Psychological segmentation – McDonald's India.

-Mahesh D

Market Segmentation

is Generally known as the process of splitting customers, or potential customers, in a market into different groups, or segments, within which the customers share a similar level of interest in the same or comparable sets of needs satisfied by a distinct marketing proposition; it is also explained as a marketing technique that targets a group of customers with specific characteristics, i.e. a particular group that has its own distinct customer profile and buyer characteristics so that for marketing purposes, it can be targeted separately from other segments of the market.

Market Segmentation can be done on the basis of the location (Geographic Segmentation); on the basis of age, income, gender and other measurable factors (Demographic Segmentation); on the basis of lifestyle, likes, dislikes, taste and preferences (Psychological Segmentation); and according to the history, loyalty and responsiveness (Behavioral Segmentation).

W hy s e g m e n t m a r k e t s ?

There are several important reasons why businesses should attempt to segment their markets carefully. These are summarized below -

Better matching of customer needs

Customer needs differ. Creating separate offers for each segment makes sense and provides customers with a better solution

Enhanced profits for business

Customers have different disposable income. They are, therefore, different in how sensitive they are to price. By segmenting markets, businesses can raise average prices and subsequently enhance profits

Better opportunities for growth

Market segmentation can build sales. For example, customers can be encouraged to "trade-up" after being introduced to a particular product with an introductory, lower-priced product

Retain more customers

Customer circumstances change, for example they grow older, form families, change jobs or get promoted, change their buying patterns. By marketing products that appeal to customers at different stages of their life ("life-cycle"), a business can retain customers who might otherwise switch to competing products and brands

Target marketing communications

Businesses need to deliver their marketing message to a relevant customer audience. If the target market is too broad, there is a strong risk that (1) the key customers are missed and (2) the cost of communicating to customers becomes too high / unprofitable. By segmenting markets, the target customer can be reached more often and at lower cost

Gain share of the market segment

Unless a business has a strong or leading share of a market, it is unlikely to be maximising its profitability. Minor brands suffer from lack of scale economies in production and marketing, pressures from distributors and limited space on the shelves. Through careful segmentation and targeting, businesses can often achieve competitive production and marketing costs and become the preferred choice of customers and distributors. In other words, segmentation offers the opportunity for smaller firms to compete with bigger ones.

Psychographic Segmentation -

Psychographic segmentation is one of the important segment amongst the various market segmentation

Psychographic segmentation is a method of dividing markets on the bases of the psychology and lifestyle habits of customers. It is the marketers and the sellers of products and commodities who use this technique in order to decide their marketing strategy. Marketing a product requires a deep understanding of the customers psychology, along with their needs, in order for the product to be accepted. Marketers carry out a number of activities in order to better understand the psyche and the habits of the customers, so that they can accurately predict the response to the product they are selling, and thus make accurate sales projections. This is the primary use of psychographic segmentation

Psychographic Segmentation Definition

When a producer decides to market a product, he has to realize that there are a lot of differences between customers of different localities, ages and nationalities. Thus, he has to divide the market into various segments, and target each segment individually so as to maximize sales. These segments are divided on a variety of factors like age, sex, lifestyle, income level and psychology.

Psychographic segmentation plays on the psychology of the potential customers and helps the seller determine how he must approach customers belonging to a particular segment.

Psychographic variables are also known as IAO variables - Interests, Activities and Opinions. The seller needs to analyze these 3 factors primarily in order to understand the psyche of the customers. Then he can adopt a suitable marketing strategy, or he can alter an existing marketing strategy. The habits that consumers generally display with regard to a certain class of products will determine their reaction to the product that a seller is offering them.

Psychographic Segmentation VariablesThe variables that come into play when we speak of psychographic segmentation are primarily psychological in nature. The following variables could be said to be a part of the process of psychographic segmentation.

Interests Activities

Opinions

Behavioral patterns

Habits

Lifestyle

Perception of selling company

Hobbies

Using these factors as a base, a marketer can determine how a particular group of customers will respond to the launch of a new product.

