• The Marketing Environment

• PESTEL Factors

The Marketing EnvironmentThe Marketing Environment

Political - Legal ConsiderationsPolitical - Legal Considerations

Component of the marketing environment consisting of laws and interpretations of laws that require firms operate under competitive conditions and to protect consumer rights

Political-Legal ConsiderationsPolitical-Legal Considerations

Government RegulationGovernment Regulation

Procompetitive LawsConsumer Protection LawsDeregulation Laws

Legal and Regulatory Forces

• Carbon Credits• Procompetitive Legislation (Antitrust Laws,

MRTP) v Protectionism– Preserve competition– Prevent restraint of trade and

monopolizing of markets– Prevent illegal competitive

trade practices

Political-Legal ConsiderationsPolitical-Legal Considerations

Government RegulationGovernment Regulation

Laws enacted to protect consumers against unscrupulous producers

Many of major consumer protection laws enacted during past 40 years

Consumer Protection Laws

Legal and Regulatory Forces (cont’d)

• Consumer Protection Legislation– Adulterated and mislabeled food and drugs…

Green Dot, MRP– Deceptive trade practices and the sale of

hazardous products…..Cigarettes, Liquor, Ban of sales promotions in Norway

– The invasion of personal privacy and the misuse of

personal information by firms…Doctors (MCI), DND

• Parle…suffering?– Maharashtra FDA– Pineapple and orange cream biscuits– Ambiguous laws

In a first-ever instance, global consumer goods giant Hindustan Unilever is under government lens for making tall claims on its malted beverage ‘Kissan Amaze' by declaring that it gives 33% key brain nutrients required by children daily. The multinational's claims are being investigated by a committee set up by the Food Safety and Standards Authority to study whether the company violated certain regulatory provisions relating to misleading or deceptive food claims.

"We have set up a committee specifically to examine claims made by Hindustan Unilever and see how scientific they are. The company has submitted data which the committee will examine and give its report by December," Food Safety and Standards Authority chairman PI Suvrathan told TOI, adding "after which we will have a detailed procedure in place on misleading advertisements on food and beverages".

When contacted a HUL spokesperson said: "We had received a communication from government about two months back and in response to that we had submitted to the government all the research work and all technical inputs to satisfy the concerned authorities that our claim is fully justified. We believe that we have satisfied the government authorities as we have answered all the queries raised".

Hindustan Unilever launched Kissan Amaze in February last year — a specifically designed brainfood for school going children. Amaze is being test-marketed in Tamil Nadu, Karnataka and Andhra Pradesh. The company says that each serving of Amaze provides the right type of brain nutrients, in the right combination, giving children 33% of their required nutrients for mental development.

• The five-member committee headed by Vasantha Muthuswamy, former deputy director general Indian Council of Medical Research, will look into such claims relating to brain development to establish whether these are supported by scientific evidence. The company's product may also be tested by scientists and experts. The committee will also study whether these claims have an adverse impact or discourage healthy eating habits of children.

Several food and consumer goods companies are airing advertisements or printing labels that promise health, wellness with a whole lot of nutrients. Most consumers are misguided and confused by such claims and have no ways of knowing whether these are actually true. HUL and many such companies will now be investigated under Food Safety and Standards Act which says that advertising and communication in food and beverages sector should not be misleading or deceptive.

There should be no false or misleading representation concerning the usefulness of food in advertisements and food labels, and which may exploit consumers' lack of experience or knowledge.

Committee will make recommendations regarding supporting evidence required for food claims, and whether such claims can be allowed without advertisements.

