Segmentation

Segmentation is the method of dividing market into different homogenous

groups of buyers on the basis of their needs, characteristics or behavior. In
other words segmentation means segregating customers into different
homogenous groups that might react to one product or marketing strategy in
different ways.
Segmentation is important because a product has some specific
characteristics and cannot cater to the needs of everyone. So segmentation
helps the company to understand the needs of each segment and market its
product so as to show case it value proposition to that particular segment of
customers.

Bases of Segmentation:
The following diagram shows few bases of segmentation.

Personal
Characterist
ics

Situational Demographi
Factors cs

Bases for
segmentati
on

Operating
Purchasing
Characterist
Approaches
ics
From the diagram, it can be seen that the market can be divided into
different segments based on the mentioned bases and each basis can help
the company divide the entire market into segments as per some
parameters. And parameters on which we can segment the market is given
in the next figure.
The following figure gives us typical parameters based on which the market
can be segmented into.

• Nation • Age
• State • Gender
• Regions • Famly

c
Geographic Demographi

hic
Psychograp Occasions
• Social Class • Behavious]r on
• Lifestyle Specific
• Personality occasions

Royal Enfield – Need for Segmentation

Royal Enfield had identified its customer base very early. It was the year
1893 when Enfield had made its first bike. It was publicized with the tagline
“MADE LIKE A GUN, GOES LIKE A BULLET” and since then, it has struck a
chord with the masses. The word ‘bullet’ since then has become a vernacular
for Enfield bikes in the Indian subcontinent.
This way of positioning had helped Enfield get orders from the Royal Army for
6 HP motorcycles equipped with Lewis Machine guns and a stretcher. Also,
during the World War II, the British authorities relied on the Enfield Cycle
Company to develop and manufacture military motorcycles. When the
company had tried to enter the Indian market, it was able to get a strong
foothold, thanks to its powerful positioning.

In 1965, when the Indian government looked for a motorcycle suitable to use
as a patrolling vehicle by the police at the country’s border, it zeroed in on
the Bullet and had placed a bulk order of 800 units of the 350-cc models of
the Bullet. What we can infer from this is that Royal Enfield’s clarity in target
and the right positioning was instrumental in getting such orders.
It was observed that Royal Enfield has been positioning its products in such a
way that they are associated with the pleasure of biking. But when it tried to
focus on expanding into a market for mass production, it failed. This was
because its characteristics were not different from a bike which could not
take in rough handling, and thus requiring a lot of care and attention from its
owners. The lack of proper care resulted in the bike’s decrease in
performance & efficiency and increase in lots of problems.
Enfield bikes had also created a lot of psychological barriers for their
potential owners. For example, the massive size and weight of the bike
discouraged skinny riders from buying it, because handling would prove to
be difficult and importantly, the bike would require powerful legs for the kick-
starting it. The positions of the gear and the brakes also scared off a few
more prospective customers.
Seeing that the nature of its products did not allow them to cater to all
segments, Enfield made a correction in the course quickly. Soon, it started
positioning itself as a lifestyle bike not for the ordinary but for the
aficionados among the country’s population, the people who are passionate
about engines and powerful machines. This strategy connected with the
“pleasure of biking” and also tagged along with it the masculine persona.
The campaign also clearly communicated the stature of the brand with
respect to other brands. The tagline, “EVERYBODY MAKES WAY FOR A
BULLET”, added fuel to the fire, raising the brand value and the sales value
of the Bullet soared off.
Thus we understand from this example how important it is to understand the
market and identify its proper segments.
Royal Enfield – Market Segments
The following figure gives us an idea of the different segments that are
currently prospective to Enfield.

Royal Enfield has identified its segment as a middle-class people that wants
a bike that is stylish and, at the same time, also powerful, coupled with the
feeling of adventure and independence.
The market can be divided into various segments as per age, sex, location,
job description, personal interests and hobbies, preferences, financial
strength, etc.
Considering such parameters, Royal Enfield has identified some segments as
mentioned below:
Middle income group
Royal Enfield’s pricing helps it target the middle class.
Defence and police
Since its inception it has always identified itself with the defence sector, due
to its involvement in World Wars I and II, and it has proven its utility. Also it
has associated with Indian army and police since 1965.
Adventure Lovers
It has positioned itself as bike for the adventure lovers with its ad campaigns
like “leave home”, and “only few live free”. This shows us that Royal Enfield
looks up at this segment as a very influential and important segment.
Young Bikers
With its ad campaigns targeting the adventure lovers, like the ones stated
before, Enfield also started to focus on the segment of young bikers, who are
in the age range of 18-35, who connect to the sense of independence as
their identity.
Now Enfield is giving focus, more than ever before, on features and try to
pass on the same to the general public. After the introduction of the Classic
model, people passionate about vintage looks with big engines have started
to go after Enfield bikes, making it one of the most sought after models of
bikes.
Now they focus more on feature and try to give pass on the same to
audience. Perhaps they don’t segment the market but the market segments
for them. The people passionate about engines and vintage look prefer royal
Enfield bikes.
To validate the segmentation we conducted a survey on various parameters
and captured the data of 100 respondents. The details of the respondents is
given below.