McDonald's India: As Indian as you and me

McDonald's in India is a locally owned and managed company run by Indians, employing local staff, procures from local suppliers to serve its customers. McDonald's India opened its first family restaurant at Basant Lok in Oct, 1996; today it has 169 Restaurants across India. This vibrant decade has seen McDonald's evolve Indian menus, Indian sensitivities and yet remain as globally innovative as ever. This journey has seen McDonald's develop a rich brand identity amongst its customers and employees as well as partners alike.

McDonald’s India have had a single mantra:

providing 100% total customer satisfaction and the formula for achieving this goal in our restaurant operation is the long-standing commitment to the McDonald’s Promise.

Global fast food major McDonald's says it survived and expanded in India by developing innovative menus to cater to the Indian taste bud, something it has not done anywhere else in the world.

As it completes 10 years of serving burgers, wraps and French fries in India, initially against opposition from nationalists, the firm has major growth plans, to double its turnover every three years in the next decade.

Food preferences in india –

Unlike many other well populated coutries, India has a very diverse population. Each region in India has completely different food traditions and preferences. Indian consumers typically maintain their distinct food habits even after migrating to different parts of the country. For example north Indian would mostly prefer pav bhaji or samosa wherein south Indians would mostly prefer idli dosa as snacks or breakfast. In large cities and metropolitan areas, some restaurants serve only specialty regional foods. Some regional fast foods such as samosa, kababs, chola bhatura, pakoda, aloo-paratha, poori-bhaji, dosa, andsambar- vada are popular among Indian consumers and are available in both specialty and multi-cuisine restaurants throughout India

Also most Indians prefer to eat home-cooked foods and take immense pride in the varieties of food cooked at home. For most Indians, home-cooked foods are considered fresh, healthy, and inexpensive. Given the distinct dietary habits and food preference of Indian consumers.

Keeping the food preference in mind McDonald’s has introduced several new products specifically for Indian consumers in order to get accepted and successfully blend into local Indian culture. Of course, introducing local products for the local palate is not a new concept at McDonald’s. The Teriyaki Burger in Japan, Croque McDo in France, the Maharani Burger in Malaysia, a green pepper burger in Singapore, a Thai burger with a Thai curry paste, spaghetti in the Philippines, spicy chicken with rice in Indonesia, and spicy seafood noodle in China are some of the examples of its localization strategy. And for indian customers McDonald’s had launched products which meets taste and satisfaction.

“Most Indians prefer to have their breakfast at home and it is a challenging job to change that habit. But we clearly see an opportunity in this segment. We feel breakfast will see the kind of success we have seen in burgers,"

says Amit Jatia, managing director,

Culture sensitivity –

Given the fact that an overwhelming majority of Indians (about 83%) do not eat beef or pork, the introduction of the Maharaja Mac (a mutton-based burger) by McDonald’s seems to be an appropriate cultural fit. Contrary to popular belief, however, India is not a predominantly vegetarian country. About 20% of India’s population is completely vegetarian (Exhibit 11). A closer look at state-level food habits in India reveals that food preferences vary widely among the country’s 30 states and six union territories.

About 69% of Gujrat is vegetarian; 60% of Rajasthan; 54% of Punjab and Haryana; 50% of Uttar Pradesh; 45% of Madhya Pradesh; 34% of Karnataka; 30% of Maharashtra; 21% of Tamil Nadu; 16% Andhra Pradesh and Delhi; 15% of Assam; 6% of Kerala, Orissa, Bihar, and West Bengal; and less than 5% in northeastern states/union territories (Manipur, Mizoran, Nagaland, and Arunachal Pradesh). While part of this vegetarianism is economic, a more compelling force is ethical and even religious. Jains avoid meat totally, while many Buddhists in India are vegetarian. Brahmins, Saivite non-Brahmins of South India and several Vaishnavite sects across the country avoid meat. Interestingly, though, Brah- mins of East India, Kashmir, and the Saraswats of the southwest eat fish and mutton. But even among meat-eaters, beef is taboo.

