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Submitted in partial fulfillment as a requirement for the degree of Bachelors of Business Administration
Submitted to : Dr. Saba Fatma
Submitted by : 1. Amina Rahman 2. Ashley Sehgal 3. Hamza Salim 4. Madeeha Ali 5. Pulkit Goyal 6. Shah Omar 7. Shainal Agarwal
MANIPAL UNIVERSITY DUBAI CAMPUS
This is to certify that the project entitled, “STRATEGIC MARKETING SEGMENTATION” in strategic marketing, submitted to Dr. Saba Fatma is a record of the original work done by us during the period of our studying in the department of management studies, Manipal Academy of Higher Education Dubai campus, UAE. Signature of the guide
TABLE OF CONTENT
Introduction 1. Attributes of effecting segmentation 2.Criteria for selecting market segments 3. Basis of consumer market segmentation 4. Basis of business market segmentation
Strategic Market Segmentation
Segmentation and market driven strategies 1. Market driven strategy 2. Creating new market space 3. Matching value opportunities & capabilities 4. Market targeting & Strategic positioning
Identifying Market segments 1. Purpose 2. Characteristics 3. Product Use
4. Buyers need
Forming Segments 1. Requirements for segmentation 2. Product differentiation and market 3. Customer group identification 4. Forming groups based on response differences
Finer segmentation strategies 1. Logic of finer segments 2. Finer segmentation Issues Selecting the segmentation strategy 1. Deciding how to segment 2. Strategic Analysis of market segments
Examples 1 Hindustan Lever limited 2 Titan watches 3 Indian automobile’s segmented on basis of purchasing power.
The market for any product is normally made up of several segments. A ‘market’ after all is the aggregate of consumers of a given product. And, consumer (the end user), who makes a market, are of varying characteristics and buying behavior. There are different factors contributing for varying mind set of consumers. It is thus natural that many differing segments occur within a market. In order to capture this heterogeneous market for any product, marketers usually divide or disintegrate the market into a number of sub-markets/segments and the process is known as market segmentation market segmentation. Thus we can say that market segmentation is the segmentation of markets into homogenous groups of customers, each of them reacting differently to promotion, communication, pricing and other variables of the marketing mix. Market segments should be formed in that way that difference between buyers within each segment is as small as possible. Thus, every segment can be addressed with an individually targeted marketing mix. The importance of market segmentation results from the fact that the buyers of a product or a service are no homogenous group. Actually, every buyer has individual needs, preferences, resources and behaviors. Since it is virtually impossible to cater for every customer’s individual characteristics, marketers group customers to market segments by variables they have in common. These common characteristics allow developing a standardized marketing mix for all customers in this segment. Through segmentation, the marketer can look at the differences among the customer groups and decide on appropriate strategies/offers for each group. This is precisely why some marketing gurus/experts have described segmentation as a strategy of dividing the markets for conquering them. Segmenting markets is the foundation for superior performance. Understanding how buyer needs and wants vary is essential in designing effective marketing strategies. Segmenting markets may be critical to developing to developing and implementing market driven strategy. The need to improve an organization’s understanding of buyers is escalating because of buyers demand for uniqueness and an array of technology available to generate
products to satisfy the demands. Companies are responding to the opportunities to provide unique customer value with products. Buyers vary according to how they use the products, the needs and preferences that the products satisfy, and their consumption patterns. These differences create market segments. Market segmentation is the process of identifying and analyzing subgroups of buyers in a product market with similar response characteristics. Recognizing differences between market segments, how they change better and faster than competitors is an increasingly important source of competitive advantage.
ATTRIBUTES OF EFFECTIVE SEGMENTATION
Market segmentation is resorted to for achieving certain practical purpose. For example, it has to be useful in developing and implementing effective and practical marketing programs. For this to happen, the segments arrived at must meet certain criteria such:a. Identifiable - The differentiating attributes of the segments must be measurable
so that they can be identified.
b. Accessible - The segments must be reachable through communication and
c. Sizeable - The segments should be sufficiently large to justify the resources
required to target them. A very small segment may not serve commercial exploitation.
d. Profitable - There is no use in locating segments that are sizeable but not
e. Unique needs - To justify separate offerings, the segments must respond
differently to the different marketing mixes.
f. Durable - The segments should be relatively stable to minimize the cost of
g. Measurable - The potential of the segments as well as the effect of a specific
marketing mix on them should be measurable.
h. Compatible - Segments must be compatible with firm’s resources and
Criteria for selecting Market Segments
Measurable A segment should be measurable. It means you should be able to tell how many potential customers and how many businesses are out there in the segment. Accessible A segment should be accessible through channels of communication and distribution like: sales force, transportation, distributors, telecom, or internet. Durable Segment should not have frequent changes attribute in it. Substantial Make sure that size of your segment is large enough to warrant as a segment and large enough to be profitable Unique Needs Segments should be different in their response to different marketing efforts (Marketing Mix).
Bases for Consumer Market Segmentation
There are number of variables involved in consumer market segmentation, alone and in combination. These variables are:
• • • •
Geographic variables Demographic variables Psychographic variables Behavioral variables
Geographic Segmentation In geographical segmentation, market is divided into different geographical units like:
• • • •
Regions (by country, nation, state, neighborhood) Population Density (Urban, suburban, rural) City size (Size of area, population size and growth rate) Climate (Regions having similar climate pattern)
A company, either serving a few or all geographic segments, needs to put attention on variability of geographic needs and wants. After segmenting consumer market on geographic bases, companies localize their marketing efforts (product, advertising, promotion and sales efforts). Demographic Segmentation In demographic segmentation, market is divided into small segments based on demographic variables like:
• • • • • • • • • • • • •
Age Gender Income Occupation Education Social Class Generation Family size Family life cycle Home Ownership Religion Ethnic group/Race Nationality
Demographic factors are most important factors for segmenting the customers groups. Consumer needs, wants, usage rate these all depend upon demographic variables. So, considering demographic factors, while defining marketing strategy, is crucial. Psychographic Segmentation In Psychographic Segmentation, segments are defined on the basis of social class, lifestyle and personality characteristics. Psychographic variables include:
• • • • •
Personality Self Image Activities Values Attitudes
A segment having demographically grouped consumers may have different psychographic characteristics. Behavioral Segmentation In this segmentation market is divided into segments based on consumer knowledge, attitude, use or response to product. Behavioral variables include:
• • • • • •
Usage Rate Product benefits Brand Loyalty Price Consciousness Occasions (holidays like mother’s day, New Year and Eid) User Status (First Time, Regular or Potential)
Behavioral segmentation is considered most favorable segmentation tool as it uses those variables that are closely related to the product itself.
