Global Segmentation and Positioning
Chap
ter
11
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Outline
The Managerial ContextMicro-Segmentation Macro-segmentationTargeting SegmentsGlobal Product PositioningGlobal S-T-P StrategiesTakeaways.
The Global Marketer’s Mindset
The typical context for globalized marketing is not the usual “close to customer” mindset.
Rather, the point is usually to coordinate marketing activities across a wide variety of markets where the firm does business.
A top-down approach easily leads to insensitivity towards local customers and local requirements, and conflicts with local subsidiaries.
1. Selling orientation – sell what we make, the product line is given.
2. Standardization of products as much as possible.
3. Coordination via new reporting lines to make sure everyone is on board.
4. Centralization of the marketing effort to make sure all speak the same language.
The Global Marketer: Customer-oriented?
The Global Marketer’s Mindset
Because of the natural inclination to ignore local variations in customer preferences and local requirements, global marketing can easily lead to mis-positioned products and inappropriate promotional appeals.
It can also, of course, lead to local resistance and animosity, not good considering anti-globalization and anti-Americanism sentiments.
The key is to strike the optimal balance between local adaptation and global efficiency.
Segmentation-Targeting-Positioning
The typical way of approaching global marketing strategy is similar to the so-called S-T-P framework:
1. Segmentation – the splitting up of the total market into segments of more homogeneous subgroups.
2. Targeting – the selection of which one(s) of these subgroups the company should market its product to.
3. Positioning – exactly how the company should present the product to the target market(s) so its perception is most advantageous relative to competition.
Two-Stage Global Segmentation
It is common to distinguish two stages of global segmentation
1. Macro-segmentation – the division of a number of countries into subgroups of more similar clusters
2. Micro-segmentation – the identification of local segments which are similar across the countries in a cluster.
The micro-segmentation techniques used in domestic markets are also useful in global segmentation.
TYPICAL SEGMENTATION CRITERIA
• Economic - the most basic local segmentation criterion is still economic development
• Demographic - the age and family structure in different countries play an important role in determining global segments
• Culture - people care about their identify even though a lot has been said in the media about the emergence of global segments of people
• Benefits - the most clear cut segmentation criteria focus on the benefits sought
• Lifestyle – consumers start developing their own lifestyle with buying behavior involving more than simple necessities
Micro-Segmentation
WHICH CRITERIA SHOULD YOU USE TO SPLIT UP THE MARKET?
Useful segmentation criteria must accomplish three goals:
1. Should show us what influences the segment’s buying behavior, both consumption level and choice between competing brands
2. Should be reflected in published data so that the size of the segment can be calculated
3. Should help identify the media through which marketers can communicate with the segment
Micro-Segmentation
WHEN DO YOU HAVE A GOOD SEGMENTATION SCHEME?
Useful market segments possess these characteristics:
• IDENTIFIABLE – what distinguishes them?
• MEASURABLE – how many belong to each segment?
• REACHABLE – how to distribute to, communicate to, each segment?
• ABLE TO BUY – can they afford it?
• WILLING TO BUY – do they want it?
Micro-Segmentation
MACROSEGMENTATION – clustering of countries on the basis of common characteristics deemed to be important for marketing
purposes, e.g. data on:
• Population size
• Population character
• Disposable income levels
• Educational background
• Primary languages
•Level of development
• Rate of growth in GNP
• Infrastructure
• Political affiliation
Macro-Segmentation
Factor number
Name and number of descriptors
Selected descriptors
I. Aggregate economic, of level of development (47)
Gross national product, radios in use, passenger kilometers flown.
