Download - Branding Strategy Adopted Byhonda

8/2/2019 Branding Strategy Adopted Byhonda

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BRANDING STRATEGY ADOPTED BYHONDA:It is common view that consumes view a brand name as an important part of the productandno doubt branding ads to the value of the product.Branding is actually:

A name, term, sign, symbol, or a designora combination of these intended toidentify thegoods and services of oneseller to differentiate them with theproducts and services of theircompetitors.HONDA BRAND NAME:I n s t i t u t eo fB u s i n e s sA d m i n i s t r at i o n 4 7


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BRAND DECISION MADE BY HONDA:Brand decision of HONDA is based on the fact that it is most popular perceived by

thecustomer as luxurious vehicle. HONDA brand name has strong consumer loyalty but onlyina specific target segment of the whole society.


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BRANDING STRATEGY:HONDA has struggled a lot to keep its brand being remain in minds of consumers. Under thisregard the main strategy is to add the valuable features to vehicles to keep the brandloyalty.BRAND PERSONNA:Every brand of HONDA has its own branding strategy. HONDA ATLAS CARS

PAKISTANLIMITED builds brand persona for each brand. Pricing, Promotion, Distributionand future products development follow brandpersona.I n s t i t u t eo fB u s i n e s sA d m i n i s t r at i o n 4 8B R A N D M ES S A G E P ER S O N A CIVICDISTRACTINGLYGOOD LOOKINGFOR THE STYLISH,GOOD LOOKINGPEOPLE

CITYEXTREMEPERFECTIONFOR THELUXURIOUSVEHICLE LOVERS


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PRODUCT FEATURE:To get a superior market share the product must have the salient features in it. HONDAhasadopted the same strategy that it has been continuously adding features to its vehicles.Lethave a look vehicles offered by HONDA ATLAS CARS (PAKISTAN.) LIMITED inregardto their featuresHonda Civic:The shinning features of Honda civic would be elaborated as follows:EXTERIOR:Distractingly goodlooking :New Civic has an exciting new style. Its the car for people who know whatshappening.Who shape the time?Theres a lot to love about the Civic:It's reliable, economical and remarkably fuel-efficient.It's now equipped with newheadlights, bumpers and grille, so you'll have a toughtime concentrating on anything except its stylish good looks.

Globalization of Tata Motors: Strategic Plan for the Future

Faculty Contributor: Murali Patibandla, ProfessorStudent Contributors: Arun A, Balasubramanian C, Indranil Guha, Gautham M N
http://www.honda.com.pk/civic_com.htmhttp://www.honda.com.pk/civic_com.htmhttp://www.honda.com.pk/civic_com.htmhttp://www.honda.com.pk/civic_com.htm


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Tata Motors produces vehicles both in the Light Commercial Vehicles (LCV) and theMedium and Heavy Commercial Vehicles (M and HCV) segments. It faces highercompetition in the LCV segment, where its Tata ACE has been a huge success.Internationalization forms a key component of Tata Motor's strategy and it has successfullyentered countries having a demand similar to India like South Africa, Thailand and

Argentina, mainly through acquisitions and joint ventures. It needs to improve its productreliability, service network and channel reach in order to maintain and replicate this successin other markets. Some of the recommendations for Tata Motors are exploring masscustomization options in the Small Commercial Vehicle (SCV) segment, improving brandreputation and technology appropriation to bring out a world class ultra-HCV segment.

Tata Motors is currently India's largest automobile company with revenues of $7.2 billion in2006-07. It is by far the leader in commercial vehicles and the second largest player in thepassenger vehicles market with winning products in the compact, midsize car and utilityvehicle segments. Employing around 23000 people and headquartered in Mumbai, TataMotors became the first company from India's engineering sector to be listed in the NYSE in

September 20041. While currently about 18% of its revenues come from internationalbusiness, the company's objective is to expand its international business, both throughorganic and inorganic growth routes.

A brief examination of the truck industry in India using Porter's analysis helps us understandthe threats that Tata Motors faces.

