Market Market SegmentationSegmentation

OverviewOverview

Discover needs/wants of consumer groups Discover needs/wants of consumer groups to develop specialized products to satisfy to develop specialized products to satisfy group needs group needs

Identify the best media for advertisingIdentify the best media for advertising Related concepts (STP)Related concepts (STP)

-Segmentation (subsets with similar needs)-Segmentation (subsets with similar needs)

-Targeting (which segment to aim for)-Targeting (which segment to aim for)

-Positioning (the product in the mind of the -Positioning (the product in the mind of the customer)customer)

FIGURE 7.3

The Classic Segmentation Variables for Consumer Markets

Hindustan Unilever Ltd Hindustan Unilever Ltd (HUL)(HUL)

Company OverviewCompany Overview HUL, the largest FMCG Company in India by revenues was HUL, the largest FMCG Company in India by revenues was

formed by merging three subsidiaries of Unilever in 1956.formed by merging three subsidiaries of Unilever in 1956.

At present, Unilever Plc holds a 51.6% stake in the At present, Unilever Plc holds a 51.6% stake in the company. HUL’s portfolio of products covers a wide company. HUL’s portfolio of products covers a wide spectrum including soaps, detergents, skin creams, spectrum including soaps, detergents, skin creams, shampoos, toothpastes, tea, coffee and branded flour.shampoos, toothpastes, tea, coffee and branded flour.

HUL's brands, spread across 20 distinct consumer HUL's brands, spread across 20 distinct consumer categories. It owns 35 major Indian brands. HUL has categories. It owns 35 major Indian brands. HUL has consistently had the most number of brands in the Top 10 consistently had the most number of brands in the Top 10 list for the most trusted brands in India from 2003 to 2009.list for the most trusted brands in India from 2003 to 2009.

Business SegmentsBusiness Segments

Soaps and Detergents.Soaps and Detergents.

Personal Care Products.Personal Care Products.

Beverages. Beverages.

Foods. Foods.

Ice Cream. Ice Cream.

Others.Others.

Sub Segments on Oral CareSub Segments on Oral Care

ToothpastesToothpastes

ToothbrushesToothbrushes

Tooth PowdersTooth Powders

Liquid Mouth CleansersLiquid Mouth Cleansers

Trends and ForcesTrends and Forces

Increasing raw material prices drives HUL to raise its Increasing raw material prices drives HUL to raise its prices prices

Increasing per capita income drives FMCG sector Increasing per capita income drives FMCG sector growth growth

Per Capita consumption of personal care products in Per Capita consumption of personal care products in India is one of the lowest among developing India is one of the lowest among developing economies of the world. economies of the world.

Highly Competitive FMCG Sector limits profit margins Highly Competitive FMCG Sector limits profit margins of HUL. of HUL.

CompetitorsCompetitors Procter and Gamble (P&G) IndiaProcter and Gamble (P&G) India

Godrej Consumer Products Ltd. GCPL)Godrej Consumer Products Ltd. GCPL)

Dabur India LimitedDabur India Limited

Colgate-Palmolive (India) LimitedColgate-Palmolive (India) Limited

Marico LimitedMarico Limited

How Does HUL Practice Market How Does HUL Practice Market Segmentation & Positioning?Segmentation & Positioning?

Product essentially sameProduct essentially same Promotion (specific promotion Promotion (specific promotion

campaigns aimed at the Indian campaigns aimed at the Indian marketmarket

Place (urban stores, suburban stores, Place (urban stores, suburban stores, express stores, etc.)express stores, etc.)

Price (junior discounts)Price (junior discounts)

Market Segmentation Decision ProcessMarket Segmentation Decision Process

Stage I - Identify Market Segmentation Stage I - Identify Market Segmentation BasesBases

The process starts when a company looks The process starts when a company looks at the potential customers and identifies at the potential customers and identifies those customers as having particular those customers as having particular characteristics - these characteristics will characteristics - these characteristics will allow the marketing company to classify allow the marketing company to classify them into market segments.them into market segments.

The segments should be selected so that The segments should be selected so that you can group together customers who you can group together customers who have similar needs.have similar needs.

