Market segmentation of computers

Having taken look at the segmentation of the automobile market in the last post, we shall now take a look at the segmentation of the computer market; which is one of the fastest growing markets globally.

·        Geographic segmentation

In the segmentation of computers, geographical segmentation yet again plays a very important role. This is because the demands of people would vary according to their regions. A very good example of this is the computer market in India. Few years ago, laptops were not at all popular in the Indian computer market which was dominated by desktops, despite the fact that laptops were very popular in the world market. Then arrived the LCD screen desktops and later the desktops gave way to laptops.

This happened because the laptops were very expensive for the Indian customer as compared with desktops. So, a global computer manufacturer would have after geographical segmentation, focussed more on the sale of computers as compared to laptops. This is not the case with India in isolation, and is common to most of the developing nations.

Even in India, further geographic segmentation would show that laptops are still not too popular in small cities and towns, where it’s still quite an expensive item for the potential buyers.

·        Demographic segmentation

Demographic segmentation plays a very important role in the computer market. It has been seen recently that most of the laptop manufacturers are coming with more and more coloured laptops in contrast to the black or silver coloured laptops. This has been done to attract the young customers towards the product.

Based on demographic segmentation, manufacturers have come up with different configuration of their product models. For example, a student may not necessarily require a computer with a very large memory space, which would definitely be the case of a professional photographer.

Also, based on demographic segmentation, manufacturers are coming up with small laptops or “net-books”, which are around 40% less expensive than the normal laptops. These having a surprisingly long power back up and are much smaller in size. These have been very popular in the corporate sector, where people like to work in cars and flights, and definitely like to be hassle free from the charger, sockets, etc.

·        Psychological segmentation

Based on the psychological segmentation, manufacturers of computers come up with different variants in the same model, which have different prices, features and configurations. Sony Vaio laptops are an example of this. More recently, the manufacturers of Sony Vaio have come up with less expensive laptops because of the brand popularity and the perception that a Vaio laptop is technologically more advanced and expensive than its competitors. More and more people would thus be attracted towards it due to its affordability.

·        Behavioural  segmentation

Behavioural segmentation is done on the basis of user status, requirements, etc. This is another important basis of segmentation of computers. Now more and more computer manufacturers are coming up with customised laptops. A very good example of this is “Dell”, where one has the option to customise his/her laptop. The customer places the order on the net stating the configuration he requires and the laptop is customised and delivered to the customer’s doorstep within a week.

Having seen the basis of segmentation of computers too, it should be noted that in most cases if a product falls under the low price range, an organisation resorts to mass marketing. However in case of products lying in the premium price category, an organisation on most occasions opts for multi-segment, single segment and micro marketing.

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Market segmentation for automobiles

In today’s times, the automobile sector is robust with growth and more and more players are entering the automobile industry. The meaning of market segmentation was discussed in the last post and here an attempt has been made to get an overview of the market segmentation of automobiles.

·        Geographic segmentation

Geographical segmentation is one of the most important basis of segmentation of the automobile sector, especially in large sized countries like India, where the conditions in different regions.

Taking the segmentation in India itself, we find that manufactures of tractors would focus only on those areas where agriculture is of prime importance and would target those agriculturists who have sizeable land holdings and have the resources to buy a tractor.

On the other hand, commercial vehicle companies would segment the market on the basis of concentration of industries in different regions.

Luxury car makers would definitely target the metropolitan regions for the sale of their cars, whereas small car makers would also take into account developing cities and townships into account during the process of segmentation of their products. 

·        Demographic segmentation

Another important basis for segmentation of the automobile sector is demographic segmentation. Demographic segmentation provides a base marketing of products according to the income, status, age, etc.

Manufactures of small cars like Nano would primarily focus on the segment of the people belonging to the middle class and here comes lies the demographic segmentation. On the other hand, luxury car manufacturers would focus more on the high income segment.

Similarly, demographic segmentation plays an important role in the two wheeler market. Bike manufacturers generally target young to middle aged people. More and more manufactures are coming with automobiles for women, which have special features and are easy to use.

According to the age of the target market group, automobile manufacturers would come up with different colour variants, for instance bright and flashy colours for the young and vice versa.

·        Psychological segmentation

Based on psychological segmentation, automobile manufacturers come up with different variant of the models of their products. This has been largely seen in the case of cars, where companies generally come up with two or three variants of the same model, and it has been observed by industry analysts that the variant of the medium variant of the model sells the most.

