Posts Tagged ‘segmentation’
In my view, segmentation is one of the most important concepts in Business and Marketing. Segmentation is about identifying a definable group of people or organizations that share a common set of needs in a common context. It sounds pretty simple, as it is nothing more than clustering people’s needs, but this task can be extremely complex in quick time.
As you segment the market and decide to provide a proposition to a particular segment, all the other entrants and existing players also will create their own propositions at various points. Imagine a market when there are already many players and the market is too fragmented. Imagine that you’re a businessmen when there is not much differentiation in the offering, and all of them are fighting on prices. The key is to re-segment the market.
I am not sure if this is used in the marketing vocabulary, but what I mean by re-segmentation is:
1. Get the customer data
2. Segment the market again
3. Identify the differentiated market offering for the segment.
This works because in any market the customer or consumer needs change. However, we need to know the extent of dissatisfaction and its affect withing the group and inter-group. Because when the markets are fragmented, then the impact of changes withing a segment spreads fast as all the people are at a similar level of satisfaction more or less. This brings in the necessity to not only understand your existing customers, but also to understand the complete market and resegment it based on various need gaps.
This form of re-segmentation helps to come up with differentiated offering in a fragmented market, rather than fighting on the margins and prices.
The heterogeneity that characterizes the modern Indian consumer has created a maze that marketeers would like to unravel inorder to target their products and services precisely. In this blog, we see the analytics presented by Indicus Analytics on the various facets of urban consumers, across geographies and socio-economic groups.
Despite visible growth in rural markets, it is in the teeming urban centres that most of the action takes place. Indian cities vary not only in size but also in terms of its economic activity. There are the bustling metropolises, towns dominated by manufacturing(Coimbatore – Tiruppur), towns that are basically transport hubs(Itarsi) and mining towns(Dhanbad). And then there are numerous small towns, most of which have no special characteristics and are overgrown villages whose markets attract people from the countryside now.
Urban centres can be classified into seven distinct sets:
- Metros with large populations – Mumbai, Delhi, Bangalore, Chennai and Kolkata – are, of course, a marketeer’s delight. They all have a good mix of people, the affluent, the middle class and the poor. Moreover, it is not that Mumbai and Bangalore have that cosmopolitan mix of people; even Chennai is shaking off its staid conservative image.
- Mini-metros are again five in number. These cities are growing so fast that they are straining at their edges to make it to the big league soon – Hyderabad, Ahmedabad, Pune, Coimbatore, and Chandigarh. On an average, mini-metros have a higher share of rich households than metros, a reflection of the smaller size and the higher density of professionals and skilled migrants.
- Tier 1 towns, with populations of more than 1 million, 33 in number, include most state capitals and cities such as Allahabad, Jodhpur,Visakhapatnam, etc.
- Tier 2 towns have populations between 6lakhs and 1 million. There are 28 in all, including upcoming cities such as Raipur, Ranchi, Bhubaneswar, Thiruvanthapuram, etc.
- Tier 3 towns, with populations between 2 lakhs and 6 lakhs are 152 in number and include Vellore, Sonepat, Siliguri, Shimoga, Agartala, Aizawal, etc.
- Tier 4 towns are the smallest with populations between 1 lakh and 2 lakhs. This category has 201, including Shimla, Ambala, Dibrugarh, Wardha, etc.
- Add to these the peri-urban centres, 4600 in number, with populations less than 1 lakh, that surround big cities or lie on highways across the country, and we get a fairly good picture of the diversity in India’s urban markets.
For those looking to tap the most affluent, metros are of course the richest and are the largest consumer markets – these five cities have a per capita income of 92000 rupees per year, compared with the lowest rung of peri-urban centres, whose per capita income is 52000 rupees per year. Interestingly, while Mumbai has the largest share of richest households earning more than 10 lakhs per year, it is Delhi with is middle class, public sector image that has the highest number of such households. Among the mini-metros, Pune, Ahmedabad, Hyderabad, Chandigarh, and Coimbatore rank in that order for the highest number of affluent households.
What is most notable about India’s urban centres is that they are spread out all over the country and not just clustered in some zones. Gujarat is the leading state when it comes to rich households in tier-1 cities with Surat and Vadodara the hotspots here, while Kerala has the highest concentration of rich households among tier-2 cities. Thiruvanathapuram and Kochi rank among the top five here.
If we look at smaller cities, Noida, Gurgaon, Mangalore, Kolhapur have the highest number of affluent households among tier-3 cities, while in the smallest towns, it is West Bengal and Haryana that stand out for rich households among tier-4 towns – Bidhan Nagar, Panchkula, Haldia, and Thanesar.