Overview of the Truck Industry in India

The truck market in India comprises the light trucks (LCV) and the medium and heavy truckssegments (M and HCV), of which the M and HCV segment constitutes nearly 78% of thetotal Indian truck market.

a) Light Commercial Vehicles (LCV)2

The market for light trucks is composed of pickups, vans and coaches weighting up to 3.5tonnes. This segment has exhibited a consistent growth rate of over 20% in the past 5 years.This growth is expected to continue with the launch of Tata Ace by Tata Motors and similarplans by other players like Mahindra & Mahindra, Eicher, etc.

b) Medium and Heavy Commercial Vehicles (M and HCV)3

The medium and heavy trucks include commercial vehicles, heavy buses and coachesweighing 3.51-16 tonnes. This segment has stabilized and is expected to grow at 10% overthe next 5 years. The major players in this segment include Tata Motors and Ashok Leylandwhich account for more than 85% of the market.

Competitive Threats in the Industry

The Porter's analysis for the LCV and the M and HCV segments show strikingly similarresults except for the threat of new entrants. In the LCV market there exist a small number oflarge companies between whom there is a high degree of competition. To gain market share

companies are focused on innovation and strong marketing strategies. The companies are


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usually not diversified beyond automotive manufacture. As a result, if the automotive sectoris in a downturn, it could raise exit barriers. Hence the overall rivalry is strong in this market.

In the face of such rivalry, let us consider the financial performance of Tata Motors.

Financial Performance of Tata Motors

Over the years the conpany has performed exceptionally well financially inspite of thecyclical nature of the industry. A critical analysis of the financial statements provides us withthe following insights.

1. The issue ofCyclicality is plaguing the automotive sector and the future outlook inIndia is not great considering the robust performance of the past 3 years. Tata Motorshas countered this by increasing the share of exports in the sources of revenue.

2. Excess debt has led to a high Debt to Equity ratio and this is not good news as thecompany plans to go for further capital expansion. Also the percentage of cash flow

used for CAPEX is increasing as shown in Exhibit 1.

Exhibit 1 Percentage of cash inflow used for

CAPEX

3. Rising interest rates in the economy is a cause of concern as it dampens both capitalinvestments and softens the domestic demand.

4. Positives: The cash flow from operations has grown 11 times compared to last yeardespite a huge CAPEX. Tata Ace single handedly raised the market share of TataMotors in LCV segment by 5%. The operating leverage for Tata Motors is higher dueto the high fixed costs of CAPEX. But still the overall financial leverage of TataMotors is well under control when compared to Ashok Leyland.

Internationalization

Tata motors has decided to focus on a narrow base of 14-15 countries where marketconditions are similar to that of India

As a part of the company's new internationalization strategy, the company has decided tofocus on a narrow base of 14-15 countries where market conditions are similar to that ofIndia. In these countries, Tata Motors now has dedicated manufacturing facilities, marketingteams and sales teams. The idea is to have self sustained operations in this narrow band ofcountries. The company evaluates locations on the basis of market opportunities and labourskills.


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In the framework pertaining to international expansion strategies, Tata Motors can beidentified as an Extender, and is focusing on expanding into markets similar to those of thehome base, using competencies developed at home (see Exhibit 2).

Exhibit 2 Where is Tata Motors now and How toGlobalize?

Korean Operations

Tata Motors entered the advanced Korean Market by acquiring Daewoo, with which it hastremendous synergies in terms of product strategy and R & D. Tata Motors has planned touse this merger and leverage the technology for developing a World Truck for India andinternational markets.

South African Operations

In the export market, Tata Motors moved from a fragmented approach to specific markets,chosen in terms of consumer behavior, distribution networks, supply chain, etc. and identifiedSouth Africa as one of the best markets. The sales in this region are about 15,000 units4. Thisis a significant improvement over what Tata Motors was cumulatively exporting (8000 units)before adopting its new internationalization strategy.

Thailand Operations

Tata Motors formed a joint venture with Thonburi Automotive Plant to enter Thailand.Thailand is the second most competitive market for pickups, and the new pickup trucksdeveloped here will be sold in both domestic and export markets.

