customer segmentation: insights into prevailing trends and strategy for future

Subject / Date Slide 1

Customer Segmentation: Insights into Prevailing Trends

and

Strategy for Future

Project Team:

Aditya Ghamande

Kongpon Kijnum

Spenser Slaton

Project Mentor:

Vaidyanathan S. Iyer


• Project Goals

• Our Approach

• Industry analysis and brand positioning in industry

• Future Opportunities & Recommendations

• Hypothesis: Where TVS is and way forward

• Question & Answers

Today’s Agenda


• Identify factors that influence customer’s buying decision

• Identify industry offerings and products’ positioning

• Perform gap analysis to understand potential gaps for future by projecting customer’s

needs vs. industry offerings.

• Recommend new models for the future based on gap analysis

• Understand socio-economic trends and customer behavior to develop future industry view

• Industry product comparisons and where TVS stands

Project Goals


Our Approach• Find out factors that influence customer’s buying decision:

• Mileage

• Style

• Power

• Brand

• Handling

• Price

• Plot the combination of parameters for two wheelers from each manufacturer

• Perform gap analysis to understand potential gaps in industry offering

• Recommend future motorcycle model based on gap analysis

Source: Company Reports (TVS Customer Interview Data)


Defining Style of Motorcycle and Scooters

• Seat: Flat• Exhaust: Straight• Tank: Simple• No Disc Brakes• Head Light

Assembly: Simple

• Seat: Deep curve• Exhaust:

Angle/Chrome• Tank: Large &

Chiseled• Disc brake &

Engine: Large• Head Light

Assembly: Chiseled and curved

• Seat: Deep curve• Exhaust:

Angle/Chrome• Tank: Chiseled• Wheels: Disc brake• Head Light

Assembly: Chiseled and curved

• Seat: Soft curve• Exhaust: Slight

angle• Tank: Simple• No Disc Brakes • Head Light

Assembly: Slightly curved

• Seat: Deep curve• Exhaust: 2

Angled pipes• Tank: Large &

Chiseled• Disc brakes &

Engine: Huge• Head Light

Assembly: Stylish, Chiseled and curved

Down-to-earthSincere / Cheerful

Competent / Successful SophisticatedFreedom /

Excitement

Generic DaringExcitingConventional LuxuryFlashy

1 2 2.8 3.3 4 53


Defining Style of Motorcycle and Scooters


Defining Handling/Comfort of Motorcycle & Scooter

Weight Gearless Geared

Less than 110 KG 8 4

110 – 130 KG 7 3

130 – 160 KG 6 2

More than 160 KG 5 1

• A vehicle with low weight is easy to handle on roads• A vehicle without gear is easy to ride on roads


Current Industry state based on Multiple

Dimension Plots


1. High Power Scooter

Current Situation

•Current market has low power and standard

mileage (average of 40 kmpl) scooters

•Lack of high power, high weight, lower

‘handling’ rating vehicle

•Increased power means higher speed, better

riding experience, and similar mileage of 35

kmpl

Plot and opportunity Explanation

• Above plot portrays that market does not have high power

scooters with ‘Handling’ rating between 4 and 8

• We recommend TVS to come up with new high power scooter


Product Characteristics

• Weight: 130 – 160 KG (Higher than Suzuki Access)

• Power: more than 10 KW

• Higher weight means lower handling rating of 6

• Price: 60,000 - 65,000 (Based on comparison with Suzuki Access)

• Mileage: Around 40 kmpl (To satisfy average mileage requirement)

• Style: Higher than 3.5; Large body size, large and inclined exhaust pipe, and visible

engine; These parameters signify higher style ratings

Target Customers

• Based on our analysis of current sales data, TVS can target customers* who are:

• In the age group of 15-30

• Earn more than INR 25,000 monthly income

• Are self-employed

*Note: These customers bought scooters with power rating of more than 6 KW


Product Visualization


Current Situation

• High Power bikes that are very stylish targeted

toward high end customers.

• No High power generic/conventional looking

motorcycle for mainstream average customers

Introduce ordinary motorcycle with

high power


• Above plot portrays that there is no high power motorcycle with a low style

quotient.

• We recommend TVS to come up with new motorcycle that is extremely

powerful but with lower style rating

2. High Power Conventional Motorcycle


Product Characteristics• Style rating between 1 and 2:

• Seating: Some soft curves in the seating for new bike

• Slightly inclined but bigger exhaust pipe to signal high power motorcycle

• Simple tank and front mirror assembly

• Weight: High (Between 125 to 130 KG)

• Power: Around 10 KW

• Displacement: 150-180 CC

• Price: Between INR 60,000 – 65,000

• Mileage: Around 55 kmpl

Target Customers

•Based on our analysis of current sales data, TVS can target customers* who are:


• Earn more than INR 25,000 monthly income


*Note: These customers bought scooters with power rating of more than 10 KW


Current Situation

• High Power, high style motorcycles that

provide low mileage

• Engineering tradeoff: Higher power bikes

cannot give high mileage.

• High investment required for low power

bikes that provide extremely high mileage

• Need exists: Customers think mileage and

acquisition cost while buying motorcycles.


• Above plot portrays that there is no motorcycle or scooter with extremely high mileage.

• We recommend TVS to come up with new motorcycle that is powerful but gives higher

mileage compared to that given by current motorcycles.

