Enfield Targeting

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 Factors

Demographi cs

Bases for segmentati on

Purchasing Approaches

Operating Characterist 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 • State • Regions Geographic

Demographi c

Psychograp hic

• Social Class • Lifestyle • Personality

• Age • Gender • Famly

Occasions

• Behavious]r on Specific 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 kickstarting 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 45 40 35 30 25 20 15 10 5 0

Income Distribution (Lakh/Annum)

14 45

35

0

0-3

1

26

3-8

>8

Part of India

Locality Type

35 30

13

25

19

20 32

15

22

10 5 0

East

North

South

West

Metro

Central

City

Town

Village

Psychographic Statistics Travelling Habits KM/Month

Parameter Preference

70

30

60

25Very Important

50

20

40

Important

Neutral

15

30

10 Less Important 5

20 10

Not Important

0

0

0

600

Power Comfort Looks

Price

Brand

Brand Preference

2 Avenger

Harley Davidson 35

20 KTM

Royal Enfield

Triumph

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. 2. 3. 4.

Price insensitive higher income bike enthusiasts Price sensitive long distance travelers Urban living aged greater than 35 years 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. • Sales Forecasting • Expected Growth Rate • Expected Profitability

Size & Growth

• Competition Analysis • Threat of substitute products • Power of Buyers and Sellers

Competition

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

Viability

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 Price sensitive higher income bike enthusiasts Price sensitive long distances travellers

Segment Analysis -

Possibility of growing

-

Largest segment present

Competition

Viability

-

Expensive foreign brands

-

Not profitable enough to pursue

-

Most of the middle range bikes with good mileage Public transport

-

Not a viable segment

at -

Urban Living and aged greater than 35 years Price insensitive middle income bike enthusiasts

-

Adventure seekers/trav ellers Royal Enfield loyalists

-

-

-

Mostly people with families Prefer safety and security Fastest growing segment Variety of choices for different needs Thrill seekers Road trip travellers Smallest segment

-

Cars Public transport

-

Not with scope

-

Middle range to high range bikes

-

Segment to be given maximum focus

-

Bikes with power comfort None

-

Ideal customer base Important customer base Efforts required retention

-

high and

-

in

for

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.