INTRODUCTION

Concept of market segmentation

“Market segmentation is the process of dividing a market into distinct

subgroups of consumers with distinct needs, characteristics, or behavior,

who might require separate products or marketing mixes.” (Philip Kotler).

Market segmentation is the identification of portions of the market that are

different from one another .Segmentation allows the firm to better satisfy

the needs of its potential customers .The marketing concept calls for

understanding customers and satisfying their needs better than the

competitors .But different customers have different needs ,and it is rarely

impossible to satisfy all customers by treating them alike .Mass marketing

refers to treatment of market as a homogenous group and offering the

same marketing mix to all customers .Mass marketing allows economies of

scale to be realized through mass production ,mass distribution and mass

communication .The drawback of mass marketing is that customer needs

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and preferences differ and the same offering is unlikely to be viewed as

optimal by all customers. If firm ignored the differing customer needs,

another firm likely would enter the market with a product that serves a

specific group, and the incumbent firms would lose those customers.

Target marketing on the other hand recognizes the diversity of customers

and does not try to please all of them with the same offering. The first step

in target marketing is to identify different market segments and their needs.

This project aims to study market segmentation strategy of Lakme with

special reference to product Lakme lipsticks.

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Industry profile

Cosmetic industry-the burgeoning Indian cosmetic industry is worth

around Rs.1200 crore, with the organized sector accounting for a share of

Rs.500 crore and the rest being with the unorganized segment. while the

total cosmetic market is growing at a rate of 20% per annum, the new back-

to- nature fad is expanding the herbal cosmetics segment to grow at a

phenomenal rate of 70%.A decade ago, the upper segment of the cosmetic

market was firmly in the grip of Lakme whose creams, lipsticks and blush

adorned many an Indian face. It was challenged by tips &toes when the

company started offering qualitative product at competitive prices. And the

attraction of a potentially lucrative market lured a plethora of companies,

big and small, to jump into the fray.

Of late, the market has been witnessing the lot of hectic competition.

Indian companies are being forced to defend their position as more

internationally famous brands come into the Indian market. Revlon

International, Avon, Garnier laboratories and Oriflame etc, have entered

Indian market through different joint ventures.

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MARKET SHARE OF LAKME PRODUCTS

5%
10%

35% Lakme
Revlon
21% Maybeline
Loreal
Other

29%

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Company profile

Lakme is an Indian brand of cosmetics, owned by Hindustan Unilever and

run by CEO Pushkaraj Shenai.Lakme started as 100% subsidiary of Tata

Oil Mills (Tomco),part of the Tata Group, it was named after the French

opera Lakme, which itself is the French form of Lakshmi,the goddess of

wealth, also renowned for her beauty. Indian cosmet Lakme was started in

1952,famously because the then Prime Minister, Jawaharlal Nehru, was

concerned that Indian women were spending precious foreign exchange on

beauty products, and personally requested JRD Tata to manufacture them

in India.Simone Tata joined the company as director, and went on to

become its chairman. In 1996 Tata sold off their stakes in Lakme Lever to

HLL, for Rs 200 crore, and went on to create Trent and Westside. Even

today, when most multinational beauty products are available in India,

Lakme still occupies a special place in the hearts of Indian women.

In the Brand Trust Report 2012,Lakme was ranked 104 th among India’s

most trusted brands and subsequently, according to the Brand Trust

Report 2013,Lakme was ranked 71st among India’s most trusted brands

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according to the Brand Trust Report 2014,a study conducted by Trust

Research Advisory, a brand analytics company.

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OBJECTIVE OF THE STUDY

Not all individuals have similar needs. A male and a female would have

varied interests and liking towards different products. A kid would not

require something which an adult needs. A school kid would have a

different requirement than an office goer. Market Segmentation helps the

marketers to bring together individuals with similar choices and interests

on a common platform.

