About the company:

Name: S.M.S. Industries

Name of owner: Mr. Rajiv C. Botadra

Type of ownership: Partnership firm

Type of Industry: Automobile Ancillary

Nature of business: Manufacturing unit of Cylinder Blocks (Two-Three Wheelers), Pistons & Rings.

PART A:

Levels of Market Segmentation:

Segment Marketing

A company that practices segment marketing isolates broad segments that make up a market and adapts its offers to more closely match the needs of one or more segments. Thus, Marriott markets to a variety of segments—business travelers, families, and others—with packages adapted to their varying needs. GM has designed specific models for different income and age groups. In fact, it sells models for segments with varied combinations of age and income. For instance, GM designed its Buick Park Avenue for older, higher-income consumers.

Segment marketing offers several benefits over mass marketing. The company can market more efficiently, targeting its products or services, channels, and communications programs toward only consumers that it can serve best and most profitably. The company can also market more effectively by fine-tuning its products, prices, and programs to the needs of carefully defined segments. The company may face fewer competitors if fewer competitors are focusing on this market segment.

During the initial stages , every market will be unsegmented . But as the market matures, segments evolve. Marketers devise new methods /variables to segment the market. In the car market also, we had the market dominated by the family segment. The first attempt to segment was by Tata Sierra which tried to bring in the SUV segment. But the market was not ready to accept that product.

Indian car market is predominantly family oriented. In the developed market, we can see different family members owning different types of cars. One of my colleagues say that a typical American

family will have a small car/office car , an offroader( or a truck) and a sedan . Our market is still to evolve to that stage. Still for most of us, cars are a luxury rather than a mode of transportation.

Hence , here the primary segmentation was based on the price of the car and also the nature of the car. So we have A segment, B segment, D segment etc and segments like MUV, SUV, Sedan, Hatchback ,small car etc .

The dominant segment ( small car/ hatchback) is driven by family. So the entire family takes part in deciding the purchase of the car. The major determinants being the size of the family, price, cost of maintaining like mileage , brand , type of car etc.

The buoyant economy and the emergence of neo-rich class has changed the dynamics at the upper end of the market. I know families which own more than 3 different types of cars to serve different purposes. In the case of such affluent family, the purchase considerations are different.

Niche Marketing

Market segments are normally large, identifiable groups within a market—for example, luxury car buyers, performance car buyers, utility car buyers, and economy car buyers. Niche marketing focuses on subgroups within these segments. A niche is a more narrowly defined group, usually identified by dividing a segment into subsegments or by defining a group with a distinctive set of traits who may seek a special combination of benefits. For example, the utility vehicles segment might include light-duty pickup trucks and sport utility vehicles (SUVs). The sport utility vehicles subsegment might be further divided into standard SUV (as served by Ford and Chevrolet) and luxury SUV (as served by Lincoln and Lexus) niches.

Whereas segments are fairly large and normally attract several competitors, niches are smaller and normally attract only one or a few competitors. Niche marketers presumably understand their niches' needs so well that their customers willingly pay a price premium. For example, the luxurious Bentley gets a high price for its cars because its loyal buyers feel that no other automobile comes close to offering the product–service–membership benefits that Bentley does.

Niching offers smaller companies an opportunity to compete by focusing their limited resources on serving niches that may be unimportant to or overlooked by larger competitors. However, large companies also serve niche markets. For example, American Express offers not only its traditional green cards but also gold cards, corporate cards, and even platinum cards aimed at a niche

consisting of the top-spending 1 percent of its 28 million cardholders. Nike makes athletic gear for basketball, running, and soccer but also for smaller niches such as biking and street hockey.

In many markets today, niches are the norm. As an advertising agency executive observed, "There will be no market for products that everybody likes a little, only for products that somebody likes a lot." Other experts assert that companies will have to "niche or be niched."

Products are created to fill the need gap of people. Whenever a need arises, companies manufacture goods which fulfill the desire by providing utility to the consumer. But in some cases, a few products attain such class and value, that they become premium status symbols. The product, by virtue of its high cost and limited and customized demand, becomes a premium niche product. And this is where the concept of niche marketing comes into the picture.