Latin American Operations

Tata Motors has taken its alliance with Fiat to produce a new one-tonne pick-up truck, forLatin American markets from Fiat's facility in Argentina. This arrangement will also see TataMotors forming a joint venture with a subsidiary of Iveco, the commercial vehicle division onFiat, to set up a distribution network.


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Now that Tata Motors has established a sustainable model in some countries, its mainchallenge is to replicate this model in other countries as well.

How to replicate this strategy for other markets?

Sustainable competitive advantage lies not in one, but a combination of multiple resources,each of which individually need not necessarily be the best, but in overall weighted averageterms, presents the best solution. For Tata Motors, the combination of resources providing itcompetitive superiority on a weighted average basis includes (see Exhibit 3):

1. Product Reliability2. Service Network3. Channel Reach

Exhibit 3 Three-way Resource Based View

In terms of product reliability, Tata Motors offers products of reasonably high standards.

However, foreign players like Volvo and even local competitors like Ashok Leyland arguablyoffer products that are far more refined. But this is more than compensated by a dependableservice network and extensive channel reach. Tata's service and distributor network is by farthe most extensive of any player in the trucks industry. Hence in overall weighted averageterms, Tata Motors still has a winning proposition.

In the next section, we provide recommendations that can take this winning proposition evenfurther.

Recommendation Matrix

Based on a close scrutiny of the resource based view of Tata Motors and the challenges itfaces, we propose a recommendation matrix arranged along three broad dimensions -Tangible, Intangible and Capabilities (see Exhibit 4).


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Exhibit 4 Three Dimensional Recommendation Matrix

Tangible

The strategies in this domain are primarily directed at sustaining Tata Motors' first moveradvantage with respect to its offering in the Small Commercial Vehicle segment - ACE.

Strategy Sustaining the First Mover's Advantage of ACE

National

Footprint

Tata Motors has an unparalleled network of dealers and service stations across the country for

Medium and Heavy Commercial Vehicles (M and HCV). However most of these servicestations are along inter-city routes. It would need to replicate this network at intra-city level forits hugely successful SCV - the Tata ACE. For this Tata Motors can liaise with small garages,train them and certify them as 'Tata Authorized Service Station'.

Product

Portfolio

Tata Motors has positioned ACE as a multipurpose vehicle (MPV). This is where Tata Motorscan learn from the Maruti small car strategy that posits that 'there is no such thing as a small carbuyer'. Hence Tata Motors should endeavour to move form a multi-purpose positioning to amass customization positioning for ACE, wherein multiple variants are offered on the ACEplatform, each uniquely suited for a specific application - such as tippers, long base trawlers,milk carriers.

Intangible

In intangible terms, Tata Motors needs to bolster its brand loyalty, by providing a uniquecustomer experience.

Strategy Intangible Assets

Unique

Customer

Experience

In commercial vehicles industry, the uniqueness of customer experience is largely driven bythe efficacy of the 'Support' framework. If your car breaks down, you can take a taxi tooffice. But that's not so for a transport operator. For him, his vehicle is at the heart of hisbusiness and hence responsive after-sales support is critical. Minimizing downtime calls for

a service network that is highly responsive and easily accessible. Besides, Tata Motorsshould also


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1. Consider introducing mobile service units for Tata ACE that can respond tocustomer calls anywhere within a given city.

2. Start treating "Services" as a dedicated profit center. Towards this end, the companyshould "productize" annual maintenance contracts.

Brand

ReputationBuilding a reputation will help sustain sales, without having to engage in discount sales.

Capabilities

There are two broad capabilities that Tata Motors should seek to acquire.

Strategy Capability Acquisition

TechnologyAppropriation

Technology Appropriation is the key to Tata Motor's ambitions to offer products withengines larger than 210 HP. As the share of ultra heavy commercial vehicles grows, the

company will need to face up to technologically superior players like Volvo. Here, Tatawill have to carefully spearhead its 'World Truck' program by carefully coordinatingtechnology appropriation from its numerous international technology partners, notablyDaewoo, Fiat and Hispano.

Robust Supply

Chain

Tata Motors has made significant investments in IT systems to network its countrywideservice network. This helps them maintain very high spares parts availability at theirservice stations and minimize downtime. In the years to come, it would need to includetheir SCV service station within this framework. This will however be a big challenge,since these service stations would largely be managed by illiterate and not-so-tech-savvyrepairmen.