Tag-lines such as “Men are Back” (used by Maruti Suzuki for the launch of a new car) and “Definitely Male” (used by Bajaj for a popular bike) target a particular category of individuals and help to increase sales and popularity in that segment.

Manufacturers of luxury cars like Ferrari, Porsche, etc target the section of the society with a large disposable income and high status, and this can be achieved by psychological segmentation.

·        Behavioural  segmentation

As mentioned earlier, behavioural segmentation is done on the basis of the benefits sought, loyalty status, etc.

This is another important means for segmentation in the automobile sector, and taking yet again the example of a car, Daimler, the manufacturer of luxury car Maybach, customises the cars according to the needs and requirements of the products.

Thus, through some examples, we have seen how the market for automobiles is segmented.

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Market Segmentation

Market Segmentation may be defined as the process of dividing a potential market into distinct sub-markets of consumers with common needs and characteristics. It is essential for an organisation to divide the market into different segments because the total market for a product or service is quite large and heterogeneous. Segmenting is done on the basis of identifying groups of customers who share a similar set of need and wants. For the segmentation to be effective, the segmentation done should be measurable, sustainable, differential, accessible and actionable.

Segmentation is generally done on the following parameters:

·       Geographic segmentation

The region, city size, climate, etc matter a lot in segmenting the market on the basis of geographic segmentation. The main advantage here is that it reflects the physical location of the market and the market’s attending conditions.

·       Demographic segmentation

Demographic segmentation divides the market on the basis of on the basis of age, sex, income, education, religion, etc. The segmentation of the market on the basis of demographics is quite old. Segmentation on this basis often works as proxy for finding similarity in behavioural patterns.

·       Psychological segmentation

Psychological segmentation is done on the basis of personality, life style, etc. A person’s life style, social class, culture and personality rest at his mind, which can be tapped by resorting to psychological segmentation.

·       Behavioural  segmentation

This is done on the basis of benefits sought, user status, loyalty status, usage rate, etc. Behavioural segmentation is based on the consumer’s response to his requirements.

After a proper segmentation, a marketing mix has to be developed for each segment, and an organisation can go for:

ü  Mass marketing

ü  Multi-segment strategy development and marketing

ü  Single segment strategy development and marketing

ü  Micro marketing

·       Local marketing and

·       Individual marketing

In the next two posts, we’ll take a look at the market segmentation of automobiles and computers.

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Marketing as a system of interacting business activities

“Marketing is a total system of interacting business activities designed to plan, price, promote and distribute want satisfying products to target markets to achieve organisational objectives” - William J. Stanton

On the basis of the above definition, it can be said that:

·         The entire system of business activities should be market or customer oriented, and aimed at recognising and satisfying the wants of customers.

·         Marketing is an integrated process rather than a fragmented process.

·         Marketing activities start with the generation of the product idea and end only after the wants of the consumers are satisfied.

With reference to the definition given by William J. Stanton, we would now discuss:

ü      The marketing system

ü      Strategic plans

ü      Satisfaction of customer wants and

ü      Selected market segments

The marketing system

Marketing is a system of integrated business activities. The marketing system consists of several coordinated business activities which are known as marketing functions. Marketing functions are involved in the marketing of goods or services that are produced or rendered by the organisation. Some important functions of marketing are:

• Functions of research (marketing research, product planning and development, etc)
• Functions of exchange (buying, assembling and selling, etc)
• Functions of physical treatment (standardisation, grading, branding, storage, etc
• Functions of facilitating exchange (salesmanship, advertising, insurance, etc)

Marketing as a system serves as a link between the organisation and the society. The activities of marketing are meant to provide benefits to the entire society. These benefits can be provided by a sound and efficient marketing system.

The marketing system not only operates in an environment outside the organisation, but it operates in an organisation inside the organisation also (which are the macro and micro environments respectively).

The micro environment consists of the factors close to an organisation that affect its ability to serve its customers, some of them being- the organisation itself, the suppliers, marketing intermediaries, customer markets, competitors and the general public at large.

On the other hand, the macro environment consists of the larger societal forces that affect the micro environment some of them being- demography, economic environment, natural factors, technology availability, and political and social forces.

It is also to be noted that the marketing system serves as a link between the marketing concept and the marketing process.

Strategic plans

The activities that constitute the marketing system are designed in a manner so as to develop strategic plans in forms of marketing mix. The marketing mix basically comprise of the four Ps- Product, Price, Promotion and Place or Physical Distribution.

