Volkswagen India Report: Market Segmentation, Challenges, and Data

This report provides an in-depth analysis of Volkswagen's market segmentation strategy in India. It explores the importance of market segmentation, its benefits, and the challenges faced by Volkswagen in the Indian market. The report examines the role of data in understanding consumer behavi...Read More

Running Head: Volkswagen India
Volkswagen India
Report
System04104
5/31/2019

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1
Introduction
This assignment is based on market segmentation, which helps to understand that how
market segmentation will help in businesses. The report will discuss the potential challenges
and future benefits that a leader might face during and after segmentation process. This report
helps to understand the Indian market segments of the company and provide a short analysis
on the Volkswagen’s segmentation approach in India. The task is about the Volkswagen
automobile company, which is a German company, founded in 1937 and known for its global
brand advertising. Volkswagen is continuously focusing on increasing its market
segmentation in Indian market and currently it has captured more than 3.6% if market share
in India in just four years. The report also discusses the 4P’s and its significance in the global
perspectives. However, the company wants to expand its market operation in India and
looking for a suitable market segment.
Market segmentation and its importance
Market segmentation refers to divide the potential market into a homogenous group of
customers on the basis of their income, gender, psychology, region, behaviour etc. The
segmentation of market helps the company to easily target the potential customers of the
company and positioning the products in that particular segment. Segmentation not only
helps to target the potential customers in the market, it also reduces the cost of advertising
and promotion of the company in unnecessary segments or regions (Kenton, 2018).
Moreover, the thought of market segmentation in Indian was not the first priority of
key leaders in the Volkswagen. Volkswagen was failed to create brand awareness and brand
value for consumers. Another good example is that researchers felt about the Volkswagen
that cars were only suitable for Indian conditions as opposed to other countries. A car
company when focuses on the family needs, they provide a low budget car model that
included some attractive features that suits the family needs of the company. The safety
comforts, and space will be the main features while designing the car for this type of
segment. When a car manufacturing company target an upper income class people and
provide a car with latest design, innovative features, with awesome design that shows the
social status of the company, it is suitable for Indian upper end class (Kenton, 2018). Apart

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from this, higher end segment in India grew faster than the lower end segments, which causes
various problems and challenges for car companies.
Benefits and Challenges
Market segmentation helps the business leader to understand the market and
consumers. For example, data is analysed to assess the demand of customers in particular
market and develop the products according to the customer demand and preferences. For
example, currently India is one of the large growing economies and it is one of the largest
populated countries after China in the world. This strategy will help to understand the Indian
customer needs and preferences and further launches the product according to the customer
needs and preferences. It will also help in gaining competitive advantages. The Volkswagen
has three brands in Indian. These three brands of the company together have 21 car models in
India that target different type of customers. Apart from this, the speed lover can be
segmented with the high-speed sports car with off-road driving facilities and quality of
features include with high speed.
Moreover, this strategy also helps the leaders to comprehend about the customers and
their expectations in the market. The growing demand of cars and hike in the per capita
income of the country increases the demand of the Volkswagen cars in India (Mack, 2018).
Volkswagen also launched its two more brands name Audi and Volkswagen in Indian market.
An excellent example of the benefits of market segmentation is that company can easily find
the gap, where dissatisfaction lies and launches the product according to the customer needs
and go for the improvements (Bhasin, 2018).
Another importance of segmentation is that the high car demand and high competition
in the Indian car market forces the Volkswagen to launched its car within the competitive
pricing strategy in India. There are already many car manufacturing companies operating
their business in India such as BMW, McLaren, Toyota, Tata Motors, Honda, Mahindra etc.
These competitors target the upper middle class in the India because the prices of these cars
so high and these cars are out of the budget of the middle class or lower middle class.
However, 70% cars in India are small cars and majority of Indians do not trust on the
Volkswagen cars, as it is very new in Indian market. However, the advertisement of the