Niche marketing is basically catering to a very restricted and limited target group for marketing of products. Wheat, pulses, fruits & vegetables are all basic needs of every person and don’t require any marketing. Commodities like clothes, furniture, footwear etc require advertising and marketing so as to create their brand identity in this competitive market. But there are certain products which are aimed at fulfilling only the needs of a certain segment of the market, and such premium products form a niche segment.

Automobile industry has a huge market globally. Cars are made as per the requirement of consumers and are categorized as sedans, SUVs, hatch-back etc on the basis of utility. Automobile industry targets the middle class segment with cars like Honda, Hyundai, Tata Motors, Chevrolet and upper class segment with cars like BMW, Mercedes, and Porsche. But above this exists an extra premium niche segment and brands like Ferrari, Bentley and Rolls Royce form a part of this. All these brands are customized, tailor-made and made to order. Not only do these exclusive brands have a high price but they also experience as a marketing by selective and personalized marketing. These are such huge and premium brands, that they don’t require TV and print advertising like other products. Promotion of Ferrari and Rolls Royce brands is done through exclusive auto expos, display at premium hotels etc. Ferrari also promotes it brand with an all exclusive merchandising exercise through apparel, watches, mobile phones etc. Since they are targeted to a very small target group, it becomes an extremely niche market.

Local Marketing

Local marketing involves tailoring brands and promotions to the needs and wants of local customer groups—cities, neighborhoods, and even specific stores. Thus, retailers such as Sears and Wal-Mart routinely customize each store's merchandise and promotions to match its specific clientele. Citibank provides different mixes of banking services in its branches depending on neighborhood demographics. Kraft helps supermarket chains identify the specific cheese assortments and shelf positioning that will optimize cheese sales in low-income, middle-income, and high-income stores and in different ethnic communities.

Local marketing has some drawbacks. It can drive up manufacturing and marketing costs by reducing economies of scale. It can also create logistics problems as companies try to meet the varied requirements of different regional and local markets. Further, a brand's overall image might be diluted if the product and message vary too much in different localities. Still, as companies face increasingly fragmented markets, and as new supporting technologies develop, the advantages of local marketing often outweigh the drawbacks. Local marketing helps a company to market more effectively in the face of pronounced regional and local differences in community demographics and lifestyles. It also meets the needs of the company's first-line customers—retailers—who prefer more fine-tuned product assortments for their neighborhoods.

Individual Marketing

In the extreme, micromarketing becomes individual marketing—tailoring products and marketing programs to the needs and preferences of individual customers. Individual marketing has also been labeled one-to-one marketing, customized marketing, and markets-of-one marketing.

The widespread use of mass marketing has obscured the fact that for centuries consumers were served as individuals: The tailor custom-made the suit, the cobbler designed shoes for the individual, the cabinetmaker made furniture to order. Today, however, new technologies are permitting many companies to return to customized marketing. More powerful computers, detailed databases, robotic production and flexible manufacturing, and immediate and interactive communication media such as e-mail, fax, and the Internet—all have combined to foster "mass customization." Mass

customization is the process through which firms interact one-to-one with masses of customers to design products and services tailor-made to individual needs.

Thus, Dell Computer can deliver computers to individual customers loaded with customer-specified hardware and software. Peapod, the online grocery shopping and delivery service, lets customers create the virtual supermarket that best fits their individual needs. Ritz-Carlton Hotels creates custom-designed experiences for its delighted guests:

Check into any Ritz-Carlton hotel around the world, and you'll be amazed at how well the hotel's employees anticipate your slightest need. Without ever asking, they seem to know that you want a nonsmoking room with a king-size bed, a nonallergenic pillow, and breakfast with decaffeinated coffee in your room. How does Ritz-Carlton work this magic? The hotel employs a system that combines information technology and flexible operations to customize the hotel experience. At the heart of the system is a huge customer database, which contains information about guests gathered through the observations of hotel employees. Each day, hotel staffers—from those at the front desk to those in maintenance and housekeeping—discreetly record the unique habits, likes, and dislikes of each guest on small "guest preference pads." These observations are then transferred to a corporatewide "guest history database." Every morning, a "guest historian" at each hotel reviews the files of all new arrivals who have previously stayed at a Ritz-Carlton and prepares a list of suggested extra touches that might delight each guest. Guests have responded strongly to such markets-of-one service. Since inaugurating the guest-history system in 1992, Ritz-Carlton has boosted guest retention by 23 percent. An amazing 95 percent of departing guests report that their stay has been a truly memorable experience.