Bases for Business Market Segmentation
Business market can be segmented on the bases consumer market variables but because of many inherent differences like
• • •
Businesses are few but purchase in bulk Evaluate in depth Joint decisions are made
Business market might be segmented on the bases of following variables:
• • •
Company Size: what company sizes should we serve? Industry: Which industry to serve? Purchasing approaches: Purchasing-function organization, Nature of existing relationships, purchase policies and criteria.
Situational factors: seasonal trend, urgency: should serve companies needing quick order deliver, Order: focus on large orders or small. Geographic: Regional industrial growth rate, Customer concentration, and international macroeconomic factors
STRATEGIC MARKET SEGMENTATION
Segmentation and Market driven strategy
Market segmentation is the process of placing the buyers in a product- market into subgroups so that the members of each segment display similar responsiveness to a particular positioning strategy. Buyer similarities are indicated by the amount and frequency of purchase loyalty to a particular brand, how the product is used and other measures of responsiveness. The opportunity for segmentation occurs when differences in buyers demand function allow market demand to be divided into segments, each with a distinct demand function. The term market niche is sometimes used to refer to a market segment that represents a relatively small portion of the buyers in the total market. Segmentation identifies customer groups within a product market, each containing buyers with similar value requirements concerning specific product/ brand attributes. A segment is a possible market target for an organization competing in the market. Segmentation offers a company an opportunity to better match its products and capabilities to buyer’s value requirements. Customer satisfaction can be improved by providing a value offering that matches the value proposition considered important by the buyer in a segment. To get a product or service to the right person or company, a marketer would firstly segment the market, then target a single segment or series of segments, and finally position within the segment. Market Segmentation is the process of placing of subsets of buyers within a market that share similar needs and demonstrate similar buyer behavior. The world is made up of billions of buyers with their own sets of needs and behavior. A segment is a possible market target for an organization competing in the market. Segmentation offers a company an opportunity to better match its products and its capabilities to buyer’s value requirements. Customer satisfaction providing a value offering that matches the value proposition considered important by the buyers in a segment. Segmentation is a form of critical evaluation rather than a prescribed process or system, and hence no two markets are defined and segmented in the same way. However there are a number of underpinning criteria that assist us with segmentation:
• • •
Is the segment viable? Can we make a profit from it? Is the segment accessible? How easy is it for us to get into the segment? Is the segment measurable? Can we obtain realistic data to consider its potential?
There are many ways that a segment can be considered. For example, the auto market could be segmented by: driver age, engine size, model type, cost, and so on. However the more general bases include:
• • • •
By geography - such as where in the world was the product bought. By psychographics - such as lifestyle or beliefs. By socio-cultural factors - such as class. By demography - such as age, sex, and so on.
A company will evaluate each segment based upon potential business success. Opportunities will depend upon factors such as: the potential growth of the segment the state of competitive rivalry within the segment how much profit the segment will deliver how big the segment is how the segment fits with the current direction of the company and its vision.
Market Driven strategy Firm's policy or strategy guided by market trends and customer needs instead of the firm's productive capacity or current products. Process:1. Segments 2. Value opportunities 3. Capabilities/segment match 4. Target 5. Positioning
Creating New Market Space Market analysis may identify segments which are not recognized or served effectively by the competitors. There may be opportunities to tap into new areas and create a unique space in the market. For example, in France Accor has established the highly successful formula 1 hotel chain by building a new market segment in between the traditional strategic groups in the hotel market. In general one –star hotels offer low prices; on the other hand two-star hotels offer more amenities and charge higher prices. Accor analysis of customer need found that customer choose the one star hotel because it is cheap, but trade up from the one star hotel to the two star hotel for the “sleeping environment “that is clean ,quiet rooms with more comfortable beds –not all the other amenities that are offered. While formula 1 provides the superior “sleeping environment” of the two star hotel, but not the other facilities, which allows it to offer this at the price of the one star hotel. Formula1 had built a market share larger than sum of the next five largest competitors.
Matching value opportunities and capabilities Broad competitive comparisons can be made for the entire product-market, more penetrating insights about competitive advantage and market opportunity result from market segment analyses. Examining specific market segments helps identify how to -: 1. Attain a closer match between buyer’s value preference’s and the organization’s capabilities. 2. Compare the organizations strengths and weakness to the key competitors in that particular segment.
For example –Atlas air Inc. ., a transportation company that offers outsourcing freight services for global air carriers which came up in 1992, the founder identifies an emerging customer need because carriers were replacing older aircrafts with fuel efficient planes having half the cargo space of those being replaced. Atlas customers include British airways, china airlines, KLM Lufthansa, Swissair, and SAS, all attracted by low cost and reliable services. Atlas AIR carries flowers and shoes from Amsterdam to Singapore for KLM and fish cattle, and horses from Taipei to Europe for china air.
Market targeting and strategic positioning There was a time when finding the best customers were like throwing darts in the dark. Target marketing changed all that. Today’s savvy marketers know that finding their best prospects and customers hinges on well thought out targeted marketing strategies. Defining a target market requires market segmentation, the process of pulling apart the entire market as a whole and separating it into manageable, disparate units based on demographics. Target market is a business term meaning the market segment to which a particular good or service is marketed. It is mainly defined by age, gender, geography, socioeconomic grouping, or any other combination of demographics. It is generally studied and mapped by an organization through lists and reports containing demographic information that may have an effect on the marketing of key products or services. Target Marketing involves breaking a market into segments and then concentrating your marketing efforts on one or a few key segments. Target marketing can be the key to a small business’s success. The beauty of target marketing is that it makes the promotion, pricing and distribution of your products and/or services easier and more cost-effective. Target marketing provides a focus to all of your marketing activities. Market targeting simply means choosing one’s target market. It needs to be clarified at the onset that marketing targeting is not synonymous with market. Through segmentation, a firm divides the market into many segments. But all these segments need not form its target market. Target market signifies only those segments that it wants to adopt as its market. A selection is thus involved in it. In choosing target market, a firm basically carries out an evaluation of the various segments and selects those segments that are most appropriate to it. As we know that the segments must be
relevant, accessible, sizable and profitable. The evaluation of the different segments has to be actually based on these criteria and only on the basis of such an evaluation should the target segments be selected.
