and Considerable advertising would be needed. A rough had thus not accepted their proposal to increase the utilization estimate showed that the market would be price sensitive. factor of the plant and the abattoir. Jyoti added that the Lower prices could increase the size of the existing market. additional investment would be around Rs 60 lakh. This could A comprehensive market research study would be required be spread over 9-10 months and bankers could be persuaded to to determine the sizes of the market at different prices. At extend additional credit for 5 years, in which time the company a first approximation, this market could equal the would be able to show an increased turnover. Jyoti continued institutional market at similar prices. that higher levels of production would also reduce the cost of the meat being produced and thus improve the profits. It was, Conclusion however, Dastidar who sold the idea. He argued that M/s The management team listened to Mr. Dastidar’s presentation. Bindu & Gautum should look at the growing domestic market. Samir Verma, the production chief, added that investments for The Indian market continued to be serviced by the conventional changing the products to suit Indian cuisine would be small butchers/meat sellers. The consumers would respond posi- and may be ignored. The senior managers could not decide tively to a quality product. The image of M/s Bindu & Gautum which segment of the market would be more suitable for M/s as meat exporters would stand them in good stead in the Bindu & Gautum. The team left the decision to you: the national market. Sales in the domestic market could also management consultant. What will be your recommendation provide the much-needed cushion against possible consign- and why? ment rejections, cancellations or shrinking of orders from Maximum time to solve this case study: 40 minutes. abroad. Diversification into the Indian market, Dastidar emphasized, was inescapable. © Copy Right: Rai University 34 11.623.3
  • Market Segmentation audit of target audience selection. This is important because CONSUMER BEHAVIOUR even with the right product and communication, a companyArticle 1 may not achieve the desired results if it targets the wrongAudit Your Marketing audience. Further, segmentation needs to be clear and definedEvaluation of all aspects of marketing periodically is and its basis chosen well, whether it be usage segmentation,important to keep your brand in good shape. through psychographics or benefit segmentation. The next element of marketing audit is related to the main ingredients of a brand — the positioning strategy. After segmentation audit, it is important to evaluate the positioning stance of the brand and its relevance in the current context as well as versus competition. This is crucial, as consumers change and brands must have a relevant and contemporary positioning to have a long life. After this, it is important to look at each element of the marketing mix. First and foremost is product portfolio audit, which is em- ployed to assess the correctness of the product in range, as also decide on modifications to it. It is also vital to do a pricing audit, and regularly monitor its impact on sales, market share and profits and check if you are available at appropriate priceThere is wisdom in running a check points.• Has Kellogg’s Cornflakes increased its household penetration? Following this, a series of audits needs to be done for existing• Has the awareness of AirTel gone up? products, pricing, customer service, distribution sales, market-• Is Intel increasing its perception amongst new computer users? ing research, people, physical appearances, ambience and processes. This detailed analysis is useful to measure the health• Is Ghari detergent expanding its distribution network from the of the brand. It is like a quarterly medical check-up of the North to other parts of the country? brand.• What could be the future growth map of Ujala? The next stage involves a detailed audit of the communication• How is the relationship between Rasna and its target consumers strategy. This is significant as large sums of money will be developing after the new campaign? wasted if the communication strategy is not handled well.THESE and many more questions come up during the life of a Following this is the communication-mix audit, which coversbrand. strategies for advertising, personal selling, public relations, salesWould you not like to know the health of your brand through promotion, perception, relationship, direct marketing and eventa regular Brand Health check-up? I would recommend that you marketing.regularly do a marketing audit of your brand so that the brand After this, it is crucial to summarise the findings and bringremains healthy and strong. about the most value-added contribution during the marketingWhat is marketing audit? And why do I strongly recommend audit process. This is the stage of interpretation of thethat it be conducted every quarter as well as annually? findings, which helps in correcting the course in terms ofMarketing audit involves thorough evaluation of all elements structure, systems and awareness at the consumer level, trade,of marketing. The assessment is enabled by a comparison with sales force and overall organisation process.the objectives and targets, set not only in terms of sales but in Very few companies in India practise the system of marketingparameters such as the ratio of advertising to sales, percentage audit. It is important to regularly check, assess and evaluate yourof awareness , percentage of household penetration, perfor- marketing and brands process and systems to ensure awareness,mance of the sales force and promotional programmes. trials, repeats, higher sales growth, marketing share and profitsQualitatively too, elements such as brand personality and