Consumer Protection Act

• 1986• 6 rights

– Safety– Information– Choice– Representation– Redressal– Education

Political Forces

• Reasons for Maintaining Relations with Elected Officials and Politicians– To influence the creation of laws and regulations affecting

industries and specific businesses– Governments are potentially large customers– Political officials can assist in securing foreign markets– Taxes– Exproporation

In 2005, Michael S. Dell’s namesake company was getting pounded. His competitors were selling personal computers and servers built on cheap, popular and powerful chips from Advanced Micro Devices, while Mr. Dell had stuck loyally with slower chips from Intel.In an e-mail note to Intel’s chief executive, Paul S. Otellini, Mr. Dell threatened to switch to A.M.D. “I am tired of losing business,” Mr. Dell wrote. “We are losing the hearts, minds and wallets of our best customers.” Mr. Otellini reminded Mr. Dell that Intel had paid Dell more than $1 billion in the last year. “This was judged by your team to be more than sufficient to compensate for the competitive issues,” he wrote. Dell delayed buying A.M.D. chips, and Mr. Otellini said in a later e-mail message to a colleague that Dell was “the best friend money can buy.” Such payments to PC makers, along with other aggressive business tactics, are at the heart of the antirust lawsuit filed against Intel on Wednesday by New York’s attorney general, Andrew M. Cuomo. Mr. Cuomo’s case — the first antitrust charges against the company in the United States in more than a decade — follows similar actions by regulators in Europe and Asia.According to Mr. Cuomo’s lawsuit, Intel, the world’s largest chip maker, has for years used large rebates and co-marketing arrangements to talk Dell and other manufacturers into sticking with its products rather than increasing their businesswith A.M.D., a much smaller chip maker.

Intel, based in Santa Clara, Calif., is no stranger to antitrust controversy. The company has spent the last five years defending itself against antitrust allegations, first in Asia and then in Europe. In May, the European Commission hit Intel with a record $1.45 billion fine for antitrust violations, which the company is appealing. Intel also faces a four-year-old antitrust lawsuit filed by A.M.D. in Federal District Court in Delaware and a continuing investigation by the Federal Trade Commission.Although Intel has faced various antitrust claims for two decades, the cases against it have picked up steam in recent years because of developments in the chip industry. In 2003, A.M.D., Intel’s longtime nemesis, began selling a new line of chips widely regarded as superior in design and performance to Intel’s products. The chips were good enough to lift A.M.D. from the PC market into the higher-profit server computer market for the first time and begin selling to Hewlett-Packard, I.B.M. and Sun Microsystems.It took Intel about four years to come up with chips that matched or surpassed A.M.D.’s products in performance. While A.M.D. did well both in sales and market share gains during that period, the company’s top executives have long argued that it could have sold far more products had Intel not used strong-arm tactics to blunt its advantage.

The major complaints surrounding Intel concern its use of rebates and marketing dollars to keep customers. The New York suit argues that Intel executives threatened to take away such incentives from customers if they did more business with A.M.D. In addition, the lawsuit contends that if businesses were close to buying A.M.D.-based computers from a company like H.P. or Dell, Intel would jump in to help the computer makers sell Intel-based machines at a large discount. Over all, the hardware makers often became dependent on Intel’s incentives to keep their computer businesses profitable, making them reluctant to make a meaningful shift to A.M.D., the lawsuit said.

The Marketing EnvironmentThe Marketing Environment

The competitive forces environment includes the number and type of competitors, along with the market share each holds

Competitive ForcesCompetitive Forces

The Marketing EnvironmentThe Marketing Environment

The social forces environment requires marketers to stay abreast of cultural developments, changes in consumer values, and social trends

Social ForcesSocial Forces

Social and Cultural Change

• the way in which we lead our lives is also changing: lifestyles and values

• greater emphasis on quality of life• changing gender roles• different attitudes toward physical activity,

exercise, and diet among certain segments• increased emphasis on quality and value• environmentalism has affected marketing• increased demands for convenience

Trends in Attitude Change

• Changing male/female roles• Emphasis on quality of life• Growing interest in physical fitness, health and

wellness• Growing focus on service quality• Some aging population• Growing environmental awareness and

concern

• Tea is British, Coffee American habit• Thanda matlab…• Cadbury Temptation Kashmir ad• Haigan Daez• McDonalds – Beef Burgers in India, cuisine in

France• Muslim boycott of American brands• Christianity in EU Constitution• China 2007 – Year of the Pig

