Chery a Case Study of Market Segmentation, Targeting and Market Positioning Essay
Built in 1997 Chery is one of the famous Chinese car manufacturers aiming at building ‘independent Chinese brand’ and is now on its way to be international. It has the capability of producing 650 thousand automobiles, 650 thousand engines and 400 thousand sets of gear-boxes annually. There are four sub-brands (Chery, Riich, Rely and Karry) under Chery and three types of cars (passenger cars, business cars and mini cars) are produced. 5 series of cars have been released in the market and there will be ten more. ‘Safe, saving energy and environmental friendly’ are the core image of this brand. It had been ranking first in 8 consecutive years among the independent Chinese auto manufacturers in China. (Chery Chinese Website, 2009) This essay focuses on the market segmentation, targeting and market positioning used by Chery in the China market in spite of its immature stage of being international.
There are not sufficient materials about these, I studied the homepage of Chery, news of this company, some comments of products on automobiles websites and its products introduction including feature and prices, I also read some literature on marketing, car industrial and demography of china and so on, after that I concluded the segmentation, targeting and positioning of this manufacturer buy integrating the facts of the company and the market and china and the marketing theories. Reasonable and reliable inference will be made in the following illustration. Segmentation
Segmentation is an important marketing process considered as ‘a foundation for superior performance’ (Craven etc. , 2009: 83) followed by targeting and positioning. In this step, customers in the market are divided into distinct groups having similar requirements, characteristics and so on. Normally, a market is segmented on these bases: geographic segmentation, demographic segmentation, psychographic segmentation and behavioral variables. Geographic segmentation is dividing the market on the basis of nation and areas etc. Psychographic segmentation is based on social class, lifestyle or personality characteristics.
Behavioral segmentation is based on customers’ knowledge, attitudes, uses or responses to a product. (Armstrong, etc. , 2005: 185-191)Demographic segmentation divides the market according to customers’ ‘age, gender, family size, family life style, income, occupation, education, religion, race, generation, and nationality’. (Armstrong, etc. , 2005: 187) There are two steps included in market segment which are identifying bases for segmenting the market and developing segment profiles. Moreover in developing the market segmentation bases, not only one base is used.
Marketers often multiple segmentation bases in order to define the customers into more detailed and distinct groups. (Armstrong, etc. , 2005) As mentioned above, Chery has four sub-brands and each brand has more than 10 types of automobiles. Studying the product line of each brand of Chery, I found that they almost share the keywords in the description and introduction of the car. They are about the age, life style and locations of customers, and the prices of the cars. Family sizes of customers multiple function energy saving are also mentioned in some range of cars.
For example, M1, under the sub-brand of Riich is defined as a small car with modern, young and fashionable looking which wins the favour of young in cities. QQ3, a new model under the brand of Chery, is the first car customized for young people leading a modern life. Concluding the whole product line of Chery, we could infer that this manufacturer segments the automobile market in china based on the multiple bases comprised by both psychographic segmentation and demographic segmentation. Social class, lifestyle and personality characteristics are considered in Psychographic segmentation.
As for demographic segmentation, age, family size, incomes are taken into account. All of the above construct the segment bases of Chery. Targeting Targeting is following segmentation and comprised with two processes which are evaluating attractiveness of each segment and then select the target segment(s). (Armstrong, ect. 2005) From the official historical data collected by the National Bureau of Statistics of China (2000), the average number of family members of each family in china was about 4. 4 before year 1982 and gradually went down to 3. 96 and 3. 44 in 1990 and 2000 respectively.
This figure reduced to 3. 17 in 2007. Moreover, there were 367,260 families in China in 2007 of which 310,771(84. 6%) are the families comprised by four or less than four people. Also, more than 30% of the population is at the age of 20 to 39. Hence, young people and small family seemed to be the most attractive market segment. At the same time, it is essential to understand what the target customers want so that the company can provide the exact product satisfying customers. (Cravens etc. 2005) Finally, cars with small displacement are becoming popular due to the recession and the imposition of fuel tax. China Finance Information, 2008) Customers with such requirement may be another attractive segment. There are four types of market targeting strategies: undifferentiated marketing, differentiated marketing, concentrated marketing and micromarketing.
An undifferentiated marketing ignores the differences of market segments and targets the whole market with only one product. A differentiated marketing targets several segments and provides different product to different segments. A firm in concentrated marketing will go ‘after a large share of one or a few segments or niches’. Armstrong, etc. 2005: 201) And micromarketing means the firm tailors products and marketing programs to the requirements of specific individuals and local customer groups. (Armstrong, etc. 2005) I would like to suggest that Chery is taking the differentiated market targeting strategy. It has various types of cars offered to several market segments because it has a wide range of different cars. In the four sub-brands as mentioned above, Chery targets at young people and small families requiring different ranges of car. The cars under this sub-brand can be roughly divided into Positioning
The marketing segmentation, targeting and positioning of Chery especially QQ are successful. As shown in the bar graph below, in January 2007, while the sales of some brand s of small cars and the total sales of small cars in china reduced, Chery QQ(First bar in the graph) was the only small car that had an increase of 5. 9%. (The Growth Rate of Small Carss Sales in January, 2007) Almost all small cars reduce their price by ?2,000-?8,000 but Chery QQ did not. Surprisingly it had a growth in its sales. It indicated that the positioning of ‘fashionable and practical’ was correct and had competitive advantage.