Contingency Plans

1. Mass customization has its own shortcomings. Firstly, it puts a disproportionateamount of strain on the company's supply chain. And this is a wasted effort in case the

demand patterns aren't properly understood. Hence we propose that the sales of thecustomized vehicles be closely tracked and in case sales achieved within a reasonabletimeframe do not merit the additional resource outlay, then the company should revert

to the original multipurpose positioning.2. In the background of rupee appreciation, exports will become costly. Hence it is

prudent to open integrated production plants in other countries rather than just

concentrating on exports.

A few pointers on what Tata Motors ought not to do are captured below:

1. Compete on price because proportion of individual players is low. Insteaddifferentiate through service.

2. Engage in rapid capital expansion given the high debt to equity ratio. Use ring fencingjudiciously.

3. Focus on rapid acquisitions and instead focus on consolidation in the foreign market.4. Lose focus on the 'Value for Money' positioning, especially in the soon to be launched

offering in the Ultra Heavy Commercial Vehicle segment

Conclusion


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Tata Motors has never had it so good. Today the company is the undisputed market leader inthe commercial vehicles industry in India and is gradually emerging as one of the key players

internationally too. It has been forging ahead on a number of fronts in an attempt to furtherentrench its position as a market leader. In the SCV segment, the company has witnessedunprecedented success with the launch of the pioneering Tata ACE. In the M and HCV

segment, the company has been taking determined steps to further consolidate its position.The company enjoys a number of key strengths that enable it to present a unique value

proposition to its customers.

However this success is far from being a given. The company must focus on combining itsunique strengths, as it endeavors to replicate its recent successes in new segments and across

new geographies. Apart from product reliability, the most important determinant of futuresuccess would the company's ability to bolster its support framework. If the company gets itright, the spoils could indeed be breathtaking. Not only will that catapult the company to the

forefront of creating a unique customer experience, but also help spawn altogether newrevenue streams. The future presents challenges and opportunities for the company in equal

measure both domestically and internationally. While pitfalls are many, Tata Motors lookswell positioned indeed to capitalize on these opportunities and take on the world.

COMPETITORANALYSISMajor competitors ofNissan nextare Suzuki, Toyota, Hyundai and Cherry QQ.A l l p r o d u c t s o f t h e s e c o m p a n i e so f s a m e s i z e a n d c a p a c i t y w i l l g i v e t o u g h competition toNissan next.6.1 PRICINGA s m a k i n g c a r s m o r e a f f o r d a b l e i s t h e m a j o r o b j e c t i v e o f l a u n c h i n gt hi s ca rt h e r e f o r e t h e p r i c e s o f t h i s c a r a r e k e p t l o w e r t h a n t h a to f a l l t h e c u r r e n t c o m p e t i to r s i n th e ma r k e t. Th i s wi l l h e l p g r a sp i n gl a r ge r m ark e t s h a r e a nd compete well in market.

CNG plus AC car will be available at Rs. 3, 50,000 only.Only AC car will be available at Rs. 3, 15,000 only.6.2 PROMOTIONMajor competitors of

Ni ssan nextl ike Toyo ta and Suzuk i; a re spending huger e v e n u e o n p ro mo t i o n o f t h e i rb r a n d a n d p r o d u c t s . N i s s a n w i l l a l s o m a k e e xt en si ve e ff or t a ndhe a vy inve s tme n t on c re a t ing a wa re ne s s a bou t

Nissannextin market. Promotion of


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Nissan nextwill be done at nation wide scale asNissan aims at targeting all major areas of country.6.3 DISTRIBUTIONNissan has currently distribution setup in the major divisional headquarters onlybu t the

competitors specially; Toyota and Suzuki h as a wider network. Therepresence inmore areas than Nissan i s givin g tough competi tion to Nissan. F or Nissannext, Gan dh ara Nis san Lim it ed wil l com e u p w ith a n ew str ate gy of distributionto reach all those areas where there they are not currently present.6.4FUTURECOMPETITORS

ANDREPLACEMENTPRODUCTSIn future the most effective competitor forNissan nextcan be a small car fromHonda Limited. Honda is a large car manufacturing companybut not currentlyproducing small cars in Pakistan. Therefore a step of producingsmall cars byH o n d a c a n g i v e t o u g h t i m e t oNissan next.Nissan should develop strategy tocope with the situation if Honda also jumpsinto the market with small cars forconsumers.

