Ma­hesh Rao: Prod­uct Seg­men­ta­tion - Dif­fer­en­ti­ate Or Per­ish

In­dus­try ex­pert and de­sign con­sul­tant MA­HESH RAO, Ban­ga­lore, puts forth his views on the im­por­tance of prod­uct seg­men­ta­tion and cau­tions against the temp­ta­tion to ven­ture into un­known ter­ri­tory for short-term gains.

Solitaire - - CONTENTS -

When times are tough in a down­turn, one hears a com­mon re­frain that ‘you must fo­cus on your busi­ness.’ But what does one mean by ‘fo­cus’?

Per­son­ally, fo­cus for me would mean that you must be sure of what you don’t want to do in life. For, it is ex­tremely dif­fi­cult to do ev­ery­thing for ev­ery­body, and you can­not please every­one all the time. You feel proud to be re­ferred to as a na­tional or in­ter­na­tional player in your in­dus­try, but at what cost? One can­not cater to a cross-sec­tion of peo­ple, es­pe­cially when the eco­nomic sit­u­a­tion is not so healthy.

Most busi­nesses do an in-depth study of the re­gions they want to tap, check con­sumer pro­files, study their own prod­uct and how it may fare in the mar­ket and so on.

This is where we come to the ques­tion of prod­uct seg­men­ta­tion – it is a very tricky topic, though. Keep fo­cus on the core busi­nesses to main­tain growth.

But be­fore we look into what is prod­uct seg­men­ta­tion, we need to take care of two as­pects that come into play in our busi­ness de­ci­sions – your ego and the busi­ness ego. What will you give weigh­tage to? To make money, one has to lis­ten to the voice of busi­ness ego. Your ego... well that is another story.

I would like to draw in­fer­ences from the au­to­mo­bile and gar­ment in­dus­tries.

In the au­to­mo­bile in­dus­try, take for in­stance the case of Toy­ota that ranked tenth in pop­u­lar­ity, and in profit terms it was num­ber one – Toy­ota’s Camry and Corolla dom­i­nate the roads in USA even to­day. But way back in the late 1950s, when Toy­ota set its foot in Amer­ica, Ford and Chevy ruled the roads. So what was the rea­son for Toy­ota’s turn­around and how did it earn prof­its? Toy­ota is known for in­vest­ing a lot of time in re­search and un­der­stand­ing the prod­uct. They plan ahead of time and un­der­stand what con­sumers ac­tu­ally want. Plus, they kept a strin­gent eye on im­prov­ing their prod­uct on a con­stant ba­sis to elim­i­nate waste, and avoid over-pro­duc­tion. Above all, they re­spect con­sumers, and their net­work of dis­trib­u­tors, deal­ers and sup­pli­ers.

Another im­por­tant point is that nov­elty in lux­ury is a tran­sient af­fair. What is lux­ury to­day may be slot­ted as the mid-seg­ment prod­uct to­mor­row. The Maruti 800, for in­stance, was con­sid­ered a lux­ury in the year 1986. To­day, it is just a so-called “clas­sic” ve­hi­cle at the bot­tom end of the seg­ment.

So what are the take­aways?

Deeper un­der­stand­ing of con­sumers is cru­cial. Un­der­stand the ground re­al­i­ties

and study the seg­ments of the con­sumer. Ev­ery time a new seg­ment emerges, a new prod­uct gets de­vel­oped to cater to the con­sumer’s new needs and new as­pi­ra­tions in the con­text of lux­ury goods.

This helps you de­fine the seg­ment that you want to cater to.

Costs to the com­pany and op­ti­mum util­i­sa­tion of the re­sources are the ma­jor

fac­tors that can yield you prof­its. Run up a check list: iden­tify the seg­ment, es­ti­mate the cost of the seg­ment; ex­am­ine the util­i­sa­tion of your fac­tory and whether you are of­fer­ing the right prod­uct to the right seg­ment. As­sess the ideal ca­pac­ity and the in­dus­try’s ca­pac­ity to buy your in­ven­tory. Your com­pany, in short, should be a per­form­ing as­set.