SOCIO ECONOMIC CLASSIFICATION (SEC) – NRS 2005
- The Market Research Society of India categorises socio-economic groups based on both occupation and education of the chief wage earner of the household.
- These eight classes are A1, A2, B1, B2, C, D, E1, and E2. A1 is the uppermost socio-economic class and E2, the lowest.
HOUSEHOLD DISTRIBUTION BY EDUCATION ALL INDIA-RURAL & URBAN
- 72 % of those who have not finished school live in rural areas.
- 61% of those who are graduates/post graduates live in urban areas.
URBAN – RURAL DIVIDE HOUSEHOLDS BY INCOME
- 78% of those in the highest income bracket live in urban areas
- 67% of the poorest live in rural areas.
Similarly, the SEC Classification of Rural India is R1, R2, R3, and R4. This again is primarily based on the chief wage earner’s occupation and the type of house like Pucca, Semi-Pucca, and Kutcha house.
As people don’t disclose their exact incomes due to various reasons, this classification is doubted by some experts. So, Market Research Users Council has devised another system called New Consumer Classification System which is based on Household Potential Index (HPI) which takes into consideration many parameters like durables owned in the house etc… Also, there are other measures like Living Standard Measure (LSM) which Unilever believes and uses for its internal use.
India is one of the most challenging markets in the world which fooled big marketers and companies across the world. We have over 1500 Gods segmented into 350 broad categories, and we have a God for every single day of the week. There are 9.5 lakh pan shops, 638,667 number of villages, 612 districts, and 28 states in India. This is the country where you see a pan shop and Haagen Daz together, and a bullock cart and a Mercedes in the traffic jams. Indian market is very challenging and it really fascinates me as a marketer.A very large part of Indian population still lives in villages defining the Rural India.
Rural India is very important for many companies and there is tremendous increase in investments and strategies surrounding the rural markets. Rural India Market buys:
- 45% of all soft drinks
- 50% of motorcycles, TVs, cigarettes, washing soap, fans, blades, and a lot others.
Rural Market Opportunities
Few of the companies that are going bullish in the rural markets:
- HUL with its Project Shakti has already has a reach of 1.7 lakh villages, and aspires to reach 5 lakh villages by 2020.
- Indian Tobacco Company (ITC) has a lot of penetration in the rural markets and the eChoupals are a big hit in the rural market.
- Airtel is planning to reach around 2 lakh villages.
- Marico with its most famous brand Parachute has a reach of 1 lakh villages.
- Pepsi and Coke, the Cola giants, have a reach of 70,000 villages.
- Dabur, known for its Lal Dant Manjan and Hajmola, has a reach of 60,000 villages.
- Colgate with its Operation Jagruthi has a reach of over 60,000 villages.
- Mahindra & Mahindra sells most of its SUVs in the rural market.
Mahindra Shubhlabh is India’s largest exporter of fresh produce. Mahindra Shubhlabh engages with farmers in the production of export quality grapes, pomegranates, and apples aimed at delivering to domestic and international markets. It has a huge R&D facility in Pune to research on various modern seeds and saplings.
- Nokia 1100 with its torch is a very big hit in the rural market. It is a perfect example of understanding the needs of the consumer. Nokia realized the need for a torch in the mobile for the rural people as they walk in the dark streets and fields of the village. Nokia is set to release some low cost phones to tap more from the tier-3 and tier-4 markets.
There are other companies like Godrej, ParleG, Asian Paints, Yes Bank, Royal Enfield, ITC and Revlon.
Delivering to the rural markets is a real challenge to many companies. In fact, the whole dynamics of these markets are so different that you need to look at a different product mix containing the 4A’s instead of the traditional 4P’s of marketing:
Acceptability – Build what the consumer wants
Affordability - Make an affordable product
Availability - Distribution plays a key role in the rural markets
Awareness - Don’t promote the brand, demonstrate the product.
Top Media in Rural Markets
Dainik group is the leading newspaper in the rural markets. In the realm of television, we have the following in the descending order of penetration in the rural markets.
- Doordarshan has a reach of 97% of the rural markets in India.
- Zee Cinema which carries with the image of movies being the favourites of rural people.
- B4u movies
- Discovery Hindi
One of the key trends in the rural markets is people changing very quickly from cable to satellite TV. This is because of the hassle-free dish connection of the satellite TV. Most of the dish TV companies like Tata Sky, BIG TV, and Airtel are selling good in the rural markets too. Similarly, Revlon has come up with a lipstick for the rural markets and it is doing very good as against Lakme. This shows that there is huge potential in these markets and it is interesting to see how these trends will transform the lives of the rural people and in turn impact the Indian markets.