Business-to-business marketers are also finding new ways to customize their offerings. For example, Becton-Dickinson, a major medical supplier, offers to customize almost anything for its hospital customers. It offers custom-designed labeling, individual packaging, customized quality control, customized computer software, and customized billing. Motorola salespeople use a handheld computer to custom-design pagers following individual business customer wishes. The design data are transmitted to the Motorola factory and production starts within 17 minutes. The customized pagers are ready for shipment within two hours. John Deere manufactures seeding equipment that can be configured in more than 2 million versions to individual customer specifications. The seeders are produced one at a time, in any sequence, on a single production line.

The move toward individual marketing mirrors the trend in consumer self-marketing. Increasingly, individual customers are taking more responsibility for determining which products and brands to buy. Consider two business buyers with two different purchasing styles. The first sees several salespeople, each trying to persuade him to buy his or her product. The second sees no salespeople but rather logs onto the Internet; searches for information on available products; interacts electronically with various suppliers, users, and product analysts; and then makes up her own mind

about the best offer. The second purchasing agent has taken more responsibility for the buying process, and the marketer has had less influence over her buying decision.

Bases for Segmenting Consumer Markets:

Individual Marketing

In the extreme, micromarketing becomes individual marketing—tailoring products and marketing programs to the needs and preferences of individual customers. Individual marketing has also been labeled one-to-one marketing, customized marketing, and markets-of-one marketing.

The widespread use of mass marketing has obscured the fact that for centuries consumers were served as individuals: The tailor custom-made the suit, the cobbler designed shoes for the individual, the cabinetmaker made furniture to order. Today, however, new technologies are permitting many companies to return to customized marketing. More powerful computers, detailed databases, robotic production and flexible manufacturing, and immediate and interactive communication media such as e-mail, fax, and the Internet—all have combined to foster "mass customization." Mass customization is the process through which firms interact one-to-one with masses of customers to design products and services tailor-made to individual needs.

Thus, Dell Computer can deliver computers to individual customers loaded with customer-specified hardware and software. Peapod, the online grocery shopping and delivery service, lets customers create the virtual supermarket that best fits their individual needs. Ritz-Carlton Hotels creates custom-designed experiences for its delighted guests:

Check into any Ritz-Carlton hotel around the world, and you'll be amazed at how well the hotel's employees anticipate your slightest need. Without ever asking, they seem to know that you want a nonsmoking room with a king-size bed, a nonallergenic pillow, and breakfast with decaffeinated coffee in your room. How does Ritz-Carlton work this magic? The hotel employs a system that combines information technology and flexible operations to customize the hotel experience. At the heart of the system is a huge customer database, which contains information about guests gathered through the observations of hotel employees. Each day, hotel staffers—from those at the front desk to those in maintenance and housekeeping—discreetly record the unique habits, likes, and dislikes of each guest on small "guest preference pads." These observations are then transferred to a corporatewide "guest history database." Every morning, a "guest historian" at each hotel reviews the files of all new arrivals who have previously stayed at a Ritz-Carlton and prepares a list of suggested extra touches that might delight each guest. Guests have responded strongly to such

markets-of-one service. Since inaugurating the guest-history system in 1992, Ritz-Carlton has boosted guest retention by 23 percent. An amazing 95 percent of departing guests report that their stay has been a truly memorable experience.

Business-to-business marketers are also finding new ways to customize their offerings. For example, Becton-Dickinson, a major medical supplier, offers to customize almost anything for its hospital customers. It offers custom-designed labeling, individual packaging, customized quality control, customized computer software, and customized billing. Motorola salespeople use a handheld computer to custom-design pagers following individual business customer wishes. The design data are transmitted to the Motorola factory and production starts within 17 minutes. The customized pagers are ready for shipment within two hours. John Deere manufactures seeding equipment that can be configured in more than 2 million versions to individual customer specifications. The seeders are produced one at a time, in any sequence, on a single production line.

