Market Segmentation: Different Strokes for Different Folks

As an advertising and brand communications professional who has been observing and working on brands for many decades, it strikes me that there are many industries and indeed companies in India that are ripe for market segmentation. In marketing, of course, that would mean tailoring specific products/brands to meet the specific requirements of select groups of consumers.

I am not a marketing professional and to me market segmentation first of all suggests that the industry is mature and well-penetrated enough to be segmented, in order to improve product and brand offerings to suit specific customers’ needs. That the said industry or company can be more discriminating in the way it understands and approaches consumers’ needs.

Typically, in marketing terms, market segmentation has been a way to grow the overall market for a brand/product category as well as increase the quality and depth of consumption within the consumer segment. Marketing teams in companies usually achieve this by creating a brand for a particular consumer group and then launching variants of it, through line extensions. This helps them slice and dice the consumer segment into even finer consumer groups with specific needs. For example, Pepsico launches Pepsi and then introduces Diet Pepsi, Pepsi Zero, etc. This helps the company finetune its product offering within the group of Pepsi consumers, through the lower-calorie and zero-sugar options for those who might be more health-conscious. At the same time, it helps attract new consumers to Pepsi who might start off with the newer, healthier options directly, without having to go through the Pepsi – Diet Pepsi – Pepsi Zero consumption ladder.

This is the most common form of market segmentation and is particularly common in FMCG companies and brands. Markets are segmented by consumer need, product quality and price. Rarely in FMCG, do we see market segmentation by corporate brand. Perhaps, as I have been writing often, most companies don’t think of themselves as brands and it is, therefore, not surprising that segmentation by corporate brand hardly exists. Whereas, in reality, product brands are connected to corporate brands and vice-versa, as I have also been writing on my blog.

What if we looked at market segmentation from a brand point of view? How would it differ from regular market segmentation and in what cases might it even be superior to it?

Because brands are relationships between consumers and products/brands that they use as well as the companies that make them, market segmentation would necessarily mean that the company is widening and deepening its relationship with select groups of consumers. It would also mean deeper and more consumption of its products/brands and an effective way of preventing consumers from shifting to a competitor’s brand. And because the brand would be communicating with its various consumer segments in deeper and more engaging ways, market segmentation ought to grow the overall market and improve consumers’ relationship with the corporate brand.

With that as the main premise, I have thought for many years that the Indian telecom industry, for example, is ripe for market segmentation. It has achieved nearly 100% penetration thanks to its low tariffs, and we often talk of a quiet mobile revolution in India. Of course, the main telecom operators in India have been whittled down to just a few from several many years ago, and even those few are struggling in the face of competition from Reliance Jio.

When I look at the state of Vodafone Idea, I can’t help but think that the merged company ought to have revised its corporate brand positioning at the time of the merger and communicated with its audiences what the new corporate brand stands for. I also think that Vodafone and Idea should have remained separate brands, each with its own distinct set of customers. This would have helped the company protect and indeed compete better with Reliance Jio on both its flanks: protect and grow the middle-to-higher end of its market, especially with the urban affluent with Vodafone and protect and grow the mid-to-lower end of the market, especially in smaller towns and semi-urban areas with Idea.

Of course, within each brand, further market segmentation would be required, based on the particular brand’s positioning. Here too, a brand-based market segmentation would mean understanding different groups of telecom users, and creating relevant plans for them. At the moment, I see all telecom companies segmenting their market based mostly on price-based plans, and little else. A certain amount of free data has been thrown in for good measure, in order to just be in the game thanks to Reliance Jio’s huge free data offering. This is a huge missed opportunity, when there is so much more meaningful and relevant market segmentation possible based on consumers’ media consumption habits, use of telecom, and online shopping as well as other interests.