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company and its different promotional programs for Audi and Volkswagen make it popular in
Indian market.
Market risk occurs when a product dominates in in the market without any advantage.
It means it is necessity of a company to know their potential risk in the market and even te
lack of data may leads to a serious threat for the company in Indian market (Mack, 2018). For
example, Volkswagen in Indian is targeting upper C segments for males 35-40 years and
younger males at 30-35 years, which may be risky for the company. Volkswagen is known
for premium and expensive cars. However, in India most of people like small cars in low
budgets cars, the high expensive cars of Volkswagen will have to try hard to create its place
in the Indian car market. However, the tough competition in the Indian car market for low
budgets car is a major challenge for the company.The unawareness about the market and lack
in data may leads to serious threat for Volkswagen that company has to avoid during market
segmentation.
Discuss the role of Data
It has been noted that the data has been collected in this cases study from primary and
secondary sources and these data are used to analyse to predict the market sources. The
secondary data has been collected from Google Analytics, Volkswagen Edge, Asia pulse etc.
Apart from this, the primary data collected from Mashable.com/2009 to analyse the Indian
market.
The primary market includes the data from firs hand. For example, researchers collect
the data from survey, interviews, and observations rather than other sources. While the
secondary data is collected through existing information and resources, in which data is
collected from other person or party for some other purposes. Nowadays, social media is a
good source of collecting secondary data (Mack, 2018).
Both primary and secondary data can be either quantitative or qualitative (Surbhi,
2016). The difference is that the secondary data can easily be available on the various
websites and can easily be collected while the primary data can be collected through known
and ask the people opinions and their feedback. However, in the current case study, business
leaders of Volkswagen focus on both primary and secondary sources of Information. The
mixed method approach and use of big data will help the company to analyse the significant

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portion of the Indian market and it will be more effective than a single primary research
method.
In order to analyse the market and market enhancement purposes some people use
marketing techniques and use the both primary and secondary sources of data along with big
data techniques. Volkswagen is planning to target the five customer groups or segments in
India. The first target of the company is new middle class with high-income people, new
business builders, people of metropolitan cities with high income and modern urban elite
group (Mack, 2018). The car segment in India is generally based on the people’s income and
on their needs and preferences. Although, the lower end segments in the country constitutes
more than 44% of the total car market while the upper end only constitutes a low market
share in India. However, the Volkswagen is generally focusing on upper end of the segments
that is related to expensive cars.
Importance of Identifying Target Segments in the Business
The researching technique of Volkswagen is excellent and it helps the company to
attract the customers in the Indian market. It helps the company to reach their customers
easily and comprehensively. However, in the case study, it has been shown that leaders failed
in direct communication with customers and also company also filed to improve their
products on the past research. Without proper research, it is really difficult for the company
to concentrate on different group of customers without proper research (Poudel, 2014). It is
also considerable that age and gender should not have been a real factor that will help in
searching for market segmentation in automobile industry, as age or gender does not matter
in driving a particular car, which customers want to buy. Furthermore, age should not have
been a targeted market for the company, as the company did not perform a quantitative
analysis with those variables included in the research (Kenton, 2018).
A target market normally focuses on a smaller and specific group of customers having
common needs and preferences. Many of the targeted markets related to psychographic,
demographic, behavioural, or based on the geographic areas. The major advantages of such
segmentation are impact of advertising on customers, the customer’s experiences, and
business operations of the company. To attract the customers, the leader should communicate
directly with defined customers or audiences. It will help the company to spread awareness
among people and attached them with the company for long time. However, the target market

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also differentiates the company’s brand from competitors, because of product’s unique
composition and proposition for the customers (Poudel, 2014).
Scenario in which segmentation may not impact the marketing mix
variables
The marketing segmentation decision commands the company’s in marketing mix policy.
Segmentation helps the Volkswagen in its marketing mix strategies. For example, the case
study on Volkswagen is based on the suitability of Indian car and market analysis. The case
study also based on the Indian consumer preferences and their needs about the cars and
opposing the international market decisions. In the case study, the business leaders should
have established a clear linkage between the target customers and segmentation. However, it
is difficult for researchers to create a link between the marketing mix and segmentation
process (Surbhi, 2016).
The buying powers of Indians are really can be measured in different scenario, when they
buy smartphones and other technologies in India, because of the big gap between the buying
power and cost of the products. In other words, it is better for Volkswagen to classify one
larger group for its products, where impact of segmentation will be minimal on marketing
mix. For instance, The Volkswagen should focus on two types of market segmentation in
India. Most of the people in India belong to the middle-income class and they cannot
purchase the high expensive cars (Surbhi, 2016).
Most of the Indians use small passenger cars and these cars are lying within their budget.
Volkswagen will have to divide the market according to the income of people and promote its
low budget car in the middle-income group of India (Surbhi, 2016). Skoda is the best option
for the company through which company can target the customers in India. As most of the
Indians used to buy low budget cars, which is suitable for the family and daily use,
Volkswagen must target these middle-income groups of people having psychology of family
cars. The company should plan to launch low budget cars under the 10-lakh Rupees. The
Volkswagen segmentation of the company should be based on the buying behaviour of the
potential customers. As 44% of people use the low budget car in India, the Volkswagen
should target these types of people based on their price psychology.