the for your brands.health of the brand, among others, are audited. Marketing SegmentationFurther, there is a process audit as well as a strategy audit, which Article 2establishes whether the marketing task is being carried out right. Going RegionalThe major components of marketing audit are done in asequence, starting with consumer behaviour. This helps the Marketers would do well to remember that a singlecompany understand its customers, why they buy its products marketing strategy for the various markets in the countryand services, where and how they use its products, and similar won’t work.behavioural patterns. LOOK at the traditional segmentation used by marketers andAfter the consumer behaviour audit, it is important to look at corporate strategists. Most plans, particularly in the FMCGspecific elements related to customer segmentation as well as the industries, are based on an urban-rural segmentation, or © Copy Right: Rai University11.623.3 35
  • segmentation by socio-economic classification (SEC). The The advantages are several. Regional markets are geographicallyCONSUMER BEHAVIOUR implicit assumption is that consumers across the country are contiguous, making logistics much easier than for national largely similar (except for language), and hence these segmenta- brands. It is easier to penetrate deeper into markets if the tions adequately capture any differentiation. operation is geographically restricted. There are two reasons for re-examining this assumption. First, The burst of regional satellite TV means that they can be it simply may not be true! India is a mosaic of very different covered by TV far more cheaply and more cost effectively than cultures and regions - are such simplistic assumptions work- on national media. Regional print can now be used far more able? True, this approach has worked pretty well in the past, but efficiently. Economies of scale? Most industries have more than that is more likely due to the ‘first mover’ effect. The rural enough excess capacity available for outsourcing. markets in particular were so underdeveloped that anyone at all Of course, this is not a panacea. Some industries, such as who bothered to reach them got rich dividends. cosmetics, personal care and foods, lend themselves more to Today, things are different. The growth of television and this approach. Others either do not, or are so capital-intensive improvement in roads has led to rural consumers becoming far (like cars) that the approach isn’t economically viable. more aware of products and services. Companies in personal More important, business will effectively move from a portfolio care, foods, textiles, consumer appliances and other FMCG of a few, large brands to an agglomeration of small, regional products have bombarded these markets with small packs and ones. other ‘rural’ products. As a result, new entrants trying to enter This puts severe stress on the organisation. A regional strategy the rural markets today face issues such as lack of good is useless without decentralised control of production and stockists, overcrowded retail shelves, intense competition and marketing. A mechanism is needed to maintain financial and brand-savvy customers. In fact, the situation is very similar to operational control over several, possibly dozens, of operating the urban markets. units. Communication between marketing and front line sales Which brings us to the second reason. With the rural markets representatives has to be improved to ensure a quick response no longer a guaranteed source of sales, where do marketers go? in local markets. Managers have to be convinced that working in One option is to penetrate even deeper into the countryside, a regional, non-metro office is not a career dead-end. down to villages with population less than 2,000. But all these are manageable issues. In fact, companies such as HLL for one is doing this, but the effort remains beyond most Bata in footwear, or even HLL (in its erstwhile Animal Foods other companies. Another option is to go in for narrower Division), have handled the challenge of delivering localised product niches, like toothpastes with three stripes versus those products from a national system without ending up with with two stripes. But these lead quickly to consumer confusion inventory logjams or unwanted products. Note that this entire and fatigue, as well as the company finding itself saddled with a approach involves changing the company so as to meet logistical nightmare. Further, these approaches still assume a consumer needs better, rather than trying to give the consumer great degree of uniformity across the country. what is convenient for the marketer. And isn’t that what A third approach is for a company to have a uniform platform marketing is supposed to be all about? for its product, but make it available in different forms in Article 3 different regions, as done by some tea brands like Taaza. But for this, the product category must both be capable of a uniform M and M Launches Bolero Variant promise (easy), and of being delivered in different, yet suitable Mahindra & Mahindra (M&M) has launched an open-top variants (very difficult except for a few products). variant of the Bolero called Invader in a bid to create a new segmentation in the highly cluttered Indian car market. The A promising way out is to re-examine this basic assumption. vehicle has been positioned as having the power of a sport As mentioned earlier, India is not a uniform market. Regional utility vehicle as well as the comfort of a car. differences are enormous. Yes, there will always be some common factors, which, after all is what national brands tap However, company officials felt that the Invader would not into. But it is now time to shift from a ‘one size fits all’ cannibalise M&M’s existing offerings. M&M decided to launch approach