2.2 Osim Market Segmentation

Market segmentation is the process of dividing a broad target market into subsets of consumers who have common needs so as to design and implement strategies to target their needs. The general target group for Osim is mid to high-end customers. This is so as they are less vulnerable to recessions and demands will become more resilient to cyclic demand patterns exhibited in typical consumer companies. This also allows them to actually charge a premium to consumers over their competitors’ products.

However each of Osim products is actually created for a specific target market group in mind as they try and gradually increase their market share. These target markets are mainly sorted out through the use of age group, gender and income levels. Below shows an example of a product’s target market.

Osim uPaPa Hug
Age Group 25-35 & 50 years old onwards It focuses on providing a relaxing experience as well as a stress remover which young working adults are facing in the fast paced lifestyle. As the society advances, young adults are often suffering from muscle discomfort due to their work nature. In addition, OSIM UPAPA Hug was also advertised as a perfect present for the elders.
Gender Male and Female As seen on their advertisements, a young lady with toned figure was portrayed. It displayed the ‘gentle’ side of the product, symbolising that it is suitable even for female usage. The male models playing the drums symbolised that the product has a ‘male dominant side’ too. OSIM attempted to attract such consumer by emphasising that UPAPA Hug not only can be used on the neck and shoulder, it can also be used to target buttock and thigh area.

Besides just focusing on population demographics as a mean of conducting market segmentation, it has also gone on to embark on market segmentation through geographical differences. Even though Osim primary markets now are in Singapore, Malaysia, Hong Kong and Taiwan, it is actually targeting new key markets in both China and Japan. Japan was chosen due to its aging population as the increase in demand for healthcare products while China was targeted due to the potential for robust sales momentum in China. This could be seen from market growth remaining strong and steady with the total retail sales of consumer goods maintaining a healthy 18.2% year on year growth for the first five months of 2013.

2.3 Product lifecycle and potential market growth

2.3.1 Product lifecycle analysis

Osim became a global leader in the branded healthy lifestyle industry through selling its various products. Osim’s revenue comes from retailing these products (93%) and also distributing these products to its international franchises (7%).

Osim produces a wide array of products including massage chairs, foot massagers, head massagers, neck and shoulder massagers and nutritional supplements as well as air purifiers. Osim’s current strategy is to focus on a two to three year product life cycle for each of its product so as to prevent each product from reaching the decline stage of its product life cycle. This was achieved by coming out with an upgraded version of a product every few years. Furthermore this coincides with Osim’s strategy of using new products to drive growth through the launching of a new product, or derivative of an existing product every quarter. Figure 1.1 shows the product roadmap of Osim from 2002 to 2012.

With such a huge product mix, it is essential for Osim to be able to determine the stage on the product life cycle for each of its product individually so as to ensure that it will be able to come out with the correct strategies. Most of Osim’s products however can be said to actually be in the maturity stage as they are signs of saturation in the healthy lifestyle product market.

Maturity stage

The maturity stage is defined as the stage whereby “the market becomes saturated with variations of the basic product, and all competitors are represented in terms of an alternative product, the maturity phase arrives. In this phase market share growth is at the expense of someone else’s business, rather than the growth of the market itself and this period is the period of the highest returns from the product.”

Furthermore, according to Frost & Sulivan, the maturation phase is a phase with stable number of competitors, low capacity of market growth, high profits and having attained the largest market share. Osim products fit into this description as the market has seen many new competitors ever since Osim entered the healthy lifestyle product industry 9 years ago in 2002 with the iMedic device. Since then there has been new competitors such as OTO, OGAWA, Panasonic, and Sanyo. This has caused the Asian market to reach heavy saturation point whereby companies are competing for market share with similar products. Hence, Osim’s products have lower chances of further increasing their market share exponentially unless they were to convert their competitors’ customers to theirs. Even though the chance of growth is low, the Osim massage chair line, for example, still brings in high level of profit for them as shown by Figure 1.2 where their profit before tax has been steadily increasing from 2007 to 2012 with the massage chair contributing at least 40% of the profits.

Osim’s business strategy for its products also fulfills that of a product in the maturity stage. When a product is in the maturity stage, the strategy of growth will be to expand in new markets to capture more market share, focus on product innovation to differentiate its product from competitors and also on marketing and distribution.