• Unilever detergent ads in Mexico• Whirlpool – tough stains in India• Henko experience• Whirlpool….usage in Punjab• GM’s Nova in Spain• Diesel?• Dell – Direct Sales in China!• Good Housekeeping in Japan• Death by Colgate! – Spain

• 4 banned in China DMV – death!• Never touch the head of a Thai localite• Bulgaria – nod means no• The OK sign…..money in Japan, vulgar in Brazil, zero in

France• Jews and German products• Bicycle exports?• Washing clothes – warm (India), cold (australia), hot (france) • Burping – Arab v US!• Shiekh – first class travel• United Airlines – Hong Kong concierge – carnation• Unilever in Brazil – butter

Islamic Traditions

• Shariah – Quran • Ramzan• Social justice and equality• Women• Banking….No interest• Unethical businesses – pork, alcohol, media

The Marketing EnvironmentThe Marketing Environment

Population and Demographics

• Population growth• Population age mix• Ethnic markets

• Educational groups• Household patterns• Geographical shifts

Marketing EnvironmentMarketing Environment

Economic ConditionsEconomic Conditions

Economic factors that influence consumer buying power and marketing strategies

IncomeIncome

Resource AvailableResource Available

InflationInflation

Business CyclesBusiness Cycles

Business CyclesBusiness CyclesEconomic ConditionsEconomic Conditions

Recession Increasing unemployment Reduced consumer spending Reduced business opportunity

Recovery Declining unemployment Increased consumer spending Increased business opportunity

Prosperity Low unemployment High income

• Growth of FMCG business in India• Expansion of investments….and recession

Economic ConditionsEconomic Conditions

Economic ConditionsEconomic Conditions

Economic factors that influence consumer buying power and marketing strategies

IncomeIncome

Resource AvailableResource Available

InflationInflation

Business CyclesBusiness Cycles

Economic ConditionsEconomic Conditions

Economic ConditionsEconomic Conditions

Economic factors that influence consumer buying power and marketing strategies.

IncomeIncome

Resource AvailabilityResource Availability

InflationInflation

Business CyclesBusiness Cycles

Resource AvailabilityResource AvailabilityEconomic ConditionsEconomic Conditions

If resources are availableIf resources are available Prices decrease Demand increases

If resources are not availableIf resources are not available Prices increase Demand decreases

Economic ConditionsEconomic Conditions

Economic ConditionsEconomic Conditions

Economic factors that influence consumer buying power and marketing strategies

Resource AvailableResource Available

InflationInflation

Business CyclesBusiness Cycles

IncomeIncome

Income

• Spending More• Bottom of Pyramid• Need more exclusivity • Decreased savings, more spending on eating

out, clothes, personal care, durables (1999-2009).

Age• Impacts product categories purchased• Entertainment, fast food, baby products, education. Mobiles,

automobiles.• Airtel – prepaid @ 5• Levis Sykes• Titan Fastrack• Scooty Pep• MTV, Bindass & V – Hinglish• Do the Dew• Pepsi• Karbonn• Hike

• Also a sizable absolute no. of greying population– Leisure class– Health and insurance products– Pharma– Travel industry

The Marketing EnvironmentThe Marketing Environment

The Marketing EnvironmentThe Marketing Environment

Technological DevelopmentsTechnological Developments

New manufacturing process New ingredients New distribution New advertising medium New eCommerce strategies

New manufacturing process New ingredients New distribution New advertising medium New eCommerce strategies

Impact of Technological Change

• Launches entirely new industries, such as multimedia, digital communications and electronic commerce….mobile banking, Papa Jones Pizza

• Alters or virtually destroys existing industries, such as the effect of e-mail on regular mail and even fax...Archies

• Stimulates other markets and industries, such as the effect of the credit card and Internet shopping on the retailing industry

Natural Environment

• Shortage of raw materials• Increased energy costs• Anti-pollution pressures• Governmental protections…Mr. J Ramesh• Coke in Kerala• Euro II norms