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How Product, price, place, and promotion are impacted?
After segmenting the market on the basis of demographic and psychographic
segmentation, Volkswagen should focuses on the following aspects of marketing mix
approach.
Volkswagen should provide a low budget car which have great quality and low service
cost. People generally focus on high quality in low prices with low maintenance cost in India
(Bhasin, 2018). Therefore, quality, mileage, low pricing, and comforts should be the main
qualities in the products of Volkswagen in India. As large number of people in India belongs
to middle level group or lower middle level family group, they cannot afford the high
premium cars of Volkswagen like Audi (Kenton, 2018).
The company should try to fix its car prices lower than 10 lakh Rupees. However, the
prices can be also set in consideration with other competitors like Tata Motors, Mahindra,
and Toyota etc. The Volkswagen should target to urban and semi urban areas, where business
people can easily be attracted towards the company. The new businessman and new
corporates should be the main target for the company and it is possible if the company
focuses on urban and semi urban areas. Apart from this, the metropolitan city can also be its
first priority such as Delhi, Mumbai, and Kolkata etc. (Johansson, 2017).
Volkswagen is known for its promotional and branding strategy. The company is already
targeting its customers through TV advertisements and Newspaper advertisement (Bhasin,
2018). The impact of advertisement also helps the company to establish itself in the Indian
car market and increase its market share up to 3.6%. The company needs to focus on its
digital marketing strategy such as advertising on social media channels like Facebook,
Instagram, and YouTube, because large number of people in India uses these social media
channels.
Analyse the Benefits and Risks of Expansion into New Markets
Targeting customers through segmenting them on the basis of their demography like
incomes and preferences of people will help the company to create a strong customer base in
the country. It also helps the company to increase its market share and utilise its large
production of cars in the Indian car market as the demand of automobile vehicles in India is
increasing by 19% per year. However, if the company expanding its market through the other

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segments, it will reduce its number of customers and also its sales revenue will be decreased
because there is a strong competition in premium car market in India (Bhasin, 2018).
Conclusion
In conclusion, market segmentation is an extension of market research, which helps the
company to target a small group of customers and present the product in such a ways that
fulfil their needs. The primary purpose of the segmentation is to minimise the market risk and
identify which product has the best chances for acquiring greater shares in target market. In
order to divide the Indian car market into segments and reaching the target customers,
Volkswagen needs to launch low budget cars in India and segment the market on the
demographic and psychographic basis of segmentation. The growing demand of cars in India
provides the opportunity to Volkswagen to increase its market share by its low budget cars.
Apart from this, a bulk production can also help the company to fulfil the market demand in
India. However, the tough competition in the Indian car market is a major challenge for the
company.

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References
Bhasin, H. (2018). Marketing mix of Volkswagen [online]. Retrieved from
https://www.marketing91.com
Johansson, R. (2017). Which market segmentation variables are most effective to
determine new business. International Journal of Business Management. Retrieved from
https://www.thesus.fi/bitstream/handle/
Kenton, W. (2018). Market segmentation. Small Business Entrepreneurship [online]. Retrieved
from, http://www.investopedia.com/term/m/marketssegmentation.asp/
Mack, S. (2018). Weakness of market segmentation [online]. Retrieved from
https://www.smallbusiness.chron.com/weakness.market-segmentation-55300
Poudel, P. (2014). Top ten benefits of data driven-market segmentation [online]. Retrieved from
https://www.grepsr.com/top10-benefits-of -data-driven-market-segmentation.
Surbhi, S. (2016). Key differences between primary and secondary data [online]. Retrieved from
https://keydifferences.com/differences-between-primary-and-secondary-data.