Week 7 - Segmentation and positioning

Week 7 - Segmentation and positioning
Prepared by Alistair Hodgson and Robin Roberts

Key Themes After attending this week’s lecture and studying chapter 7 you should be able to: Identify the reasons marketers use international market segmentation Discuss approaches to international market segmentation Apply different scenarios for segmentation

Key Themes Distinguish among various bases for country segmentation
Understand different international positioning strategies Identify the differences between global, foreign and local consumer culture positioning

Scene Setter: Volkswagen
Positioning: VW Group one of the three largest car manufacturers in the world Positioned as a ‘global economic and environmental leader’ Segmentation: Targets different products at different consumer groups (generally determined by region) Vehicles sold in Latin America & the Asia-Pacific are not always the same as European/Australian models Therefore, VW meets the needs of different segments in a global target market

Reasons for international market segmentation
The rationale for segmenting international markets is the same as domestic ones. Ideally, segments should be: measurable how accurate is data from countryside Laos? A key statistic, such as income, can be complicated through the presence of informal sector jobs. sizable how big is the emerging middle class in Cambodia? accessible can I reach all segments in Japan or am I blocked by traditional distribution networks? actionable will the target segment respond to my pricing strategy? Refer to header: Reasons for international market segmentation In Chapter 6, we discussed how market research can assist in determining which markets are sufficiently attractive for market entry. Here, we consider the rationale for market segmentation for progressive market entry as well as what the various markets offer. The goal of market segmentation is to break down the market for a good or a service into groups of consumers who differ in their response to the organisation's marketing mix program. That way, the organisation can tailor its marketing mix to each individual segment and do a better job of satisfying the needs of the target segments. The requirements for effective market segmentation in a domestic marketing context also apply to international market segmentation.

Reasons for international market segmentation
There are also some additional considerations for international markets competitive intensity can be very important for a small business when considering entry into a foreign market growth potential how does growth compare to the domestic market the company currently operates in? e.g. Projected growth for 2014 in US is 3%, China is 8.5% and Euro Area is 1% (Source: IMF) Achieving a successful trade-off between competitive intensity and growth potential is difficult Refer to header: Reasons for international market segmentation In addition, organisations should consider: Competitive intensity – preferably, segments should not be pre-empted by the organisations competition. Growth potential – segments should have significant growth potential. In practice, identifying market segments with promising growth prospects and low competitive pressure is quite challenging. Typically, marketers face a trade-off between competitive intensity and growth prospects. Growth potential statistics source: IMF, World Economic Outlook Update, January 23, URL:

Country screening Preliminary screening of the country takes place
prior to serious market research being undertaken Perhaps based upon key secondary data (think back to last week’s recording) Helps break down large groups of possible markets into a handful of market opportunities the company might consider e.g. Kellogg and country size/population Countries with significant youth population chosen Refer to header: Reasons for international market segmentation Organisations usually do a preliminary screening of countries before identifying attractive market opportunities for their goods or service (See chapter 8). For preliminary screening, market analysts rely on a few indicators for which information can easily be gathered from secondary data sources. Example: Kellog uses population size to classify potential markets. For instance, a growth in youth population will suggest market potential for its snacks division.

International marketing research
Companies make an effort to design products or services that meet the increasingly global needs of customers from different countries adding features changing communication strategies standardising the research is one approach clustering ‘like’ countries together (think about the ‘analogy’ method from last week Australia and New Zealand Research conducted in just one of these countries and the findings applied to the other members of the group Refer to header: Reasons for international market segmentation Country segmentation also plays a role in international marketing research (See Chapter 6). Organisations increasingly make an effort to design products or services that meet the needs of customers in different countries. Certain features might need to be added or altered but the core product is largely common across countries.

Question What problems are likely to occur through the clustering approach?

Entry decisions Similar to targeting decisions
Many different strategies/considerations Ethics & The Body Shop Attempts to avoid locating to countries where sweatshop labour is prominent (operates in over 60 markets) look for similar segments in other markets Calvin Klein and its appeal to upwardly mobile males in a number of countries (mid-to-high-end brands tend to target similar segments) Tabasco popularity in countries that favour hot flavours Aim to launch product in India, Vietnam, & Thailand Refer to header: Reasons for international market segmentation Entry decisions are similar to targeting decisions. A decision to enter a market implies that the market is the one targeted. When a product or service does well in one country, organisations often hope to replicate their success story in other countries. The strategic logic is to launch the product in countries that are highly similar to the country of the original launch.