• Japan• El-Nino• SARS…chicken @ 10• Toyota

– Greenest global brand– Prius– Gas and electric engines

• And…the Reva– Electric car (2001)– 80-20 JV– 10 patents– 90% indigenous ingredients– Thomas Elva Edison award in 2003 for innovation in

technology– European Economic Community certificate –

Homologation – Export to 17 countries– Priced at $ 5500– Cheap to drive (50 p/km)– Low maintenance

• Competition

• Look at the Indian Industries:• Automobile/Telecom/Retail/Financial

Services/Pharma/Personal Care/Airlines/Food……even Politics!

• Competition

• Lets do an exercise..

• Read the links..

– http://articles.economictimes.indiatimes.com/2012-10-05/news/34279526_1_toothpaste-market-colgate-palmolive-india-market-share

– http://articles.economictimes.indiatimes.com/2012-11-07/news/34970830_1_toothpaste-market-oral-care-sensitive-toothpaste

– http://www.business-standard.com/india/news/pepsodent-fights-on/396472/

– http://www.business-standard.com/article/companies/p-g-to-price-oral-b-toothpaste-at-10-15-premium-to-rivals-113070100894_1.html

– http://marketingcrow.wordpress.com/2013/02/18/colgate-pepsodent-parodontax-and-becoming-small-by-becoming-big/

– http://paper.hindustantimes.com/epaper/viewer.aspx

• Brand Team – Colgate, Pepsodent, Sensodyne, Oral B• Competitive Strategy – H2 FY 2013-14

Competitive Forces

Types of Competition

Competition Other organizations that market products that are similar to a marketer’s products in same geographic area..MUL & Honda

Generic competitors

Firms that provide very different products that solve the same problem or satisfy the same basic customer need..Skype, Deccan, Volvo, LinkedIn

Total budget competitors

Firms that compete for the limited financial resources of the same customers…stationary and cutlery

Different competitive structures

• Monopoly – no competition, few substitutes, high barriers to entry..railways

• Oligopoly – few competitors, reasonable barriers, differentiated products..airlines

• Pure competition – many competitors, low barriers, low differentiation…FMCG, personal care

Barriers to Entry and Exit

• Government Policy– Licencing Regime– Labour Laws

• Initial Cost• Strong Brands presence• Customer service• Technology

Obtaining Information on Competitors

• Competitor’s Website – Strategic vision– Values and culture– Portfolio of businesses – clue to priorities and strategies– Assets such as plants, global access, brand symbols

• Search Engines for articles and financials• Databases• Directories• People Poaching• Intermediaries• Government Reports• Trade associations, magazines, and meetings• Technical meetings and Journals• Marketing Research

Industry Analysis: Forces Influencing Competition

• Industry—group of firms that produce products that are competitors/close substitutes for one another

• Five forces influence competition in an industry described by Michael Porter

Competitive Rivalry

• Entry is likely• Commodity products or equally strong brands• Competitors are in balance• There is slow market growth• Global customers increase competition• There are high fixed costs in an industry• Markets are undifferentiated• There may be high exit barriers

Indian Auto Industry

Buyer power• Buyers = manufacturers and retailers, not consumers• Buyers seek to pay the lowest possible price• Buyers have leverage over suppliers when

– They purchase in large quantities (enhances supplier dependence on buyer)

– Suppliers’ products are commodities – There are many small operators in the supplying industry– There are alternative sources of supply– Components or materials are a high percentage of cost to the

buyer leading to “shopping around”– Switching costs are low– There is a threat of backward integration– Organized retail

We do not quibble or argue with anyone’s right to sing what they want, to print what they want, and say what they want. But we reserve the right to sell what we want.