Osim has been embarking on these various methods to promote growth of its products as they are constantly trying to break into new markets every year to avoid saturation and promote market growth. Since 2002, it has broken into markets in America, Africa, Europe, Middle East and Oceania, where the healthy product industry is still in the growth stage.

As mentioned earlier, Osim has also been coming out with new products frequently so as to use these new products to drive growth by gaining an edge over its competitors in the Asia market. These can be seen through the release of a new improve version of a product every 2 years such as the uDivine Sport to the uSoffa Runway and the uPapa to the uPapa Hug.

Lastly Osim has been shifting its focus on increasing its marketing and distribution of its massage chairs as a means of capturing market share. As shown by Figure 1.3, the number of retail stores has increased over the years. Another marketing technique used was to have celebrity endorsements to boost sales. Figure 1.4 shows the different heavy weight personalities used to promote Osim products such as the massage chairs.

With these measures, Osim has managed to gain a majority of the market share in this industry and is the number 1 brand in Asia for healthy lifestyle products. Figure 1.5 shows an example of how Osim actually commands 75% of the massage chair market share in Hong Kong by sales revenue in 2010.

2.3.2 Potential for market growth

2.3.2.1 Consumer characeristics

Osim has always been mainly targeting elderlies as well as higher income groups of individuals as they have a higher demand for healthy lifestyle products. This strategy still has a huge growth potential, as their primary markets of Singapore and Hong Kong are both moving in the direction of an aging population. For Singapore, the percentage of population under nineteen has decreased from 29% to 23.9% from 2001 to 2012 while the percentage of population over 65 increased from 7.7% to 11.1% over the same period . As Osim’s target market increases in size over the years it will also signal an increase in demand and hence potential growth.

Furthermore, Osim’s key market of China is also still in the midst of developing. China’s growth, even though it has slowed down, is still very high as they achieved a 9.6%, 9.2%, 10.4% and 9.3% growth in 2008, 2009, 2010 and 2011 respectively . Hence China is still in the developing stages while her people are getting more and more affluent, translating into a potentially bigger consumer base every year. Thus this shows a potential area of great growth. Not only is China growing, Osim is also trying to break into the America and Africa. Even though Osim is the number one brand in Asia, they still haven establish themselves in the western market. Currently Osim has 1,136 stores in 32 countries in North and South Asia, America, Africa, Europe, Middle East and Australia/New Zealand. However, more than 90% of its revenue is derived from Asia alone . This means that there is a great opportunity of growth in those respective markets as they look to further expand their markets into the western culture. Besides the trend of people getting wealthier, Osim will benefit, as there is a global trend of becoming more health conscious. This can be shown through consumer choices in both consumer good and food being influenced on how green and healthy they are. They also expect companies to become more green in their business processes or will even threatened to boycott a company altogether. It is shown by Technomic in 2013 that 64% of consumers now, up from 57% in 2010, believe that it is important to eat healthy and pay more attention to nutrition . This global trend will definitely benefit Osim who sells healthy lifestyle products by increasing the size of their market.

2.3.2.2 Product characteristics

Osim still shows a great capability to grow in terms of product innovation. As mentioned earlier, Osim is always trying to improve on their product mix by coming out with a new and improved version of a product every few years. This is done to differentiate their products from that of their competitors and appeal to consumers by giving them the improvements they are looking for.

Furthermore Osim will also be able to grow by constantly trying to find new usage for their current products. This is shown through the innovative measures made by Osim to find new markets for their goods. One example will be to actually add MP3 playback to their massage chair starting from the uDivine model. They also started to actually integrate smartphone into their products in search of new uses and features for them. An example will the uDivine app created for the Iphone allowing people to use their phones to pair with their massage chairs so as to bring their massage chair experience to a whole new multi-sensory enjoyment for the body, mind and soul, with endless possibilities of online, audio-visual entertainment. The features include healthcare information, producing ambience music as well as tips on how to improve the consumers’ massage experience . By constantly finding new usage for their products, Osim is able to leverage on it to ensure that they are able to allow potential market growth.

Besides working on their products to ensure their continued market growth, they are also constantly looking for new ways to reduce the cost of production. These will allow them to increase their profits and ensure that they are able to price their products more competitively so as to increase the demand for their goods so as to increase market growth. This is seen through the move made by Osim in 2001 to actually outsource the production of their products. This will allow them to actually them to China and Taiwan manufacturers so as to lower production costs, have less investments in fixed assets, have flexibility in managing production and focus on value-added design, product development and brand management.