WRONG TARGETING RENDERS STRATEGY INEFFECTIVE
In the wake of the economic liberalization a host of multinationals (MNC) entered the Indian market. In a number of these cases, their offers failed to click, mainly because of wrong segmentation and targeting.
Many of these MNC considered the Indian middle class as a single market segment and assumed that it would perfectly serve as the target market for their products they were introducing in India. While a part of the Indian middle class did constitute a market for the products, the MNC failed to appreciate that there were many distinct market segments within what was described as the Indian middle class and that many of these segments had nothing to do with the products they were offering.
For example, according to a survey by NCAER, the 350 million strong middle class is by no means a single market segment. First, there are wide variations among them in purchasing power. Second, they also differ vastly in the benefits they expect from the products. Third, most of them are not much bothered about the brand name. For example, as per the NCAER survey, 225 million out of them are governed by the functions offered by the brand rather than by the brand name as such.
The MNC seem to have failed to catch such facts, while choosing the target market. In fact, they seemed to have used the expression â€˜Indian middle classâ€™ in a loose sense. Only a handful among the newly entering MNC segmented and targeted the market properly, and extended the right offers to the chosen segments. They succeeded. The majority had gone about target market selection in the wrong way and consequently had to shift their focus and wait for their day of success.
Ineffective segmentation and targeting led to wrong product offers, inappropriate marketing appeals, wrong pricing, and overemphasis on the brand name. The offers did not suit the middle class as such. They suited just the top end of the loosely termed middle class, a very small segment. Naturally, the firms were unable to gather worthwhile volumes. The volumes lay in the middle and lower ends. As the firms did not target those segments and as they failed to make product offers that were appropriate for them, the end result was poor. For example, this was the main reason for brands like Levis, Ray-Ban, and Reebok not taking off in the Indian market for quite sometime.
In the case of Leviâ€™s product offer and pricing were inappropriate. This was so because segmentation and targeting had gone wrong. Leviâ€™s had priced its jeans upwards of Rs. 995 extending to Rs. 2,295. It had defined its target market as the college students in the age group of 15 to 25 years. Leviâ€™s had assumed that a sizeable segment of consumers of this description, could afford the price tag, and would be willing to buy the jeans at their prices because they were available in India. Leviâ€™s failed to understand what constituted its target market and hence in assessing its size. The segment of teenagers in India, whose parents would willingly spend so much money on a pair of jeans for their children for the sake of a â€˜foreignâ€™ label, was tiny. Leviâ€™s could have gone in for a different (and larger) market segment and tried out a product and price that was appropriate for the segment.
Reebok is another example. Reebok entered India, aiming at the segment of those with Rs. 500,000 plus annual income that was generally referred to as the high-end segment of the Indian footwear market. Reebok had assumed that this segment would buy the Reebok range, which was priced between Rs. 1,300 and rs. 6,500. Soon, it found that its targeting was flawed. Volumes were not forthcoming at this price. As in the case of Leviâ€™s, the segment that fitted Reebokâ€™s product/price offer was not sizeable in the Indian context. After a while, Reebok shifted to the next lower end, and introduced its new range, Classic, at a comparatively more affordable price of Rs. 900 per pair and sales picked up.