to customised, region-specific marketing. the soft-top version on the Bolero platform, instead of Scorpio as the company felt that this would enable it to keep the vehicle This needs a mindset very different from the one that, for in the price segment. Moreover, the retro-fit appeal of Bolero example, considers a Hindi, essentially northern belt ad would be more in tune with the Invader, according to M&M translated into Tamil as ‘regionalised’. Each region has a strong vice president (marketing) Rajesh Jejurikar. culture and set of traditions - regionalised marketing must begin with products that fit this, then carry on to communica- M&M would replace its “Classic” model with the new Bolero tion specifically developed for the region. variant. The company currently sells around 1,300 units of soft- tops per month. The base version has a price tag of Rs 3.78 It is not a coincidence that while the larger, ‘national brand’- lakh (ex-showroom Jaipur). oriented FMCG companies are slowing down, small regional players with products and communication fine-tuned to their M&M executive director and president (automotive sector) Alan markets are zipping ahead. An Arokya ad is quintessentially Durante said that the company was looking at the African Tamil, in a way that no translated Nestle ad, no matter how market for exports apart from neighbouring countries. It could slickly produced, can ever be. be useful for government agencies like the police or defence © Copy Right: Rai University 36 11.623.3
  • establishments, he added. On exports, Mr Durante said that Chennai and in the South, in general. In time, it came to be CONSUMER BEHAVIOURinitially the company was planning it on CBU (completely built perceived by people in the North as a South Indian car, andunits) basis for its vehicles unless there is demand to set it up as hence the Matiz was preferred! I am not sure how true this is ora separate facility. how extensive the study was. But this gives me the impressionProduction of Bolero would continue to be in the region of that while brands can be more enduring, they can be limited by750-800 units a month. Company officials, however, did not the boundaries of the classification or segmentation made bydivulge sales target for the new vehicle, preferring to say that the the market. This segmentation can be based on age, geographycompany was fully geared to meet the demand. The petrol or any other parameter. What are your thoughts on this?version of the “Invader” with an Isuzu engine would be In another piece of literature on branding, I came across yetavailable in the next three to four months. The vehicle would another interesting view that suggests that customers (or theinitially be available in the four metros, Jaipur and Chandigarh market) do not fall into fixed segmentation patterns. Rather,from mid-April and a phased rollout across the country from they are defined by what the brand communicates. The writerMay onwards. The vehicle is powered by a 2.5 litre IDI diesel took pains to explain that despite changes in business, technol-engine offering 72.5 bhp output with a DI diesel version, and ogy, social and economic conditions, market perceptions of58 Bhp diesel engines. brands have not changed much. The market reacts to the brandNimble Brands Stay Eternal based on what the brand offers. Every brand offers a set ofBrand owners need to remember that brands that don’t promises or values that appeal to the targeted segment in akeep up get lost quickly. They first become irrelevant, then particular way. The trick is to have the product or service meetinvisible and then they’re gone! the values or promises for the brand to succeed. Based on all these views, I have the following questions: Are brands really eternal? Are they otherwise limited by the way markets segment them or are they limited by the values or attributes or promises they offer? YOUR question is all the more pertinent today, given the rapid growth in technology leading to the creation and obsolescence of product categories and resulting in ever changing consumer needs. This is clearly the best of times and the worst of times for big brands. While brands such as Marlboro, Levi’s, Campbell, Sunsilk and Lifebuoy continue to enjoy high popularity after many decades and across many continents, iconic brands such as Polaroid, Cadillac and Oldsmobile have either died or are going through very troubled times. What determines the life of a brand and why have some brands been successful where others have failed? The answer lies in many factors that affect the brand. The first to be considered is the linkage of a brand with a particular product category. If a brand has established itself very strongly in a product category and the category itself becomes obsolete, the brand will die a natural death, unless the company has the foresight and vision to enter related contemporary product categories that enable it to build on the existing equity of the brand. Take the classic example of Polaroid which had established itself as a strong brand in instant photography and is facingLevi’s is a brand that has stood the test of time. troubled times because the technology is no longer relevant. AThe markets are cluttered with products, technologies and logical extension for the brand would have been to enter digitalservices, and it is branding that has helped successful products/ photography where its promise of instant photography wouldservices/ companies stand out from the crowd and avoid the have been all the more relevant.commodity trap. My study so far indicates that recent years haveseen a big surge in the awareness of brand building. Yet, do A similar example closer home is that of Singer sewingbrands have life cycles or are they eternal? What puzzles me machines, a name that was almost synonymous with sewingabout this is that there have been innumerable instances where a machines in India for many decades, but failed to extend intoparticular product was very popular once, but was rejected later related categories as the market for sewing machines begansimply because it was identified with the older generation. declining. Usha sewing machines, on the other hand, success- fully transferred some of the equity from sewing machines toSimilarly, I read about an interesting situation involving the launch a range of home appliances under a sub-brand, UshaMatiz and the Santro. The sales of the Santro started off well in Lexus. © Copy Right: Rai University11.623.3 37