Demographic Statistics

Age Distribution Income Distribution (Lakh/Annum)

45
40
35 14
30 1
25 45
20 26
15
10
5
0 0 0-3 3-8 >8
<21 21-25 25-30 30-35 >35

Geographic Statistics
 Part of India Locality Type
35
30
13 19
25
20
15 32 22
10
5
0 Metro City Town Village
East North South West Central

Psychographic Statistics

Travelling Habits KM/Month Parameter Preference

70 30
60 25Very Important Important Neutral
50 20
40
15
30
10
20 Less Important Not Important
5
10
0 0
0 <100 100-300 300-600 >600 Power Comfort Looks Price Brand

Brand Preference

2
20
Avenger Harley Davidson KTM Royal Enfield Triumph
35
12

17

Based on the survey statistics following segments of customers were identified as

distinct (since most of the respondents of the survey fell into one of these
segments):
1. Price insensitive higher income bike enthusiasts
2. Price sensitive long distance travelers
3. Urban living aged greater than 35 years
4. Price insensitive middle income bike enthusiasts
 5. Adventure seekers / travelers
6. Royal Enfield loyalists
After dividing the market into these segments, we tried to understand the
requirements of each segment through some primary and secondary analysis.
Targeting
To successfully position the product into the market, we need to analyze the
different segments and find out which segments are to be targeted and how viable
such targeting would turn out to be.
Segmentation of markets is followed by the evaluation of attractiveness of each
segment and selecting one or more segment to target.
Evaluating market segments
A market segment needs to be evaluated to ensure sustainable and profitable
business while keeping in mind the objectives of the company and resource
availability.

• Expected Profitability
Size & Growth
• Expected Growth Rate
• Sales Forecasting

• Power of Buyers and Sellers

Competition
• Threat of substitute products
• Competition Analysis

• Competitive advantage
Viability
segments
• Company skills and resources to cater to the needs of

Fig 2.1 Segment attractiveness measures and their matrices

Size and Growth Analysis

After the division of the population into various segments, the parameters on which
to evaluate them were chosen and with these parameters, the following analysis of
the segments were done.

Segment Segment Competition Viability

Analysis
Price - Possibility of - Expensive foreign - Not profitable
sensitive growing brands enough to
higher pursue
income bike
enthusiasts
Price - Largest - Most of the - Not a viable
sensitive segment at middle range segment
long present bikes with good
distances mileage
travellers - Public transport
Urban Living - Mostly people - Cars - Not with in
and aged with families - Public transport scope
greater than - Prefer safety
35 years and security
Price - Fastest - Middle range to - Segment to be
insensitive growing high range bikes given
middle segment maximum
income bike - Variety of focus
enthusiasts choices for
different
needs
Adventure - Thrill seekers - Bikes with high - Ideal
seekers/trav - Road trip power and customer
ellers travellers comfort base
Royal Enfield - Smallest - None - Important
loyalists segment customer
base
- Efforts
required for
retention

Price sensitive higher income bike enthusiasts – This is the ultra-rich

segment of the population. The people of this segment are connoisseurs of
bikes and prefer to associate themselves with foreign brands that amplify
their status in the society. Harley-Davidson, Triumph, KTM and Ducati are
some brands that compete strongly with Enfield. It is quite probable for
people from this segment to buy Bullets, but the segment is not profitable
enough for Enfield to pursue strongly.
Price sensitive long distance travelers – This segment comprises of
people from all income groups. The people from this segment are focused on
their destination and they try to minimize the cost of traveling from one
point to another. If they buy bikes, they will minimize the cost of the
investment and also focus on those bikes that have very good mileage (so as
to reduce their fuel consumption costs). Public transport also serves as a
strong competitor, since the people of this segment are not focused on the
journey as much as they’re on the destination. This segment isn’t an
economically viable segment for Enfield to focus on.
Urban living and aged greater than 35 years – The members of this
segment mostly comprise of those men who have families. These men give
utmost importance to safety and security. These people are likely to go for
four wheeler vehicles or public transport. This segment is out of Enfield’s
scope.
Price insensitive middle income bike enthusiasts – This is the fastest
growing segment as more and more people are moving from the lower
income level to middle income level. These people start to give importance
to their status as well and would like to flaunt it, while also trying to not
unnecessarily squander off their income, though some are daring enough to
ignore all the constraints that they may encounter. Those looking for a strong
brand value will go for Harley-Davidson; those looking for utility will go for
bikes like TVS Apache or Bajaj Pulsar; fans of sports bikes could go for bike
like the Yamaha R15, Honda CBR or KTM Duke; and those focusing on
comfort and looks have the option of Bajaj Avenger, in addition to the Harley
and the Triumph. This is a segment that requires the greatest focus from
Enfield since these segment members have a lot of potential to be converted
to Enfield enthusiasts and loyalists of the brand. These people would like the
power and the vintage looks that the Bullet offers.
Adventure seekers and travelers – This segment of riders often go on
very long road trips and spend a very significant portion of their life on the
road. The people of this segment look for durability, power and comfort.
Harley-Davidson, Triumph and the Bajaj Avenger offer strong competition.
This a segment that is very ideal for Enfield since their bikes are usually
made to last long, with engines that offers great power while the bike offers
great comfort. The Bullet and the Continental GT are two models from Enfield
that strongly cater to this segment.
Royal Enfield loyalists – This is the most comfortable segment for Enfield,
because no competition is offered from the other brands. But there’s the
possibility of the loyalty of these enthusiasts to diminish if they happen to
lose their faith in Enfield. So it is important for Enfield to keep the key
features that made them a legend and distinguishable from the other brands.
It is also important for Enfield to offer more value than ever before to these
customers so as to retain them.