MARKETINGSTRATEGIESThis section of the plan basically outlines Nissans plan to achieve its objectivesthat are

mentioned above as well, it is the most essential part of the marketingplan.8.1 TARGETMARKETNissannexctarget market will be the low-level income group, middle class andb i k e o w n e rs . B i k eo w n e rs a r e t h e mo s t c r it i c al a s l a r g e nu m b e r of c o n s um e r c u r r e n t l y i n

P a k i s t a n t r a v e l t h r o u g h b i k e s . S a f e t y h a z a r d s o f t h i s t y p ea r e tremendous considering the increasing number of accidents that occur due


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tounsafe bikes. With constant awareness and education about Nissan affordabilityand safetyfeatures, this type of group could be acquired resulting in increase of brand loyal consumers.People are more aware and therefore, they are constantlym o r e p a r t i c u l a r w h e nd e c i d i n g w h i c h c a r t o p u r c h a s e . W i t hs t r a t e g i c advertisement, consumers can be att racted with its latest features

and a newimage Nissan will provide to owners.8.2NISSAN

NEXTTARGETMARKET: G

EOGRAPHICSEGMENTThe major concern of Nissan

nextis to capture all the district headquarters of thecountry resulting in its coverage of almost all over thecountry.8.3 NISSAN

NEXTTARGETMARKET: PSYCHOGRAPHICSWith new image Nissannextwill provide to its buyers, owners will feel moreconfident and proudconsidering that Nissan is an international organization withstrong background resulting

driving Nissannexta status symbol. Also safety andco mf or t ar e bi g fa ct or s o f co ns id er at io ns in ac o ns ume rs mi nd s o N is s an b yfocusing on these factors will attract safety and comfortconscious people. Seeingits potential, consumers will most likely shift to Nissannext.8.4 NISSAN

NEXT

TARGET


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MARKET: DEMOGRAPHICSP r i m a r y T a r g e t m a r k e t b e l o n g s t o m i d d l e c l a s s , u p p e r m i d d l e c l a s s a n d

l o w earning income people in society, falling in income bracket of below Rs. 50,000.

Also the target will be people from 25 - 60year old who are major

automobilebuyers

A l s o i t i s r e c o m m e n d ed t o i n c r e a s e t h e d i r e c t d i s t r i b u t i o n c o v e r a g ea r ea b ysetting up showrooms in more areas to have better control over distribution.U s e o f I n - d i r e c t C h a n n e l :I n t h o s e a r e a s w h e r e N i s s a n d o e s n t h a v e i t s showrooms it will use itschain o f authorized dealers to sell out its cars in these areas.

9.4 PROMOTIONSTRATEGIESPromotion is one of the most important factors of marketing; it is done to affectthe consumerbehavior in order to achieve sales and increase product image. Inp ro mo t i on t he maj o rt a s k i s t o m a k e c o n s u m e r s a w a r e o f t h e p r o d u c t a n d t o a t t r a c t c o n s u m e rt o w a rd s t h e p r o d u ct b y h i g h l i g ht i n g t h e a d v an t a ge s o f t h e p r o d u c t .A l s o i t k e e p c o n s u m e r s a w a r e a n d w e l l i n f o r m e d a b o u t

p r o d u c t s features and improvements.Recommendations

Nissan can use electronic and print media to advertise about its car.Nissan can advertise on billboards, flex signs, bus boards, telemarketing etc.Special advertisement campaigns can be launched e.g. seminars, road showspublications etc. tocreate awareness about Nissan next.Nissan will sponsor special events like concerts etc. to introduce the car to public.9.4.1 E