—Wal-Mart’s response to the accusation that it is using its financial power to dictate what is

appropriate music and art

Supplier power• When suppliers have leverage, they can raise prices high

enough to affect the profitability of their customers

• Leverage accrues when– There is a concentration of suppliers– Switching costs are high– The supplier brand is powerful– Critical Inputs– Few substitutes– Integration forward by the supplier is possible– Customers are fragmented and bargaining power low

– OPEC

Threat of substitutes• Availability of substitute products places limits on the prices

market leaders can charge• High prices induce buyers to switch to the substitute

Substitutes take different forms:• Substitution of need • Generic substitution - mobiles for land based telephones• Doing without - no communication

• Volvo, Skype

The threat of entryNew entrants mean downward pressure on prices and reduced

profitability

Dependent on barriers to entry such as following, being low:• Capital requirements of entry• Level of Innovation & tech• Access to distribution channels• Cost advantages• Expected retaliation – competitor response• Legislation or government action

• Airlines, Financial Services

Competitive Advantage

• Achieved when there is a match between a firm’s distinctive competencies and the factors critical for success within its industry

• Two ways to achieve competitive advantage– Low-cost strategy– Product differentiation

Generic Strategies for Creating Competitive Advantage

• Broad market strategies– Cost leadership—low price– Product differentiation—premium price

• Narrow market strategies– Cost focus—low price– Focused differentiation—premium price

Cost Leadership

• Based on a firm’s position as the industry’s low-cost producer

• Must construct the most efficient facilities• Must obtain the largest market share so that its per

unit cost is the lowest in the industry• Works only if barriers exist that prevent competitors

from achieving the same low costs• Japanese Electronics, Amul, Aravind Eye

Product Differentiation

• Product that has an actual or perceived uniqueness in a broad market has a differentiation advantage

• Extremely effective for defending market position

• Extremely effective for obtaining above-average financial returns; unique products command a premium price

• Caterpillar construction equipment

Cost Focus

• Firm’s lower cost position enables it to offer a narrow target market and lower prices than the competition – Deccan/Jet Lite

• Sustainability is the central issue for this strategy– Works if competitors define their target market

more broadly– Works if competitors cannot define the segment

even more narrowly

Focused Differentiation

• The product has actual uniqueness but it also has a very narrow target market

• Results from a better understanding of customers’ wants and desires

• Ex: High-end audio equipment

Competitive Advantage???

• Axe– First mover advantage– Strong company backing– High ad recall– Industry growing at 18% p.a., Axe MS 25%– Then came Fogg– Differentiation – no gas– No.1 today (13%)– Park Avenue & Engage also catching up…Joint No.2 (8%)– Axe has slipped to No.3 (7%)– Wildstone no.4

Competitive Advantage???

• Mercedes India– Earliest entrant in luxury segment in India– Nearly 100% market share– Admired brands, good variants– Enter Audi and BMW– Both companies realized focus on younger audience,

and SUV segment– Today, Audi MS 33%, BMW and Merc 25% each– Lower price cars sales stagnant in India since a year,

luxury segment growing at 15% p.a.

• Competitive advantage is nearly always relative, not absolute

• Can’t go on forever

• Toyota, Bailey, Kodak, Nokia, Dell, LG, M&M Scorpio, Blackberry, All Out, Anchor Toothpaste…..

Creating Sustainable Competitive Advantage

Sustainable Competitive Advantage

• SCA is an element (or combination of elements) of the business strategy that provides a meaningful advantage over both existing and future competitors.

• An SCA needs to be meaningful, sustainable and substantial.

• An SCA needs to be supported and enhanced over time.

• The assets and competencies of an organization represent the most sustainable element of a business strategy, because these are usually difficult to copy or counter.