II. Population size (31) Total midyear population
III. Personal economic, or standard of living (32)
Income per capita, newsprint consumption per capita, birth rate (negatively related)
IV. Canada—conditions on which Canada ranks highest (12)
Newsprint production, visitor arrivals in the U.S. geographic area
V. Linguistic affinity (10) Adults who read English or speak it
VI. YC—Code for private descriptors (11)
Brand and industry sales of a consumer product, number of Roman Catholics
VII. International participation (22) Membership in international organizations, foreign tourist arrivals, airfare to Tokyo
VIII. Trade capacity (12) Exports, number of Protestants
IX. Climate or price stability (10) Sunny days per year, temperature of key city, price index (negative)
X. Mortality (5) Infant death rate, number of Moslems
Typical Macro-Segmentation Criteria
0
.9
.8
,7
.6
.5
.4
.3
.2
.1
0
-.1
-.2 -.1 0 .1 .2 .3 .4 .5 .6 .7 .8 .9 1.0
•SOT
• UKINOR •
• SWE• DEN
FIN•
• SWI
• AUS
•NET
•GER
•NEZ
• BEL
• AUT
• COL
• CHI• VEN• SPA
• BRA
• PER • MEX
PUE • •FRA
ITA• • ARG
PHI •
• THI
• ISR
• JAP
• MAC
• IND •PAK
Factor VI Religion
TUR •
Protestant
Catholic
Factor III
Standard of Living
Macro-Segmentation on Standard of Living and Religion
TRADITIONALIST 18%
HOMEBODY 14%
RATIONALIST 23%
PLEASURIST 17%
STRIVER 15%
TRENDSETTER 13%
6 PAN-EUROPEAN LIFESTYLE SEGMENTS
Relative size of segments in percent, of the European Market, as developed by the RISC research agency
Macro-Segmentation Based on Lifestyle
Targeting Segments
The choice of which countries and which segment(s) to target involves an analysis of projected profitability over the planning horizon.
The basic computation involves forecasting sales in a segment and the market share that the firm can expect to achieve. These techniques were covered in the forecasting chapter (no.4).
Predicting competitive reactions is also necessary, especially if the target segment is likely to be brand loyal.
The choice of target countries should also consider the tradeoff between focus and diversification.
Targeting Segments
Diversification versus Focus StrategyDiversification Strategy
In developing a global strategy, some companies make a conscious effort to be a player in different countries and different market segments. Difficulties in one market segment or country can be offset by gains elsewhere.
Focus StrategyMarkets and segments can be given more attention and
markets positions fortified. This is particularly advantageous when the country or segment competitive rivalry is intense (see hyper-competition in chapter 2, for example).
Factors Diversity if: Focus if:
Growth rate Low High
Demand stability Low High
Competitive lag Short Long
Spillover High Low
Need to adapt product Low High
Need to adapt promo Low High
Marginal sales Diminishing Increasing
Need for control Low High
Entry barriers Low High
Diversification vs Focus
Global Product Positioning
Product Positioning involves using the marketing mix (the 4Ps) to present the product to the selected target market(s) so that it is perceived in the most favorable way relative to preferences and competition.
To identify the optimal position, global marketing draws on the same techniques as domestic marketers in mapping out a visual representation of how the customers view the competing brands on the market.
This visual mapping is usually called “perceptual space” or, more commonly, the “product space.”
Mercury Cougar
Ford Mustang
Plymouth Barracuda
AMC Javelin
SPORTY
LUXURIOUS
Jaguar Sedan
Ford Thunderbird V8
Buick Le Sabre
Lincoln Continental
Chrysler Imperial
Chevrolet Corvair
Ford Falcon
Ideal point for subject I
Ideal point for subject J
U.S. Product Space of Autos 1968
Salient Attributes - data on what attributes a customer looks for in a product
Evoked Set - identifying what brands are considered by the buyer
Attribute Ratings - how the individual rates the brands in the evoked set on salient attributes
Preferences - how the brands rank in terms of overall preferences
Four sets of data to construct the product space
Global Product Positioning
Oldsmobile
Cadillac
MercedesBuick
Has a touch of class. Distinguished looking
BMW
Pontiac
Plymouth VW
Porsche
Ford
Sporty looking
.
Fun to drive.
Appeals to older people
Conservative looking
Very practical. Gives good gas mileage.
Toyota
DatsunChevrole
t
Dodge
Chrysler
Lincoln
4 5
3
2
1
Product Space with Segment Sizes
Global Product Positioning
THERE ARE THREE DIFFERENT EFFECTS ON BUYERS WHEN A GLOBALLY STANDARDIZED PRODUCT OR BRAND IS INTRODUCED ON A LOCAL MARKET:
1. THE NEW BRAND SIMPLY TARGETS ONE UNTAPPED SEGMENT.
2. THE PRODUCT SPACE IS ALTERED, BY ADDING DIMENSIONS OR EXTENDING ENDPOINTS.
3. BUYER PREFERENCES ARE CHANGED.
IN PRACTICE, ALL THREE PROCESSES ARE OFTEN AT WORK
SIMULTANEOUSLY.
Global Product Positioning
IT IS RARE THAT CUSTOMERS’ PERCEPTIONS REMAIN UNCHANGED WHEN A GLOBALLY STANDARDIZED PRODUCT ENTERS THE MARKET.