The move toward individual marketing mirrors the trend in consumer self-marketing. Increasingly, individual customers are taking more responsibility for determining which products and brands to buy. Consider two business buyers with two different purchasing styles. The first sees several salespeople, each trying to persuade him to buy his or her product. The second sees no salespeople but rather logs onto the Internet; searches for information on available products; interacts electronically with various suppliers, users, and product analysts; and then makes up her own mind about the best offer. The second purchasing agent has taken more responsibility for the buying process, and the marketer has had less influence over her buying decision.

Demographic Segmentation

Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, and nationality. Demographic factors are the most popular bases for segmenting customer groups. One reason is that consumer needs, wants, and usage rates often vary closely with demographic variables. Another is that demographic variables are easier to measure than most other types of variables. Even when market segments are first defined using other bases, such as benefits sought or behavior, their demographic characteristics must be known in order to assess the size of the target market and to reach it efficiently.

Age and Life-Cycle Stage

Consumer needs and wants change with age. Some companies use age and life-cycle segmentation, offering different products or using different marketing approaches for different age and life-cycle groups. For example, McDonald's targets children, teens, adults, and seniors with different ads and

media. Its ads to teens feature dance-beat music, adventure, and fast-paced cutting from scene to scene; ads to seniors are softer and more sentimental. Procter & Gamble boldly targets its Oil of Olay ProVital Series subbrand at women over 50 years of age. It's "specially designed to meet the increased moisturization needs of more mature skin."

Sega, the computer games giant, which has typically focused on the teen market, is now targeting older customers. According to a Sega licensing executive, Sega's core market of 10- to 18-year-olds "sit in their bedrooms playing games for hours." Then, however, "they turn 18 and discover girls . . . and the computer gets locked away." To retain these young customers as they move into new life-cycle stages, Sega is launching a range of products for adults under its Sega Sports brand, including clothing, shoes, watches, and sports equipment such as Sega Sports–;branded footballs and basketballs.

Marketers must be careful to guard against stereotypes when using age and life-cycle segmentation. For example, although some 70-year-olds require wheelchairs, others play tennis. Similarly, whereas some 40-year-old couples are sending their children off to college, others are just beginning new families. Thus, age is often a poor predictor of a person's life cycle, health, work or family status, needs, and buying power. Companies marketing to mature consumers usually employ positive images and appeals. For example, ads for Oil of Olay ProVital feature attractive older spokeswomen and uplifting messages. "Many women 50 and older have told us that as they age, they feel more confident, wiser, and freer than ever before," observes Olay's marketing director. "These women are redefining beauty."

Gender

Gender segmentation has long been used in clothing, cosmetics, toiletries, and magazines. For example, Procter & Gamble was among the first with Secret, a brand specially formulated for a woman's chemistry, packaged and advertised to reinforce the female image. Recently, other marketers have noticed opportunities for gender segmentation. For example, Merrill Lynch offers a Financial Handbook for Women Investors who want to "shape up their finances." Owens-Corning consciously aimed a major advertising campaign for home insulation at women after its study on women's role in home improvement showed that two-thirds were involved in materials installation, with 13 percent doing it themselves. Half the women surveyed compared themselves to Bob Vila, whereas less than half compared themselves to Martha Stewart.

The automobile industry also uses gender segmentation extensively. Women buy half of all new cars sold in the United States and influence 80 percent of all new car purchasing decisions. "Selling to women should be no different than selling to men," notes one analyst. "But there are subtleties that make a difference." Women have different frames, less upper-body strength, and greater safety concerns. To address these issues, automakers are designing cars with hoods and trunks that are

easier to open, seat belts that fit women better, and an increased emphasis on safety features. Male car designers at Cadillac now go about their work with paper clips on their fingers to simulate what it feels like to operate buttons, knobs, and other interior features with longer fingernails. The Cadillac Catera features an air-conditioned glove box to preserve such items as lipstick and film. Under the hood, yellow markings highlight where fluid fills go.

