Q: We’ve been in car dealership since we married about 20 years ago. We’ve read your Segmenting book on Amazon Kindle (referring to the Senior MRx-er’s book). We particularly like your book’s theme that “the ultimate source of growing a business is marketing segments.” And so we’re thinking of getting into a related market segment. That’s the used-car dealership.
Most of our friends in the car dealership industry are no longer talking about survival. We’re now optimistic and talking of business growing. We believe the worst of our country’s economic crisis is over.
However, my wife and I also recall that, in exploring “unserved and underserved” market segments, your book advises that we should think of two or more options and not commit to just one. Can you please help us what two or more related market segments for growing our business can we study and get into?
A: It’s businessmen like you that we need in overcoming and reversing the difficulties of tough times. Like you, we regard business confidence more as a driver of economic recovery and less as its consequence.
Now to your question: What other market segments can grow your car dealership business? Before answering, we’d like to say first that your identifying the used-car market segment is an excellent choice for business growing.
We don’t have the car sales statistics in the Philippines. In the United States, however, it’s known that used-car sales are about 2.5 times those of new-car sales. According to Art Macapagal, the Toyota car dealership head in the country, it’s in recognition of this larger segment market size that the Toyota head office in Japan is encouraging Toyota Philippines to get into this market segment.
In participating in this market segment, we’re sure you are aware that it’s a price-sensitive market. So you have to be prepared to compete on price. But as the Segmenting book says, if you’re a known brand with an established brand capital or brand equity like Toyota of Art Macapagal, it’s this brand equity that is your protection against predatory used-car price competitors.
In searching for a meaningful answer to your question on two or more unserved and underserved market segments to explore, you’re always better off by starting from a market segmentation model of sorts. One such meaningful model in your specific business relates to the car buyer’s “purchase system.”
You’ve heard us talk about this concept before. As applied to car buyers, “car purchase system” refers to all those products and services that car buyers also buy together with the car. There are at least two kinds: (1) products and services that most car buyers find necessary or absolutely necessary to have with the car; and (2) products and services that most car buyers find nice to have but not necessary when purchasing a car.
What quickly comes to mind as examples of the necessary and absolutely necessary products and services are emergency lights and tools for the frequent out-of-town, night driving car owners, and car insurance as service necessity. All other products and services, like signature car seat covers, carpets, mufflers, and other car cosmetics would fall under the nice-to-have-but-not-necessary category.
Focus your search on the necessary or absolutely necessary products and services. The frequent out-of-town, night-driving car owners are a market segment. These car buyers believe that when they buy their car, they simply must have those emergency lights and tools. This is a ready-to-buy market segment. And because the price of those emergency lights and tools is “just” a fraction of the price of the car, these are “ideal” customers to have. They’re price-insensitive.
The market segment for car insurance is much larger and car buyers’ price sensitivity is just as low if not lower. So this is a business-growing market segment for a car dealer business like yours to participate in.
We’re certain that you will now appreciate why the Ayalas, in acquiring the Honda dealership, also went into a joint venture with a non-life insurance company. We’re not saying this is the only reason for that joint venture, but it most certainly must have been a major consideration.
You can find more market segment leads for business growing in the market segmentation models covered in the Senior MRx-er’s Segmenting book. It’s worth your while to reread the book. Incidentally, you can tell your business friends that the Segmenting book is now up and available on Amazon Kindle, if they have a Kindle, or iPad (just download the Kindle app, if they have an iPad, Blackberry or any Android tablet).