SEGMENTATION

Prof.SameerKulkarni.
The Case:
Hindustan Lever Ltd. is a leading FMCG conglomerated in India whose success in management
policies and strategies are taken as an example by many Indian companies and emulated.
The decade of 1980 must have been a memorable one for Hindustan Levers Ltd (HLL) .For, in a
typical David and Goliath war, the giant and an undisputed market leader in consumer non-
durables in India suffered a humiliating defeat at the hands of a new and small firm, Nirma
Chemicals .Nirma Washing Powder became a national brand soon after 1982, when the Indian
Television went commercial and started color telecast. The product immediately caught the
fancy of the middle-income customers; who was finding it difficult to make both ends meet with
a limited monthly income. Nirma was the lowest priced branded washing powder available in the
grocery and co-operative stores .The middle class housewife was more than satisfied, as she
could now choose a lower priced washing powder rather than the high priced Surf detergent
powder from HLL. Nirma also had an impact on upper middle income and higher income
families where it was used for washing their inexpensive clothes and linen. Initially, HLL
responded by launching sales promotion campaigns on Surf—by offering a bucket at subsidized
price for every 1 kg of Surf, or by trading premium brands of toilet soap with every kilogram of
Surf. These schemes, however, could not stop the decline in the popularity of Surf. HLL then
launched a head-on attack on Nirma .Without naming it (though it was obvious) they came up
with an advertising commercial comparing 1 kg of surf with 1 kg of low-priced yellow washing
powder and showed that Surf washed more clothes than the low-priced yellow washing
powder—and hence it was economical to buy Surf.
The commercial did not bring in any substantial results. It was at this time (around 1984) that
HLL decided to take a fresh look at the market. Research was conducted throughout the country
which revealed that different income groups of the consumers had varying expectations from
detergents and washing powder, it also showed that different colors of washing or detergent
powders were associated with different types of fabrics. For example, yellow colored washing or
detergent powders were mainly bought by middle and lower middle or lower income group
people. They washed all their fabrics and associated whiteness in clothes to a yellow colored
powder .Also, middle class families used the blue colored Rin bar or the white colored Lux
flakes for washing their expensive clothes. The research further indicated that blue or white
colored detergent powders were bought by middle to higher income group people, and these
colors were also associated with washing clothes clean. In fact, the housewife was known to add
“blue to her laundry to give that extra whiteness to the white clothes. Interestingly, green was
also a color that was perceived to clean extra-dirty clothes. Armed with this research on color
perceptions and income groups,
HLL launched the Sunlight (yellow) , Wheel(green), Rin (blue) and Surf Ultra(white)
detergents powders for different market segments. This strategy of segmenting the markets
,understanding its needs and then evolving a marketing mix to suit separate segment needs
helped HLL win back its lost market. In fact Nirma made all other consumer product companies
sit up and take a fresh look at their markets It announced ,for many, a beginning of an era of low
priced products for a highly price sensitive Indian Market , and, to others ,an end of a mass
marketing era.
Niche marketing and segmental marketing were ushered in by firms like Titan Watches,
Cambridge and Chirag Din Shirts and trousers, T-series music and audio cassettes and their like.
The market was indeed changing demanding a new response from the companies.
The latter part of 1980s or early 1990s taught the firms a lesson—“one cannot be everything to
everyone; but one can be everything to a select few. This is the basis of segmentation.
SEGMENTATION DEFINED
Market segmentation is the process of dividing a heterogeneous market into homogeneous sub-
units.
Consider the Indian market, which consists of 844 million people, as per the 1991 census. For a
consumer product company making toiletries, this is a big number and hence a big market.
However, not all the 844 million people believe in the same things. Not all look for same
features and buy for the same reason.
Now when the same toiletries firm looks at the census data further, it finds that there are about
438 million men and 406 million women.
64% of the men and 39% of the women were literate.
This forms a new insight. So on the basis of this insight should the firm make toiletries for men
or women, or both?
The firm also found that 74% of the entire population lived in rural areas.
Given this fact, the question then is, should the firm launch a product for rural males or females,
or both, or only for the urban customers?
The firm decided to launch the product for the urban male customer, the firm also took note of
the NRS IV data from IMRB and MARG, two leading marketing research agencies,
It showed that 21% of urban households belonged to the higher income group and 58% to the
middle income.
Given this data, the firm decided to launch a premium price range of toiletries for the
Urban
High-income
Male customers.
Thus, the total population of a given market indicates only the market size .This, however, does
not indicate anything more .To succeed, a firm needs to realize that the market is a
heterogeneous one and cater to it accordingly. The marketer must also identify similarities
among the different groups of customers.

NEED FOR SEGMENTATION

The market segmentation helps a firm compete in a highly competitive market. A successful
marketer knows that all elements of marketing mix are imitable. Sooner or later the competition
will catch up and at the end of the day; it will become a promotion and price war. To be able to
overcome this threat from competition, a successful marketer should always segment the
markets, and then position themselves in a segment where they perceive they will be able to
defend against competitive attacks, and emerge as the segment leader. As Michael Porter states,
the competitive advantage of a firm lies in being everything to a select few. To be everything to
everyone is a sure recipe for a strategic failure.
Basis Used for Segmentation:

I) Preferences:

II) Hierarchy of Variables:

III) Situation Based

Preferences: Preferences are classified in to three segments:

 Homogeneous

 Diffused

 Clustered

Hierarchy of Variables:

Primary Variables Secondary variable

Need Cheap Moderate Expensive Item

Washing Washing Washing

Size Small Medium Large Super-Large family

Pack Pack Pack pack Pack

Brand Local Dealer Regional State-Level National

Forms Bar Cake Powder Liquid

In case of some of the products we can find Situational Segments,

Products are: TV, Ice Creams, Drinks, and Bed etc.

TV In drawing room
In Dining room
At Booth
Ice Cream In a Parlor
In a Park
Out in Walking
During Shopping
During Party
Drinks @ home
@ Picnic
@ the Club
With friends
Bed In the main bedroom
In the little bedroom
In children’s bedroom
In guest Room
Russel- Haley‘s Concept (1968) for Tooth Paste Segmentation:

Segment The Sensory The Sociable The Worriers The

Variable Independent
Segment Segment Segment
Segment

Principal Benefit Flavor Brightness of Teeth Decay Price

Prevention

Age Young Teens & young Aged Family

Package Size Small Medium Medium + Free Large

Brush

The Process of Arriving at Behavioural Segmentation: (Original Concept by P.R. Dickson)

Person Person-Situation Situation

Segmentation Segmentation Segmentation

Determinant Particular People in Determinants of

attributes of Users Particular Usage Situation Usage Situation

Benefit
Segmentation

Product Perception
Segmentation

Behaviour
Segmentation

Loyalty as a criterion of Segmentation:

This segmentation is on the basis of consumer loyalty patterns. Suppose there are five
brands A, B, C, E and F then buyers can be divided in to four groups according to their
loyalty status.

a) Hard core loyal: Consumer buys only one brand at all the occasions.

b) Soft core loyal: Consumer is loyal to two or three brands. I.e. divided loyalty
between A & B.

c) Shifting loyal: Consumers who shift from favoring one brand to another.

d) Switchers: Consumers show no loyalty to any brand may be they want to take the
best option available by bargaining.

Hard core loyals Soft core loyals Shifting loyals Switchers

AAAAAA ABBBAA AAABBB ABEDB

E.g.

Newspaper Customers are These customer They are variety

readers, loyal to shift seeking

Cigarette Smokers more than one Their preference

,tea drinkers brand