NVIRONMENTR


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ESEARCHA n e x t e n s i v e m a r k e t r e s e a r c h w i l l b e c o n d u c t e d t o h a v e b e t t e r i d e aa b o u t consumers perception about Nissan and its competitors. For this purpose Nissanwillacquire services of marketing and research agencies to better analyze marketenvironment. This willenable Nissan to learn about the consumers behavior, howthey perceive us and compare with the

competitor. The media of the advertising ap r o d u c t i s a l w a y s c h o s e n a f t e r t h em a r k e t e n v i r o n m e n t r e s e a r c h t o g e t knowledge that if the target audienceis interested in that mode of advertisementor not

9.4.2 ADVERTISINGTo advertise the product better and create awareness about product; Nissan willuse different

advertisement methods to approach the consumers. The diversity of advertisement channelswill help in reaching the masses of different mindsets.Following Advertisement methods will be

used:N i s a n w i l l u s e p r i n t a n d e l e c t r o n i c m e d i a t o i n t r o d u c e t h eproduct toconsumers.Special events will be sponsored by Nissan.Use of Billboards, flex signs etc for massive introduction of cars launch.Special road shows and displays will be set at dealers outlets.

Prize contest will be conducted to attract people towards the car.9.5 POSITIONINGSTRATEGYNissannextwill use the image of NISSAN MOTOR CO. and hope that it will attractthe customers towardsthe car. Also Nissannextsextensive marketing with focuson i ts special fea tures like economy, safety and

comfort will draw attention of buyers and create room for the product in the market.9.6 ACTIONPLANThe action plan will commence from the month of January 2007 and will go up to June

2007.P R O M O T I O NA C T I V I T Y D U R A T I O N R E SP O N S I B I L I T Y La u n ch a b l in d a d c a m pa i gn on b il l bo a r d s and magazines in all A class areas of

majorcities and magazine.2 weeks Marketingdepartment


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Heavy advertis ing o n TV, newspapers andmagazines4 w e e k s M a r k e t i n g departmentSponsor a highly prestigious chain of eventsor concerts.3 w e e k s M a r k e t i n g department,Finance


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DepartmentS e t d i s p l a y s o f c a r a t a l l t h e N i s s a n showrooms andmajor d ealer outlets in all cities.3 w e e k s M a r k e t i n g department

A contest will be held and people who winwill get prizes (Car Info. Books, Keychains,phone cards etc.)A p r i l F i n a n c e Department,MarketingDepartment.Reduce number of billboards, television andmagazines advertisements.M a y M a r k e t i n g departmentContinue Advertising

J u n e M a r k e t i n g department


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Market segmentation

From Wikipedia, the free encyclopedia

It has been suggested thatCluster analysis (in marketing)bemergedinto this article orsection. (Discuss)Proposed since September 2011.

Marketing

Key concepts

Product marketingPricing

DistributionServiceRetail

Brand management

Account-based marketing

EthicsEffectivenessResearch

SegmentationStrategyActivation

ManagementDominance

Marketing operations

Promotional contents

AdvertisingBrandingUnderwriting

Direct marketingPersonal sales

Product placementPublicity

Sales promotionSex in advertising

Loyalty marketingSMS marketing

PremiumsPrizes

Promotional media

PrintingPublicationBroadcasting

Out-of-home advertisingInternet

Point of saleMerchandise

Digital marketingIn-game advertising

Product demonstrationWord-of-mouth

Brand ambassadorDrip marketingVisual
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merchandising

v d e

A market segment is a sub-set of amarketmade up of people or organizations with one ormore characteristics that cause them to demand similar product and/or services based onqualities of those products such as price or function. A true market segment meets all of thefollowing criteria: it is distinct from other segments (different segments have different needs),it is homogeneous within the segment (exhibits common needs); it responds similarly to amarket stimulus, and it can be reached by a market intervention. The term is also used when

consumers with identical product and/or service needs are divided up into groups so they canbe charged different amounts for the services. The people in a given segment are supposed tobe similar in terms of criteria by which they are segmented and different from other segmentsin terms of these criteria. These can be broadly viewed as 'positive' and 'negative' applicationsof the same idea, splitting up the market into smaller groups.

