Strategic Brand Management

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The Challenge Of Growth In Mature Markets/Managing Fragmented Markets

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Managing fragmented markets

Customisation is also a response to the slackening of desire among those who have become blasé. In the Maslow chain, individualization comes high in the ladder. Everything that creates an ability to tie the brand and its products to the singularity of each client is to be looked for, within an economically favourable equation, of course. One quarter of the revenues of Harley-Davidson comes from accessories. They enhance the experience of both bike riders and non-riders, and meet these needs for individualisation.

Customisation has its limits in terms of cost and profitability. Segmentation can circumvent them. It is very interesting to analyse the Ralph Lauren range, which takes seriously the issue of market fragmentation (Table below). Actually there are no fewer than 10 ranges within the Ralph Lauren empire, from the very expensive Purple Collection (with jackets price ranging from US $2,000) to the more inexpensive Polo Jeans and RLX. Each label provides a full range of products and line extensions. This policy has a number of advantages:

It creates a built-in coherence that distributors might not match without guidance.It allows the distributor to allocate specific labels to specific stores and locations.It matches the inclination of consumers to feel different in the morning, afternoon and evening, while continuing to wear Ralph Lauren clothes.It increases the perception of rarity, of exclusivity, a feat for a brand that in fact is more and more diffused.

The car industry has also discovered the virtues of range fragmentation. It is not certain that consumers would want a fully personalised car. The number of alternatives available would make the choice a chore.

However, they do expect to be able to choose between prepackaged variations on the same model. This is why modern car-makers increase the level of involvement of consumers with their cars by planning in advance the line extensions that target specific highly conspicuous targets, or valued life-styles. The sales of a new model are in fact made by the addition of segmented offers.

Mercedes decided to address the fragmentation of needs. It sold 700,000 cars in 1995, and has now reaches 1,250,000 a year. Meanwhile the number of models has made a leap, reaching 23 in 2005.

Nike’s success can be explained the same way (Bedbury, 2002). It offers an increasingly broad array of niche products (a sign of mass customisation), thereby creating relationships with subsets of the market, with fragments. Being more involved with a product tailored to them, customers are ready to pay more. Nike now produces a number of collections even for a single sport. Also to maintain the thrill, product life cycles have been shortened from one year to three months.

As a whole, all these examples demonstrate the need for greater innovation in all aspects of the marketing mix, from product, channel and store to communication to match the fragmentation of demand.

 Addressing market fragmentation