Customer Segmentation: Insights into Prevailing Trends and Strategy for Future

1. Customer Segmentation: Insights into Prevailing Trends and Strategy for Future Project Team: Aditya Ghamande Kongpon Kijnum Spenser Slaton Project Mentor: Vaidyanathan S. Iyer

2. Today’s Agenda • Project Goals • Our Approach • Industry analysis and brand positioning in industry • Future Opportunities & Recommendations • Hypothesis: Where TVS is and way forward • Question & Answers

3. Project Goals • Identify factors that influence customer’s buying decision • Identify industry offerings and products’ positioning • Perform gap analysis to understand potential gaps for future by projecting customer’s needs vs. industry offerings. • Recommend new models for the future based on gap analysis • Understand socio-economic trends and customer behavior to develop future industry view • Industry product comparisons and where TVS stands

4. Our Approach • Find out factors that influence customer’s buying decision: • Mileage • Style • Power • Brand • Handling • Price • Plot the combination of parameters for two wheelers from each manufacturer • Perform gap analysis to understand potential gaps in industry offering • Recommend future motorcycle model based on gap analysis Source: Company Reports (TVS Customer Interview Data)

5. Defining Style of Motorcycle and Scooters Sophisticated Competent / Successful Freedom / Excitement Down-to-earth Sincere / Cheerful Generic Conventional Exciting Flashy Luxury Daring 3 5 2.8 2 3.3 1 4 • Seat: Deep curve • Exhaust: 2 Angled pipes • Tank: Large & Chiseled • Disc brakes & Engine: Huge • Head Light Assembly: Stylish, Chiseled and curved • Seat: Deep curve • Exhaust: Angle/Chrome • Tank: Large & Chiseled • Disc brake & Engine: Large • Head Light Assembly: Chiseled and curved • Seat: Flat • Exhaust: Straight • Tank: Simple • No Disc Brakes • Head Light Assembly: Simple • Seat: Soft curve • Exhaust: Slight angle • Tank: Simple • No Disc Brakes • Head Light Assembly: Slightly curved • Seat: Deep curve • Exhaust: Angle/Chrome • Tank: Chiseled • Wheels: Disc brake • Head Light Assembly: Chiseled and curved

6. Defining Style of Motorcycle and Scooters

7. Defining Handling/Comfort of Motorcycle & Scooter • A vehicle with low weight is easy to handle on roads • A vehicle without gear is easy to ride on roads

8. Current Industry state based on Multiple Dimension Plots

9. 1. High Power Scooter Current Situation • Current market has low power and standard mileage (average of 40 kmpl) scooters • Lack of high power, high weight, lower ‘handling’ rating vehicle • Increased power means higher speed, better riding experience, and similar mileage of 35 kmpl Plot and opportunity Explanation • Above plot portrays that market does not have high power scooters with ‘Handling’ rating between 4 and 8 • We recommend TVS to come up with new high power scooter

10. Product Characteristics • Weight: 130 – 160 KG (Higher than Suzuki Access) • Power: more than 10 KW • Higher weight means lower handling rating of 6 • Price: 60,000 - 65,000 (Based on comparison with Suzuki Access) • Mileage: Around 40 kmpl (To satisfy average mileage requirement) • Style: Higher than 3.5; Large body size, large and inclined exhaust pipe, and visible engine; These parameters signify higher style ratings Target Customers • Based on our analysis of current sales data, TVS can target customers* who are: • In the age group of 15-30 • Earn more than INR 25,000 monthly income • Are self-employed • *Note: These customers bought scooters with power rating of more than 6 KW

11. Product Visualization

12. 2. High Power Conventional Motorcycle Current Situation • High Power bikes that are very stylish targeted toward high end customers. • No High power generic/conventional looking motorcycle for mainstream average customers Introduce ordinary motorcycle with high power Plot and opportunity Explanation • Above plot portrays that there is no high power motorcycle with a low style quotient. • We recommend TVS to come up with new motorcycle that is extremely powerful but with lower style rating

13. Product Characteristics • Style rating between 1 and 2: • Seating: Some soft curves in the seating for new bike • Slightly inclined but bigger exhaust pipe to signal high power motorcycle • Simple tank and front mirror assembly • Weight: High (Between 125 to 130 KG) • Power: Around 10 KW • Displacement: 150-180 CC • Price: Between INR 60,000 – 65,000 • Mileage: Around 55 kmpl • Target Customers • Based on our analysis of current sales data, TVS can target customers* who are: • In the age group of 30-45 • Earn more than INR 25,000 monthly income • Are self-employed • *Note: These customers bought scooters with power rating of more than 10 KW

14. Product Visualization

15. 3. Hybrid Motorcycle or Scooter Current Situation • High Power, high style motorcycles that provide low mileage • Engineering tradeoff: Higher power bikes cannot give high mileage. • High investment required for low power bikes that provide extremely high mileage • Need exists: Customers think mileage and acquisition cost while buying motorcycles. Introduce motorcycle with high mileage Plot and opportunity Explanation • Above plot portrays that there is no motorcycle or scooter with extremely high mileage. • We recommend TVS to come up with new motorcycle that is powerful but gives higher mileage compared to that given by current motorcycles.