Entry decisions consider local tastes when modifying products or services Mars changes the formulation for its Mars Bar based on local tastes… …and it is not alone in doing so buying power differs from market to market Refer to header: Reasons for international market segmentation Entry decisions are similar to targeting decisions. A decision to enter a market implies that the market is the one targeted. When a product or service does well in one country, organisations often hope to replicate their success story in other countries. The strategic logic is to launch the product in countries that are highly similar to the country of the original launch.

Positioning strategy Segmentation is instrumental in determining the company’s positioning strategy Characteristics of target segment determine marketing mix Major changes in segmentation can dramatically affect the market position Pizza Hut appeals to middle-class shoppers in China In China it is more of a restaurant experience than a fast-food pizza outlet This is actually true of Pizza Hut in the UK too Refer to header: Reasons for international market segmentation Segmentation decisions are also instrumental in setting the organisation’s product positioning strategy. Once the organisation has selected the target segments, management needs to develop a positioning strategy to embrace the chosen segments. Basically, the organisation must decide on how it wants to position its goods or services in the minds of its prospective target customers.

Marketing mix policy The challenge between standardisation and customisation A significant challenge to determine a link between market segments and all four aspects of the marketing mix ‘global segments’ suggest a more standardised approach Apple iPad, iPhone local segments sometimes mean that some or all elements of the marketing mix need changing Budweiser is an entry-level beer in its domestic market but a premium beer in Hong Kong (alcoholic beverages typical of this strategy) Refer to header: Reasons for international market segmentation In domestic marketing, segmentation and positioning decision will dictate an organisation’s marketing mix policy. Country segmentation will also guide these decisions. A persistent problem faced by international marketers is how to strike the balance between standardisation and customisation. International market segmentation could shed some light on this issue. Potential customers falling in the same segment might lend themselves to a standardised marketing mix strategy. However, usually difficult to establish a link between market segments and all four elements of the marketing mix. Some elements of the marketing mix may need changing. Another example of marketing mix change: McDonald’s have smaller portion sizes in Japan compared with the US. The menu also contains different products, adapted to local taste, such as the Teriyaki McBurger

International market segmentation approaches
The process can be approached from FOUR different angles: aggregate segmentation disaggregate international consumer segmentation two-stage international segmentation domain-specific bases Refer to header: International market segmentation approaches International marketers approach the segmentation process from different angles. A common international segmentation procedure classifies prospective countries on a single dimension (e.g.. Per capita GDP) or on a set of socioeconomic, political and cultural criteria such as life expectancy, GDP per capita and consumer price index, available secondary data sources (e.g. World Bank, UNESCO, the Organisation for Economic Cooperation and Development (OECD). This is known as country-as-segmentation or aggregate segmentation. Disaggregate international consumer segmentation: a segmentation strategy that focuses on the individual consumer using one or more segmentation bases; consumer segments are identified in terms of similarities with respect to the selected bases. Two-stage international segmentation: uses a first (aggregate) stage to group countries on general segmentation bases and a second (disaggregate) stage that uses product-specific bases. Domain-specific bases: segmentation characteristics such as brand penetration rates or attitudes that depend on the particular domain or product. These are explained further on the following slides.

Aggregate segmentation A segmentation strategy that classifies countries on a single dimension for ease of analysis as opposed to focusing on individual characteristics to form segments GDP country life expectancy Its strength is its weakness (simplified approach, but country boundaries are unlikely to be consistent with consumer responses to marketing strategies) Refer to header: International market segmentation approaches A common international segmentation procedure classifies prospective countries on a single dimension (e.g.. Per capita GDP) or on a set of socioeconomic, political and cultural criteria such as life expectancy, GDP per capita and consumer price index, available from secondary data sources (e.g.. World Bank, UNESCO, the Organisation for Economic Cooperation and Development (OECD). This is known as country-as-segments or aggregate segmentation. Flaws to this approach: Managerial relevance of geographic segments is often questionable Country boundaries rarely define differences in consumer response to marketing strategies Seldom clear what variables should be included in deriving the geographic segments i.e. its simple approach does not allow for these complexities