Creating sustainable Competitive Advantage via Strategic Intent

• Building layers of advantage• Searching for loose bricks• Changing the rules of engagement• Collaborating

Building Layers of Advantage

• A company faces less risk if it has a wide portfolio of advantages

• Successful companies build portfolios by establishing layers of advantage on top of one another

• Illustrates how a company can move along the value chain to strengthen competitive advantage

• Japanese TV industry: 1970s—largest producer of black-and-white sets and becoming world leading in color sets; competitive advantage = low labor costs

• Next, they built factories large enough to serve the world market; sold under many brand names; added layers of competitive advantage of quality and reliability

• Next, they invested in marketing channels and Japanese brand-name recognition; new layer of competitive advantage of global brand franchise

• Led to the introduction of new products such as VCRs and photocopiers and to the establishment of regional manufacturing to adapt products to local market needs

Searching for Loose Bricks

• Search for opportunities in the defensive walls of competitors whose attention is narrowly focused – Focused on a market segment– Focused on a geographic area to the exclusion of

others

Acer in Middle East, Southeast Asia, Latin AmericaHonda v Harley Davidson in US

Changing the Rules of Engagement

• Refuse to play by the rules set by industry leaders

• Ex: Xerox and Canon– Xerox employed a huge direct sales force; Canon

chose to use product dealers– Xerox built a wide range of copiers; Canon

standardized machines and components– Xerox leased machines; Canon sold machines

Collaborating

• Use the know-how developed by other companies

• Licensing agreements, joint ventures, or partnerships

Competitor Types

• Leader• Challenger • Follower• Nicher

Strategy for market leader

• Expand market – more usage (replacement indicator – battery, toothbrush), new customers

• Protect and increase its market share– Create barriers to entry – cost, distribution,

goodwill, service, opinion leaders– Financial muscle - advertising

• Innovation

Strategy of Challenger

• Attack – frontal challenge (Vodafone, P&G)• Flanking – blind side, weak areas (geography

or segments) Docomo, LG Sampoorna, Woodland, bailey’s

• Guerrilla warfare – advertising, flash mobs, ambush marketing….nothing official about it!!

Strategy for Follower

• Laid back• No challenge• Ability to replicate quickly – speed to market• Low cost ability (with lower quality)

Strategy for Nicher

• Smaller companies• Or with extremely focused expertise• Finding ignored segments (Anchor, Wagh Bakri,

Monte Carlo, Dolby, Blackberry)• Needs indepth knowledge of segment• Low volume, higher margins• Customization• Risk – limited market (Zippo, I Ball)…challenge of

diversification

• What is CRM?

• All about retaining customers• But not all customers….• Retaining customers = more sales, more

profits AND less costs• Customer value can be measured• CRM is system driven

Customer Retention

• Acquisition of customers can cost 5 times more than retaining current customers.

• The average company loses 10% of its customers each year.

• A 5% reduction to the customer defection rate can increase profits by 25% to 85%.

• The customer profit rate increases over the life of a retained customer.

Customer Profitability-Focused Marketing - CRM

• Tracks costs and revenues of individual consumers

• Categorizes them into tiers based on consumption behavior

• A customer pyramid groups customers into four tiers

Customer Profitability-Focused Marketing

Tier 1: Platinum

Tier 2: Gold

Tier 3: Iron

Tier 4: Lead

A Portrayal of the Characteristics of Relationship Marketing

•Products/Services•Individualized attention•Continuous information•Price offers•Customer services•Extras and perks, etc.

•Repeat Purchase•Increased Loyalty•Goodwill•Positive word-of-mouth•Lower costs for the firm

Trust and promises

The Firm provides The Customer provides

Objectives of CRM

• Customer Retention - retain loyal and profitable customers and channels

• Customer Acquisition - acquire customer based on known characteristics which drive growth and increase margins

• Customer Profitability - increase individual customer margins by offering the right product at the right time

Advantages of CRM• Reduces advertising costs• Increases awareness of customer needs• Tracks the effectiveness of promotional campaigns• Allows competition for customers based on service,

not prices• Prevents overspending on low-value clients and

under spending on high-value ones• Speeds the time it takes to develop and market a

product• Improves use of the customer channel

• Segmentation, Targeting & Positioning

• Once upon a time…

– There was Ambi & Fiat– And the Lambretta– Now…customer spoilt for choice– Economy, mid-size and luxury cars– In order to fight competition

• The story of Surf and Nirma– Nirma : national brand after 1982, colour TVs– Low price, branded detergent– Upper class also used for inexpensive clothes– Surf lost– 1984 – fresh approach– Study on colour associations with cleaning– Yellow – lower class, Blue – middle class, white –

upper class, also green– Sunlight, Wheel (green), Rin, Surf Ultra

What is a Market Segment?