Each of the above Ps should be designed in a manner that is most appropriate for the target group of customers. Also, there should be a proper matching and integration of the various elements of the marketing mix in order to evolve an efficient system. A separate strategy has to be developed for each of the above Ps, which in turn need to be integrated with the other strategies of the organisation so as to achieve organisational goals. For instance, the product mix may be further classified and sub divided on the basis of the attributes, design, support services, etc, which have to be integrated with the other components of the marketing mix accordingly so as to achieve organisational goals.

Satisfaction of customer wants

The most important function of marketing is to satisfy the needs and wants of the customers. An organisation will be able to grow only if customers are satisfied. Satisfied customers not only come back for the fulfilment of their wants, but also tell others about their experiences with the organisation, leading to more and more people to try out the product/service being offered, which in turn increases the customer base and ensures growth. Customer satisfaction also directly results into customer loyalty. The reverse would happen in case of unsatisfied customers.

Today, more and more organisations are realising the importance of customer satisfaction, and are aiming for Total Customer Satisfaction, where customer satisfaction is both a goal and a marketing tool for companies. Organisations regularly provide financial and other incentives to the product to retain customer. This is because losing customers can dramatically affect the profitability and the market position of an organisation. It has been estimated that the cost of attracting a new customer is almost five times higher than the cost of retaining an existing customer!

Market Segmentation

Market Segmentation may be defined as the process of dividing a potential market into distinct sub-markets of consumers with common needs and characteristics. It is essential for an organisation to divide the market into different segments because the total market for a product or service is quite large and heterogeneous. Segmenting is done on the basis of identifying groups of customers who share a similar set of need and wants.

Segmentation is generally done on the following parameters

·         Geographic segmentation (on the basis of region, state climate, city, etc)

·         Demographic segmentation (on the basis of age, sex, income, education, religion, etc)

·         Psychological segmentation (on the basis of personality, life style, etc)

·         Behavioural  segmentation (on the basis of benefits sought, user status, loyalty status, usage rate, etc)

·         Value Based segmentation (on the basis of profitability, etc)

For the segmentation to be effective, the segmentation done should be measurable, sustainable, differential, accessible and actionable.

After a proper segmentation, a marketing mix has to be developed for each segment, and an organisation can go for mass marketing, multi-segment marketing, micro marketing, etc.

The customer is the focus of the organisation which aims to build a strong and profitable relationship with the customer. The organisation aims to attain its objective of having a profitable relationship with its customers by developing a sound marketing strategy. The market segmentation, targeting and positioning helps the organisation to develop an appropriate target market and a prospective customer base. Segmentation helps the organisation to divide the total market into small segments based on different characteristics and features.

The marketing strategy helps the organisation to design a proper and the most suitable product mix comprising of the four Ps- Product, Price, Place and Promotion. The marketing strategy is in turn developed by proper and extensive market analysis, planning, implementation and control.

Thus, it can be concluded that marketing is an integrated set of activities, which are performed to attain the objective of customer satisfaction.

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Budget 2011 update

Bowing to demand from all quarters, Finance Minister Pranab Mukherjee on Tuesday (March 22) announced withdrawal of the proposed 5 per cent service tax on airconditioned hospitals with more than 25 beds and on diagonistic services. For details, see here.

Budget 2011 - Highlights

Old tax exemption limit (Rs.)	New tax exemption limit (Rs.)	Category
160000	180000	Men
190000	190000	Women
240000	250000	Senior (60 yrs from 65)
240000	500000	Very senior citizens (over 80 yrs) {new category this yr}
Education cess of 2% and 1% for primary and higher education, respectively.

·        India has been projected to grow at 9% in 2011-2012.

·        The 5% rate of inflation has been projected.

·        DTC would be implemented from April 1, 2012.

·        Fiscal deficit of 5.1% is estimated in FY 11.

·        Aim to cut fiscal deficit to 4.6% in FY 2012.

·        Revenue deficit expected to be 1.8% in FY 2012.

·        An attempt will be made to bring down the fiscal deficit to 3% by 2014.

·        The surcharge on domestic companies has been reduced from 7.5% to 5%.

·        The rate of Minimum Alternate Tax (MAT) has been increased from 18% to 18.5%.

·        FIIs have been allowed to invest in MFIs.

·        The Foreign funds Investment limit in corporate infrastructure bonds has been increased four- fold to $25 billion.

