Tuesday, November 27, 2007

Segmenting and targeting the market

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.


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 ,which 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.


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.

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