A growing number of Web sites also target women. For example, the Girls On Network appeals to 18- to 34-year-old women with hip, twenty somethings-style film, television, and book reviews and features. After only two years, this site has 100,000 members and averages 5 million page views per month. The leading women's online community, iVillage, offers "real solutions for real women" and entreats visitors to "Join our community of smart, compassionate, real women." Various iVillage channels cover topics ranging from babies, food, fitness, pets, and relationships to careers, finance, and travel. The site now claims a membership of more than 1 million women across a broad demographic spectrum.

Income

Income segmentation has long been used by the marketers of products and services such as automobiles, boats, clothing, cosmetics, financial services, and travel. Many companies target affluent consumers with luxury goods and convenience services. Stores such as Neiman Marcus pitch everything from expensive jewelry and fine fashions to glazed Australian apricots priced at $20 a pound. Prada's hot-selling black vinyl backpack sells for $450, and a front-row seat at a New York Knicks game at Madison Square Garden goes for $1,000.

However, not all companies that use income segmentation target the affluent. Despite their lower spending power, the 25 percent of the nation's households that earn less that $25,000 per year offer an attractive market. For example, Greyhound Lines, with its inexpensive nationwide bus network, targets lower-income consumers. Almost half of its revenues come from people with annual incomes under $15,000. Many retailers also target this group, including chains such as Family Dollar, Dollar General, and Dollar Tree stores. When Family Dollar real estate experts scout locations for new stores, they look for lower-middle-class neighborhoods where people wear less expensive shoes and drive old cars that drip a lot of oil. The typical Family Dollar customer's household earns about $25,000 a year, and the average customer spends only about $8 per trip to the store. Yet the store's low-income strategy has made it one of the most profitable discount chains in the country.

Psychographic Segmentation

Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality characteristics. People in the same demographic group can have very different psychographic makeups.

The products people buy reflect their lifestyles. As a result, marketers often segment their markets by consumer lifestyles. For example, Duck Head apparel targets a casual student lifestyle claiming, "You can't get them old until you get them new." One forward-looking grocery store found that segmenting its self-service meat products by lifestyle had a big payoff:

Walk by the refrigerated self-service meat cases of most grocery stores and you'll usually find the offering grouped by type of meat. Pork is here, lamb is there, and chicken is over there. However, a Nashville, Tennessee, Kroger supermarket decided to experiment and offer groupings of different meats by lifestyle. For instance, the store had a section called "Meals in Minutes," one called "Cookin' Lite," another, filled with prepared products like hot dogs and ready-made hamburger patties, called "Kids Love This Stuff," and one called "I Like to Cook." By focusing on lifestyle needs and not on protein categories, Kroger's test store encouraged habitual beef and pork buyers to consider lamb and veal as well. As a result, the 16-foot service case has seen a substantial improvement in both sales and profits.

Marketers also have used personality variables to segment markets. For example, the marketing campaign for Honda's Helix and Elite motor scooters appears to target hip and trendy 22-year-olds. But it is actually aimed at a much broader personality group. One ad, for example, shows a delighted child bouncing up and down on his bed while the announcer says, "You've been trying to get there all your life." The ad reminds viewers of the euphoric feelings they got when they broke away from authority and did things their parents told them not to do. It suggests that they can feel that way again by riding a Honda scooter. Thus, Honda is appealing to the rebellious, independent kid in all of us. As Honda notes on its Web page, "Fresh air, freedom, and flair—on a Honda scooter, every day is independence day!" In fact, more than half of Honda's scooter sales are to young professionals and older buyers—15 percent are purchased by the over-50 group.

Duck Head ad

Lifestyle segmentation: Duck Head targets a casual student lifestyle, claiming, "You can't get them old until you get them new."

Behavioral Segmentation

Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product. Many marketers believe that behavior variables are the best starting point for building market segments.