Maharaja Mac (India)

When McDonald’s replaced its beef-based Big Mac with the mutton-based Maharaja Mac in India, skeptics shook their heads. After all, no one had ever successfully marketed a burger made of anything other than beef. But McDonald’s faced a dilemma: how to sell hamburgers in a culture where the cow is sacred. As it turned out, the mutton burger was a tremendous hit. In addition to the Maharaja Mac, the company now sells cottage cheese wraps and potato patties to its growing Hindu clientele. This success has allowed McDonald’s to shape and grow the Indian fast food market while capturing a large slice of the growing pie.

McDonald's India Goes Veggie –

McDonald's announced a big India expansion, which is mind-blowing when you consider the fact that India is a vegetarian country. McDonald's has built a primarily veggie-lover’s menu, with only a few exceptions, such as the Chicken Mahraja Mac.

The menu in India has absolutely no beef or pork on it, in deference to the local belief that cows are sacred animals. McDonald's ability to adapt to this meat-less culture is extraordinary when you consider the fact that it is best known as the chain that sells billions

of hamburgers a year. Just as the company does everywhere it goes, it gives the Indian people what they want and does it better than almost anyone else

The biggest challenge the American franchise faced in India was how to reach the large vegetarian population of India for which it had to reengineer its products and yet maintain international brand value.

So in 1999 it came up with 'McAloo Tikki Burger' - a burger unheard of anywhere else. The burger changed entire segment of people who is completely vegetarian and always prefer eating Indian chats.

"Today the McAloo Tikki Burger is the single highest selling product and is one of the first products to be exported to the Middle East due to high demand," said Bakshi, speaking at his corporate office in Jor Bagh.

The McAloo Tikki has indeed won over numerous Indians.

Said Sulakshana Monga, a New Delhi-based fashion designer: "I just love biting into Veg Surprise, and McAloo Tikki is my all-time favourite. They are the best."

Some other Indian McDonald products –

Product Positioning –

“Mc Donald’s mein hai kuch baat” projects was aiming McDonald’s as a place for the whole family to enjoy. When McDonald’s entered in India it was mainly perceived as targeting the urban upper class people. Today it positions itself as an affordable place to eat without compromising on the quality of food, service and hygiene. The outlet ambience and mild background music highlight the comfort that McDonald’s promises in slogans like “You deserve a Break Today” & “Feed your inner child”. This commitment of quality of food and service in a clean, hygienic and relaxing atmosphere has ensured that McDonald’s maintains a positive relationship with the customers. And hence most of Indian families started preferring Mc Donald’s as family meal and changed the entire style of having a short snack, lunch or a heavy meal.

Family and Child restaurant Strategy.

In India, McDonald’s has positioned itself as a family restaurant. Family has become the cornerstone of its strategy. Its outlets are called “McDonald’s Family Restaurants,” as opposed to simply McDonald’s as in other parts of the world. McDonald’s restaurants provide a clean, comfortable, and stress-free envi- ronment especially suited for working families. With India’s changing family system in metropolitan cities, where the extended family is no longer the preferred way of living, McDonald’s has become an attractive place for working and busy young parents on weekdays. On weekends, residents of Delhi and Mumbai bring their children to McDonald’s so that they can relax, while their children play in McDonald’s hugely popular play places.

Like its other worldwide locations, McDonald’s targets children as their main clientele in India. Children in India may not have the purchasing power comparable to their Western counterparts, but they are still the center of the universe in the Indian family system, and they can actually pull the parents to visit a place time and again. Children are an enormously powerful medium for relationship building in India. They not only influence markets in terms of the parental decision-making to buy certain kinds of products, they are also future consumers. After all, brand impressions, once formed, can stay for a lifetime.

