Market Segmentation: Conceptual And Methodological Process Essay

Question:

Discuss about the Market Segmentation for Conceptual and Methodological Process.

Answer:

Introduction

In the mid of the 19th century, the concept of retail marketing has taken a dramatic change. The changing behaviour of customers gave birth to two of the potential phase of a retail market. Moreover, the concept of department stores and discount stores has grabbed significant attention of consumers, which provided enough space for the competition in between top companies (Zielke 2014).

Department stores used to have sections for different types of products such as clothing, furniture, sporting goods and many more. Nevertheless, all necessary products assembled to a single place provided a cost effective and time saving benefit to the consumers (Davis and Dyer 2012). Moreover, they are no longer required to go to different place for different products.

This assignment helps in finding out the changing face of retail management and respective customer behaviour. With the help of some potential parameters, companies are encasing on the enhanced opportunities because of a phenomenal customer response to the retail shopping.

Department stores and discount stores

A department store is a place, which offers wide range of consumer goods at one place. The concept has changed the shape of shopping habits in major cities in the mid of the 19th century. Department stores have different sections dedicated to a wide range of consumer goods such as clothing, home appliances and many more (Davis and Dyer 2012).

Discount store is another retail concept, which offers goods at a more affordable and discounted prices (Zielke 2014). Discount stores mainly focus on the pricing of the product. However, they compromise on the quality and the service part. Aldi is a good example of such kind of a store, which has the reputation of being the world largest retailer. Moreover, it operates in more than 10,121 discount stores across the globe.

Evolution of department and discount stores

It all started in the mid of the 19th century, when the retail management started giving a new face to the shopping habits (Ewing 2014). Inception of department store has all changed the buying behaviour of customer by bringing more diversification in their shopping habits. Industrial revolutions have bettered the economy structure of people living in major cities. Moreover, an improved economy structure of common people acted as a catalyst in favour of the retail revolution (Mercer 2014). They sensed the gaps that need to be filled up with some new concept, which could help in enhancing the market feasibility of companies. Moreover, companies thronged to the changed concept and brought some of the best experience to the customers, which they had never imagined. Both the department stores and the discount stores are same in their product segmentation but differ in their mode of operation (Clodfelter 2012). Department stores have different sections offering wide range of consumer goods whereas discount stores offered wide range of discounted products. However, discount stores focus more on product pricing rather than the quality and the service part (Kim and Kim 2012). Aldi is a good example of such a store, which is the largest retailer in world to offer discounted products.

Customer segmentation

Customer segmentation refers to a process, which divides customer based on their feasible level to the pricing of the product (Wedel and Kamakura 2012). Different types of customer in Australia and Nepal represent the different face of a retail market, which solely depend on buying behaviour of customers. In Australia and Nepal, there are five types of customers in retail market such as:

Potential customer: These customers come to the stores and buy the desired product irrespective of their price range (Parment 2013). In this context, Nepal has more potential customers than Australia. Moreover, this is for the reason that Nepal has less number of supermarkets than Australia.

New customer: New customers are those, which gives retail market a sigh of hope of prospering in the coming future (Ferrell and Hartline 2012). However, this heavily depends on a large population of the country. Nepal has very less population than Australia as it has less number of people falling under the age of (18-30).

Impulsive customer: Impulsive customer is an instant buyer of products, which happens all of sudden without any proper plan for this before (West, Ford and Ibrahim 2015). In this context, Australia has a large number of impulsive buyers because there is large number of supermarkets in the country. Customers can find various stores in various places whereas in Nepal thee are lesser number of supermarkets.

Discount customer: These customers seek for a discounted product and wishes to visit to those supermarkets, which has the reputation to offer discounted products (Solomon, Russell-Bennett and Previte 2012). In this context, both Australia and Nepal have same rate of customers, who wish to buy product on a discounted price.

Diversification

Diversification is something, which encourages a company to bring new products in market (Oh, Sohl and Rugman 2015). Moreover, it adds another level in the business operation, which indeed is a result of added production. Diversification also helps a company during its economic downturn by bringing product variation as per the changing requirement of consumers (Goworek and McGoldrick 2015).

