Faculty of Management Studies, South Campus Marketing ManagementBatch: 2015-17 Group No. 6

Page | 1

MARKET SEGMENTATION

Why we need segmentation?

There are two main segmentation approaches: needs-based and characteristics-based. Needs-based segmentation is based on customer needs. This is the understanding that drives product development and brand strategy.

Characteristics-based segmentation is based on the characteristics of the customer and area. It is the process of segmenting customers based on their characteristics, attitudes or behaviour. This process helps drive the development and execution of customer strategy and targeting.

A basis for segmentation is a factor that varies among groups within a market, but that is consistent within groups. One can identify four primary bases on which to segment a consumer market:

Geographic segmentation is based on regional variables such as region, climate, population density, and population growth rate.

Demographic segmentation is based on variables such as age, gender, ethnicity, education, occupation, income, and family status.

Psychographic segmentation is based on variables such as values, attitudes, and lifestyle.

Behavioral segmentation is based on variables such as usage rate and patterns, price sensitivity, brand loyalty, and benefits sought.

Faculty of Management Studies, South Campus Marketing ManagementBatch: 2015-17 Group No. 6

Page | 2

MARKET SEGMENTATION OF MOBILE INDUSTRY

According to the latest preliminary release from the International Data Corporation (IDC) Worldwide Quarterly Mobile Phone Tracker, vendors shipped a total of 337.2 million smartphones worldwide in the second quarter of 2015 (2Q15), up 11.6% from the 302.1 million units in 2Q14. The 2Q15 shipment volume represents the second highest quarterly total on record. Following an above average first quarter (1Q15), smartphone shipments were still able to remain slightly above the previous quarter thanks to robust growth in many emerging markets.

Smartphone Vendor Highlights:

Samsung remained the leader in the worldwide smartphone market but was the only company among the top five to see its shipment volume decline year over year. The new Galaxy S6 and S6 edge arrived with mixed results as a limited supply of the edge models did not keep pace with the demand for the new curved handset. Older Galaxy models, however, sold briskly thanks to deep discounts and promotions throughout the quarter.

Apple's second quarter proved to be its biggest fiscal third quarter ever with 47.5 million units shipped. The iPhone once again continued to dominate in China where shipments remained buoyant after a strong first quarter. The larger screened iPhones along with the rapid expansion of 4G networks in China continued to drive momentum for Apple in Asia/Pacific.

Xiaomi continues to find success in its home country thanks to both premium and entry-level devices like the Mi Note and Redmi 2 handsets, which helped Xiaomi, achieve a 29.7% year-over-year increase. With a significant presence in India and Southeast Asia, Xiaomi is now looking to bulk up its IP portfolio to expand its reach even further outside of Asia/Pacific, starting with Brazil.

Faculty of Management Studies, South Campus Marketing ManagementBatch: 2015-17 Group No. 6

Page | 3

Lenovo, the third and final Chinese OEM on the list, captured the final spot despite steep home turf competition from both Xiaomi and Huawei. Outside of China, Lenovo continued to witness success in many emerging markets such as India with entry-level and mid-range models like the A600 and A7000, sold via Internet retail channels.

Huawei's mid-range and high-end models continue to prove successful with the flagship P8, Honor Series, and Mate 7 handsets delivering sustainable growth both in the consumer and commercial segment.

Top Five Smartphone Vendors - Worldwide Shipments, Market Share, and Year-Over-Year Growth, Q2 2015 Preliminary Data (Units in Millions)

Vendor2Q15

Shipment Volumes

2Q15 Market Share

2Q14 Shipment Volumes

2Q14 Market Share

Year-Over-Year Change

Samsung 73.2 21.7% 74.9 24.8% -2.3%

Apple 47.5 14.1% 35.2 11.7% 34.9%

Huawei 29.9 8.9% 20.2 6.7% 48.1%

Xiaomi 17.9 5.3% 13.8 4.6% 29.4%

*Lenovo 16.2 4.8% 15.8 5.2% 2.4%

Others 152.5 45.2% 142.2 47.1% 7.3%

Total 337.2 100.0% 302.1 100.0% 11.6%

Lenovo + Motorola 16.2 4.8% 24.3 8.0% -33.3%

Source: IDC Worldwide Quarterly Mobile Phone Tracker, July 23, 2015

SCENARIO IN INDIA

In India, for the first time, feature phones registered static volume growth as sales were impacted by the rapid growth of smartphones during 2013. However, feature phones continued to significantly outsell smartphones in India due to their popularity in rural regions. Rural consumers and senior citizens continued to prefer feature phones over smartphones due to the ease of usability.

India constitutes approximately 10% of world-wide sale of mobile devices. “Market is supported by global and local players as well. Growing influence of local handset players in the low-end segment has forced high-end companies to sell phones at a discounted rate. Despite very high competition Mobile Industry is growing at a very high pace.

LEVEL OF COMPETITION

Global mobile manufacturing firms are facing tough competition from local mobile manufacturing firms. New Entrants are using various techniques like- low price, innovative product, etc. to capture market share. Companies like Micromax, Karbonn, etc. are using low-price strategy to gain market share. With the entry of low-priced Indian market handset players like- Micromax, Karbonn, etc. focusing on value conscious consumers has intensified competition in the Indian market mobile device market.

Faculty of Management Studies, South Campus Marketing ManagementBatch: 2015-17 Group No. 6

Page | 4

Available market for mobile handsets in India

Low-end products: Low-end products have price band of approximately Rs. 1000 to Rs. 3000. This segment contributes to approximately 15% of total Indian mobile device market. These phones are generally meant for basic functions. These products are meant for people for whom cell phones are just another communication device.

Mid-range Products: The products have price band of Rs. 3000 to Rs. 10000. Almost all companies offer product in this range. These types of products have various features like good music speaker and compatibility, good camera and social networking applications. These products are used by Pragmatic adopters and social connectors.

High-end Products: High-end product have price band of above Rs. 10,000. Local player’s like- Lava mobile, Lemon mobile and karbonn mobile etc. doesn’t target this market. This segment constitutes products like PDA, high-tech mobile handsets. In this segment, mobile handsets like Apple, one plus two, Samsung galaxies S5 etc. are the predominent leaders.

MARKET FORECAST WITH MACRO-ECONOMICS ASSUMPTIONS

At present, India is ranked No. 2 in world mobile market and is soon expected to takeover China as the world’s biggest mobile market. The innovations in the field of telecom-sector are making mobile market in India, one of the biggest industry segments. The mobile TV, Mobile Commerce, 3G, PDA are some of the examples that clearly show the bright future of the Mobile Industry ahead.

CONCLUSION

Segmentation is becoming ever more important in the mobile industry. Among the manufacturers there is acceptance that market segmentation should occur earlier, to drive market understanding and provide a foundation for more efficient brand development. The form of market segmentation based on identifying customers’ needs is particularly valuable given the ever-increasing importance of the customer perspective in mobile handsets. Two segmentation types, Needs-based & Characteristics-based segmentation provide a fundamental understanding of what product design opportunities exist, how a successful brand development strategy can be designed and implemented. The needs-based segments may be developed initially through qualitative research. This process of building understanding adds high value in building innovative mobile handsets as per the needs of customer.