Market SegmentationPresented By:Abhishek JainAshutosh JhaMegha ThaparRupali Saini

What is Market Segmentation?

The breaking down or building up

of potential buyers into groups

called

Market Segments

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Market segmentation

The process of dividing a market into distinct subsets (segments) of consumers with common needs or characteristics and selecting one or more to target with a distinct marketing mix

Benefits of Market Segmentation

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1. Identifies opportunities for new product development

2. Helps design marketing programs most effective for reaching homogenous groups of buyers

3. Improves allocation of marketing resources

Fundamental-Buyer Related Questions

Who are they?

What do they want to buy?

How do they want to buy?

When do they want to buy?

Where do they want to buy?

Why do they want to buy?

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Each Market Segment should be…

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Measurable

Differentiable

Accessible

Substantial

Holistic ViewSteps in Segmentation, Targeting, and

Positioning

1. Identify Basesfor Segmenting the Market

2. Develop Profilesof Resulting Segments

3. Develop Measuresof Segment Attractiveness

4. Select TargetSegment(s)

5. Develop Positioningfor Each Target Segment

6. Develop MarketingMix for Each Target Segment Market

Positioning

MarketTargeting

Market Segmentation

Market SegmentationLevels of Market Segmentation

Mass MarketingSame product to all consumers

(no segmentation)

Mass MarketingSame product to all consumers

(no segmentation)

Segment MarketingDifferent products to one or more segments

(some segmentation)

Segment MarketingDifferent products to one or more segments

(some segmentation)

MicromarketingProducts to suit the tastes of individuals or locations

(complete segmentation)

MicromarketingProducts to suit the tastes of individuals or locations

(complete segmentation)

Niche MarketingDifferent products to subgroups within segments

( more segmentation)

Niche MarketingDifferent products to subgroups within segments

( more segmentation)

Market SegmentationBases for Segmenting Consumer Markets

Geographic

Demographic

Age, gender, family size and

life cycle, or income

PsychographicSocial class, lifestyle,

or personality

Behavioral

Occasions, benefits, uses, or responses

Nations, states, regions or cities

Bases for Segmenting Consumer Markets

• Marketers may use a single variable out of the above mentioned, or,

• Marketers may use two or more variables

Geographic Segmentation• Division of the market based on the location

of the target market• People living in the same area have similar

needs and wants that differ from those living in other areas

• Climate• Population density• Taste• Micromarketing

Demographic SegmentationPartitioning of the market based on factors

such as▫age▫gender ▫marital status▫income▫occupation▫education ▫ethnicity

Geo-demographic Segmentation

• A hybrid segmentation scheme • Based on notion that people who live close to

one another are likely to have similar financial means, tastes, preferences, lifestyles and consumption habits

Psychographic Segmentation

•Partitioning of the market based on lifestyle and personality characteristics

•Marketers use it to further refine a target market

•Its appeal lies in the vivid and practical profiles of consumer segments that it can produce

•Accomplished by using AIO inventories

Examples of the use of psychographic segmentation reflected in marketing messages

•Kellogg’s targets health-conscious consumers with brands such as Special K and Product 19

•Old Spice is targeting the active sports lifestyle with High Endurance deodorant

Behavioral Segmentation

•Partitioning of the market based on attitudes toward or reactions to a product and to its promotional appeals

Behavioral segmentation can be done on the basis of:

1. Usage rate2. Benefits sought from a product3. Loyalty to a brand or a store

1. Usage Rate

•Differentiates between ▫heavy users▫medium users ▫light users ▫nonusers

•In general, a relatively small number of heavy users account for a disproportionately large percentage of product usage

•Targeting those heavy users is a common marketing strategy

2. Benefit Segmentation

•Marketers constantly attempt to identify the single most important benefit of their product that will be the most meaningful to consumers

•Changing lifestyles play a major role in determining the product benefits that are important to consumers and also provide marketers with opportunities for new products and services

3. Brand and Store Loyalty

•The tendency of some consumers to repeatedly select the same brand within a given product category

•A parallel tendency of some consumers to repeatedly patronize a particular retail establishment

Brand and Store Loyalty (Contd..)

•Marketers often try to identify the characteristics of their brand-loyal customers so they can target consumers with similar characteristics in the larger population

•Marketers also target consumers who show no brand loyalty as a means of penetrating a larger market

•Marketers reward brand loyalty by offering special benefits to frequent customers

Market SegmentationRequirements for Effective Segmentation

• Size, purchasing power, profiles of segments can be measured.