Examples of characteristics used for segmentation:

Gender Price Interests Location Religion Income Size of Household

While there may be theoretically 'ideal' market segments, in reality every organizationengaged in a market will develop different ways of imagining market segments, and createProduct differentiationstrategies to exploit these segments. The market segmentation andcorresponding product differentiation strategy can give a firm a temporary commercialadvantage.

Contents

[hide]

1 Criteria for Segmenting 2 Bases for segmenting consumer markets

o 2.1 Geographic segmentationo 2.2 Demographic Segmentationo 2.3 Psychographic Segmentationo 2.4 "Positive" market segmentationo 2.5 Behavioral Segmentationo 2.6 Occasions
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o 2.7 Benefitso 2.8 Users status

3 Using Segmentation in Customer Retentiono 3.1 Process for tagging customerso 3.2 Niche Marketingo 3.3 Local Marketing

4 Price Discrimination 5 Algorithms and Approaches 6 References

[edit] Criteria for Segmenting

Homogeneity (within a segment)

similar responses to marketing mix similar segmenting dimensions

Heterogeneity (between segments)

different responses to marketing mix different segmenting dimensions

Substantial

segment is big enough to be profitableOperational

useful for identifying customers useful in deciding on marketing mix

[edit] Bases for segmenting consumer markets

[edit] Geographic segmentation

The market is segmented according to geographic criteria- nations, states, regions, counties,cities, neighborhoods, or zip codes. Geo-cluster approach combines demographic data withgeographic data to create a more accurate profile of specific[1]

[edit] Demographic Segmentation

Segmentation by Age, gender, Income, social class, etc.

[edit] Psychographic Segmentation

Psychographics is the science of using psychology and demographics to better understandconsumers. Psychographic segmentation: consumer are divided according to their lifestyle,
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personality, values. People within the same demographic group can exhibit very differentpsychographic profiles.[2]

[edit] "Positive" market segmentation

Market segmenting is dividing the market into groups of individual markets with similarwants or needs that a company divides into distinct groups which have distinct needs, wants,behavior or which might want different products & services. Broadly, markets can be dividedaccording to a number of general criteria, such as by industry or public versus private.Althoughindustrial market segmentationis quite different from consumer marketsegmentation, both have similar objectives. All of these methods of segmentation are merelyproxies for true segments, which don't always fit into convenient demographic boundaries.

Consumer-based market segmentation can be performed on aproduct specific basis, toprovide a close match between specific products and individuals. However, a number ofgeneric market segment systems also exist, e.g. the system provides a broad segmentation ofthe population of the United States based on the statistical analysis of household andgeodemographic data.

The process of segmentation is distinct frompositioning(designing an appropriate marketingmix for each segment). The overall intent is to identify groups of similar customers andpotential customers; to prioritize the groups to address; to understand their behavior; and torespond with appropriate marketing strategies that satisfy the different preferences of eachchosen segment. Revenues are thus improved.

Improved segmentation can lead to significantly improved marketing effectiveness. Distinct

segments can have different industry structures and thus have higher or lower attractiveness

Once a market segment has been identified (via segmentation), and targeted (in which theviability of servicing the market intended), the segment is then subject to positioning.Positioning involves ascertaining how a product or a company is perceived in the minds ofconsumers.

This part of the segmentation process consists of drawing up a perceptual map, whichhighlights rival goods within one's industry according to perceived quality and price. Afterthe perceptual map has been devised, a firm would consider the marketing communicationsmix best suited to the product in question.

[edit] Behavioral Segmentation

In behavioral segmentation, consumers are divided into groups according to their knowledgeof, attitude towards, use of or response to a product.

[edit] Occasions

segmentation according to occasions.we segment the market according to the occasions.

[edit] Benefits
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segmentations according to benefits sought by the consumer.

[edit] Users status

nonusers, ex-users, first time users, etc.

[edit] Using Segmentation in Customer Retention

The basic approach to retention-based segmentation is that a company tags each of its activecustomers with 3 values:

Tag #1: Is this customer at high risk of canceling the company's service? One of the mostcommon indicators of high-risk customers is a drop off in usage of the company's service.For example, in the credit card industry this could be signaled through a customer's decline inspending on his or her card.