 Market Segmentation helps the marketers to devise appropriate

marketing strategies and promotional schemes according to the tastes

of the individuals of a particular market segment. A male model would

look out of place in an advertisement promoting female products. The

marketers must be able to relate their products to the target segments.

 Market segmentation helps the marketers to understand the needs of

the target audience and adopt specific marketing plans accordingly.

Organizations can adopt a more focused approach as a result of

market segmentation.

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 Market segmentation also gives the customers a clear view of what to

buy and what not to buy. A Rado or Omega watch would have no

takers amongst the lower income group as they cater to the premium

segment. College students seldom go to a Zodiac or Van Heusen store

as the merchandise offered by these stores are meant mostly for the

professionals. Individuals from the lower income group never use a

Blackberry. In simpler words, the segmentation process goes a long

way in influencing the buying decision of the consumers.

An individual with low income would obviously prefer a Nano or Alto

instead of Mercedes or BMW.

 Market segmentation helps the organizations to target the right

product to the right customers at the right time. Geographical

segmentation classifies consumers according to their locations. A

grocery store in colder states of the country would stock coffee all

through the year as compared to places which have defined winter and

summer seasons.

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 Segmentation helps the organizations to know and understand their

customers better. Organizations can now reach a wider audience and

promote their products more effectively. It helps the organizations to

concentrate their hard work on the target audience and get suitable

results.

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Bases for segmentation

Lakme lipstick market is a consumer market. Consumer market can be

segmented on the following customer characteristics.

 Geographic

 Demographic

 Psychographic

 Behavioral

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Geographic Segmentation

The following are some examples of geographic variables often used in

segmentation.

 Region: by continent, country, state or even neighborhood

 Size of metropolitan area: segmented according to size of population

 Population density: often classified as urban, suburban or rural

 Climate: according to weather patterns common to certain geographic

regions

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Demographic Segmentation

Some demographic segmentation variables include.

 Age

 Gender

 Family size

 Family lifecycle

 Generation: baby-boomers, Generation x etc.

 Income

 Occupation

 Education

 Ethnicity

 Nationality

 Religion

 Social class

Many of these variables have standard categories for their values. For

example, family lifecycle often is expressed as bachelor, married with no

children (DINKS: Double Income No Kids), full nest, empty-nest, or solitary

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survivor. Some of these categories have several stages, for example, full nest

I, II or III depending on the age of the children.

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Psychographic Segmentation

Psychographic segmentation groups customers according to their lifestyle.

Activities, interests, and opinions (AIO) surveys are one tool for measuring

lifestyle. Some psychographic variables include.

 Activities

 Interests

 Opinions

 Attitudes

 Values

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Behavioral Segmentation

Behavioral segmentation is based on actual customer behavior toward

products. Some behavioralistic variables include:

 Benefits sought

 Usage rate

 Brand loyalty

 User status: potential, first-time, regular, etc.

 Readiness to buy

 Occasions: holidays and events that stimulate purchases

Behavioral segmentation has the advantage of using variables that are

closely related to the product itself. It is a fairly direct starting point for

market segmentation.

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Process of market segmentation

Four step market segmentation process

to develop a successful marketing strategy, it is important to identify the

appropriate consumer segments. Following four steps are perform to

conduct the market segmentation process effectively.

Step 1: Identify segmented markets

The first step of the market segmentation process is to identify the

segmented markets. It is important to select the segmenting strategy that

most accurately categorizes consumers according to your product or

service.

For example, suppose that your company manufactures infant safety seats.

The decision to use the age-oriented strategy to segment the market may

not be effective because people become parents at different ages.

Promotions and advertising directed toward twenty-something parents may

not appeal to older couples with children.

Step 2: Analyze each segment

Step two of the market segmentation process is to analyze each segment.

analyze the consumers that comprise each segment. You must determine

the similarities that connect the members of each segment, and identify the

differences that separate one segment from another.

During the analyzing step, you should outline the buying habits, product

usage rates, attitudes, and lifestyle choices that represent a typical

customer in each segment. Demographic and geographic information will

provide a clear customer profile to help you determine the market segment

best suited for your product or service.

