RJOAS January 2025
by
Pratiwi Sari, Department of Tourism, Samarinda State Polytechnic, Indonesia
Alex Taman, Department of Environment and Forestry, Samarinda State Agricultural Polytechnic, Indonesia
Winarni Budi, Department of Agriculture, Samarinda State Agricultural Polytechnic, Indonesia
The development of the Indonesian economy is inseparable from the role of Micro, Small, and Medium Enterprises (MSMEs), both in terms of the number of businesses and in terms of job absorption through the creation of employment opportunities. MSMEs are able to provide employment opportunities, provide affordable goods for the people, and create new entrepreneurs. PT. Duta Karya Mandiri is an MSME engaged in the automotive component manufacturing industry. A new product in the form of a capstock hanger originated from the abundance of iron scrap from the production of bars-headrest components for cars. The aim of this study is to identify the suitable segmentation, targeting, and positioning strategies for the new capstock hanger product developed by PT. DKM. This study uses the business coaching method, a qualitative research method that uses an exploratory research method to explore and understand information comprehensively from the overall problem situation. The geographic segmentation for PT. DKM's capstock hanger is focused on the vicinity of the factory in Cibubur, within a 57 km radius, covering the Jakarta, Bogor, Depok, Tangerang, and Bekasi areas. The demographic segmentation targets service producers, specifically general suppliers. The psychographic segmentation focuses on medium to large-scale Business to Business companies. The behavioral segmentation targets companies that require capstock hangers. The potential target market for PT. DKM consists of vendors/general suppliers who cater to apartment developers. Consumer perception of capstock hangers is characterized by minimalist design, competitive pricing, and high-quality materials.
Micro, Small, and Medium Enterprises (MSMEs), which are the backbone of Indonesia's economic development, are continuously encouraged to upgrade, so that they can make a greater contribution to the economy and absorb more labor. With their significant roles and contributions, MSMEs are able to drive economic growth, create jobs, and improve people's welfare. The MSME sector contributes 61% to the Gross Domestic Product (GDP), equivalent to Rp9.580 trillion, and even the MSME contribution to job absorption reaches 97% of the total workforce. According to the Ministry of Cooperatives and SMEs, Indonesia has 65.5 million MSMEs, accounting for 99% of all business units (Limanseto, 2023).
The large number of MSMEs also indicates that business competition has increased. Business competition not only comes from other MSMEs but also from large businesses and imported goods. Therefore, MSMEs must be able to develop their business activities, one of which is through product marketing development. Many MSME products have good quality, but face challenges when marketed. In fact, MSMEs have great potential for market development, especially in the international market, because the creativity and innovation of Indonesian human resources can be a competitive advantage for Indonesian MSME products.
PT. Duta Karya Mandiri (PT. DKM), a company operating in the automotive component manufacturing industry, is a supplier of bars-headrest components for cars. The idea of creating a new product, a capstock hanger, originated from the abundance of iron scrap from the production of bars-headrest components for cars. This capstock hanger can be produced using scrap iron or new lightweight steel material, which aligns with the expertise of PT. DKM's workforce and the capacity of its machinery, resulting in low production costs. This is expected to be an opportunity for PT. DKM to enter the new product business in the Business to Business (B2B) market, which will be marketed to apartment developers. Apartments, as a service-providing business, have become a popular residential trend among urban communities. This is due to the decreasing availability of land in large cities, leading people to actively seek housing that is close to their workplace and equipped with supporting facilities.
Business market, more commonly known as B2B, refers to the marketing transactions of goods and services sold from one company to another, rather than from a company to the end user. B2B customers are businesses/commercial entities, governments, and institutions. Business/commercial customers purchase industrial goods to form or facilitate production processes or use them as components for other goods and services, such as manufacturing, service companies, and transportation companies. Meanwhile, government agencies and private institutions purchase industrial goods to manage and provide services to their own market segments, namely the general public (Hutt & Speh, 2021).
Segmentation is the process of dividing a market into smaller groups with distinct needs, characteristics, or behaviors, that require separate product or marketing mixes. Market segmentation is divided into four variables: geographic, demographic, psychographic, and behavioral. Geographic segmentation divides the market into geographical units such as nations, regions, states, counties, cities, or neighborhoods. Demographic segmentation divides the market into groups based on variables such as age, family size, family life cycle, gender, income, occupation, education, religion, race, and nationality. Psychographic segmentation divides the market into groups based on social class, lifestyle, and personality characteristics. Behavioral segmentation divides the market into groups based on their knowledge of, attitude toward, use of, or response to a product (Kotler & Kelle, 2021).