·        No FDI in multi brand retail for the time being.

·        A divestment target of Rs. 40000 crores has been set.

·        There is a plan to provide Rs. 3000 crores to NABARD.

·        The rate of Service Tax has been maintained at 10%.

·        An Excise duty of 10% would be imposed on branded clothes.

·        Eating out in restaurants that serve liquor would be costlier by 3%.

·        130 items have been brought into the excise duty net for the first time with a 1% duty.

·        Private Hospitals and diagnostic tests have been brought under the service tax net, thus would cost 5% more.

·        An Excise duty of 1% is to be charged on branded jewellery.

·        The Excise duty on LED bulbs halved to 5%.

·        Service tax is expected to generate 19% higher revenue next year.

·        MAT has been imposed on Special Economic Zones.

·        RBI to sell stakes in NABARD, NHB to the government for Rs 1430 crores and Rs 450 crores, respectively.

·        The Housing loan limit for priority sector lending had been raised to Rs 25 lakhs (due to increase in prices as a result of inflation).

·        Interest subsidy of 1% has been extended to home loans up to Rs 15 lakh and property worth Rs 25 lakh.

·        Increase in overall social sector spending by 17%.

·        Spending on education and healthcare to increase by 24% and 20%.

·        The Farmer credit target has been increased to Rs 4.75 lakh crore.

·        Rs 40000 crore is to be allocated for NREGA.

·        Poor users of kerosene, cooking gas and fertilizers to get cash subsidies by March 2012.

·        The 10 year tax holiday for power projects gets a one year extension.

·        The definition of CKD (completely knocked down) units has been changed, and is expected to bring a steep hike in prices of certain cars.

·        LLPs (limited liability partnerships) to pay a tax of 18.5%. {In case of LLPs, the liability of the partners is restricted to the amount of their capital contribution, & a partner’s personal assets are not at risk, except when he is himself responsible for the claim}

·        On the budget day the stock market zoomed 499 points and then lost several points to end at a high of 122.5 points.

·        On the next day of the budget, the stock market gained 623 points, which is the biggest single day jump in 22 months.

   

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Rural Marketing

 

Rural marketing is promotion of a company's products in the rural market by using strategies which differs from that of urban market, the rural market is more price sensitive, but it has preference for quality. Rural marketing can be defined in terms of the location (villages) and occupation (mainly farming).

Reasons for going Rural:

·       Increase in demand due to an increase income.

·       Saturation of Urban Markets (earning profits were thus difficult)

·       Tough competition in urban areas (thus firms have to increase promotional costs)

·       A marked increase in rural income (owing to agrarian prosperity)

·       Improved standard of living : owing to increase in literacy and education level and large inflow of investment from rural development programmes and other sources

·       Better Exposure through media and increased contact with the urban counterparts

Strategies for rural marketing:

·       Developing rural-specific products

·       Communicating and changing quality perception

·       Proper communication in Indian language

·       By promoting products with Indian models and actors

·       By giving Indian words for brands

·       Effective media communication

·       Adopting localised way of distributing

Rural Mix

Just as we have the 4 P’s constituting the marketing mix, 4 Distinct elements of rural marketing mix have been developed, which are referred to as 4 A’s. In the rural settings with places far flung and barely connected, getting the product to the consumer can be a challenge. Business houses have to be creative in addressing this situation. It has been seen that a rural consumer demands an end-to end service rather than the just demanding the product.

Elements -4A’s

4 P’s	4 A’s
Product	Affordability
Price	Awareness
Place	Availability
Promotion	Acceptability

Some examples of rural mix:

·       The ‘GoldPlus’ jewellery brand by Tata Group is an interesting example of the brand addressing the non-metro jewellery culture. In rural areas, gold jewellery is used as a store of value and given the adulteration in gold; the goodwill of the organisation is taking the brand places.

·       Samsung too rolled out its ‘Dream Home’ road-show visiting 48 towns in 100 days in an effort to increase its brand awareness.

·       Airtel and Samsung have tied up with IFFCO, Indian farmer’s cooperative of fertilisers, to sell their mobiles and services while other telecom giants and DTH providers are looking at PCOs as a channel of distribution.

·       Soft drinks companies are still using the traditional wholesale retail model but transportation modes are unique indeed. Goods are initially transported to small towns and later to various corners using transport like cycle, auto, hand-cart, camel-carts, etc.
(Co-authored with Abhidha Salhotra, B. Com. (Hons.) SRCC)