Market segmentation by brand recognises different types of consumers; Image: Julian O Hayon on Unsplash

Sub-branding is another way to segment markets. It helps you leverage the equity and strength of the main corporate brand and all that it stands for, while providing products and services to select groups of customers. For example, when working on Seagram at Ogilvy Delhi, decades ago, I created a corporate campaign for the company to establish their credentials at the time they entered the Indian market. Since many of their whiskies as well as their gin were sub-brands with the Seagram prefix, they all had to reflect the overall corporate brand positioning of Seagram, but to different consumers with different needs, tastes and budgets. Even after Seagram has been acquired by Pernod Ricard, these brands all continue to carry the Seagram name, and have almost created something of a brand franchise. I am not sure how long Pernod Ricard has the license to use the Seagram brand; if it has bought rights to the brand, it can be developed into an even stronger franchise of whisky brands. Such a whisky franchise could represent the second and third rung of whiskies as well as Scotch whiskies below The Glenlivet and Chivas Regal, that sell in many countries and that come with great history and heritage. And if it has to lose the Seagram brand at some point in time, it shouldn’t matter too much as the brands are now well-established in their own right, at least in India. Pernod Ricard find themselves in the happy position of even having the luxury of such a choice.

I would recommend sub-branding as a market segmentation strategy for Taj Hotels as well. Instead of launching separate brands, they can segment their market by their customers’ preferred choice of hotel and type of stay and always still deliver the Taj deluxe experience. I also think that sub-branding market segmentation would work well in the case of Titan watches – I believe that Fastrack should have continued to be Titan Fastrack, and could be Titan’s serious foray into fashion.

Sub-branding as a market segmentation strategy is extremely common in the automobile industry, where the corporate brand is the main brand and products are always sub-brands. For example, VW Golf and VW Beetle, or Toyota Corolla and Toyota Camry, are ways that Volkswagen and Toyota segment their markets and engage with their consumers, respectively. Here too, the corporate brand’s positioning is the most important, as the sub-brands and car models are merely ways in which the company delivers its brand promise to different consumer segments.

Even in the case of individual car brands such as Jaguar and Land Rover from JLR or Chevrolet from GM, product sub-brands such as Jaguar I-Pace or Land Rover Defender or Chevrolet Cruise are ways of segmenting the markets for their cars.

American Express is another good example of sub-branding as a way of segmenting their markets. Here, American Express is the corporate brand and their products are all sub-brands, whether it be American Express Bank, American Express Travelers Cheques or their American Express Credit Cards, the last of which is further segmented by Regular, Gold and Platinum.

In India, another industry which hasn’t even begun attempting market segmentation is banking. It hasn’t achieved even 80% penetration and plenty needs to be done to take banking to every nook and corner of the country, but it is a mature industry. And Indians have got used to all the savings instruments and investment plans that they offer, with the high savings rate that India has traditionally had. There is plenty of scope for finer market segmentation based on their customers’ savings and investment profile, and future plans, not by bank balance alone.

However, very few banks have even begun to scratch the surface of this, since in India banking is a seller’s market. Very few people shift between banks, though there is very little brand differentiation even at the corporate brand level, especially among PSU banks. So, I would suggest that banks start building their corporate brands through differentiation at the product and quality of service levels.

When I think about market segmentation in the case of Indian banks, though, I am inclined to think that perhaps straightforward sub-branding might not work here. For one thing, most of the brands are abbreviations, and since they stand for very little by themselves, it might require an intermediate stage of segmentation. A new umbrella brand for each of the bank’s services, under which sub-branding is then possible might be one way to segment their customers. This would still require the banks to work out their main corporate brand positionings, for an idea to emerge as the umbrella brand. 

The three ways of segmenting the market by brand; Image: Pixabay, flow chart by the author, animation by Canva

Not all banks are as lucky to have been born in New York City with Citibank as their brand name and with a brand positioning/strapline to match: The Citi never sleeps.

The fabled information technology industry in India too hasn’t explored market segmentation beyond just the verticals. In fact, they have rarely cared to communicate. Therefore, there is plenty of room for innovation on market segmentation by brand and customer, not by product and price alone. Market segmentation by brand is possible in three ways:

  • at the product brand level through line extensions
  • through sub-branding of a corporate brand
  • through umbrella brand at the intermediate stage

If one considers market segmentation carefully, one realises that the typical product brand way is perhaps the most downstream, as is clear from the flow chart above. There might be other ways still to segment markets, that can help brands serve consumers better, strengthen relationships with them, and connect better with the corporate brand. More innovation in these areas of brand-building will also lead to more innovation in products as well as in communication.

I recommend an umbrella brand for Tata Consumer Products Ltd since they are present in many product categories, and have put down my thoughts on this, which you can read by clicking the link below.

Market segmentation is the key to growing your markets, your brands and serving consumers better. Good luck with trying out new and relevant strategies for what suits your industry best!

 

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