skapoor aim-market segmentation

7/29/2019 SKapoor AIM-Market Segmentation

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IIML/PGPABM/2013-14

Market Segmentation in Agriculture Input

Marketing

Prof. Sanjeev Kapoor


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Segmentation?

Segmentation involves identification of groups

(segments) of buyers that differ in their requirements

or buying process, in terms of satisfying their needs

The members of each of the groups have similar

requirements, and therefore, each segment is

homogenous.


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Segmentationwhy?

Assumptions and pre-requisite for segmentation are:

- markets are not homogenous in terms of needs

- most companies are not in a position to cater to

all the needs of all the markets


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Segmentationwhy?

Segmentation is a part of firm growth strategy

- Horizontal growth

(selling same products to more number of

existing or new customers)

- Vertical growth

(selling more products to existing customers)


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Products

MarketsExisting Modified New

Sell more products to

existing types of

customers (Market

penetration)

Modify current

products and sell

more to existing

customers (Productmodification)

Design new

products that will

appeal to existing

customers (Newproduct

development)

Enter and sell products

in other geographic

areas (Geographicexpansion)

Offer and sell

modified products

to new geographicalmarkets.

Design new

products for

prospects in newgeographic areas.

Sell existing products to

new types of customers

(Segment invasion)

Offer and sell

modified products

to new types of

customers

Design new

products to sell to

new customers

(Diversification)

Growth strategies


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Market?

Before talking about process of market segmentation,

it is important to understand the term market

How can we define market?


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Dimension of market

A

Physical Attributes

C

Qualitative Factors

B

Behavioral Characteristics

One can define the market based on series of dimensions withineach of these three components


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Physical attributes

Dimension 1: Size

- Number of units sold

- Rupees sales volume

- % market share Dimension 2: Geographical location

- Physical boundaries

- Rupees sales by region, district, area

- Location attributes


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Physical attributes

Dimension 3: Demographic features

- Income

- Sex

- Age- Education

- main occupation (farming, dairy)

- Land holding status (small or large)

- Irrigation potential


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Physical attributes

Examples of each of the three dimensional factor suggest ahigh degree of quantification

There is no role of subjective judgments in describing these

dimensions

Agribusiness managers feel most comfortable in viewingmarket exclusively within this context


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Behavioral characteristics

Dimension 1: When purchases are made?

- Month, Week, Season

Dimension 2: How purchases are made?

- Impulse- Brand loyalty

- Direct request

- Frequency of purchases

- Scale of each purchase


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Dimension 3: Purchasing Influences

- Who use product

- Who buys product

- Who influences

- Buying decisions

Dimension 4: Reasons for purchasing

- Utility value

- Status

- Collective Compulsion- Interlinking with other transactions

- convenience

- ease of application


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Dimension 5: Reasons for not purchasing

- lack of other complementary resources

- lack of financial resources

- lack of awareness about the effectiveness of input- lack of knowledge about use of input

- no access for the input

These behavioral dimensions are both subjective andobjectives in measurement


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Qualitative factors

Dimensions

1. Risk takers or risk averters

2. Favorable versus unfavorable attitude towards brand

3. Firm versus indefinite intention to purchase soon

These factors are largely based on subjective measures andexpressed in relative term

These dimensions suggest attitudinal characteristics ofcustomers


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Understanding market (7 O approach)

Issues to be considered for understanding market:

- Who constitutes the market? Occupants

- What does the market buy? Objects- Why does the market buy? Objectives

- Who participates in the market? Organizations

- How does the market buy? Operations

- When does the market buy? Occasion

- Where does the market buy? Outlets


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Who constitutes the market?

Understanding farmers in terms of:

- size of land holdings

- cropping pattern

- Availability of irrigation- current usage of different inputs

- Risk bearing availability

- Education & awareness

- Innovators/laggards

Understanding of occupants (farmers) helps in segmentation,

Targeting and Positioning (STP) of the product.


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What does the market buy?

Understanding the portfolio of the products (agri-inputs):

- What are the different agri-inputs presently

available in the market by different companies

- What are the different attributes of these products?

- What are the unmet needs of the farmers?

It would help in understanding competition in the market

Helps in new product development or product refinement


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Why does the market buy?

What is the basic motive of the farmers to buy a particularinput?

- increasing production/income?

- Food security

- Status symbol- Group pressure

- cheap (less price)

Why does the market not buy? (constraints)

Helps in understanding farmers buying behavior

Helps in designing the communication for the farmers

Pricing policy for the agri-input


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Who participates in the market?

Who uses the product and who buys the product?

- Customer v/s user

- Individual farmer or cooperative society or

producer company or SHG

- Who influences the use of agri-input?

- Retail sale v/s institutional sale

Helps in channel design for the input Helps in understanding the transaction cost both for

farmer and supplier


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How does the market buy?

How purchases are made?

- impulse

- brand loyalty

- Frequency of purchase- Volume of transaction

- cash or credit transaction

- credit interlinking

Helps in packaging, inventory of product at dealer level,designing terms and conditions with dealer (cash v/s credit

sale).


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When does the market buy?

When purchases are made?

- season

- month/week/day

- time of day

Helps in production and distribution scheduling of the

input Working hours of store


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Where does the market buy?

Density of dealers/retailers in the market

Characteristics of the prominent dealers/retailers in

terms of

- social and economic background

- availability of different agri-inputs

- availability of complementary products

- availability of after sales services- providing product knowledge

Helps in selecting the channel partners


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Steps in Segmentation Process1 Needs-Based Segmentation Group customers into segments based on similar needs/

benefits sought or constraints faced by customer in

consumption of an input.2 Segment Identification For each segment, determine which demographics,

lifestyles, and usage behaviors make the segment

distinct and identifiable (actionable).

3 Assess Segment Attractiveness Using predetermined segment attractiveness criteria,

determine the overall attractiveness of each segment.

4 Evaluate Segment Profitability Determine segment profitability (net marketing

contribution).

5 Segment Positioning For each segment, create a "value proposition" and

product-price positioning strategy based on that

segment's unique customer needs and characteristics.

6 Segment "Acid Test" Test the attractiveness of each segment's positioning

strategy.

7 Marketing-Mix Strategy Expand segment positioning strategy to include all

aspects of the marketing mix: product, price,

promotion, place, and people.

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