Segmentation in the crisis era

Segmentation in the crisis era

In June 1997, MasterCard conducted a consumer survey at a time when confidence in the Indonesian economy was extremely high.

Only six months later, that optimism was replaced by deep pessimism. The sudden shift in market mood was a tremendous jolt to the activities of business enterprises.

In December 1998, MarkPlus, in an effort to assist the business community in Indonesia, unveiled a strategic marketing guide for the crisis, replete with projections on changes in consumer marketing behavior and also market segmentation during the crisis.

Projections were based on findings from both developed and other countries which have experienced recessions, with social and cultural change taken into account.

MarkPlus also conducted a consumer marketing survey in February 1998, in eight major Indonesian cities on the four main islands -- Sumatra, Java, Kalimantan and Sulawesi. Respondents were 2,500 middle-class housewives (from class A+ to class B). Random sampling was used.

The findings bore out the projections of a crisis-induced segmented market. Most consumers searched for quality goods at reasonable prices. The value-oriented customers accounted for 83.5 percent.

Those who searched for inexpensive products -- price-oriented customers -- accounted for 12.1 percent. Consumers who searched for quality goods with no concern for price -- composed the remaining 4.4 percent.

In other words, the results of the survey bucked assumptions that a drop in consumer purchasing power would lead to a rise in price-oriented customers.

These findings were presented by MarkPlus Leading Service Officer Hermawan Kartajaya at the Summer Marketing Educators' Conference of the American Marketing Association with the theme Segmentation in the Crisis Era: An Indonesian Experience. The conference was held from Aug. 15 to Aug. 18, 1998.

It must be acknowledged the survey findings were not shocking. For the precrisis consumers already persistent in their demands for quality products, it only followed that despite their reduced spending power, quality labels were not deserted.

Like consumers in other crisis-hit countries, Indonesians are also learning to love domestically produced products. The survey showed that 91.8 percent of respondents would choose domestic products, with 51.5 percent selecting high quality goods and 40.3 percent willing to accept satisfactory quality products.

Again, this was no surprise, especially when it is taken into account that Indonesia has suffered the greatest decline in the value of its currency of any crisis-hit country. Prices of imported goods have skyrocketed.

Quality-conscious Indonesian consumers are not blind nationalists. They choose quality products, and account for the 8.2 percent of respondents seeking imported products. From that number, 6.1 percent would purchase imported products at reasonable prices, but 2.1 percent vouched that cost was not an issue.