Positioning involves implementing our targeting. For example, Apple Computer has chosen to position itself as a maker of user-friendly computers. Thus, Apple has done a lot through its advertising to promote itself. They iterate that any brand is valued by the perception it carries in the prospect or customer's mind. Each brand has thus to be 'Positioned' in a particular class or segment. Example: Mercedes is positioned for luxury segment, Volvo is positioned for safety. The position of a product is the sum of those attributes normally ascribed to it by the consumers – its standing, its quality, the type of people who use it, its strengths, its weaknesses, any other unusual or memorable characteristics it may possess, its price and the value it represents. Although there are different definitions of Positioning, probably the most common is: “A product's position is how potential buyers see the product", and is expressed relative to the position of competitors. Positioning is a platform for the brand. It facilitates the brand to get through to the mind of the target consumer .The position of the brand has thus to be carefully maintained and managed. Example: When Marlboro cut down its prices, its sales dropped immediately, as it began being associated with the generic segment. Watches like Rolex are positioned as luxury segment watches, thus they being one of the most expensive have become a symbol for accomplishment in life. If Rolex reduces its prices, it loses its perceived image and hence is in danger of losing its customers.
Selecting the Market to be Segmented Market segmentation may occur at any of the product –market levels . Genric level segmentation by segmenting supermarket buyers based on sjopper types eg.limited shopping time . Product type segmentation is shown by the diffrences in price, quality and features of shving equipment.Product variant segmentation considers the segments within a category such as electric razors. An important consideration in defining the market to be segmented is estimating the variation in buyers needs and requirements at the different product market –levels and identifying the types of buyers included in the market. Example-the atlas air example ,management definede the product market to be segmented as air freight services for business organizations between major global airports.Segmenting the genric product market for air freight services was too broad in scope. In contemporary markets, boundaries and definations can change rapidly, underlining the strategicc importance of market defination and selection , and the need for frequent reevaluation.
Identifying market segments
After the market to be segmented is defined, one or more variables are selected to identify segments. For example, United States Automobile Association (USAA) segments by type of employment. Although unknown to many people, USSA has built a successful business serving the automobile insurance needs of U.S. military personnel located throughout the world. USA has close relationship with its 2.6 million members using powerful information technology. The USAA service representative has immediate access to the clients consolidated file, and the one to one service encounter is highly personalized. USAA achieves a 98% retention rate in the market chosen segment.
Purpose of segmentation variables
One or more variables (e.g. Frequency of use) maybe used to divide the product market in 2 segments. Demographic & psychographic (lifestyle & personality) characteristics of buyers are of interest, since this information is available from the US census report & many other sources including electronic data base. The use situation variables consider how the buyer uses the product, such as purchasing a meal away from home for the purpose of entertainment. Variables measuring buyers needs & preferences include attitudes, brand awareness & brand preference. Purchase behavior variables describe brand use & consumption (e.g. Size & frequency of purchase). We examine these variables to highlight their uses, futures & the considerations important in segmenting market.
Characteristics of people and organizations
Consumer Markets The characteristics of people fall into 2 major categories, • • Geographic & demographic Psychographic (lifestyle & personality)
Demographics are often more useful to describe consumer segments after they have been formed rather than to identify them. Nonetheless, variables are popular because available data often relate demographics to the other segmentation variables. Geographic location maybe useful for segmenting product markets. Example, there are regional differences in the popularity of transportation. In several US states the most popular vehicle is the pick-up truck. The truck belt runs from the upper mid west &
through Texas & the Gulf coast states. The Ford brand is dominant in the northern half of the truck belt while Chevrolet leads in the southern half. Demographic variables describe buyers according to their age, income, education, occupation, and many other characteristics. Demographic information helps to describe groups of buyers such as heavy users of a product or brand. Demographics used in combination with buyer behavior information are useful in segmenting markets, selecting distribution channels, designing promotion strategies, and other decisions on marketing strategy. Lifestyle variables indicate what people do (activities), their interest, their opinions, and their buying behaviors. Lifestyle characteristics extend beyond demographics & offer a more penetrating description of the consumer. Profiles can be developed using lifestyle characteristics. This information is used to segments markets, help position products, and guide the design of advertising messages. An array of specialty magazines enables company to identify & access various specific lifestyle segments. Example, Peterson publishing company, publishes 23 monthlies, 9 by monthlies, and 45 annuals. The company’s magazines portfolio includes motor trend MTB (mountain bikes), circle track & teen magazine. Specialty magazines match buyer’s lifestyle interest with articles that correspond to the interest. Subscriber profiles help companies match their market target profiles with the right magazines. Many of the specialty magazines conduct subscriber research study that is useful to companies targeting lifestyle segments. The availability of new technologies also enables more general publication, to create themed sections or demographically targeted edition. Example, time magazines can produce customized versions of its national edition at the extreme as many as 20,000 different versions of a single issue. The global feature describes the success of BMW in positioning its mini as a lifestyle vehicle, promoted through unconventional routes that fit with buyer characteristics in this niche of the automobile market. Organizational markets Several characteristics help in segmenting business markets. The type of industry (sometimes called a vertical market) is related to purchase behavior for certain types of products. Example, automobile producer purchases steel, paint & other raw materials. Since automobile firm’s needs many vary from companies in other industry, this form of segmentation enables suppliers to specialize their efforts & satisfy customer needs. Other variables for segmenting organizational markets include size of the company, the stage of industry development, and the stage of value added system (e.g. Produce, distribution, large companies, mid size companies, government agencies, education & small companies).
Organizational segmentation is aided by first examining, • • The extent of market concentration The degree of product customization
Concentration considers the number of customer and the relative buying power. Product customization determines the extent to which the supplier must tailor the product to each organizational buyer. If one or both of these factors indicate quite a bit of diversity, segmentation opportunities many exist. Boeing caters to the specific needs of each air carrier purchasing commercial aircraft. Example, an airline ordering a 747 has a choice of 4 configurations for the interior wall at the front of the rare cargo compartment. This decision how 2,550 parts are installed. While Boeings efforts to provide customized designs are preferred by the customers, the costs are high & Boeing has had to evaluate the value/cost relationship of its attempts to satisfy the needs of single airline segments.
Product use situation segmentation
Markets can be segmented based on how the product is used. As an illustration, Nikon, the Japanese camera company, offers a line of high performance sunglasses designed for activities and light conditions when skiing, driving, hiking, flying, shooting & participating in water sports. Nikon competes in the premium portion of the market with prices somewhat higher than Ray-ban, the market leader. Timex uses a similar basis of segmentation for its watches. Needs & preferences vary according to different use situations. Consider, for example, segmenting the market for prescription drugs. Astra/Merck identifies the following segments based on the type of physician/patient drug use situation: •
Health care as a business – customers such as managed care administrators to consider economic factor of drug use foremost. Traditional – physicians with standard patient needs centered around the treatment of disease. Cost sensitive – physician for whom cost is paramount such as those with a sizeable number of indigent patient. Medical thought leaders – people on the leading edge, often at teaching hospitals, who champion the newest therapies.
