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?

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

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

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

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

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

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

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)

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

International market segmentation approaches

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)

International market segmentation approaches

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

International market segmentation approaches

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

International market segmentation approaches

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)

International market segmentation approaches

Figure 7.2

Segmentation scenarios

Country X

Segment A Segment B Segment C

Country Y

Segment A Segment B Segment D Segment E

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

Bases for country segmentation

• Demographic

• Socioeconomic

• Behaviour-based

• Lifestyle

*These have been considered in recent weeks

Bases for country segmentation

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 populationin Japan – could the ageing population in China be grouped with Japanese consumers?

Bases for country segmentation

Socioeconomic• Consumption patterns for many goods and services

often driven by consumer wealth or economic development of the country

• Chinese tourists

Bases for country segmentation

• 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)

Bases for country segmentation

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

Bases for country segmentation

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

Bases for country segmentation

• 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

Bases for country segmentation

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

International positioning strategies

• Steps in global positioning1. What are the competing brands/Competitive frame?2. What are customer’s perceptions of your own brand and

competing brands?3. Develop possible positioning themes4. Select most appealing theme after screening5. Develop marketing mix strategy to complement theme6. 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

International positioning strategies

• 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”

International positioning strategies

• 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

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’

Positioning for 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

Positioning for 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)

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

Summary

• Distinguishing among various bases for country segmentation

• Different international positioning strategies• Identifying the differences between global, foreign

and local consumer culture positioning