Disaggregate international consumer segmentation A segmentation strategy that focuses on the individual consumer using one or more segmentation bases (i.e. gender, income, age etc.) Consumer segments are identified in terms of similarities with respect to selected characteristics Would this be the most efficient way for a retailer to segment? What are the likely problems with this approach? Distribution is an issue Refer to header: International market segmentation approaches Disaggregate international consumer segmentation offers another way to identify segments that are similar in terms of needs. Using one or more segmentation bases to focus on the individual consumer, consumer segments are identified in terms of similarities with regard to the bases selected. This may not be the most cost effective method, especially where distribution costs make up a large part of the total costs, as in the retailing sector.

Two-stage international segmentation Segmentation that uses a first (aggregate) stage to group countries on general segmentation bases and a second (disaggregate) stage that uses product-specific bases First stage provides screening to eliminate unsuitable countries (i.e. those with high risk) Cluster analysis used to group remaining countries combines the best of the first two approaches more cost effective more accurately target markets Refer to header: International market segmentation approaches To address weaknesses of these two approaches, the two-stage international segmentation method can be considered. The first (aggregate) stage involves grouping countries on general bases to identify clusters that are similar in socioeconomic and cultural attributes. The first stage acts as a screening device to eliminate unacceptable countries on bases such as general characteristics or their not fitting with the organisation’s goals. As well, this stage provides some guidance to organisations that offer a wide range of different product categories.

Domain-specific bases Segmentation characteristics such as brand penetration rates or attitudes that depend on the particular domain or product Data used to then identify cross-national segments within a particular geographic region (from the initial stage of segmentation) The idea of ‘luxury’ can vary from country to country Three core characteristics: Democratisation (luxury available to many), Elitism (luxury available to a select few), and Distance (luxury belongs to others) Refer to header: International market segmentation approaches The objective of the second (disaggregate) stage is to collect date on domain-specific bases (e.g. brand penetration rates) among consumers in different countries belonging to the target geographic segment. The data then forms the basis for identifying cross national segments of consumers within the geographic segment selected. As a result the segments should be more responsive to marketing efforts.

Refer to header: International market segmentation approaches Figure 7.2

Segmentation scenarios
Refer to header: Segmentation scenarios While, in theory, market segmentation appears neat and clean, in reality, segmentation can be a complicated process. A common phenomenon in market segmentation is illustrated in figure 7.3 (refer students to the text book), where there is one universal segment with other segments that are either unique to a country or exist in only two of the three countries.

Segmentation scenarios
Universal (global) segments (i.e. affluent) transcend global boundaries consumers with common needs Regional segments (i.e S.E. Asian emerging middle-class) consumers within a region have similar needs Unique (diverse) segments disparity of consumer needs and wants between different countries is large deters the creation of cross border segments marketing mix is localised to meet local needs Refer to header: Segmentation scenarios While, in theory, market segmentation appears neat and clean, in reality, segmentation can be a complicated process. A common phenomenon in market segmentation is illustrated in figure 7.3 (refer students to the text book), where there is one universal segment with other segments that are either unique to a country or exist in only two of the three countries.

Bases for country segmentation
Demographic Socioeconomic Behaviour-based Lifestyle *These have been considered in recent weeks Refer to header: Bases for country segmentation Despite such challenges in segmentation, marketers need to segment the markets in minute detail. The first step in doing international market segmentation is to decide which criteria to use in the task. Hundreds of country characteristics can be used as inputs. However, for the segmentation to be meaningful here should be a link between the market segments and the response variable or variable in which the organisation is interested. The variables most commonly used for country segmentation purposes are: demographic, socioeconomic, behaviour and lifestyle. Further detail on following slides.

Demographic One of the most popular segmentation criteria age of Chinese consumers teenagers as a potentially homogeneous group how accurate will this be? Are Chinese teenagers the same as those in Western countries? This is somewhat true, though persistent cultural trends are evident (i.e. the propensity to save) the case for targeting an ageing population in Japan – could the ageing population in China be grouped with Japanese consumers? Refer to header: Bases for country segmentation Demographic variables are among the most popular segmentation criteria. They are easy to assess. Moreover, information on population variables is, most often, reasonably accurate and readily available.