In this regard, Aldi represent a good example, which has diversified culture in their production. The two effective issues, which are associated with the diversification, are elated issues and unrelated issues. For Aldi, the related issues are health and cosmetic products, vegetables and fresh fruits whereas unrelated issues may be electronic, stationary an household goods.

The related issue with the Chaudhry Group in Nepal are house development, food and beverages. The unrelated issue for the Chaudhry Group in Nepal can be categorised as real state, automobiles, tobacco, education and many more. Moreover, the Company answered to the urgency of having brown instant noodle in Nepal, which was primarily dominated by white noodles in the 80s.

Challenges and issues of retail market in Australia and Nepal

Challenges and issues have always affected the business of leading companies in past (Layton 2015). In Australia also, there is a healthy competition in between different types of supermarkets and the online mode of shopping. Aldi has created a strong impact in the past by achieving the reputation of the leader company in the discount store format. However, the performance of the Company is challenged by an increasing popularity of online mode of shopping. The online mode of shopping is offering products at a cheaper rate than the discount stores. Nevertheless, Aldi is under notable pressure from diverse segments of customer in Australia (Chugh and Grandhi 2012).

On a same note, Chaudhary Group is also facing certain challenges in Nepal because of a low population there. The low population in the country mean that other companies who wish to expand their business in the country might not experience a healthy market shares. Moreover, low population and challenging business access in Nepal have constructed the country as an unfavourable choice for the investors. Nonetheless, the poor transport system in Nepal has added another feather in the book of challenges in front of Chaudhry Group (Magnani, Gevorgyan and Kurz 2012).

Company’s Future

Fresh vegetables and fruits and their environment-friendly packaging have shown Aldi’s utmost dedication towards the social wellbeing. Moreover, they do so to grab a competitive edge over its competitors. Aldi is strongly focussing on some key part of its production such as adding nutritional values to it with the help of extensive teams of experts who take care of the nutritional part with suitable strategies. With regular set up of different stores at different locations, Aldi has successfully hampered market shares of some leading companies such as Asda, Tesco and Morrisons during economic recession (Chugh and Grandhi 2012).

On a same note, Chaudhary Group has left its massive impact on the retail market in Nepal. However, at a global level, it is facing some serious challenges such as rules & regulations, cost and currency rates. Nonetheless, the Company has so far managed these challenges. CG is one of the giant companies in the Kingdom of Nepal, which has diversified inclinations across various domains. They have some of the excellent manufacturing facilities for the production of noodles, cigarettes, beverages and snacks. WAI-WAI is the market leader in Nepal in the noodle market. The Company has influenced not only Nepal but also India, Bhutan and the global countries. The effective and unique taste of the noodle has also produced worthy results in European countries such as UK, Germany & Austria. Throughout the expansion of the Company during the last 137 years, the WAI-WAI has expertise in possessing not less than 40 businesses (Magnani, Gevorgyan and Kurz 2012).

Cost containment and value-driven behind the changing face of retail management

Cost contaminant is the business practice in order to maintain level of expense to prevent redundant expenditure in order to enhance profitability devoid of long-tem damage to the Company (Manjeshwar, Sternquist and Good 2013). Retailers mostly endeavors investments as well as operating costs with a cost-contaminant approach. Most of the retail firms use this to hold down both preliminary strategies due to intense competition from discounters (P?rez–Caba?ero, Cruz–Ros and Gonz?lez–Cruz 2014). It is done to authorize a complicated chain or franchise operation as well as high land and construction cost and a desire to maximize the productivity. With the help of the following strategies, cost contaminant can be achieved:

Regulating operating processes, size of stores, layout of stores as well as goods offerings

Making the use of secondary location, self-supporting units, and sites in older stripe centers and by occupying sites deserted by others

Making the use of plainer fixtures as well as lower-cost displays

Making the use of reasonable construction materials that includes exposed cinder-block walls as well as solid floors.

Positioning stores in smaller communities where building guidelines are less strict, cost of labor is lower and the operating cost is diminished.

Purchasing renovated equipment that includes pos hardware

Joining cooperative purchasing and advertising groups

Encouraging manufacturers in order to finance inventories

The quest to provide good value to customers acts as the driving force behind contaminant of cost (Manjeshwar, Sternquist and Good 2013). Price plays a major role in what a customer desire to acquire and from where they acquire it. However, price is no longer considered as the precise reflection of value.