Occasions

Buyers can be grouped according to occasions when they get the idea to buy, actually make their purchase, or use the purchased item. Occasion segmentation can help firms build up product usage. For example, orange juice is most often consumed at breakfast, but orange growers have promoted drinking orange juice as a cool and refreshing drink at other times of the day. In contrast, Coca-Cola's "Coke in the Morning" advertising campaign attempts to increase Coke consumption by promoting the beverage as an early morning pick-me-up. Some holidays, such as Mother's Day and Father's Day, were originally promoted partly to increase the sale of candy, flowers, cards, and other gifts. Many food marketers prepare special offers and ads for holiday occasions. For example, Beatrice Foods runs special Thanksgiving and Christmas ads for Reddi-wip during November and December, months that account for 30 percent of all whipped cream sales.

Kodak, Konica, Fuji, and other camera makers use occasion segmentation in designing and marketing their single-use cameras. By mixing lenses, film speeds, and accessories, they have developed special disposable cameras for about any picture-taking occasion, from underwater photography to taking baby pictures.

Standing on the edge of the Grand Canyon? Try Konica's Panoramic, which features a 17mm lens that takes in nearly 100 degrees horizontally. Going rafting, skiing, or snorkeling? You need Kodak's Max Sport, a rugged camera that can be used underwater to 14 feet. It has big knobs and buttons that let you use it with gloves. Want some pictures of the baby? Kodak offers a model equipped with a short focal-length lens and fast film requiring less light for parents who would like to take snapshots of their darlings without the disturbing flash. Need to check out your golf swing? Just point and shoot the QuickSnap Golf disposable camera, which snaps off eight frames per click showing how your body and club do during the swing. In one Japanese catalog aimed at young women, Kodak sells a package of five pastel-colored cameras, including a version with a fish-eye lens to create a rosy, romantic glow.

ad for ReddiWip

Occasion segmentation: Beatrice Foods runs special Thanksgiving and Christmas ads for Reddi-wip during November and December, months that account for 30 percent of all whipped cream sales.

Benefits Sought

A powerful form of segmentation is to group buyers according to the different benefits that they seek from the product. Benefit segmentation requires finding the major benefits people look for in the product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit. For example, one study of the benefits derived from travel uncovered three major

market segments: those who travel to get away and be with family, those who travel for adventure or educational purposes, and people who enjoy the "gambling" and "fun" aspects of travel.

One of the best examples of benefit segmentation was conducted in the toothpaste market. Research found four benefit segments: economic, medicinal, cosmetic, and taste. Each benefit group had special demographic, behavioral, and psychographic characteristics. For example, the people seeking to prevent decay tended to have large families, were heavy toothpaste users, and were conservative. Each segment also favored certain brands. Most current brands appeal to one of these segments. For example, Crest toothpaste stresses protection and appeals to the family segment, whereas Aim looks and tastes good and appeals to children.

Benefit Segmentation of the Toothpaste Market

Benefit Segments Demographics Behavior Psychographics Brands Favored

Economic

(low price) Men Heavy users High autonomy,

value oriented Brands on sale

Medicinal

(decay prevention) Large families Heavy users Hypochondriacal, conservative Crest

Cosmetic

(bright teeth) Teens, young adults Smokers High sociability, active Aqua-Fresh, Ultra Brite

Taste

(good tasting) Children Spearmint lovers High self-involvement hedonistic Colgate, Aim

Source: Adapted from Russell J. Haley, "Benefit Segmentation: A Decision-Oriented Research Tool," Journal of Marketing, July 1968, pp. 30–;35. Also see Haley, "Benefit Segmentation: Backwards and Forwards," Journal of Advertising Research, February–;March 1984, pp. 19–;25; and Haley, "Benefit Segmentation—20 Years Later," Journal of Consumer Marketing Vol. 1, 1984, pp. 5–;14.

User Status

Markets can be segmented into groups of nonusers, ex-users, potential users, first-time users, and regular users of a product. For example, one study found that blood donors are low in self-esteem, low risk takers, and more highly concerned about their health; nondonors tend to be the opposite on all three dimensions. This suggests that social agencies should use different marketing approaches for keeping current donors and attracting new ones. A company's market position also

influences its focus. Market share leaders focus on attracting potential users, whereas smaller firms focus on attracting current users away from the market leader.