  • The second factor to be considered is the core promise of the • Hybrid segmentationCONSUMER BEHAVIOUR brand or the reason why consumers prefer the brand to other • VALS competing brands. In the case of Cadillac, the automobile • Counter segmentation offered consumers ‘luxury’. However, over a period of time new brands such as BMW, Mercedes, Ferrari or Alpha Romeo • Differentiated marketing came into the market and offered consumers not just ‘luxury’ but ‘luxury combined with superior performance’. In fact, Points To Remember studies show that luxury for luxury’s sake is no longer relevant to those under 60 who are buying luxury cars. Cadillac is today a struggling brand because it did not adapt its promise to meet the changing needs of its consumers. Consumer expectations The process of have risen and Cadillac is today performing below expectations. dividing a potential Sunsilk, a Unilever brand launched in 1954, is an example of a market into distinct brand that has been continuously appealing to different subsets of consumers consumer segments in 40 markets across the globe, due to its Market and selecting one or understanding of the requirements of different consumers and Segmentation more segments as a being able to consistently address these through a range of products. Some recent product innovations include colourants, target market to be Afro Hair and Black Hair. reached with a distinct marketing The third factor, as correctly pointed out by you, is the target market and target segments for the brand. Many successful mix. power brands have learnt that to extend the life cycle of a brand, it is not always necessary to either enter new categories or re- position the brand, but simply to re-define the brand’s target market and segments. Marlboro, a brand built in the US, realised that the changing lifestyles and habits of US citizens were moving them away from the smoking habit and immedi- ately launched the brand in less health-conscious countries. The Marlboro brand today is the preferred brand in Russia. Similarly, a brand such as Starbucks has been extremely successful in dealing with flagging sales in the US by entering new markets, such as China. The entry of Ford Motors and Toyota in the Indian market also illustrates this principle. A brand’s life cycle, unlike the product life cycle, is thus infinite and depends on the light-footedness, vision and capabilities of the team managing the brand. The threat of extinction is heightened depending on the industry or the sector. Product categories such as automobiles, information technology, fashion and so on face a far greater threat of extinction. My advice to all brand owners is to follow the simple rule — remember that brands that don’t keep up get lost quickly. They first become irrelevant, then invisible and then they’re gone! Key Terms • Market segmentation • Mass marketing • Positioning • Repositioning • Geographic segmentation • Micro marketing strategies • Demographic segmentation • Psychological segmentation • Sociocultural variables • Use-related segmentation • Benefit segmentation © Copy Right: Rai University 38 11.623.3
  • CONSUMER BEHAVIOUR Table 3.2 Market Segmentation Three Phases of Marketing SEGMENTATION BASE SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES Strategy Geographic Segmentation Region Southwest, North American, Alaska, Hawaii City Size Major metropolitan areas, small cities, towns n Phase 1: Market Segmentation Density of area Urban, suburban, exurban, rural Climate Temperate, hot, humid, rainy n Phase 2: Target Market and Marketing Demographic Segmentation Age Under 11, 12-17, 18-34, 35-49, 50-64, 65-74, 75-99, 100+ Mix Selection Sex Male, female Marital status Single, married, divorced, living together, widowed n Phase 3: Product/Brand Positioning Income Under Rs25,000, Rs25,000-Rs34,999, Rs35,000-Rs 49,999, Rs50,000-Rs74,999, Rs75,000-Rs99,999, Education Rs100,000 school, high school graduate, some college, Some high and over college graduate, postgraduate Occupation Professional, blue-collar, white-collar, agricultural, military Bases for Segmentation Table 3.2, continued SEGMENTATION BASE SELECTED SEGMENTATION VARIABLES SEGMENTATION VARIABLES n Geographic Segmentation Psychological Segmentation Needs-motivation Shelter, safety, security, affection, sense of self-worth n Demographic Segmentation Personality Extroverts, novelty seeker, aggressives, low dogmatics n Psychological Segmentation Perception Low-risk, moderate-risk, high-risk Learning -involvement Low-involvement, high -involvement n Psychographic Segmentation Attitudes Positive attitude, negative attitude n Sociocultural Segmentation Psychographic (Lifestyle) Segmentation Economy-minded, couch potatoes, outdoors enthusiasts, n Use-Related Segmentation status seekers Sociocultural Segmentation n Usage-Situation Segmentation Cultures American, Italian, Chinese, Indian, French, Pakistani n Benefit Segmentation Religion Hindu, Moslem, Christian, Sikh, other Subcultures (Race/ethnic) North-Indian, South -Indian n Hybrid Segmentation Approaches Social class Lower, middle, upper Family life cycle Bachelors, young married, full nesters, empty nesters © Copy Right: Rai University11.623.3 39