Changing face of retail management in coming future

Concept of life cycle in retail and the wheel of retailing concept are the driving force behind the changing future of the retail market (Ryan 2016). The concept of life cycle in a retail management refers to a process through which an organization passes through. Moreover, the cycle has divided into four parts such as innovation, success, saturation and decline. Innovation is the one weapon, which a company uses to produce different expertise in the market. However, inclination of a product is also a part of the retail management, which can have various driving forces behind this such as decreasing demand for the product or changing behaviour of customers for the product (Layton 2015). On the other hand, wheel of retailing represent a strategy, which a company exhibit in their entire operation of a product in the market. They first introduce the product in market with a lower pricing to grab the attention of customers. However, once the product takes a strong foothold in the market, they increase the pricing of the product to provide them a healthy profit margin.

The wheel of retailing concept is the most powerful driver behind the changing face of the retail market (St?hlberg and Maila 2012). Irrespective of the companies are following the same technique to turn consumer in their favour. Nevertheless, giving variations to the pricing of the product based on situational demand for the product produces healthy customer base (Lee and Kotler 2015). The growing awareness towards the societal values of customers has given a rethink to the companies on their products and the formats of stores. Keeping the premises environment friendly, there is an utmost requirement to maintain hygienic surroundings in the supermarkets. Nonetheless, customers are now more centric towards their health values.

Scrambled merchandising

When a retailer sells goods in his shop, which do not belong to the usual variety of commodities he keeps or sells it is termed as scrambled merchandizing (Zentes, Morschett and Schramm-Klein 2017). A retailer may opt for scrambled merchandizing in order to increase his top line or bottom line and for better utilization of space. Scrambled merchandizing also illustrates scattered management of product and it can leave a negative image in the mind of the customer who is not sure of what the retailer stands for (Zentes, Morschett and Schramm-Klein 2017). The observable fact is mostly observed with small and medium sized retailers whose key objective is to make more money. The modern practices among retailers in order to enlarge their product lines beyond those conventionally carried foremost competition between types of retailers. Scrambled merchandising is popular due to several causes that include the desire of the retailers to augment overall revenues, largely profitable commodities and services and because customers make more desire purchases (St?hlberg and Maila 2012). Scrambled merchandising is infectious. In other words, drugstores, florists, video-stores as well as bookstores are all affected negatively due to scrambled merchandizing. Retailers such as drugstores are forced into scrambled merchandising to complete the sales emptiness caused by supermarkets.

Conclusion

Although, flexibility is an important key in the changing face of the retail market but examples are very rare for such leaders. Even the giant companies like Aldi could not keep it away from certain challenges that are coming its way. The online shopping mode such as Amazon, Snapdeal, EBay and many more have all hampered the sales figure of the Company notably. To sustain the gained customer base, Aldi can go the same way by offering online product sale. They need to add online purchase mode to their existing website, which could offer wide range of products at a comparatively cheaper rate. Once it grows with the online sale system and catches significant customer base, the Company can increase respective product pricing considerably to enhance the profit margin.

Low population and an unfavourable transport mean in Nepal are causing serious threat to the Chaudhry Group. Big companies are not daring to expose their expertise in this counterpart. Nonetheless, due to low population companies have less scope for their drive in market shares. CG can go for a merger concept as this can expose their expertise in front of international customers. Moreover, this can open ample of options to the Chaudhry Group in international market with diverse range of products.

The concept of retail market is continually changing, which is driven by certain forces such as cost containment, value-driven and scrambled merchandising. However, changing customer behaviour is acting as the most influential factor for a changing face of retail market in the coming future. The diverse culture of buyers has opened up several dimensions for a retail market expansion such as online sales of goods through various platforms. Moreover, Amazon, Snapdeal, EBay and many more have changed the buying perceptions of customers in a big deal. A considerable growth is there in the online buyers list, which is providing ample of space to the existing giants in retail market to look for a significant change in their operations mode. Nonetheless, Aldi in Australia and Chaudhry Group in Nepal both need to improve their operation mode to meet with the enhanced demand of customer buying habit.

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