Step 3: Evaluate market opportunities

The third step of the process is to evaluate your market opportunities. The

customer profiles you create help you identify the market segments that

offer the sufficient benefits you need to achieve company goals and

objectives.

When evaluating each segment, you should consider your ability to reach

the targeted consumer, the number of potential customers within the

segment, your ability to measure the segment's progress, and the segment's

compatibility with your company's mission.

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During this step, you must also forecast your company's market share

possibility in each segment. By defining the sales potential, you can justify

the need to secure the necessary resources to implement your marketing

strategy.

Step 4: Select target segments

The fourth step of the market segmentation process is to select the

appropriate target segments. The research, examination, and evaluation of

the market segments allow you to evaluate the profit potential of each

segment. Once you select one or more target segments, you can develop

products and marketing strategies to satisfy your customers' needs.

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Criteria for segmentation

Study is made under following criteria:

1. Measurable and Obtainable:

The size, profile and other relevant characteristics of the segment must be

measurable and obtainable in terms of data.

It has to be possible to determine the values of the variables used for

segmentation with justifiable efforts. This is important especially for

demographic and geographic variables. For an organization with direct sales

(without intermediaries), the own customer database could deliver valuable

information on buying behavior (frequency, volume, product groups, mode

of payment etc).

2.Relevant:

The size and profit potential of a market segment have to be large enough to

economically justify separate marketing activities for this segment. If a

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segment is small in size then the cost of marketing activities cannot be

justified.

3.Accessible:

The segment has to be accessible and servable for the organization. That

means, the customer segments may be decided considering that they can be

accessed through various target-group specific advertising media such as

magazines or websites the target audience likes to use.

4.Substantial:

The segments should be substantial to generate required returns. Activities

with small segments will give a biased result or negative results.

5.Valid:

This means the extent to which the base is directly associated with the

differences in needs and wants between the different segments. Given that

the segmentation is essentially concerned with identifying groups with

different needs and wants, it is vital that the segmentation base is

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meaningful and that different preferences or needs show clear variations in

market behavior and response to individually designed marketing mixes.

6.Unique or Distinguishable or Differentiable:

The market segments have to be that diverse that they show different

reactions to different marketing mixes. If not then there would have been no

use to break them up in segments.

7.Appropriate:

The segments must be appropriate to the organization’s objectives and

resources.

8.Stable:

The segments must be stable so that its behavior in the future can be

predicted with a sufficient degree of confidence.

9.Congruous:

The needs and characteristics of each segment must be similar otherwise

the main objective of segmentation will not be served. If within a segment

a unique marketing strategy cannot be implemented for everyone. This will

call for a further segmentation.

10. Actionable or Feasible:

It has to be possible to approach each segment with a particular marketing

programme and to draw advantages from that. The segments that a

company wishes to pursue must be actionable in the sense that there

should be sufficient finance, personnel and capability to take them all.

Hence, depending upon the reach of the company, the segments must be

selected.

11. Some general considerations:

Apart from the above-mentioned characteristics, the segment must have

some other features:

a. Growth potential

b. Profitable

c. Less risk prone

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 d. Less competition intensive

Benefits of market segmentation

1. The marketer can spot and compare marketing opportunities. He can

examine the needs of each segment and determine to what extent the

current offering satisfies these needs. Segments which have low level

of satisfaction from current offerings represent excellent opportunities

for the marketer.

2. With the help of knowledge about different segments, the marketer can

better allocate the total marketing budget. Differences in customer

response to different marketing tools serve as the basis for deciding on

the allocation of market funds to different customer groups.

3. The marketer can modify his product service and marketing appeals to

suit the target segment.

4. Segmentation facilitates setting up of realistic selling targets and

priorities.

5. Management can identify new profitable segments which deserve

special attention.

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6. It is possible to deal with competition more effectively by using

resources more effectively.