Socioeconomic Consumption patterns for many goods and services often driven by consumer wealth or economic development of the country Chinese tourists Refer to header: Bases for country segmentation Another popular way to segment international markets is to use socioeconomic variables. Consumption patterns for many goods and services are largely driven by consumer wealth or the country’s level of economic development in general. Consumers from countries at the same stage of economic development often show similar needs in terms of per capita amount and types of goods they desire. Examples of Traditional societies – sub-Saharan Africa countries Examples of Take-Off – most ASAEAN countries such as Thailand and Malaysia

5 key categorisations: Traditional societies economic ‘basket cases’ Preconditions for take-off Scientific & technological advances in the agricultural sector The take-off required infrastructure is mainly in place > rapid modernisation Drive to maturity Service-sector gains prominence > wide variety of goods produced High mass-consumption Highly-developed service sector. Dominant middle-class with high discretionary income (or access to credit)

Behaviour-based Many of the same criteria as domestic segmentation degree of brand/supplier loyalty usage rate based on per capita consumption product penetration the percentage of target market that uses the product Speed of product adoption (longer in countries with high uncertainty-avoidance) Time to sales-peak benefits sought Refer to header: Bases for country segmentation Just as in domestic marketing, segments can also be based on behavioural response variables. Behavioural segmentation criteria include degree of brand/supplier loyalty, usage rate, product penetration and benefits sought. For new products, organisations might consider segmenting countries on behavioural characteristics such as new product diffusion patterns. Diffusion based criteria could relate to country traits such as the speed of adoption, the time-of-sales peak and the propensity to innovate.

Lifestyle variables 1000 people in 35 countries (pretty good sample size, though 1000 per country would be better) Strivers (23%): material things (phones & other technology)/professional Common in East Asia & Russia Devouts (22%): mostly women/traditional Primarily women in developing nations; focus on traditional values; unlikely to consume media & likely to reject Western products Refer to header: Bases for country segmentation Marketers can also group consumers according to their lifestyle - that is, their attitudes, opinions and core values. Lifestyle segmentation is especially popular in the advertising industry. Many lifestyle segmentation schemes are general and not related to a specific product category. Others are derived for a specific product field. Distinctions can also be made between whether a given typology was prepared for a specific country or a given region. Study conducted – survey covered 1000 people in 35 countries. Based on responses, the researchers came up with six global values segments.

Lifestyle variables Altruists (18%): social issues/welfare Well-educated; focused on social justice; common in Latin America Intimates (15%): value family and friends Common in the US and Europe Fun seekers (12%): adventure and pleasure Youngest segment; common in Developed Asia Creatives (10%): interest in education Western Europe & Latin America; technology important Refer to header: Bases for country segmentation Marketers can also group consumers according to their lifestyle - that is, their attitudes, opinions and core values. Lifestyle segmentation is especially popular in the advertising industry. Many lifestyle segmentation schemes are general and not related to a specific product category. Others are derived for a specific product field. Distinctions can also be made between whether a given typology was prepared for a specific country or a given region. Study conducted – survey covered 1000 people in 35 countries. Based on responses, the researchers came up with six global values segments.

Lifestyle variables Does potentially present problems values are too general (i.e. focused on family) to relate to consumption patterns or brand-choice behaviour value-based segmentation is not always actionable values tend to change over time Vietnam’s shift from communist to modern society in little more than a decade Refer to header: Bases for country segmentation Practitioners and academics alike have raised concerns about the use of lifestyle segmentation. Values are too general to relate to consumption patterns or brand choice behaviour within a specific product category. As a result, lifestyle segmentation is not very useful as a tool to make predictions about consumers’ buying responsiveness. Value based segmentation schemes are not always ‘actionable’ - Remember a requirement for effective segmentation is actionability. International applicability is quite limited because lifestyles, even within the same region, often vary from country to country.