According to (Kotler & Kelle, 2021), there are several levels of segmentation for targeting markets: full market coverage, multiple segment specialization, single-segment concentration, and individual marketing. Currently, PT. DKM’s target market has not been clearly identified. If PT. DKM is later able to produce new products targeting multiple market segments at competitive prices, the level of multiple segment specialization could become an attractive option for the company.
PT. DKM positions its bars-headrest products (car seat support poles) for Xenia and Avanza vehicles as value-added products. PT. DKM assists its main customer, PT. Astra International, Tbk., in reducing the production costs of metal seat support poles by handling the manufacturing as a third party (cost reduction).
Based on the results of interviews, observations, mapping of MSME conditions, and problem analysis conducted on PT. DKM, the main problem faced by PT. DKM is: how to segment, target, and position PT. DKM's new capstock hanger product. This research aims to segment, target, and position PT. DKM's new capstock hanger product.
Business coaching is a qualitative study that employs an exploratory research approach. This method seeks to delve deep into and fully grasp information from the overall problem context (Malhotra & Dash, 2016). To gather data, this qualitative study utilizes a direct technique known as depth interviewing. Interviews were conducted with respondents, including owners, managers, and employees of PT. DKM.
The interview structure according to (Cooper & Schindler, 2014) includes unstructured interviews, semi-structured interviews, and structured interviews. In this research, a semi-structured interview was used, which is a combination of an interview with a structured list of questions and the ability to adjust questions according to the responses given by the respondents.
The data used in this study consists of two types: primary data and secondary data. Primary data refers to sources that directly provide information to the data collector (Sugiyono, 2019). To obtain primary data, the author conducted direct observations through Focus Group Discussions and interviews with the owner, management, and employees of PT. DKM. Meanwhile, secondary data refers to sources that do not directly provide data to the collector, such as documents or information obtained through other individuals (Sugiyono, 2019). In this study, secondary data was obtained through literature reviews, including previous research, articles, books, and documents owned by PT. DKM.
Data analysis was conducted using a qualitative technique. According to (Malhotra & Dash, 2016), there are three general steps that can be taken when conducting qualitative data analysis, namely: (1) Data reduction, where data is sorted by setting aside, emphasizing, or summarizing the research data; (2) Data display, where a visual interpretation of the data is developed in the form of diagrams, graphs, or matrices to understand patterns and relationships between data; (3) Conclusion drawing and verification, where the meaning of the analyzed data is considered and the research questions it has are evaluated, so that later the gap between the actual and ideal conditions of PT. DKM can be concluded.
The challenges faced by PT. DKM include optimizing factory capacity, innovating new products from iron waste, and acquiring new customers to diversify revenue streams. The notion of developing novel products was sparked by the substantial volume of iron scrap generated from the production of bars-headrest components for cars, amounting to 3 tons monthly. These iron scraps were sold at a low price of Rp3,000 per kilogram to scrap metal traders.
The iron scrap generated from the production of bars-headrest components for cars, along with newly acquired lightweight steel, will be repurposed to manufacture capstock hanger. This initiative will enable PT. DKM to extract maximum value from its existing materials. The production of capstock hangers represents a new product line for the company, categorized as a new-to-the-firm' product, although the product itself is not novel in the broader market (Crawford & Benedetto, 2021).
According to (David, 2017), there are four corporate strategies for understanding products and markets: market penetration, market development, product development, and diversification. Market penetration is a corporate strategy to increase the growth of existing products in the market without changing the product itself. Market development strategy is a corporate strategy to market existing products to new market segments. Product development is a corporate strategy to introduce new products into existing markets or modify existing products. Finally, diversification is a corporate strategy to market new products into new markets. Diversification is divided into three types: concentric, horizontal, and conglomerate. Concentric diversification is a way to develop new products by utilizing the technology and marketing techniques already possessed by a company. Horizontal diversification is a way to create new products by adopting technology and marketing techniques from outside the company. Conglomerate diversification is a way to enter new markets by producing new products using technology and marketing techniques other than those owned by the company. From the explanation above, a concentric diversification strategy is very suitable for PT. DKM because the existing iron scrap can still be used as raw material to produce new capstock hanger products by maximizing the factory's capabilities, such as the expertise of the workforce and the capacity of the machines already owned by PT. DKM.