16. Product Characteristics • Mileage: More than 90 kmpl (Compared to 87.7 kmpl mileage of TVS Sport) • Style: Could vary from 2 – 4 • Weight: 130 – 160 KG • Price: At least 80,000 INR Target Customers • Based on our analysis of current sales data, TVS can target customers* who are: • In the age group of 15-30 • Having monthly income between INR 16,000-25,000 • Are self-employed • Customers would be ready to pay high upfront costs to gain mileage advantages in future • *Note: These customers bought motorcycles with mileage of at least 75 kmpl

17. Product Visualization

18. 4. Sporty & Powerful Looking Scooter Current Situation • Lack of sporty and powerful scooter in the market • TVS can come up with such scooter that looks sporty and powerful but is of approximately 125 cc. Plot and opportunity Explanation • Above plot portrays that there is no high power motorcycle with extremely high mileage. • We recommend TVS to come up with new motorcycle that is powerful but gives higher mileage compared to that given by current motorcycles. Introduce scooter with high style

19. Product Characteristics • Price: Around INR 50,000 as the bike is not actually powerful • Power: In the range of 5-7 kw • Displacement: 125 cc • Style: A rating of at least 4 • Mileage: Around 40 kmpl Target Customers • Based on our analysis of current sales data, TVS can target customers* who are: • In the age group of 15-30 • Having monthly income between INR 25,000 • Students • Are self-employed • *Note: These customers bought scooters with power of at least less than or equal to 6

20. Product Visualization

21. Improvement in affluence levels across income groups is increasingly driving structural shifts across industries >40000 INR MHI Increasing share of ‘Seekers’ among the population 16000-40000 INR MHI Exponential Increase in share of ‘Strivers’ among the population 8000-16000 INR MHI

22. With hardly 7% penetration, Indian Two Wheeler Industry is sitting on the launch pad of an exponential growth phase Global Two Wheeler Penetration and GDP Per Capita SOURCE: Credit Suisse Aug 2012

23. Competitor & Product Positioning Goal: Analyze positioning of major competitors to understand TVS’s capability to seize future opportunities

24. Motorcycle Segment: Hitting the Target 80% of all motorcycles sold: Price: 40K – 60K Power: 100cc – 150cc Weight:100kg – 140kg 20% Represent Premium & High Power bikes

25. Motorcycle Segment: Competitor Positioning Close up Comparison

26. Motorcycle Segment: Competitor Positioning Close up Comparison

27. Motorcycle Segment: Competitor Positioning Close up Comparison

28. Motorcycle Segment: Competitor Positioning Close up Comparison • Key Take-away: • TVS bikes are competitive or better in target segment. • TVS’s competitive offerings do not translate to high sales. • Hypothesis: Competitor positioning is similar within motorcycle segment. Factor outside product characteristics is driving market sales

29. Scooter Segment: Analysis

30. Scooter Segment: TVS scooter sales are lower than expected. • TVS Streak & Pep+ are more stylish and lower priced than competitors. • Style is the 2nd largest determining factor when deciding a two-wheeler. • TVS Wego lags behind Maestro sales despite being similar in all characteristics. • Hypothesis: Competitor positioning is similar within scooter segment. • A factor outside product characteristics is driving market sales

31. Brand: The BIG Difference Most Preferred Motorcycle Company Source: Francis Kanoi Marketing Research: A Report on Performance and Image of Motorcycle Brands (2011)

32. Brand: The BIG Difference

33. Brand: The BIG Difference Brand you will never buy Source: Vinayak Tiwari, PGDM-MM: Brand Image of Motorcycles and the Colour Survey for the Bike Colours

34. Brand: The BIG Difference Brand you will never buy Source: Vinayak Tiwari, PGDM-MM: Brand Image of Motorcycles and the Colour Survey for the Bike Colours Hypothesis Competitor positioning is similar within industry among major competitors. TVS will need to strengthen it’s brand to effectively seize future opportunities, as brand is likely one of the largest competitive advantages, not product offerings.

35. Question n Answers