Stories from the streets: Be street smart

JAKARTA (JP): There are only two kinds of people: those who have ATM cards and those who do not.

At least that is what Bagus T., the owner of a business that sells public transportation tickets through Automated Teller Machines (ATMs), believes.

There are 210 million people in Indonesia -- only 5 million of them are ATM cardholders. A mere drop in the ocean. Besides, not all of them are frequent travelers of trains, planes or ships. But Bagus operates his business on the assumption that most people in Jakarta today have ATM cards and some of them use public transportation. They are Bagus' targeted markets -- the ATM cardholders that travel.

How does he reach such a narrow market segment? He designed a system that enables the cardholders to buy tickets through the ATMs, the way people now purchase cellular phone vouchers. A customer can easily exchange the ATM receipts with the actual tickets at the airport, railway station or seaport.

In order to provide the service, Bagus cooperated with Bank Central Asia (BCA), train company PT Kereta Api Indonesia, flight operators as well as other businesses that need ticketing sale.

Bagus' company, Expert, is a fledgling business, but judging from the clearly defined market segment that he is targeting, it has a fair chance of succeeding. Most marketing manuals today preach the wisdom of aiming at very segmented markets -- in fact, they say securing a segmented market is as good as achieving 60 percent success.

Many companies do not fare well because they are set up without clearly defining their market segments. Traditional warung (food stalls or small shops) have been managed in such a way for so long, the owners think that as long as the stalls and shops are open, customers would come in and find what they need. When there are many customers, its fine and good, and the owners are thankful, but when business is scarce, they think it's fate.

Such an approach to business lends a greater chance of failing than succeeding. No matter how hard one works at promoting one's business, no matter how much money one spends, not many of the targeted customers would know of the product .

This is because there is no clear definition of the targeted market. Marketing experts would liken such a business approach to a cowboy who fires his gun in any which direction, and manages to hit only one or two.

Fortunately, most cowboys would, over the course of time, learn to shoot well and more effectively. As have Betty and her husband, the owners of MM Juice outlets in various upscale shopping centers such as Pasaraya in South Jakarta.

The couple opened their first fruit juice counter in the popular Melawai shopping area in South Jakarta in 1988, and soon made a great sale. Their optimism soaring, the couple indiscriminately opened up branches in any location they could access. Any offer of a joint business was taken up without much consideration.

Over the years, Betty and her husband have had to close as many as 75 MM Juice outlets in various places of Jakarta because of poor sale. They learned, then, that not all locations are good locations for business. They realized that the more successful outlets are those located in rather posh shopping centers, and that their market segment is the more affluent shoppers because their fruit juices are relatively more expensive than the others in the market.

Twelve years after they first entered the business, Betty and her husband now decide how, where and when to expand their business more carefully. Now the owners of 25 MM Juice outlets, they know that to open new counters, a segmented market is needed to ensure at least 90 percent success.

Betty and her husband have advanced from owning a mass business -- that is characterized by indiscriminate marketing, aiming at satisfying various groups of customers -- to one that is efficient and segmented.

There are actually many ways of segmenting the market. Bagus' market segment is a group of people with similar financial management (people who save their money in the bank and withdraw through ATMs), and who travels. This particular segmentation is known as one that is based on customer habits; there are segmentations that are based on age groups, gender, needs, professions and others.

The more elements that are used for segmentation, the better defined will the segment be. This is because two women with the same income may not necessarily be in the same market segment for a product. One woman may think her money is better spent on books than on cosmetics -- she would then be in a different segment than the other woman who loves branded clothes, likes to eat at expensive restaurants, and collect CDs.

The better those characteristics are recognized and defined in a market segment, the greater chance a business will have of succeeding. Segmentation, however, is not the only factor for success; differentiation is sometimes a key.

A good example of this concept would be book publishing. Those who survive are those who understand their segments -- which is why there are specialists in management manuals, religious books and school textbooks. A publisher that tries to deviate from its segmented market usually risks failure.

The Gramedia Group of publishers survives because each of its units serves their own segments. The units do school textbooks, management books, social and political books and others.

A closer look at today's business scene would tell us that more and more companies are working on segmented markets. Some of the more recently established radio stations, for instance, cater to the over-40s, the young or women only. There are also radio stations that serve only young professionals who commute and need immediate information on the traffic and latest news.

Our leaders in the executive and legislative bodies would do better to learn and understand their market segments, namely their constituents, when issuing statements and formulating policies.

-- Tjipto Ramuni