A market segment consists of a group of customers who share a similar set of

needs and wants.

Market Segmentation

• Represents an effort to identify and categorize groups of customers and/or countries according to common characteristics

Market SegmentationMass Market

Niche Micro-marketing The

Individual

Personal-izationMicro-

marketingNicheStandardized Marketing Mix

Continuum of Market Segmentation Size

Targeting

• The process of evaluating segments and focusing marketing efforts on a country, region, or group of people that has significant potential to respond

• Focus on the segments that can be reached most effectively, efficiently, and profitably

Positioning

• Positioning is required to differentiate the product or brand in the minds of the target market.

Global Market Segmentation

• Geographic• Demographics• Psychographics• Behavioral characteristics• Benefits sought

Geographic Segments

• Can segment on basis of country – but usually different segments exist with countries as well

• Intermarket segments – Small car in EU v US• Intramarket segments – Whirlpool washing machines in Italy v

Germany• Sweaters & Coolers• Coffee in South India• MDH masalas

Demographic Segmentation

• Income• Population• Age distribution• Gender• Education• Occupation

What are the trends?

Demographic Facts and Trends• A widening age gap exists between the older populations in

the West and the large working-age populations in developing countries - Singapore

• In the European Union, the number of consumers ages 16 and under is rapidly approaching the number of consumers ages 60-plus

• Asia is home to 500 million consumers ages 16 and under• Half of Japan’s population will be age 60 or older by 2025

Demographic Facts and Trends• By 2030, 20 percent of the U.S. population—70 million

Americans—will be 65 or older versus 13 percent (36 million) today

• India has the youngest demographic profile among the world’s large nations: more than half its population is under the age of 25

Segmenting by Income and Population• Income is a valuable segmentation variable• Bhutta!• Do not read into the numbers

– Some services are free in developing nations so there is more purchasing power

– Income information is an average – disparities prevail• For products whose price is low enough, size of

population is a more important variable

Marketing to the Bottom of the Pyramid

• Grameen Bank• The $100 laptop• The Nano• The Re 1000 water purifier• Deccan – identifying price sensitive customers

segment• Aravind Eye Care• Philips Hand Radio

India – Income Segmentation (NCAER)

• Rich – fastest growing• Consuming – FMCG & durables consumers,

cost benefit seekers• Climbers – new jobs• Aspirants – auto walla• Destitute

Age Segmentation• Global teens—young people between the ages of 12

and 19– A group of teenagers randomly chosen from different parts

of the world will share many of the same tastes– Pepsi

• Global elite—affluent consumers who are well traveled and have the money to spend on prestigious products with an image of exclusivity

• Carrefour – DINKs• Aastha, Cartoon Network• CSR Magazine• Johnson & Johnson

Gender Segmentation

• In focusing on the needs and wants of one gender, do not miss opportunities to serve the other

• Companies may offer product lines for both genders– Nike, Levi Strauss– Wills Lifestyle, Lee

• Madura Garments• Femina• Madame• Fair and Handsome

Psychographic Segmentation

• Grouping people according to attitudes, values, and lifestyles – SRI International and VALS 2

MTV India Psychographic Segmentation

• Homebodies - traditional• Two faced • Wannabes – largest number, show offs• Rebels – 2nd largest segment• Cool guys – influencers

Psychographic Segmentation

• The Euroconsumer– Successful idealist—comprises from 5 to 20% of the

population, consists of persons who have achieved professional and material success while maintaining commitment to abstract or socially responsible ideals

– Affluent materialist—about 30%, status-conscious “up-and-comers,” many of whom are business professionals, use conspicuous consumption to communicate their success to others