A sales representative provides the medical thought leader with cutting-edge clinical studies, where as the cost- sensitive doctor is provided information related to cost of treatments. Mass customization offers a promising means of responding to different use situation at competitive prices. Example, lutron electronics gives its buyers customized light dimmer switches by programming desired features using computer chip build into the switches- the company holds 80% of all dimmer patents, and has achieved a 75% market share, with a product catalog including several thousand product variation in dozen of colors.
Buyers need and preferences
Needs and preferences that are specific to products and brands can be used as segmentation bases and segment descriptors. Examples as brand loyal status, beliefs sought, and proneness to make a deal. Buyers maybe attracted to different brands because of all the benefits being offered. Example, seeking to generate additional revenues in the mid 1990s, Credit Lyonnaise, France’s largest commercial bank, segmented and began targeting customers with annual incomes in excess of 500,000 francs ($100,000 at the time) that wanted quality service, financial advice, and upscale facilities. Several new branch offices in Bordeaux, called Club Tourney, had an elegant townhouse with salons where clients met with advisors to discuss financial needs. The branch served 100 wealthy clients. Customer needs Needs motivate people to act. Understanding how buyers satisfy their needs provides guidelines for marketing actions. Customers attempt to match their needs with products to match their needs. people have a variety of needs, including basic physiological needs (food, rest, and sex), the needs for safety, the need for relationships with other people (friendship), and personal satisfaction needs. Understanding nature and the intensity of these needs is important in • • Attitudes Buyer’s attitudes towards brands are important because experience and research findings indicate that attitudes influence behavior. Attitudes are enduring systems of favorable or unfavorable evaluation of brands. Attitudes may develop from personal Determining how well a particular brand may satisfy the needs, and/or, Indicating what change(s) in the brand may be necessary to provide a better solution to the buyer’s needs
experience, interactions with other buyers, or by marketing efforts, such as advertising and personal selling. Attitude information is useful in marketing strategy development. A strategy may be designed either to respond to established attitudes or, instead, to attempt to change an attitude. In a given situation, relevant attitudes should be identified and measured to indicate how brands compare. If important attitudes influence on buyer’s behavior is identified and a firm’s brand is measured against these attitudes management may be able to improve the brand’s position by using this information. Attitudes are often difficult to change, but firms may be able to do so if buyers’ perceptions about the brand are incorrect. Example, if the target-in value of an automobile is brand (which actually has a high trade-in value) is perceived as having a low trade-in value, advertising can communicate this information this information to buyers. Perceptions Perceptions is defined as “the process by which an individual selects, organizes, and interpret marketing stimuli, such as advertising, personal selling, price, and the product. Perceptions form attitudes. Buyers are selective in the information they process. As an illustrative of selective perceptions, some advertising messages may not be received by viewers because of the large number of messages vying for their attention. Example, a salesperson’s conversation maybe misunderstood or not understood because the buyer I trying to decide of the purchase is necessary while the salesperson is talking. People often perceive things differently. Business executives are interested in how their products, and salespeople, stores and companies are perceived. Perception is important strategically in helping management to evaluate the current positioning strategy and in making changes in this positioning strategy. Perception mapping is a useful research technique for showing how brands are perceived by buyers according to various criteria. Purchase behavior Consumptions variables such as the size and frequency of a purchase are useful in segmenting consumer and business markets. Markets of industrial products often classify customers and prospects into categories on the basis of the volume of the purchase. Example, a specialty chemical producer concentrates its marketing efforts on chemicals each year. The firm further segments the market on the basis of how the customer uses the chemical. The development of CRM systems offers fast access to records of actual customer purchase behavior and characteristics. CRM and loyalty programs are generating insights into customer behavior and segment differences, and providing the ability to
respond more precisely to the needs of customer’s indifferent segments. Example, Cons data is a CRM company working for the jigsaw consortium of some of the largest fast-moving consumer goods companies in the world. Unilever, Kimberley-Clark, and Cadbury Schweppes are sharing the costs of a giant database that can divide countries into any size segment and determine exactly who lives there, where they shop, what they buy, their lifestyles, and attitude data. Initial applications are in the precise merchandising of supermarkets shelves to reflect local segment characteristics. Similarly, Accor, the French-based hotel group, has adopted sophisticated business intelligence systems for its Sofitel and Novotel hotels in the United States. The potential benefit is to identify different customer’s preferences, to differentiate and to customize. Using survey data, records of guest’s visits and preferences or problems, the data are mined to draw up “golden nugget maps” to identify which customer segments have potential, which already have been heavily exploited, and which have limited potential. Since buying decisions vary in importance and complexity, it is useful to classify them to better understand their characteristics, the products to which they apply, and the marketing strategy implications of each type of purchase behavior. Buyer decisions may be classified according to the extent to which the buyer is involved in the decision. A high-involvement decision maybe expensive purchase, have important personal consequences, and impact the customer’s ego and social needs. The decision situation may consist of extended problem solving (high involvement), limited problem solving, or routine problem solving (low involvement). Involvement may vary from person to person. Example, a high involvement purchase for one person may not be such for another person, since perceptions of expense, personal consequences, and social impact may vary across individuals.
The credit card division of American Express (AMEX) identifies market segments based on purchase behavior. One group of cardholders pays the annual fee for the card but rarely uses it. This group of zero spenders is made up of: · · Those who cannot afford much discretionary spending. Those who use cash or competitors cards.
AMEX’s objective is to identify the second group of potential buyers because they offer card usage opportunities and may potentially give up their card. AMEX uses selfselecting incentive offers (e.g. two free airline tickets for heavy card use over six months) to identify the valuable nonuser cardholders. While this segmentation approach is expensive, it costs less than obtaining a new customer to replace one who leaves AMEX. It also does not require using expensive marketing research to identify card holders with the ability (financially) to use their cards. Requirements for segmentations An important question is deciding if it’s worthwhile to segment a product-market. E.g. Gillette has successfully adopted a “one product for all” strategy in the razor market. While in many instances segmentation is a sound strategy, its feasibility and value need to be evaluated. Nonetheless, the growing fragmentation of mature mass markets into segments with different needs and responsiveness to marketing actions may mandate segmentation strategy. Correspondingly, the growth of narrowcast media – cable television & radio; specialized magazines; cell-phone and personal digital assistant screens; and the internet – makes major changes in the costs of reaching market segments. Segment targets that could not traditionally be reached with communications and product variants to match their needs at reasonable costs to the seller may now be accessible targets. It is important to decide if it is worthwhile to segment a product-market. Five criteria useful for evaluating a potential segmentation strategy are: 1. Response Differences Determining differences in the responsiveness of the buyers in the product-market to positioning strategies is a key segment identification requirement. Suppose the customers in a product-market are placed into four groups, each a potential segment, using a variable such as income. If each group responds (e.g. amount of purchase) in the same way as all other groups to a marketing mix strategy, then the four groups are not market segments. If segments actually exist in this illustration, there must be, there must be differences in the responsiveness of the groups to marketing actions, such as pricing, product features, and promotion. The presence of real segments requires actual response differences. Simply finding differences in buyers’ characteristics such as income is not enough.