EXTENDED PRODUCT SPACE THIS OCCURSWHEN GLOBALLY STANDARDIZED PRODUCTS OFFER MORE OF THE SALIENT FEATURES DESIRED. THE NEW FEATURES TEND TO ENLARGE THE SPACE WHICH DEFINE THE PRODUCT. (EX: MORE MEMORY IN PCs)
ADDED DIMENSIONS THIS OCCURS WHEN THE GLOBALLY STANDARDIZED PRODUCT OFFERS IMPORTANT NEW FEATURES (EX: CAMERA ON A CELL-PHONE)
Datsun 200SX
Honda Accord
VW Rabbit Toyota Celica
ECONOMY
PERFORMANCE
BMW 320i
Mazda
Chevrolet Citation Ford
Mustang
Audi 4000
Chrysler K-car
Overall Rating
Honda Accord Extends the Product Space
Global Product Positioning
WHEN PRODUCTS ARE STANDARDIZED AND NOT ADAPTED TO THE PARTICULAR MARKET, THEY ARE OFTEN “MISPOSITIONED” (NOT HITTING THE TARGET BULLSEYE).
THERE ARE THREE REASONS WHY CONSUMERS MIGHT STILL BUY MISPOSITIONED PRODUCTS:
BRAND IMAGE
COUNTRY OF ORIGIN
LOWER PRICE
Brand Image
MISPOSITIONED PRODUCTS CAN BE ATTRACTIVE TO POTENTIAL CUSTOMERS BECAUSE OF BRAND IMAGE AND STATUS. GLOBAL BRANDS OFTEN DO BETTER THAN LOCAL BRANDS THAT MAY BE BETTER SUITED TO CUSTOMER NEEDS FOR THAT AND OTHER REASONS:
CONSPICUOUS CONSUMPTION --LET EVERYONE SEE WHAT YOU BUY AND HOW MUCH YOU BUY.
LOWER PERCEIVED RISK AND COGNITIVE DISSONANCE -- WHEN GIVING A GIFT, FOR EXAMPLE
Country-of-Origin
WHERE A PRODUCT OR BRAND COMES FROM OFTEN COUNTS A GREAT DEAL WITH CONSUMERS.
COUNTRY-OF-ORIGIN EFFECT DEALS WITH QUALITY PERCEPTIONS OF PRODUCTS. THIS EFFECT DIFFERS BY PRODUCT CATEGORY. ALSO, THE QUALITY LEVEL AT WHICH A COUNTRY PRODUCES IS FACTORED IN.
COUNTRY-OF-ORIGIN BIAS CUSTOMERS TEND TO OVERSTATE THE POSITIVE AND NEGATIVES OF PRODUCT ATTRIBUTES AND THIS CAN CAUSE A BIAS TOWARDS PRODUCTS FROM A GIVEN COUNTRY.
Lower Price
THROUGH A REDUCED PRICE, A CUSTOMER IS OFTEN INDUCED TO BUY A MISPOSITIONED BRAND BECAUSE THEY FEEL THAT THEY AR GETTING A “GOOD DEAL.”
HOWEVER, THIS CAN BACKFIRE ON THE MARKETER, SINCE THE PRICE PAID GRADUALLY LOSES SALIENCE, WHILE THE LESS DESIRABLE BRAND STAYS AS A REMINDER.
Global S-T-P Strategies
Market Segmentation CasesSimilar Segment
The target segment is the same across countries Different Segment
The target segment differs across countriesProduct Positioning Dimensions
Similar PositioningIndicates a positioning which is the same across countries
Different PositioningIndicates that the positioning theme is adapted across
countries.
NikeIKEA
Mobile phones
Honda Prelude
Levi’sVolvo
Pampers
Similar
Different
Similar Different
Local Micro-Segment
Positioning
Global S-T-P Strategies
Because global marketing involves coordination of marketing across countries, the mindset of the global marketer is
different from that of the typical domestic marketer.
It is not as customer oriented in any one local market..
It is important to strike the right balance between a global and local orientation.
Takeaway
The typical approach to global segmentation occurs in two stages:
Macro-segmentation of countries in a first stage,
followed by
micro-segmentation where target segments in the chosen countries are identified.
Takeaway
Statistically based clustering techniques can be used with trade regions to group the countries into macro-segments of markets with similar economic & cultural
characteristics.
Takeaway
Successful local positioning of a product or brand requires an in-depth analysis of how the local market might react to the
entry of a foreign or global brand.
Takeaway