• Segments must be effectively reached and served.

• Segments must be large or profitable enough to serve.

Measurable Measurable

AccessibleAccessible

SubstantialSubstantial

DifferentialDifferential

ActionableActionable

• Segments must respond differently to different marketing mix elements & actions.

• Must be able to attract and serve the segments.

Market TargetingEvaluating Market Segments

•Segment Size and Growth▫ Analyze sales, growth rates and expected profitability.

•Segment Structural Attractiveness▫ Consider effects of: Competitors, Availability of

Substitute Products and, the Power of Buyers & Suppliers.

•Company Objectives and Resources▫ Company skills & resources relative to the segment(s).▫ Look for Competitive Advantages.

Sample Offering - Market Matrix for Handheld Calculators

Business Scientific Home School

Simple

Moderate

Complex

Very complex

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Market Segments (User Groups)

Choosing Market Segments to Target

• Once an organization has identified its most promising market segments, it must decide whether to target one segment or several segments

• Each targeted segment will then receive a specially designed marketing mix — i.e., a specially tailored product, price, distribution network and/or promotional campaign

CASE STUDY

•The domestic market size of fans in India is around 20 Million units. The share of the organized sector stands at 45 per cent and of the unorganized sector at 55 per cent.

•There are 6 major brands in the organized sector namely: Crompton, Orient, Polar, Khaitan, Usha and Bajaj.

Market Segmentation

•The fan market is segmented based on price, quality and aesthetics.

•The Fan industry has the following Product based segmentation and shares: Percent

Ceiling FansTable/Wall/Ped-estal (TPW)FansFresh Air fans

The Marketing Vision

To make Bajaj Fans a leading player in the fans market in India, by understanding and effectively meeting the consumers stated and unstated needs, so as to achieve a sustained competitive advantage, while pursuing the path of profitable growth for the Fans BU and its brands.

Bajaj Fans - The Competitive Stance

Increase the width of the product line and launch new categories / products Move towards a Direct distribution system. Benchmark the market leaders network reach and expand the retail network aggressively

Price the products competitively with a higher deliverable value.Create a unique positioning by capitalizing on a core category benefit, hitherto not appropriated by any other competitor.

Use the power of the large organizational infrastructure, good brand equity and resources to take on major players head on and invest to grow the business.

The Product - Market Segmentation

Bajaj Fans was earlier focusing only on the premium segment of ceiling fans and was a niche player in the market. To have a dominating position in the fans market based on the strengths that company had in terms of brand, infrastructure, management capabilities and understanding of the fans market, the company decided to target most of the segments in the fan market by following a micro-segmentation strategy. The Company believed that the Right Product at the Right Price Point for the Right Target Consumer was the Right approach to creating the Right Competitive Advantage.

THE BRAND POSITIONING

Brand Architecture of Bajaj Fans

Although Bajaj Fans decided to target nearly all the segments in the fans market, it was imperative to have a differentiation and concentrate on a set of customers in each segment, which will value the core benefit, which shall be offered by the Bajaj brand in each segment.Existence of the product segments such as TPW and Freshair fans is largely necessitated by the desire to meet the customer needs in a price segment with a different product line i.e. a premium end customer can have a need for a ceiling fan as well as a TPW and Freshair fans. Therefore the Company decided to launch sub brands under the mother brand Bajaj to target each of the customer segments, segmented on the basis of price and launched a range of ceiling, TPW and exhaust fans under those sub brands for premium, economy and sub-economy segments. The role of the sub brands was to create a differentiation in the mind of the consumer regarding the brand image. Thus, the image of the Crown sub-brand was built to appeal to the Premium Fan customer belonging to SEC A1, A2 and B1; whereas the Bahar sub-brand was aimed at the lower end customer.

THE BRAND POSITIONING (Contd..) Introduction of Sub Brands

As many as five new Sub brands were introduced

• Bahar as a low-price Sub economy Fan in Ceiling, Table & Exhaust Fans

• Maxima as a medium price Sub Economy Fan in Ceiling and Exhaust • Grace as an Economy Ceiling Fan. • Crown as a Premium Ceiling Fan and TPW fans • Bajaj Midea as a Premium TPW Fans in a tie up with GD Midea

Holding Co.- A unique Co-Branding exercise with the worlds largest fan manufacturing company based in China.