Usage Rate

Markets can also be segmented into light, medium, and heavy product users. Heavy users are often a small percentage of the market but account for a high percentage of total consumption. Marketers usually prefer to attract one heavy user to their product or service rather than several light users. For example, a recent study of U.S.-branded ice cream buyers showed that heavy users make up only 18 percent of all buyers but consume 55 percent of all the ice cream sold. On average, these heavy users pack away 13 gallons of ice cream per year versus only 2.4 gallons for light users. Similarly, a travel industry study showed that frequent users of travel agents for vacation travel are more involved, more innovative, more knowledgeable, and more likely to be opinion leaders than less frequent users. Heavy users take more trips and gather more information about vacation travel from newspapers, magazines, books, and travel shows. Clearly, a travel agency would benefit by directing its marketing efforts toward heavy users, perhaps using telemarketing and special promotions.

Loyalty Status

A market can also be segmented by consumer loyalty. Consumers can be loyal to brands (Tide), stores (Wal-Mart), and companies (Ford). Buyers can be divided into groups according to their degree of loyalty. Some consumers are completely loyal—they buy one brand all the time. Others are somewhat loyal—they are loyal to two or three brands of a given product or favor one brand while sometimes buying others. Still other buyers show no loyalty to any brand. They either want something different each time they buy or they buy whatever's on sale.

A company can learn a lot by analyzing loyalty patterns in its market. It should start by studying its own loyal customers. Suppose Colgate finds that its loyal toothpaste buyers are more middle class, have larger families, and are more health conscious. These characteristics pinpoint the target market for Colgate. By studying its less loyal buyers, the company can detect which brands are most competitive with its own. If many Colgate buyers also buy Crest, Colgate can attempt to improve its positioning against Crest, possibly by using direct-comparison advertising. By looking at customers who are shifting away from its brand, the company can learn about its marketing weaknesses. As for nonloyals, the company may attract them by putting its brand on sale.

Segmenting Business Markets

Consumer and business marketers use many of the same variables to segment their markets. Business buyers can be segmented geographically, demographically (industry, company size), or by

benefits sought, user status, usage rate, and loyalty status. Yet, business marketers also use some additional variables, such as customer operating characteristics, purchasing approaches, situational factors, and personal characteristics. The table lists major questions that business marketers should ask in determining which customers they want to serve.

Major Segmentation Variables for Business Markets

Demographics

Industry: Which industries that buy this product should we focus on?

Company size: What size companies should we focus on?

Location: What geographical areas should we focus on?

Operating Variables

Technology: What customer technologies should we focus on?

User–nonuser status: Should we focus on heavy, medium, or light users or nonusers?

Customer capabilities: Should we focus on customers needing many services or few services?

Purchasing Approaches

Purchasing function organization: Should we focus on companies with highly centralized or decentralized purchasing?

Power structure: Should we focus on companies that are engineering dominated, financially dominated, or marketing dominated?

Nature of existing relationships: Should we focus on companies with which we already have strong relationships or simply go after the most desirable companies?

General purchase policies: Should we focus on companies that prefer leasing? Service contracts?Systems purchases? Sealed bidding?

Purchasing criteria: Should we focus on companies that are seeking quality? Service?Price?

Situational Factors

Urgency: Should we focus on companies that need quick delivery or service?

Specific application: Should we focus on certain applications of our product rather than all applications?

Size of order: Should we focus on large or small orders?

Personal Characteristics

Buyer–seller similarity: Should we focus on companies whose people and values are similar to ours?

Attitudes toward risk: Should we focus on risk-taking or risk-avoiding customers?

Loyalty: Should we focus on companies that show high loyalty to their suppliers?

Source: Adapted from Thomas V. Bonoma and Benson P. Shapiro, Segmenting the Industrial Market (Lexington, MA: Lexington Books, 1983). Also see John Berrigan and Carl Finkbeiner, Segmentation Marketing: New Methods for Capturing Business (New York: HarperBusiness, 1992).