E.g. A study conducted by a New Delhi thing tank identifies a premium segment in the Indian consumer market. Families with annual income in excess of 1 million rupees have as much buying power as a U.S. family with three times the same income. Living costs for the Indian family are very low. The premium segment is a promising target for luxury goods brands like Mercedes-Benz, Cartier and Christian Dior. There are 600,000 Indian households in the premium segment, including 200,000 in Bombay. Several Japanese, U.S. and European auto manufacturers plan to produce luxury cars in India. 2. Identifiable segments It must be possible to identify the customer groups that exhibit response differences, and sometimes finding the correct groups may be difficult. E.g. even though variations in the amount of purchase by customers occur in a market, it may not be possible to identify which people correspond to the different response groups in the market. While it is usually feasible to find descriptive differences among the buyers in a product-market, these variations must be matched to response differences. Recall AMEX’s approach to identifying cardholders with buying power who use the card infrequently. Incentives are used to attract nonuser card holders with buying power. 3. Actionable Segments A business must be able to aim a marketing program strategy at each segment selected as a market target. As discussed earlier, especially magazines offer one means of selective targeting. Ideally, the marketing effort should focus on the segment of interest and not be wasted on non segment buyers cable television, magazine, and radio media are able o provide coverage of narrowly defined market segments. The internet offers great potential for direct marketing channels to reach specialized segments. Similarly, databases offer much focused access to buyers. 4. Cost/Benefits of Segmentation Segmentation must be financially attractive in terms of revenues generated and costs incurred. It is important to evaluate the benefits of segmentation. While segmentation may cost more in terms of research and added marketing expenses, it should also generate more sales and higher margins. The objective is to use a segmentation approach that offers a favorable revenue and cost combination.
E.g. British based ICI fertilizers experienced substantial losses in the late 1980’s, but rebuilt its business around an innovative market segmentation strategy. Research showed that farmers’ priorities in fertilizer purchasing were dominated by price only in 10% of cases; instead, farmers were more influenced by advanced technology, loyalty to traditional merchants, and loyalty to brands. ICI created new product ranges around these needs, restructured the business around these ranges, and built impressive profitability. 5. Stability over Time Finally, the segments must show adequate stability over time so that the firm’s marketing efforts will have enough time to produce favorable results. If buyers’ needs change too fast, a group with similar response patterns at one point may display quite different patterns several months later. The time period may be too short to justify using a segmentation strategy. However, this question is also one where the impact of narrowcast media and advanced production technology may drastically reduce the time over which a segment target needs to be stable for it to be an attractive target. Product differentiation and market segmentation The difference between product differentiation and market segmentation is not always clear. Product differentiation occurs when a product offering is perceived by the buyer as different from the competition on any physical or non physical product characteristics, including price. Using a product differentiation strategy, a firm may target an entire market or one (or more) segments. Competing firms may differentiate their product offerings in trying to gain competitive advantage with the same group of targeted buyers. Approaches to segment identification Segments are formed by: · · Grouping customers using descriptive characteristics and then comparing response differences across the groups. Forming groups based on response differences and determining if the groups can be identified based on differences in their characteristics.
Customer group identification After the product-market of interest is defined, promising segments maybe identified, using management judgment in combination with analysis of available information and/or marketing research studies. Consider, for example, hotel lodging services which shows the ways to segment the hotel lodging product-market. An additional breakdown can be made according to business and household travelers. These categories may be further distinguished by individual customer and group customer segments. Groups may include conventions, corporate meetings, and tour groups. Several possible segments can be distinguished. Consider Marriott’s Courtyard hotel chain. These hotels fall into the mind priced category and are targeted primarily to frequent business travelers who fly to destinations, are in the 40-plus age range, and have relatively high incomes. When using the customer group identification approach, it is necessary to select one or more of the characteristics of people or organizations as the basis of segmentation. Using these variables, segments are formed by: 1. Management judgment and experience 2. Supporting statistical analysis The objective is to find differences in responsiveness among the customer groups. We look at some of the customer grouping methods to show how segments are formed. Experience and Available Information Managements knowledge of customer needs is often guide to segmentation. For example, both experience and analysis of published information are often helpful in segmenting business markets. Business segment variables include type of industry, size of purchase, and product application. Company records often contain information for analyzing the existing customer base. Published data such as industry mailing lists can be used to identify potential market segments. These groups are then analyzed to determine if they display different levels of response. Segmenting using management judgment and experience, the Italian fashion producer and retailer Prada markets an extensive array of dresses, handbags, hats, shoes and other women’s apparel. The best selling $450 backpacks are designed to appeal to affluent women that do not want to flaunt their status. Each knapsack has a small triangular logo. Prada’s products offer an antistatic appeal to a segment of affluent women. The luxury retailer has 47 stores including 20 in Japan and two in the United States. Prada’s goods are also sold in department stores. Cross Classification Analysis Another method of forming segments is to identify customer using descriptive characteristics and compare response rates by placing the information in a table. Customer groups form the rows and response categories form the columns. Review of industry publications and other published information may identify ways to break up a product-market into segments. Standardized information services such as Information
Resources Inc. collect and publish consumer panel data on a regular basis. These data provide a wide range of consumer characteristics, advertising media usage, and other information that are analyzed by product and brand sales and market share. The data are obtained from a large sample of households through the United States. Similar statistical data are available in many overseas countries. Information is available for use in forming population subgroups within product-markets. The analyst can use man y sources, as well as management’s insights and hunches regarding the market. The essential concern is whether a segmentation scheme identifies customer groups that display different product and brand responsiveness. The more evidence of meaningful differences, the better chance those useful segments exist. Cross- classification has some real advantages in terms of cost and ease of use. There may be strong basis for choosing a segmenting scheme that uses this approach. This occurs more often in business and organizational markets, where management has good knowledge of user needs, because there are fewer users than there are in consumer product-markets. Alternatively, this approach may be a first step leading to a more comprehensive type of analysis. Database Segmentation The availability of computerized databases offers a wide range of segmentation analysis capabilities. This type of analysis is particularly useful in consumer market segmentation. Databases are organized by geography and buyers’ descriptive characteristics. They may also contain customer response information as shown in the AMEX cardholder illustration. Databases can be used to identify customer groups, design effective marketing programs, and improve the effectiveness of existing programs. The number of available databases is rapidly expanding, the costs are declining, and the information systems are becoming user friendly. Several marketing research and direct mail firms offer database services. Forming groups based on response differences
The alternative to selecting customer groups based on descriptive characteristics is to identify groups of buyers by using response differences to form the segments. A look at the segmentation analysis for the packaging divisions of Signode Corporation illustrates how this method is used. The products consist of steel strapping’s for various packaging applications. An analysis of the customer base identified the following segments: • Programmed buyers (limited service needs) • Relationship buyers • Transaction buyers • Bargain hunters (low price, high price)
Statistical analysis formed the segments using 12 variables concerning price and service trade-offs and buying power. The study included 161 Signode’s national accounts. Measures of the variables were obtained from sales records, sales managers and sales representatives. The segments vary in responsiveness based on relative price and relative service. The widespread adoption of CRM system offers greater opportunity for timely and detailed analysis of response differences between customers. The “data warehouse”, by integrating transactional data around customer types, makes possible complex analyses to understand differences in the behavior of different customer groups, observe customer life cycles, and predict behavior. Response difference approaches draw more extensively from buyer behavior information than the customer group identification methods discussed earlier. Note, for example, the information on Signode’s customer responsiveness to price and service. We now look at additional applications to more fully explore the potential of the customer response approaches.