7. Appropriate service packages can be developed for each market

segment.

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Limitations of market segmentation

1. Segmentation increases costs. When a firm attempts to serve several

market segments, there is a proliferation of products. Cost of

production rises due to shorter production runs and product

variations.

2. Larger inventory has to be maintained by both the manufacturer and

the distributors.

3. Promotion and distribution expenditures increase when separate

programme are used for different market segments.

4. When characteristics of a market segment change investment made

already might become useless.

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RESEARCH METHODOLOGY

Research design

Research is exploratory. When you use no earlier model as a basis of your

study, the most usual reason for using this approach is that you have no

other choice. Normally you would like to take an earlier theory as a support,

but there perhaps is none, or all available models come from wrong

contexts.

Exploratory research means that hardly anything is known about the

matter at the outset of the project. You then have to begin with a rather

vague impression of what you should study, and is also impossible to make

a detailed work plan in advance.

The gradual process of accumulating intelligence about the object of study

means also that it will be impossible to start by defining the concepts of

study. You have to start with a preliminary notion of your object of study,

and of its context. During the exploratory research project, these provisional

concepts then gradually gain precision.

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Data source

The research is based on:-

Primary data

1) Questionnaire

Secondary data

 Internet

 Company reports & broachers

 Magazines

 Newspapers, articles & journals

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ANALYSIS OF MARKET SEGMENTS

Demographic segmententation

AGE:-

EXPENDITURE ON LIPSTICK BY DIFFERENT AGE GROUP PEOPLE

Sr.No. Age Group No of users out of

100
1 60~69 yrs 10
2 50~59 yrs 16
3 40~49 yrs 27
4 30~39 yrs 30
5 15~29 yrs 17
Total 100

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 No of users out of 100
35
30
25
20 No of users out of
15 100
10
5
0
60~69 50~59 40~49 30~39 15~29
yrs yrs yrs yrs yrs

INFERENCE

From the table and graph it is clear that number of users between the age

group of 15 to 49 is more as compare to 50+.Accordingly target customers

for lipstick product is between 15 to 49 years of age.

GENDER: - Target female gender

Sr.no Income level(earning Customers(expenditure

per month) on lipstick per month) INCOME: -

From the table it is clear that women with income level between31000

to110000 can afford to buy lakme lipstick, since lakme produce high price

product which can be afforded by these income level groups. Thus target

customers for lakme lipstick are middle class and upper class.

OCCUPATION: -

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Sr.no Occupation Customers
1 Student 33
2 Working women 45
3 House wife 22
Total 100

Customers
50
45
40
35
30
25 Customers
20
15
10
5
0
Student Working House wife
women

INFERENCE

It is clear from the above table and graph that student and working women

are the frequent users of lipstick product and thus provide good number of

customers for lipstick product.

Geographic segmentation

REGION

Region wise lipstick usage.

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 Lipstick usage
25

20

15 Lipstick usage
10

0
Bengal Gujarat Punjab Tamil

INFERENCE

From the graph it is clear that Bengal and Gujarat both states provide large

market for lipstick in India. Thus Lakme should open more retail shops in

these states.

RURAL Vs URBAN AREA:-

Particular Urban area (per month) Rural area (per month)

expenditure per person

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 Average Cosmetic expenditure per person
1000
900
800
700
600
500 Average Cosmetic
400 expenditure per
300 person
200
100
0
Urban area Rural area (per
(per month) month)

INFERENCE

It is clear from the above table and graphs that cosmetic expenditure in

rural area very low. Therefore target market for lakme lipstick should be

only urban area because of its high priced products.

Psychographic segmentation

ATTITUDE

 Some buyers have compulsive buying attitude. This segment should be

target of lakme lipstick products.

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  Some buyers are experimental especially young ones. Lakme should

try to attract them by providing lipstick with large number of color

option.

SOCIAL CLASS

 Upper middle class

 Lower upper class

 Upper upper class

Lakme should target these different class segment as per there income level,

culture and values.