Introduce motorcycle with

high mileage

3. Hybrid Motorcycle or Scooter


Product Characteristics• Mileage: More than 90 kmpl (Compared to 87.7 kmpl mileage of TVS Sport)

• Style: Could vary from 2 – 4

• Weight: 130 – 160 KG

• Price: At least 80,000 INR

Target Customers• Based on our analysis of current sales data, TVS can target customers* who are:


• Having monthly income between INR 16,000-25,000


• Customers would be ready to pay high upfront costs to gain mileage advantages in future

*Note: These customers bought motorcycles with mileage of at least 75 kmpl


Current Situation

• Lack of sporty and powerful scooter in the

market

• TVS can come up with such scooter that

looks sporty and powerful but is of

approximately 125 cc.


• Above plot portrays that there is no high

power motorcycle with extremely high

mileage.

• We recommend TVS to come up with new

motorcycle that is powerful but gives higher

mileage compared to that given by current

motorcycles.

Introduce scooter with high style

4. Sporty & Powerful Looking Scooter


Product Characteristics• Price: Around INR 50,000 as the bike is not actually powerful

• Power: In the range of 5-7 kw

• Displacement: 125 cc

• Style: A rating of at least 4

• Mileage: Around 40 kmpl

Target Customers• Based on our analysis of current sales data, TVS can target customers* who are:


• Having monthly income between INR 25,000

• Students


*Note: These customers bought scooters with power of at least less than or equal to 6


Improvement in affluence levels across income groups is increasingly driving structural shifts across industries

Increasing share of ‘Seekers’ among the population

8000-16000 INR MHI

16000-40000 INR MHI

>40000 INR MHI

Exponential Increase in share of ‘Strivers’ among the population


Global Two Wheeler Penetration and GDP Per Capita

SOURCE: Credit Suisse Aug 2012

With hardly 7% penetration, Indian Two Wheeler Industry is sitting on the launch pad of an exponential growth phase


Competitor & Product Positioning

Goal: Analyze positioning of major competitors to understand TVS’s capability to seize future opportunities


Motorcycle Segment: Hitting the Target

80% of all motorcycles sold:Price: 40K – 60KPower: 100cc – 150ccWeight:100kg – 140kg

20% Represent Premium & High Power bikes


Motorcycle Segment: Competitor PositioningTVS Hero Honda Bajaj

# of Bikes 3 4 4 6

Monthly Company Sales 50K 400K 100K 200K

Close up Comparison

Brand Motorcycle Name Sales Style Mileage DisplacementBajaj Platina 100 CC 35K 1.8 72.5 99.27

Hero Hero CD Deluxe/Dawn 86K 1.2 60 97.2

TVS Sport 17K 2.2 87.7 99.7

TVS Star city 15K 2.2 83.9 109.7



# of Bikes 3 4 4 6


Close up Comparison



TVS Sport 17K 2.2 87.7 99.7

TVS Star city 15K 2.2 83.9 109.7



# of Bikes 3 4 4 6


Close up Comparison



TVS Sport 17K 2.2 87.7 99.7

TVS Star city 15K 2.2 83.9 109.7

Key Take-away:

•TVS bikes are competitive or better in target segment.

•TVS’s competitive offerings do not translate to high sales.

•Hypothesis: Competitor positioning is similar within motorcycle segment. Factor

outside product characteristics is driving market sales


Scooter Segment: Analysis

TVS Hero Honda# of Scooters 3 4 4

Monthly Company Sales 35K 56K 118K

Brand Motorcycle Name Sales Style Price Mileage Displacement

Honda Honda Aviator 9,800 2.2 51,200 45 109

Suzuki Access N/A 1.5 50,300 42.6 124

Honda Honda Activa 100,000 1.5 49,900 45 109

Hero Hero Maestro 28,000 2.2 46,900 42 109

TVS Wego 15,000 2.2 46,892 40 109.7

Honda Honda Dio 8,100 2.8 44,718 45 109

Hero Hero Pleasure 28,000 1.5 42,950 40 102

TVS Scooty Streak 5,000 3 42,735 40 87.8

TVS Scooty Pep+ 15,000 3 40,825 52.5 87.8


Scooter Segment:

TVS scooter sales are lower than expected.

• TVS Streak & Pep+ are more stylish and lower priced than competitors.

• Style is the 2nd largest determining factor when deciding a two-wheeler.

• TVS Wego lags behind Maestro sales despite being similar in all characteristics.

• Hypothesis: Competitor positioning is similar within scooter segment.

A factor outside product characteristics is driving market sales


Brand: The BIG Difference

Most Preferred Motorcycle Company

Source: Francis Kanoi Marketing Research: A Report on Performance and Image of Motorcycle Brands (2011)



Brand you will never buy

Source: Vinayak Tiwari, PGDM-MM: Brand Image of Motorcycles and the Colour Survey for the Bike Colours



Brand you will never buy

Source: Vinayak Tiwari, PGDM-MM: Brand Image of Motorcycles and the Colour Survey for the Bike Colours

Hypothesis

Competitor positioning is similar within industry among major competitors. TVS will

need to strengthen it’s brand to effectively seize future opportunities, as brand is likely

one of the largest competitive advantages, not product offerings.


Question n Answers

customer segmentation: insights into prevailing trends and strategy for future

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