Market Segmentation Strategies Used by Chloride Exide Kenya Limited as a Competitive Advantage Tool

Abstract

Market segmentation used as a strategy by firms can enhance their profitability and increase their competitiveness. Chloride Exide Kenya Limited has used it to target particular sections of the market and introduce specific products. A firm’s relative position within its industry determines whether a firm’s profitability is above or below the industry average. The fundamental basis of above average profitability in the long run is sustainable competitive advantage. Competitive advantage is a position that a firm occupies in its competitive landscape. A competitive advantage, sustainable or not, exists when a company makes economic sense that is, their earnings exceed their costs (including cost of capital). That means that normal competitive pressures are not able to drive down the firm’s earnings to the point where they cover all costs and just provide minimum sufficient additional return to keep capital invested. Most forms of competitive advantage cannot be sustained for any length of time because the promise of economic rents drives competitors to duplicate the competitive advantage held by any one firm (Porter, 1980).Market segmentation was found to influence the demand for products and services: in that different market segments had tailor-made products and services. The company’s segmentation strategy considered the customer’s needs, the purpose for their use for example power back-up systems ranging from the powering of lights to powering the computers and other electrical appliances. The findings indicate that the company offers a variety of products and services that might not be required by all customers thus they identity each markets’ needs; groups/segment these needs into a ‘market’ and position their products and services. The company’s segmentation is also helped by its wide branch network which covers a wide part of the country. The company covers corporate clients, hotels and hospitals that power backup systems for uninterruptible operations of their firms. It uses cluster system to analyze their customer base, target direct-mail campaigns and select branch locations through which it positions its product to the targeted segments. Apart from religion, it was established that personality, personal values and psychographic/lifestyle determined market segmentation.The study established that market segmentation leads to provision of lower prices, greater benefits and services that justifies the higher price. Lower prices offered by the company attract more clients thereby increasing clientele base. Provision of additional benefits such as longer warranty periods and presentations on how their products are supposed to work, targeting high income earners. This has helped give the company a competitive advantage. The study also established that market segmentation ensured customer retention as varied customer needs are catered for; lower prices for retail banking, shorter queues and personalized attention. The study indicated that the implementation of segmentation strategy is long term in nature. Further as the environment responds to the implementation of strategy is necessary and thus formulation is under constant review to accommodate effects of the interaction between the organization and environment.