Behavioral Segmentation

OCCASION: -Lakme should introduce its product under two different

categories

 Special occasion –Bright shades of lipstick for party wear.

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  Regular occasion-Light and sober shades of lipstick for office wear.

BENEFITS:-Customers require lipstick which can last longer and give

shine in single stroke. Lakme should try to provide lipstick product with

these features.

USAGE RATE:-Some customers are frequent users of lipstick. Lakme

should target such customer through different marketing policies.

USER STATUS:-

 Potential -Lakme should target non-users by informing them about

various types of lakme lipstick available in market to suit their

requirement through advertisements, personal selling etc.

 First time -Lakme should encourage them through various marketing

policies to buy more products in future.

 Regular –Lakme should understand their needs and customize its

product according to their requirement in order to retain them.

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BRAND LOYALTY:-Many of the buyers purchase products of same brand

name because of its image for quality products. Such customers should be

retain by lakme by providing them with quality products.

FINDINGS

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In the market following lipstick are available for different segments of

society

1. Lakme Absolute Gloss Addict:-Product of Lakme created for women

who work as models in fashion shows. It is available in 15 glamorous

shades.

2. Lakme Absolute Lip Sync:-Product of Lakme specially designed for

women whose job is to travel from one place to another. These lip

colors are wearable during both day and night.

3. Lakme 9 To 5 Matte Lip Color:-This is an exclusive lipstick range

especially dedicated for working women. These lipsticks come in subtle

shades perfect for office wears.

4. Lakme Enrich Satin Lip Color;-These are the most popular and

affordable lipstick of Lakme

5. Elle 18 Color Pops Lipstick;-Created by Lakme with animated

character on it make its more appealing for one to get attracted to it

especially the teenagers and young girls.

Pros of Lakme lipstick products

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  Lakme provide wide range of lipstick shades.

 It’s provides quality products.

 Provide lipsticks with nice fragrance.

 Provide easy to handle products.

 Provide rich color lipstick which gives great finish to lips.

 Elle 18 products introduce by lakme is easily available and affordable.

 Provide product fit for Indian outfits.

Cons of Lakme lipstick products

 Lakme products are overpriced.

 It advertises its product that they give long lasting effects but they fail

in this area.

 Its some products like lakme enrich satin lipstick#160 are not at all

suitable for Indian skin tones.

 It’s some lipstick products have very limited shades.

SUGGESTIONS
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1. Lakme’s products are overpriced. It should try to lower their cost.

2. It should eliminate faults found in its lipstick products. For example

Elle 18 Color Pop Lipstick Rusty is not suitable for sensitive skin and

also full ingredient list on it is missing.

3. In many of its lipstick products it provides very less shades of color.

Thus it should introduce more colors for such lipsticks.

4. For most of its products it advertises that they give long lasting effect,

but they not. Lakme should either make its products work like it or it

else it should not advertise them like that.

5. Some of its products are weird in taste and smell. For example Lakme

Enrich Satin Lip Color #162 has overwhelming medicinal fragrance

while Lakme Enrich Satin Lipstick #160 is weird to taste. Lakme

should eliminate such flaws.

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CONCLUSION

Market segmentation is very important for any organization. Segmentation

allows the firm to better satisfy the needs of its potential customer. During

my research, I found that the segmentation of market by Lakme for its

product lipstick is quite satisfactory as Lakme is gradually coming up with

products for different segment of the society.

Though Lakme does not cater to the low level income group but the Elle-18

range it offers is low-priced and hence can satisfy this end of the market

also. Moreover Lakme understands the need of customization and introduce

products according to the convenience of its customers.

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BIBLIOGRAPHY

Websites:-

www.google.com

Text books:-

Marketing Management

Dr.S.C.Gulhane

R.C.Gulhane

Dr.R.K.Cham

Dr.M.L.Vanjari

Dr.A.S.Gulhane

(SHETH publisher’s pvt.ltd.)

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