Stories from the streets: Be street smart

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