Saturday, May 03, 2008

Marketing Q&A : Automobile Market segmentation

Marketing Practice Reader Krishnan asks this question :

"Is Indian automobile market (car) driven by family ? Is family influence more when someone buys a small car or a sedan ?"

The answer to the first question is both Yes & No. The major segment in the Indian car market is driven by family. This is because of the current state of Indian automobile market. The market is still evolving .

During the initial stages , every market will be unsegmented . But as the market matures, segments evolve. Marketers devise new methods /variables to segment the market. In the car market also, we had the market dominated by the family segment. The first attempt to segment was by Tata Sierra which tried to bring in the SUV segment. But the market was not ready to accept that product.

Indian car market is predominantly family oriented. In the developed market, we can see different family members owning different types of cars. One of my colleagues say that a typical American family will have a small car/office car , an offroader( or a truck) and a sedan . Our market is still to evolve to that stage. Still for most of us, cars are a luxury rather than a mode of transportation.

Hence , here the primary segmentation was based on the price of the car and also the nature of the car. So we have A segment, B segment, D segment etc and segments like MUV, SUV, Sedan, Hatchback ,small car etc .

The dominant segment ( small car/ hatchback) is driven by family. So the entire family takes part in deciding the purchase of the car. The major determinants being the size of the family, price, cost of maintaining like mileage , brand , type of car etc.

The buoyant economy and the emergence of neo-rich class has changed the dynamics at the upper end of the market. I know families which own more than 3 different types of cars to serve different purposes. In the case of such affluent family, the purchase considerations are different.

My feeling is that the launch of Tata Nano will also see some change in the way Indian car market is segmented. Now even middleclass can afford to have more than one cars. And cars may move from a luxury product to a mode of transportation.