By going after segments instead of the whole market, companies have a much better chance to deliver value to consumers and to receive maximum rewards for close attention to consumer needs. Thus, Hewlett-Packard's Computer Systems Division targets specific industries that promise the best growth prospects, such as telecommunications and financial services. Its "red team" sales force specializes in developing and serving major customers in these targeted industries. Within the chosen industry, a company can further segment by customer size or geographic location. For example, Hewlett-Packard's "blue team" telemarkets to smaller accounts and to those that don't fit neatly into the strategically targeted industries on which HP focuses.

A company might also set up separate systems for dealing with larger or multiple-location customers. For example, Steelcase, a major producer of office furniture, first segments customers into 10 industries, including banking, insurance, and electronics. Next, company salespeople work with independent Steelcase dealers to handle smaller, local, or regional Steelcase customers in each segment. But many national, multiple-location customers, such as Exxon or IBM, have special needs

that may reach beyond the scope of individual dealers. So Steelcase uses national accounts managers to help its dealer networks handle its national accounts.

Requirements for Effective Segmentation

Clearly, there are many ways to segment a market, but not all segmentations are effective. For example, buyers of table salt could be divided into blond and brunette customers. But hair color obviously does not affect the purchase of salt. Furthermore, if all salt buyers bought the same amount of salt each month, believed that all salt is the same, and wanted to pay the same price, the company would not benefit from segmenting this market.

To be useful, market segments must be:

Measurable: The size, purchasing power, and profiles of the segments can be measured. Certain segmentation variables are difficult to measure. For example, there are 32.5 million left-handed people in the United States—almost equaling the entire population of Canada. Yet few products are targeted toward this left-handed segment. The major problem may be that the segment is hard to identify and measure. There are no data on the demographics of lefties, and the U.S. Census Bureau does not keep track of left-handedness in its surveys. Private data companies keep reams of statistics on other demographic segments but not on left-handers.

Accessible: The market segments can be effectively reached and served. Suppose a fragrance company finds that heavy users of its brand are single men and women who stay out late and socialize a lot. Unless this group lives or shops at certain places and is exposed to certain media, its members will be difficult to reach.

Substantial: The market segments are large or profitable enough to serve. A segment should be the largest possible homogenous group worth pursuing with a tailored marketing program. It would not pay, for example, for an automobile manufacturer to develop cars for persons whose height is under four feet.

Differentiable: The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. If married and unmarried women respond similarly to a sale on perfume, they do not constitute separate segments.

Actionable: Effective programs can be designed for attracting and serving the segments. For example, although one small airline identified seven market segments, its staff was too small to develop separate marketing programs for each segment.

PART B:

Company name: SOTC

SOTC offers a variety of tours which includes tours for families with kids, tours for senior citizens, theme vacations like beaches and also special packages for pure vegetarian and jains.SOTC offers price sensitive tours like cost saver and premium tours which can be afforded by all classes.Different distribution strategies are selected for Tours marketing by SOTC. There are also small agents (who have taken franchise of SOTC) spread all over the town/country who also play a role of place. SOTC act as wholesalers and also act as a retailer. The latest mode of reaching the customers is through Internet that is SOTC has its own website from where information on the tours can be procured, direct booking can be done for which the payment can be made through the credit card. SOTC also has its own offices from where booking can be done.SOTC uses electronic, print and all sorts of media as tourism is a highly promoted industry. SOTC gives printed ads in The Times of India mentioning the special tours in it with the special prices offered by them. Brochures are another form of communication provided by SOTC to stimulate customers and motivate them to buy. They are used to demonstrate in pictures and words the images and positioning of the product and the organizations.SOTC provides information through its website, newspaper ads and in SOTC branches in the form of pamphlets.The itineraries in SOTC are customized that is if the customer doesnt wish to visit a particular place that place can be replaced with a place the customer wants to visit.In SOTC the tours are customized that is if customer cant afford the premium holiday he will be given the same tour but the cost will be reduced by offering him a deluxe hotel instead of a five star hotel or by offering him a non ac bus instead of a ac coach.In SOTC the tours, air and rail tickets are booked online. SOTC provides its customers with foreign currency and visa services.