1. Cluster analysis: Cluster analysis (a statistical technique) groups’ people
according to the similarity of their answers to questions such as brand preferences or product attributes. This method was useful to form segments for Signode Corporation. The objective of cluster analysis is to identify groupings in which the similarity within a group is high and the variation between groups is as great as possible. Each cluster is a potential segment.
2. Perceptual maps: Another promising segmentation method uses customer
research data to construct maps of buyers’ perceptions of products and brands. The information helps select market-target strategies, and decide how to position a product for a market target. While the end result of perceptual mapping Is simple to understand, its execution is demanding in terms of research skills. Although there are variations in approach , the following steps are illustrative:
• • • •
Select the product-market area to be segmented. Decide which brands compete in the product-market. Collect buyers’ perceptions about attributes for the available brands (and an ideal brand) obtained from a sample of people. Analyze the data to form one, two, or more composite attribute dimensions, each independent of the other.
• • • •
Prepare a map (two dimensional X and Y grid) of attributes on which are positioned consumer perceptions of competing brands. Plot consumers with similar ideal preferences to see if subgroups (potential segments will form. Evaluate how well the solution corresponds to the data that are analyzed. Interpret the results as to market-target and product-positioning strategies.
Finer Segmentation Strategies
A combination of factors may help a company utilize finer segmentation strategies. Technology may be available to produce customized product offerings. Furthermore, highly sophisticated database for accessing buyers can be used and buyers escalating preferences for unique products encourage consideration of increasingly smaller segments. In some situations an individual buyer may comprise a market segment. Thus an important segmentation issue is deciding how small the segment should be. Logic of Finer Segments Several factors working together point to benefits of considering very small segment in some cases, segment of one. These include:
The capabilities of companies to offer cost effective customized offerings. The desire of buyers for highly customized products and, The organizational advantages of close customer relationships.
Customized Offerings: offering customized products may be feasible because of extensive information flow and comprehensive database computerized manufacturing system and integrated value chains. At the center of these capabilities to provide buyers with customized offerings is information technology. Database knowledge computeraided product design and manufacturing, and distribution technology offer promising opportunities for serving the needs and preferences of very small market segments. This technology combined with the internet has led to the emergence of silver companies or micro multinationals. Small flexible organizations selling highly specialized products across the world. Diverse Customer Base: The requirements of an increasingly diverse customer base for many products are apparent. Buyers seek uniqueness and companies such as Lutron electronics try to respond to unique preferences. Global competitors seek to offer more attractive value in their goods and services.
Close Customer Relationships: companies recognize the benefits of close relationship with their customer. By identifying customer value opportunities and developing cost effective customized offerings, relationships can be profitable and effective in creating competitive barriers.
Finer Segmentation Strategies. Micro Segmentation: this form of segmentation seeks to identify narrowly defined segment using one or more of the previously discuss segmentation variables. It differs from more aggregate segment formation in that micro segmentation result in a large number of very small segments. Each segment of interest to the organization receives a marketing mix design to meet the value requirement of the segment. Mass Customizing: providing customized products at prices not much higher than mass produce item is feasible using mass customization concepts and method. Achieving mass customization objectives is possible through computer aided design and manufacturing software, flexible manufacturing techniques, and flexible supply system. There are too forms of mass customization. One employs standardized components but configuring the components to achieve customized product offering. E.g.: using standardized paint component retail store are able to create customized color shades by mixing the components. The other mass customization approach employees of flexible process. Through effective system design, variety can be created at very low cost. E.g.: Casio’s customization approach enables the companies to offer 5000 different watches. Variety Seeking Strategies: this product strategy is intended to offer buyers opportunities to vary their choices in contrast to making unique choices. The logic is that the buyers who are offered alternatives may increase their total purchases of a brand. Mass customization method also enables company to offer an expensive variety at relatively low prices, thus gaining the advantages of customized and variety offering. Finer Segmentation Issues: while the benefit of customization are apparent, there are several issues that are need to be examine when considering finer segmentation strategies.
How much variety should be offer to buyers?
What attributes are important in buyers choices and to what extend to they need
to be varied?
Will too much variety has negative effects on buyers?
Is it possible that buyers will become confused and frustrated when offered too many choices? Is it possible to increase buyer’s desire for variety creating a competitive advantage? What processes should be learned to about customer preferences? This may entail indirect method or involving buyers in the process. High variety strategies properly conceive and executed, offered powerful opportunities for competitive advantage by providing superior value to customer. As highlighted by the above issues, pursuing these finer segmentation strategies involve major decision including which strategy to pursue and how to implement the strategy. Important in deciding how fine the segmentation should be is estimating the value and cost trades of the relevant alternatives.