The segmentation of PT. DKM's new capstock hanger product is divided into geographic, demographic, psychographic, and behavioral segments (Table 1). Geographic segmentation, the target segment for PT. DKM's capstock hanger is located around the factory in Cibubur, covering a 57 km radius or the Jakarta, Bogor, Depok, Tangerang, and Bekasi (Jabodetabek) areas. Demographic segmentation, the target segment comprises service providers in the form of vendors/general suppliers who will distribute the product to apartment developers, including XYZ. Psychographic segmentation, the target segment consists of medium to large scale B2B companies. Behavioral segmentation, the target segment includes companies requiring furniture or household items, such as capstock hangers, as complementary products for their business.
After identifying potential market segments, the next step is to decide which segment will be the target market for PT. DKM's capstock hangers. Full market coverage, multiple segment specialization, single-segment concentration, and individual as segment are several options to consider as target markets (Kotler & Kelle, 2021). Full market coverage is an option where a company attempts to serve all market segments with the required products. However, only large-scale companies can achieve this. Multiple segment specialization involves serving two or more market segments with mass-produced products. Single-segment concentration allows a company to focus on just one segment. Finally, individual as segment refers to providing services to specific individuals to meet individual needs. PT. DKM should opt for multiple segment specialization due to its resources and capability to serve potential markets. The target market for PT. DKM's capstock hangers includes vendors/general suppliers of apartment developers who will ultimately market these products to apartment complexes. Apartments are becoming a popular housing trend for urban communities, as they are seen as a solution to the increasingly limited land availability in major cities.
Positioning refers to how a product is perceived by consumers, distinguishing it from competing products (Kotler & Kelle, 2021). There are four criteria that companies can use to determine positioning: (1) Consumer-oriented analysis: Positioning describes superior value for consumers, which is a key determinant in purchase decisions; (2) Company capability analysis: Positioning reflects the company's strengths and competitive advantages; (3) Competitor-oriented analysis: Positioning must be unique, making it easy to differentiate from competitors; (4) Business environment analysis: Positioning must be sustainable and continuously relevant to changes in the business environment. PT. DKM’s capstock hanger, as a new product, is positioned as a minimalist, competitively priced clothes hanger made from high-quality materials. Its small, straight design creates a minimalist appearance, making it easy for consumers to place the hanger in any corner and save space, particularly in apartments. The hanger is also affordably priced compared to other premium products. Additionally, the steel used in its production is the same as that used for manufacturing car bars-headrests, ensuring durability and strength.
Several steps that PT. DKM can take in determining segmenting, targeting, and positioning for new product development of the capstock hanger are as follows:
- Geographic segmentation: PT. DKM’s capstock hanger market is located around the factory in Cibubur, within a radius of 57 km, covering Jakarta, Bogor, Depok, Tangerang, and Bekasi (Jabodetabek). Demographic segmentation: The target demographic includes producers of services, specifically general suppliers who will supply capstock hangers to apartment developers, such as XYZ. Psychographic segmentation: The target psychographic segment consists of medium to large scale B2B companies. Behavioral segmentation: The target behavioral segment includes companies that require furniture or household items, such as clothes hangers, as complementary products for their business;
- With the introduction of the new capstock hanger product, PT. DKM has a promising target market: vendors/general suppliers of apartment developers who will ultimately market the capstock hanger products to apartment complexes;
- The capstock hanger is perceived by consumers as a minimalist, competitively priced clothes hanger made from high-quality materials. Its small, straight hook design allows consumers to easily place the hanger in any corner of an apartment, saving space. The price offered is affordable compared to most premium hanger products. Despite its affordable price, the strength and durability of the steel material are unquestionable.
PT. DKM can improve its market segmentation, refine targeting, and strengthen its positioning strategy, ultimately maximizing the potential of its new product development efforts, by addressing these areas:
- While the current geographic segmentation focuses on the Jabodetabek area, PT. DKM could consider exploring potential markets in other metropolitan areas across Indonesia. This can help the company capture a broader customer base and increase sales;
- The demographic segmentation is currently focused on general suppliers and apartment developers. PT. DKM could also target retailers, wholesalers, and online marketplaces that cater to urban consumers, especially as e-commerce continues to grow;
- In addition to medium- and large-scale B2B companies, PT. DKM could target small-scale businesses, co-working spaces, or budget-conscious enterprises that require cost-effective yet durable products;
- Conduct deeper market research to understand consumer behavior, such as preferences for environmentally friendly materials or customizable designs. Incorporating these insights into product development could enhance appeal.
Original paper, i.e. Figures, Tables, References, and Authors' Contacts available at http://rjoas.com/issue-2025-01/article_02.pdf