Psychographic Segmentation

• The Euroconsumer– Comfortable

belongers• 25 to 50% of a

country’s population• Conservative • Most comfortable

with the familiar • Content with the

comfort of home, family, friends, and community

– Disaffected survivors• Lack power and

affluence• Harbor little hope for

upward mobility • Tend to be either

resentful or resigned • Concentrated in high-

crime urban inner city

• Attitudes tend to affect the rest of society

Psychographic Segmentation:Sony’s U.S. Consumer Segments

Lifestyle Segmentation

• Kitchens of India, Ashirwaad

Behavior Segmentation• Focus on whether people purchase a product, as well as how

much and how often they use it• User status• Kellogs• China – smoking• Bottled water – Nestle• ATMs - Japan

Behavioral Segmentation

Behavioral Variables• Occasions…Archies, Cadburys• Benefits• User Status• Usage Rate

Benefit Segmentation

• Benefit segmentation focuses on the value equation– Value = Benefits / Price

• Based on understanding the problem a product solves, the benefit it offers, or the issue it addresses

• Toothpastes, Energy drinks

Effective Targeting Requires…

• Identify and profile distinct groups of buyers who differ in their needs and preferences

• Select one or more market segments to enter• Establish and communicate the distinctive

benefits of the market offering

Assessing Market Potential

• Three basic criteria– Current size of the segment and anticipated

growth potential– Competition– Compatibility with company’s overall objectives

and the feasibility of successfully reaching the target audience

Current Segment Size and Growth

• Is the market segment currently large enough to present a company with the opportunity to make a profit?

• If the answer is no, does it have significant growth potential to make it attractive in terms of a company’s long-term strategy?

• Indian mobile market growth

Potential Competition

• Is there strong competition in the market segment currently?

• Is the competition vulnerable in terms of price or quality?

• Japanese autos in US

Feasibility and Compatibility

• Will adaptation be required? If so, is this economically justifiable in terms of expected sales?

• Will import restrictions, high tariffs, or a strong home-country currency drive up the price of the product in the target market currency and effectively dampen demand? - China

Feasibility and Compatibility

• Is it advisable to source locally? Would it make sense to source products in the country for export elsewhere in the region?

• Is targeting a particular segment compatible with the company’s goals, brand image, or established sources of competitive advantage? – Honda Jazz

Target Market Strategy Options

• Standardized marketing– Mass marketing on a global scale– Undifferentiated target marketing– Standardized marketing mix– Minimal product adaptation– Intensive distribution– Ford : Any colour as long as its black! (Model T)Usually niche luxury brands

Target Market Strategy Options• Concentrated

marketing– Niche marketing– Single segment of

market– Ex: Chanel, Body Shop– Godrej Ezee detergent –

woolens– Paras Pharma Crack cream –

women’s heels– Aastha channel– Meswak, Vicco – herbal

toothpaste– Red Bus, Red Bull, Dolby

• Differentiated marketing– Multi-segment

targeting– Two or more

distinct markets– Wider market

coverage– Ex: P&G markets Old Spice

and Hugo Boss for Men – HUL - Axe & CK– MUL

Niche Marketing @ Revolution Clothing

• Plus sizes• Began 2001, today 27 outlets with sales of 10

Cr/month

Targeting a Local Market

• Kerela – Banks with NRI services• Discovery – 7 languages• HSBC – The world’s local bank’s UAE

experience• STAR - Adsharp

Positioning

• Locating a brand in consumers’ minds over and against competitors in terms of attributes and benefits that the brand does and does not offer– Attribute or benefit – Visa, Clinic Plus– Quality and price – Audi, Deccan– Use or user – Dettol Soap, Oral B– Competition – DOCOMO– Service – Dominos– Gender – Hero Honda Pleasure, Pulsar

Positioning Strategies

• Global consumer culture positioning– Identifies the brand as a symbol of a particular

global culture or segment - UCB– High-touch and high-tech products – Nescafe

• Foreign consumer culture positioning– Associates the brand’s users, use occasions, or

product origins with a foreign country or culture – Fosters, Budwieser