Selecting the segmentation strategy
Deciding how to segment The choice of a segmentation method depends on such factors as the • • Maturity of market The competitive structure
The organizations experience in the market The more comprehensive the segmentation process, the higher the cost of segment identification will be reaching the highest level when field research studies are involved and finer segmentation strategies are considered. It is important to maximize the available knowledge about the product market. An essential first step in segmentation is analyzing the existing customer base to identify groups of buyers with different response behavior. Developing a view of how to segment the market by managers may be helpful. In some instances this information will provide a sufficient basis for segment formation. If not experience existing information are often helpful in guiding the design of customer research studies. The five segmentation criteria discussed earlier helped to evaluate potential segments. Deciding if the criteria are satisfied rests with management after examining response differences among the segments. The segmentation plan should satisfy the responsiveness criterion plus the others criteria • End users are identifiable
• • •
They’re accessible via marketing program The segments is economically viable The segment is stable over time
The latter criterion may be less of an issue with mass customization since changes can be accommodated. It is useful to consider the tradeoff between the cost of developing a better segmentation scheme and the benefits gained.eg. Instead of one variable being issued to segment, a combination of 2 or 3 variables might be used. The cost of a more insightful segmentation scheme includes the analysis time and complexity of strategy development. The potential benefits include better determination of response differences which enable the design of more effective marketing mixed strategies. Importantly segmentation should not be viewed as static but as dynamic as dell learned more about the pc market, the segmentation approach involved and developed. The competitive advantage gained by finding a new market segment can be very important. Segment strategies are used by a wide range of small companies with excellent performance records. E.g. Segmenting the market for people. One way to segment is according to the used situation. The uses of paper include: • • • • • • Newspapers Magazines Books Announcements Letters Other applications
Crane and company, a firm competing in this market is the primary supplier of paper for printing money. The segment of the high quality paper market consists of single customer the US treasury. The company’s commitment to making quality products as sustained to competitors its competitive advantage in this segment since 1879. In the early 1990’s crane introduced a new currency paper designed to identify counterfeit bills by placing a polyester thread in the paper. The other 3 quarters of cranes sales includes fine writing papers and high quality paper products
Strategic analysis of market segments Each market segment of interest needs to be studied to determine its potential attractiveness as a market target. The major areas of analysis include: • • • • Customers Competitors Positioning strategy Financial and market attractiveness
Customer analysis: when forming segments it is useful to find out as much as possible about the customers in each segment. Variables such as those used in dividing product markets into segments are also helpful in describing the people in the same segment. The discussions of customer profiles include information needed to profile a product market. Similar information is needed for the segment profile although the segment level analyzes is more comprehensive than the product market profile. The objectives are to find descriptive characteristics but are highly correlated to the variables used to form the segments. Standardized information services are available for some product markets including foods, heath n beauty aids, and pharmaceuticals. Large markets involving many competitors make it profitable for research firms to collect
and analyze data that are useful to the firms serving the market. Information resources Inc., a Chicago based research supplier has combined computerized information processing with customer research methods to generate information for market segmentation. Its behaviors scan system electronically tracks total grocery store sales and individual household purchase behavior through complete Universal Product Code (UPC) scanner coverage. An essential part of the customer analyses its determining how well the buyers in the segments are satisfied. We know that customer’s satisfaction is measured by comparing customer expectation about the product and supporting services with the performance of the product and supporting services. Customer satisfaction depends on the perceived performance of a product and supporting services and the standards that customers use to evaluate the performance. The customer’s standards complicate the relationship between organizational product specification and satisfaction. Competitor analysis: market segment analysis considers the set of key competitors currently active in the market in which the segment is located plus any potential segment entrance. In complex market structures mapping the competitive arena requires detailed analysis. The competing firms are described and evaluated to highlight their strength and weakness. Competitor’s analysis includes Business scope and objectives Market position Market targets and customer base Positioning strategy Financial Technical Operating strengths
Management experience and capabilities Special competitive advantage
Positioning analysis: segment analysis involves some preliminary choice about positioning strategies. One objective of segment analysis is to obtain guidelines for developing positioning strategy. Flexibility exists in selecting how to position the firm with its customers and against its competition in its segment. Positioning analysis shows how to combine product, distribution, pricing and promotion strategies to favorably position the brand with buyers in the segment. Estimating Segment Attractiveness: the financial and market attractiveness of each segment needs to be evaluated. Market attractiveness can be measure by market growth rate projections and attractiveness assessments made by management. Financial analysis obtains sales, cost, and profit contribution estimates for each segment of interests. Since accurate forecasting is difficult if the projections are too far into the future. Detailed projections typically extend 2 to 5 years ahead. Both the segments competitors’ position evaluation and the financial forecast are used in comparing segments. Flows of revenues and cost can be weighted to take into account risks and the time value of revenues and expenditures. Segmentation fit and implementation: one important aspect of evaluating segment attractiveness is how well the segment matches the company capabilities and the ability to implement marketing strategies around those segments. New segment targets that do not fit into conventional information reporting, planning processes, and budget systems in the company may be ignored or not adequately resourced. Innovative models of customer segments and market opportunities may be rejected by managers or the culture of the organization. There are dangers that managers may prefer to retain traditional views of the market and structure information in that way or the segmentation strategy will be driven by existing organizational structures and competitive norms. It is to build effective marketing strategy around market segmentation mandates and emphasizes on actionably as well as technique and analysis. The issues that impact on the operational capabilities of a company to implement segmentation strategies are: • Strength in cross functional relationships may be pre requisite to deliver value to new segments
The ability to work with partners may be needed to develop new products and services to build a strong position in a key market segment.
Segment analysis illustration: A 2 year period is used for estimating sales, cost, contribution margin, and market share. Depending on the forecasting difficulty, estimates for a longer time period can be used. When appropriate estimates can be expressed as present values of future revenues and cost. Business strengths refer to the present position of the firm relative to the competition in the segment. Alternatively it can be expressed as the present position and estimated future position based upon plans for increasing business strength.
