A careful market segmentation is critical to successfully selling products; you need to understand what makes different consumers tick and how best to reach them. Skincare giant Nivea conducted an impressive market research campaign that can be modeled by other firms.
First, a little background: Beiersdorf is an international skincare company with leading brands such as Nivea and Eucerin. They have expanded significantly in the UK market through effective segmentation that matches consumer needs. The company has become the value leader in the field, meaning people spend more on Nivea sun protection products than any other brand.
One important product line for Nivea is sun-related skincare products, worth upwards of £173.6 million in the United Kingdom alone. Nivea’s reputation in this broad segment is bolstered by robust scientific research and development focused on providing the best protection possible from the sun’s skin-damaging rays.
The key was to further segment the sun protection products market by two important factors: Skin type and the climate where the products are used. Skin types include very light, fair, normal, dark and children (who tend to have thinner, lesser developed skin) while the climates include moderate, hot and very hot. The level of protection is measured by SPF, which stands for Sun Protection Factor. The lighter the skin and the higher the temperature, the higher the SPF that is needed. SPF 20 may be adequate protection for a fair-skinned person in the UK, but SPF 40 might be recommended for the same person if they were in a more tropical environment.
The company’s market research revealed significant demographic differences between men (who go for convenience), women (who gravitate towards more luxurious products) and children (a market reached through adult parents, mostly mothers). Through the use of surveys and focus groups, Nivea was able to determine the attitudinal differences between distinct segments of consumers.
They discovered concerned consumers who were not at all concerned about getting a tan but instead were more focused on protection from sun damage. Sun avoiders don’t buy these products at all because they avoid high-exposure situations, although with education they may be convinced of the need for sun protection product purchases. Conscientious sun lovers love being out in the sun but are concerned about protection. Careless tanners, on the other hand, don’t worry about the sun at all and buy low-SPF products if they buy any at all. Finally, the naïve beauty conscious people are the ones who want to have a good tan but don’t adequately understand the relation between SPF and protection.
Nivea used this research to develop their unique brand positioning that includes making sun care as simple as possible, providing education about the importance of protection and finding ways to reinforce that protection message. One product innovation that came from this research was a product that offered full and instant protection from both UVA and UVB sunrays because many consumers fail to apply such products in the necessary time frame for effectiveness (20-30 minutes before exposure). Other product innovations have included sprays that are easy to apply, colorful products for children and water-resistant products for both children and adults. Advertising for children’s products targets the mothers of children with a protection message.
Interested researchers can get an important insight from the Nivea case study: a sophisticated market segmentation strategy goes beyond simple demographics. Through targeted research, firms develop an understanding of customer segments that takes buying habits and motivations into account. Using this segmentation, product development and messaging both become more effective and sales and revenue increase.
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Using the full spectrum of segmentation variables, describe how L’Oreal has segmented the Indianmarket.
L’Oreal has engaged in many forms of Market Segmentation in their venture in India, with differentvariables during different time periods. Firstly we will discuss the segmentation methods when it firstentered the market in 1991, followed by what ensued after their makeover.
When it First Entered the Market
Gender Segmentation: L’Oreal first segmented the population into the different sexes as they thoughttheir products’ “combination of low price and natural ingredients would fit India’s market, where womenuse plants and herbs as part of their beauty culture”. Their product specifically catered to the women of India, though later our group discusses how it should carve a niche market for itself in the Men’s sector aswell.Income Segmentation: L’Oreal segmented the market into 2 main segments: the poorer masses andthe rest. It marketed its product as low in cost to attract the poorer masses, and her efforts in reducingingredients to cut price reveals her aim to minimize costs as much as possible. At this point of time, it wasnot yet targeting the affluent middle class or upper class and thus did not make any distinct segmentation of the richer classes, preferring to regard them as a whole entity.
The “L’Oreal Makeover”
After a poor start, L’Oreal approached the market with a different concept. Presence of home brands posed problems as they had already captured a large proportion of the masses’ market share. They offeredcheaper products to buyers at a price which L’Oreal was unable to match, and their long presence hadestablished a strong sense of loyalty in the buyers, making it difficult to pry them away. With theunderstanding that it needed to capture a different market, it proceeded with a different from of segmentationin order to better identify its target segmentsIncome Segmentation: This time L’Oreal separated a new segment from the original 2 segments: thequickly rising middle class which was gaining in affluence. This was very specific compared to the originaltwo broad segments it identified as they saw that this was the fastest growing income class that represented ahighly untapped market potential due to their radically different mindsets from the masses.Psychographic Segmentation: L’Oreal segmented India into different groups based on their thinkingand behavior from the older, more conservative Indians who held conservative values of thriftiness more
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