Stage II - Develop Relevant Profiles Stage II - Develop Relevant Profiles for each Segmentfor each Segment

Once the segments have been identified -Once the segments have been identified -should develop a profile of the relevant should develop a profile of the relevant customer needs and behaviors in each customer needs and behaviors in each segment.segment.

What does your customer look like (profile) What does your customer look like (profile) !!!!

What do they like !!What do they like !!

What do they do !!What do they do !! You need this description to be very precise in You need this description to be very precise in

order to make your marketing “match” the order to make your marketing “match” the needs of the customerneeds of the customer

Stage III - Forecast Market PotentialsStage III - Forecast Market Potentials

You create a “Forecast” of the market You create a “Forecast” of the market potential within each segment.potential within each segment.

This is the “go, no-go” stage. When you are This is the “go, no-go” stage. When you are at this stage you gather the information on at this stage you gather the information on sales potential to determine whether you can sales potential to determine whether you can go further ahead and justify further analysis.go further ahead and justify further analysis.

Forecast - “what if” - an expectation of future Forecast - “what if” - an expectation of future action.action.

Stage IV - Forecast Probably Stage IV - Forecast Probably Market ShareMarket Share

Once the market potential has been estimated, Once the market potential has been estimated, you have to determine how much of that you have to determine how much of that market you can obtain (what “market share” market you can obtain (what “market share” can you capture.can you capture.

Then you develop specific marketing strategy Then you develop specific marketing strategy for the segments you are trying to develop.for the segments you are trying to develop.

(text eg. P&G outselling Colgate, therefore (text eg. P&G outselling Colgate, therefore Colgate strategy changes so it doesn’t Colgate strategy changes so it doesn’t compete directly)compete directly)

Stage V - Select Specific Market Stage V - Select Specific Market SegmentsSegments

Finally, you take all this information, Finally, you take all this information, and identify specific target markets.and identify specific target markets.

ie. University students who have part-ie. University students who have part-time jobs, and do not have credit cardstime jobs, and do not have credit cards

Product PositioningProduct Positioning

Developing a marketing program in Developing a marketing program in such a way that the product is such a way that the product is perceived to be very different from perceived to be very different from competitors productscompetitors products

Levels of Market SegmentationLevels of Market Segmentation

Through Market Segmentation, Companies Divide Large, Through Market Segmentation, Companies Divide Large, Heterogeneous Markets into Smaller Segments that Can be Heterogeneous Markets into Smaller Segments that Can be Reached More Efficiently And Effectively With Products and Reached More Efficiently And Effectively With Products and Services That Match Their Unique NeedsServices That Match Their Unique Needs

Mass MarketingSame marketing mix (mm) directed at all consumers

(no segmentation, i.e.,Ford Model T )

Segment MarketingDifferent marketing mix (mm) to one or more segments

(some segmentation, i.e. GM)

It is Critical to understand that..It is Critical to understand that..

Mass marketers do not often practice Mass marketers do not often practice mass marketing todaymass marketing today

They practice differentiated marketingThey practice differentiated marketing Often they do not change the product Often they do not change the product

to appeal to different segmentsto appeal to different segments They change price, place, and They change price, place, and

promotionpromotion

Having ID’ed the Targeting Strategy and Having ID’ed the Targeting Strategy and Determined Segmentation Variables Determined Segmentation Variables

We develop different segment profilesWe develop different segment profiles Evaluate these for profitabilityEvaluate these for profitability And select the target markets we want to enterAnd select the target markets we want to enter

Finally We PositionFinally We Position

Market Segmentation (ID)2. Determine which segmentation variables to use3. Develop market segment profiles

Market Segmentation (ID)2. Determine which segmentation variables to use3. Develop market segment profiles

Market Targeting (Evaluate)4. Evaluate relevant market segments5. Select target markets

Market Targeting (Evaluate)4. Evaluate relevant market segments5. Select target markets

Market Positioning (Enter)• Develop positioning for target segments• Develop a marketing mix for each segment

Market Positioning (Enter)• Develop positioning for target segments• Develop a marketing mix for each segment

Having Finished the Target Market Selection Process We Act!