EXAMPLE 1 – HINDUSTAN LEVER LIMITED Hindustan Lever Ltd is a leading FMCG conglomerated in India whose success in management policies and strategies are taken as an example by many Indian companies and emulated. The decade of 1980 must have been a memorable one for Hindustan Levers Ltd (HLL) .For, in a typical David and Goliath war, the giant and an undisputed market leader in consumer non-durables in India suffered a humiliating defeat at the hands of a new and small firm, Nirma Chemicals . Nirma Washing Powder became a national brand soon after 1982, when the Indian Television went commercial and started color telecast. The product immediately caught
the fancy of the middle-income customers; who was finding it difficult to make both ends meet with a limited monthly income. Nirma was the lowest priced branded washing powder available in the grocery and co-operative stores .The middle class housewife was more than satisfied, as she could now choose a lower priced washing powder rather than the high priced Surf detergent powder from HLL. Nirma also had an impact on upper middle income and higher income families where it was used for washing their inexpensive clothes and linen. Initially, HLL responded by launching sales promotion campaigns on Surf—by offering a bucket at subsidized price for every 1 kg of Surf, or by trading premium brands of toilet soap with every kilogram of Surf. These schemes, however, could not stop the decline in the popularity of Surf. HLL then launched a head-on attack on Nirma .Without naming it (though it was obvious) they came up with an advertising commercial comparing 1 kg of surf with 1 kg of lowpriced yellow washing powder and showed that Surf washed more clothes than the lowpriced yellow washing powder—and hence it was economical to buy Surf. The commercial did not bring in any substantial results. It was at this time (around 1984) that HLL decided to take a fresh look at the market. Research was conducted throughout the country which revealed that different income groups of the consumers had varying expectations from detergents and washing powder, it also showed that different colors of washing or detergent powders were associated with different types of fabrics. For example, yellow colored washing or detergent powders were mainly bought by middle and lower middle or lower income group people. They washed all their fabrics and associated whiteness in clothes to a yellow colored powder .Also, middle class families used the blue colored Rin bar or the white colored Lux flakes for washing their expensive clothes. The research further indicated that blue or white colored detergent powders were bought by middle to higher income group people, and these colors were also associated with washing clothes clean. In fact, the housewife was known to add “blue to her laundry to give that extra whiteness to the white clothes. Interestingly, green was also a color that was perceived to clean extra-dirty clothes. Armed with this research on color perceptions and income groups, HLL launched the following : Sunlight (yellow) Wheel(green) Rin (blue) Surf Ultra(white)
Detergents powders for different market segments. This strategy of segmenting the markets, understanding its needs and then evolving marketing mix to suit separate segment needs helped HLL win back its lost market.
In fact Nirma made all other consumer product companies sit up and take a fresh look at their markets It announced ,for many, a beginning of an era of low priced products for a highly price sensitive Indian Market , and, to others ,an end of a mass marketing era.
EXAMPLE 2 – TITAN WATCHES Titan Industries is the world's sixth largest wrist watch manufacturer and India's leading producer of watches under the Titan, Fastrack, Sonata, Nebula, RAGA, Regalia, Octane & Xylys brand names. It is a joint venture between one of India's most respected business organizations, the Tata Group, and the Tamil Nadu Industrial Development Corporation (TIDCO). Its product portfolio includes watches, accessories and jewellery, in both contemporary and traditional designs. It exports watches to about 32 countries around the world with manufacturing facilities in Hosur, Dehradun, Goa and manufactures precious jewellery under the Tanishq brand name, making it India's only national jewellery brand. It is a subsidiary of the Tata Group.
After carrying out an in-depth market study, Titan identified three distinct Market segments for its watches. The segments were arrived at using benefit And income level as the bases.
1. The first consisted of the high income / elite consumers who were buying a watch
as a fashion accessory not as a mere instrument showing time. They were also willing to buy a watch on impulse. The price tag did not matter to this segment.
2. The next segment consisted of consumers who preferred some fashion in their
watches but to them price did matter. While they had the capacity to pay the price required for a good watch, they would not purchase a watch without comparing various offers in the market.
3. The third segment consisted of the lower-income consumers who saw a watch
mainly as a time-keeping device and bought mainly on the basis of price. For the first segment, Titan offered Aurum and Royale in the gold/ jewellery Watch range. They were stylish dress watches in all gold and precious metals. The prices ranged between Rs.20,000 and Rs. 1 lakh. For the middle segment, Titan offered the Exacta range in stainless steel, aimed at withstanding the rigours of daily life. There were 100 different models in the range. The price range was Rs.500-700. Titan also offered the RAGA range for women in this segment. And, for the third segment, Titan first offered the TIMEX watches and later, when the arrangement with Timex was terminated, the SONATTA range. The price range was Rs. 350 – 500. It was offered in 200 different models. Titan also offered the “Dash!” range for children.
EXAMPLE 3 – INDIAN AUTOMOBILE’S SEGMENTED ON BASIS OF PURCHASING POWER. The automobile industry in India is the ninth largest in the world with an annual production of over 2.3 million units in 2008. In 2009, India emerged as Asia's fourth largest exporter of automobiles, behind Japan, South Korea and Thailand. India has emerged as one of the world's largest manufacturers of small cars. According to New York Times, India's strong engineering base and expertise in the manufacturing of low-cost, fuel-efficient cars has resulted in the expansion of manufacturing facilities of several automobile companies like Hyundai Motors, Nissan, Toyota, Volkswagen and Suzuki.
In 2008, Hyundai Motors alone exported 240,000 cars made in India. Nissan Motors plans to export 250,000 vehicles manufactured in its India plant by 2011. Similarly, General Motors announced its plans to export about 50,000 cars manufactured in India by 2011. In September 2009, Ford Motors announced its plans to setup a plant in India with an annual capacity of 250,000 cars for US$500 million. The cars will be manufactured both for the Indian market and for export. The company said that the plant was a part of its plan to make India the hub for its global production business. Fiat Motors also announced that it would source more than US$1 billion worth auto components from India. According to Bloomberg L.P., in 2009 India surpassed China as Asia's fourth largest exporter of cars. Budget car segment It is the largest segment in Indian market. Here the entry level starts from Rs 1.5 to 3 lakh. Maruti 800Maruti 800 and Omni are the dominant players in these segments. With the launch of Tata NanoTata Nano with a price range of 1lakh the outlook of this segment has changed. This segment is sometimes referred to as the small car segment. Competition in this segment is extreme in Indian market. Compact car segment It lies between budget car and family car. Preferred price range is between Rs 3 to 4.5 lakh. Maruti Zen, Fiat Uno, Tata Indica, Santro, Matiz is some of the dominant players in this segment.
Family car segment The purchasing capacity of buyers of this segment is somewhat higher than that of the budget and compact car segment. Price ranges between Rs 4.5 to 6 lakhs. Maruti Esteem, Daewoo Cielo, and HM Contessa belongs to this segment. In India cars that are sold in India as ‘Budget Car’ and ‘Compact Car’ do not meet their purpose, especially in term of space, that they turn to ‘the family car segment’. Premium car segment This segment represents the buyer who require true world class luxury car. Price ranges between Rs 6 to 8 lakh. Ford Escort, Honda City, Mitsubishi Lancer, Audi 1800Lancer, Opel, Astra etc are some of the major cars in this segment.
Super luxury saloon segment Buyer in this segment looks for a real super premium segment car. Mercedes Benz E229, E-250, Rover Montego, Audi 6, BMW are the players in this segment. Obviously, this is a tiny segment in the Indian context.
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