McDonald’s also promotes birthday parties complete with cake, candles, and toys in television advertising aimed directly at kids. In some Indian cities like Mumbai, Delhi, and Bangalore, birthday parties are all the rage for upwardly mobile youngsters. Given that most young people in these cities live in small, overcrowded flats, McDonald’s has become a convenient and welcoming place for birthday celebrations

Mc Donald’s drive-through –

is a type of service provided by a business that allows customers to purchase products without leaving their cars. The format was first pioneered in the United States in the 1930’s but has since spread to other countries.

Orders are generally placed using a microphone and picked up in person at the window. A drive-through is different from a drive-in in several ways— The cars create a line and move in one direction in drive-thru’s, and do not park, whereas drive-ins allow cars to park next to each other, the food is generally brought to the window by a server, called a carhop, and the customer can remain in the parked car to eat.

This bought a change in the lifestyle of consumers. As most of the indian places has more of parking problems, this method of drive thru as resolved the problem of consumers having an issue with parking if the parking is full. This service is also helpful to most of the Indian folks who are very engaged in their daily work and give less time for their breakfast and snacks. For e.g. corporate employees who prefer having breakfast on their desk or in pantry in much quicker way and also to most of the consumers who stay away from their family and give less time to cook food at home and prefer having food at home and hence grab a burger while driving back home.

Mc Donald’s financial highlights of last 6 years –

Why Is McDonalds So Successful?

There are approximately 22,000 registered restaurants in India. In addition, there are more than 100,000dhabas (small roadside food stalls) that sell a variety of foods in cities and on highways. By 1998, there were approximately 1,568 registered hotels in India, half of which have their own restau- rants. In addition, large to medium-range canteens serve the food needs of various institutions such as hospitals, prisons, defense establishments, schools, colleges and universities, railways, airlines, govern- ment establishments, and private companies.

After all the tuff condition of the market McDonalds reason to achieve its success today is the ability to adapt to lifestyle and the market conditions. They are able to react based on the demands of the consumers. They are able to provide what the customers want and that is the most important factor of all because without the consumers, they will not succeed. Systems, people and ability to give what the customers want are the reasons why McDonalds is as successful as it is today.

Refrences – websites Macdonalindia.com , aboutmcdonalds. Books - Philip kotler.

SWOT Analysis -

Strengths

McDonalds has built up huge brand equity. It is the No. 1 fast-food company by sales, with more than 31,000 restaurants serving burgers and fries in almost 120 countries. Sales, 2007 (11,4009 million), 5.6% sales growth.

Good innovation and product development. It continually innovates to retain customers in the business.

The McDonalds brand offers consumers choice, reasonable value and great service

Large amounts of investment have gone into supporting its franchise network, 75% of stores are franchises.

Loyal staff and strong management team give a very good customer satisfaction.

Weaknesses

Core product line out of line with the trend towards healthier lifestyles for adults and children. Product line heavily focused towards hot food and burgers.

Seasonal

Quality issues across the franchise network.

Opportunities

Joint ventures with retailers where in MC Donald products can be reached to any close by super markets.

Respond to social changes - by innovation within healthier lifestyle foods. Its move into hot baguettes and healthier snacks (fruit) has supported its new positioning.

Strengthen its value proposition and offering, to encourage customers who visit coffee shops into McDonalds.

The new “formats”, McCafe, having Wifi internet links should help in attracting segments. Also installing children’s play-parks and its focus on educating consumers about health, fitness.

Continued focus on corporate social responsibility, reducing the impact on the environment and community linkages.

International expansion into emerging markets of China and India.

Threats

Social changes - Government, consumer groups encouraging balanced meals, 5 a day fruit and vegetables.

Focus by consumers on nutrition and healthier lifestyles.

Competitive pressures on the high street as new entrants offering value and greater product ranges and healthier lifestyles products. E.g. subway, supermarkets, M&S.

Recession or down turn in economy may affect the retailer sales, as household budgets tighten reducing spend and number of visitors.

Recommendation –