• Introduction of multiple sub brands and products has been a key ingredient to the success of Bajaj fans. Each sub brands signifies a specific customer expectation and the company’s attempts at meeting them.

KEY ELEMENTS OF THE MARKETING STRATEGY

I. Product Strategy Ceiling Fans

▫Launch high quality decorative fans with better designs in the premium segment.

▫Launch high quality decorative and non-decorative but contemporary fans in the Economy Segment corresponding to the consumer needs of this segment.

▫Launch basic products without any frills to meet the needs of sub-economy segment aimed at providing an up-gradation platform to the customer from the unorganized sector.

• TPW FansLaunch a new range of TPW fans in the premium and economy segments.

• Fresh air FansLaunch a new range of Fresh air fans in the economy and sub-economy segments.

• ActionsTo bring the products in line with the positioning strategy the Revolutions Per Minute (RPM) of all products was increased from 330RPM to around 400RPM to ensure higher Air Flow Velocity.Launched the Bajaj Midea range of TPW fans in the premium segment.Launched the Crown range of TPW fans in the Premium segment.Launched decorative & non-decorative fans in the economy segment of ceiling fans - Grace, Grace Gold & Ultima.Launched basic models with no special features in the sub economy segment - Bahar & Maxima

II. Pricing Strategy

The company follows a competitive pricing strategy in all major markets for all product segments.

The strategy to enter the lower price segments was executed through launch of differentiated models aimed at the lower price segments.

Earlier all Economy and Premium ceiling fans were sold at around Rs.1000 and Rs.1200 respectively to the customer. Sub-Economy ceiling fans were introduced at a customer price of less than Rs.900.

The company introduced their Maxima ceiling fans at a customer price of Rs.900 and Bahar ceiling fans at a customer price of Rs.800. However, one of the organised sector competitors (say Competitor A) introduced a ceiling fan model at a customer price of Rs.700. Today the sub economy segment is being actively looked at by most major competitors.

The pricing innovation aimed at the Bottom of the Pyramid mass market has been a key element of the Bajaj Fans success story.

Promotion Strategy

Television as the main media

It was important to create high aided and unaided brand recall related to the fans category in the minds of the consumer. Fan as a product category has no major regional disparities in sale. Much of the sale of organised sector is in the metro, Class I and Class II markets. The cable and satellite penetration in these markets is very high. It was therefore strategised to shift from the traditional way of promoting fans in print media to TV advertising through major C&S channels like Star, Sony and Zee.TVC’s of 10, 20 & 30 secs were developed based on a positioning “Bajaj Fans Sabse Tez” in Hindi and various regional languages such as Tamil, Kannada, Telegu, Malayalam & Bengali.A CD Rom containing some recent TVCs is submitted alongwith the Paper. The Paper Weight TVC won a Silver Abby for 2002 and has been widely acclaimed. The Door Closer press ad won a Silver Abby for 2002 and the Fish Bowl press ad won a Bronze at the International ADFEST at for Asia Pacific 2002.

IV. Increased brand visibility at the market place

Initiated various Ground level activities by hiring promoters in key wholesale and large retail markets for fans. These promoters were dressed in branded T-shirts and caps and were asked to distribute leaflets of Bajaj fans to the potential customers and to detail the products at the Point of Sale.

When visiting the market, they would carry placards with the core communication message of Bajaj fans “Subse Tez”. This created a lot of excitement in the market and customers started asking for Bajaj fans.

Attractive POPs, Display schemes and Mystery Customer Contests were also run for the dealers for better display of products and packaging on the retail shelves by the retailers and for a Channel Push

CONCLUSION • The Company believed that the Right Product at the Right Price Point for

the Right Target Consumer was the Right approach to creating the Right Competitive Advantage”.

• Indeed the substantial success achieved by Brand Bajaj Fans, whether it be in terms of the Sales Performance, Market share gains, Profit performance, Image improvements, Increase in Consumer Demand, Network related improvements, Dealer Loyalty and the overall Brand strengths, has been a vindication of this firm belief.

• The Fans BU has been a trail blazer within the company in terms of energizing and electrifying Team Bajaj Electricals with it’s sterling performance and substantial achievements. In fact, the Fans team has set an example for the rest of the company to follow and emulate.But the greatest tribute to the marketing success are the many Lakhs of new customers whom the company has been able to add year after year, who in turn also become the spokespersons for brand Bajaj Fans.

• The brand now looks to the future with renewed hope, optimism and confidence.