The ten­dency to build huge ca­pac­i­ties in man­u­fac­tur­ing or in in­ven­tory com­pels us to utilise them by out­sourc­ing jobs or giv­ing dis­counts to off­load the in­ven­tory. In the process, we kill each other’s busi­ness.

Match up the re­sources with de­mand. Don’t let the com­pany re­sources lie idle. You are only as strong as the weak­est link in the chain. You must en­sure that you do not have any non-per­form­ing as­sets. What will then tempt you is go­ing for ver­ti­cal growth in order to keep the ma­chin­ery hum­ming. In the long run, you just may run up huge bills and be laden with jobs that you were not meant to do in the first place.

Jew­ellery not sold as lux­ury

The jew­ellery in­dus­try can also learn a lot from the gar­ment in­dus­try that has de­vel­oped a suc­cess­ful busi­ness model. In the In­dian gar­ment in­dus­try, many brands have grown with­out hurt­ing each other’s busi­ness growth.

Each ser­vice provider spe­cialises in dif­fer­ent as­pects of the in­dus­try. A man­u­fac­turer, dis­trib­u­tor, re­tailer, agent and stock­ist all per­form spe­cific roles, and each pro­fes­sional gets hand­some re­turns on in­vest­ments de­pend­ing on the ca­pac­ity utilised. There are no ter­ri­to­rial en­croach­ers. There are strate­gic al­liances and they all work in har­mony.

In In­dia, the ba­sic ne­ces­si­ties of a com­mon man are – roti (food), kapda (cloth­ing) and makaan (shel­ter). In my opinion, we can eas­ily say that jew­ellery is the fourth ne­ces­sity.

De­spite a na­tion that eyes jew­ellery as an adorn­ment and an in­vest­ment, most of us jewellers only dis­pense jew­ellery. We do not cre­ate a de­sire to buy jew­ellery. Jewellers rarely en­gage in brand-build­ing ex­er­cises. They do not lay enough em­pha­sis on ad­ver­tise­ments. Jew­ellery is not sold as a lux­ury item, but as a ne­ces­sity and there­fore, in­clude jew­ellery as the fourth ma­jor ne­ces­sity.

As jewellers, there is lot of scope for us to un­der­stand dif­fer­ent seg­ments of cus­tomers and cater to their needs through smaller busi­ness mod­ules.

I would like to quote an ex­am­ple of a top gold jew­ellery man­u­fac­turer from the south­ern re­gion. He pro­duces jew­ellery for oth­ers through a fixed dis­tri­bu­tion net­work, and does not re­tail. He ad­heres to his prin­ci­ples and goes through or­gan­ised chan­nels, do­ing what he does best. Sim­i­larly, one should recog­nise one’s core strengths and align with the in­dus­try’s state of af­fairs and work in tan­dem.

For ex­am­ple, a jew­eller spe­cial­is­ing in kun­dan-meena jew­ellery must work on en­sur­ing that he en­hances the prod­uct by way of re­search and de­sign and op­ti­mum util­i­sa­tion of re­sources. He shouldn’t be tempted to en­ter into other cat­e­gories, like cut­ting and pol­ish­ing or any other seg­ment for quick gains. This way, he di­lutes his busi­ness and by un­der­cut­ting oth­ers in the in­dus­try, he will only work at less-thanop­ti­mum ca­pac­i­ties. Fo­cus­ing on your strengths will help you de­fine your role in the in­dus­try; dif­fer­en­ti­ate you from oth­ers, and help your prod­ucts stand out. Re-jig your busi­ness in a man­ner that is prof­itable to all. Times are chal­leng­ing and mar­kets are slug­gish. In my opinion, we need to look at other in­dus­tries that are do­ing well and learn from their strate­gies. Surely, we can adapt some good prac­tices from them?

As jewellers, there is lot of scope for us to un­der­stand dif­fer­ent seg­ments of cus­tomers and cater to their needs through smaller busi­ness mod­ules.”

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.