International positioning strategies
Steps in global positioning What are the competing brands/Competitive frame? What are customer’s perceptions of your own brand and competing brands? Develop possible positioning themes Select most appealing theme after screening Develop marketing mix strategy to complement theme Monitor the effectiveness of the positioning strategy over time > if the strategy is not working, determine if the strategy is fundamentally-flawed, or if implementation was just poor Refer to header: International positioning strategies Segmenting international markets is only part of the task. Once a multinational organisation has segmented its foreign markets, the organisation needs to decide which target markets to pursue. The organisation will evaluate these potential markets in terms of profitability, growth opportunities, competitive intensity and consistency with overall organisational values. Some markets may require substantial investment and losses may have to be incurred for a few years, yet they are an attractive target because of growth opportunities. Following targeting, the organisation needs to decide on the positioning strategy to use to appeal to the target markets. The formulation of a positioning strategy – local or global – moves through a sequence of steps (as shown on slide).

Uniform versus localised positioning strategies uniform A positioning strategy that is used worldwide by an organisation e.g. HSBC’s global strategy localised A positioning strategy that is modified to suit local conditions e.g. Volkswagen in Australia “premium” vs Germany “mainstream” Refer to header: International positioning strategies For international marketers, a key question is how far a uniform positioning strategy can be used? Clearly one key driver is the target market decision. Roughly speaking multinational organisations have two choices: target a universal segment across countries or pursue different segments in the different markets. When positioning a product for a specific use category, a uniform approach might work when the user group shares common characteristics. Uniform positioning is likely to be ineffective where there are still very strong culture-specific values.

Universal positioning appeals universal appeals that attract consumers regardless of their cultural background e.g. the use of pop stars to market soft drinks globally Pepsi Faye Wong in Hong Kong Ricky Martin in Latin America* *slightly out-of-date cultural references Refer to header: International positioning strategies Universal positioning appeals are positioning themes that appeal to consumer anywhere in the world, regardless of their cultural background. Remember that positioning themes can be developed at different levels, such as specific product features/attributes; product benefits; solutions for problems; user category; user application and lifestyle. Products that offer benefits or features that are universally important would meet the criterion of a universal benefit/feature positioning appeal. When positioning the product for a specific user category, a universal approach might work when the user group shares common characteristics. For example, Pepsi’s generation positioning which goes after the young generation.

Positioning for culture
Global consumer culture positioning (GCCP) A strategy that positions the brand as a symbol of a given global consumer culture > slogans used are often quite generic to appeal to different tastes Nike ‘Just Do It’ Nokia ‘Connecting People’ Sony ‘My First Sony’ Refer to header: Global, foreign and local consumer culture positioning Brand managers can position their brand as symbolic of a global consumer culture, a ‘foreign’ culture or a local culture (last two detailed on following slides). Global consumer culture positioning – a strategy that positions the brand as a symbol of a given global consumer culture.

Local consumer culture positioning (LCCP) A strategy that positions the brand as an intrinsic part of the local culture Mercedes Benz launches its mid-price E-class model in Japan advertising campaign used Japanese scenery and images ‘Mercedes and a beautiful country’ Recent Japanese advertisement uses Nintendo Refer to header: Global, foreign and local consumer culture positioning Local consumer culture positioning – a strategy that positions the brand as an intrinsic part of the local culture.

Foreign consumer culture positioning (FCCP) A strategy that positions the brand as possessing specific attractive attributes of a foreign culture e.g. Timberland positioned as strong American brand Switzerland & watches Can also use a hybrid approach e.g. McDonald’s global, cosmopolitan fast-food brand (GCCP) incorporates rice into its menu in places like Taiwan (LCCP) Refer to header: Global, foreign and local consumer culture positioning Foreign consumer culture positioning – a strategy that positions the brand as possessing specific attractive attributes of a foreign culture. Hybrid approach GCCP – Global consumer culture positioning FCCP – Foreign consumer culture positioing

Summary You should now have an understanding of:
Identifying the reasons marketers use international market segmentation Approaches to international market segmentation Applying different scenarios for segmentation Refer to header: Summary

Summary Distinguishing among various bases for country segmentation
Different international positioning strategies Identifying the differences between global, foreign and local consumer culture positioning Refer to header: Summary

Week 7 - Segmentation and positioning

Similar presentations

Presentation on theme: "Week 7 - Segmentation and positioning"— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

Week 7 - Segmentation and positioning

Similar presentations

Presentation on theme: "Week 7 - Segmentation and positioning"— Presentation transcript:

Similar presentations

About project

Feedback