Tag #2: Is this customer worth retaining? This determination boils down to whether thepost-retention profit generated from the customer is predicted to be greater than the costincurred to retain the customer. Managing Customers as Investments.[3][4]

Tag #3: What retention tactics should be used to retain this customer? For customerswho are deemed save-worthy, its essential for the company to know which save tactics aremost likely to be successful. Tactics commonly used range from providing specialcustomer discounts to sending customers communications that reinforce the value propositionof the given service.

[edit] Process for tagging customers

The basic approach to tagging customers is to utilize historical retention data to makepredictions about active customers regarding:

Whether they are at high risk of canceling their service Whether they are profitable to retain What retention tactics are likely to be most effective

The idea is to match up active customers with customers from historic retention data whoshare similar attributes. Using the theory that birds of a feather flock together, the approachis based on the assumption that active customers will have similar retention outcomes asthose of their comparable predecessor.

[edit] Niche Marketing

A niche is a more narrowly defined customer group who seek a distinct set of benefits.dentified by dividing a segment into subsegments,distinct and unique set of needs,requiresspeciallization, and is not likely to attract too many competitors.

[edit] Local Marketing

Marketing programs tailored to the needs of local customer groups.
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[edit] Price Discrimination

Where amonopolyexists, the price of a product is likely to be higher than in a competitivemarket and the quantity sold less, generatingmonopoly profitsfor the seller. These profitscan be increased further if the market can be segmented with different prices charged todifferent segments charging higher prices to those segments willing and able to pay more andcharging less to those whose demand isprice elastic. The price discriminator might need tocreate rate fences that will prevent members of a higher price segment from purchasing atthe prices available to members of a lower price segment. This behavior is rational on the partof the monopolist, but is often seen bycompetitionauthorities as an abuse of a monopolyposition, whether or not the monopoly itself is sanctioned. Examples of this exist in thetransport industry (a plane or train journey to a particular destination at a particular time is apractical monopoly) where business class customers who can afford to pay may be chargedprices many times higher than economy class customers for essentially the same service.

[edit] Algorithms and Approaches

Any discrete variable is a segmentation. For instance, customers might be segmented bygender ('Male' or 'Female') or attitudes ('progressive' or 'conservative'). Numeric variablesmay be discretized to become segmentations, such as age ("=30") or income ("The99% (AGI= US $300,000)").

Segmentations can be obtained by any number of approaches. Minimally, an existing discretevariable may be chosen as a segmentation, also called "a priori" segmentation. At the otherextreme, a research project may be commissioned to collect data on many attributes and usestatistical analyses to derive a segmentation, also called "post-hoc" segmentation. In between,qualitative knowledge of the market based on experience may be used to identify divisionsthat are likely to be useful.

Common statistical techniques for segmentation analysis include:

Clustering algorithms such asK-meansor otherCluster analysis Statistical mixture models such asLatent Class Analysis Ensemble approaches such asRandom Forests

Latent class analysis and k-means analysis may be viewed as identifying new variables that

maximize the sum ofmutual informationbetween the segmentation variable and a set of basisvariables.[5]

[edit] References

1. ^name 'What is geographic segmention ' Kotler, Philip hilip, and Kevin Kevin Lane Keller.Marketing Management. Prentice Hall, 2006ISBN 9780131457577

2. ^Kotler, Philip, and Kevin Kevin Lane Keller. Marketing Management. Prentice Hall, 2006.ISBN 9780131457577

3. ^Gupta, Sunil. Lehmann, Donald R. Managing Customers as Investments: The StrategicValue of Customers in the Long Run, pages 70-77 (Customer Retention section). Upper

Saddle River, NJ: Pearson Education/Wharton School Publishing, 2005.ISBN 0-13-142895-0
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4. ^Goldstein, Doug.What is Customer Segmentation?MindofMarketing.net, May 2007.New York, NY.

5. ^Sheth-Voss, Pieter. Carreras, Ismael.How Informative is Your Segmentation? A simple newmetric yields surprising results, Marketing Research, pages 8-13, Winter 2010, American

Marketing Association

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