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

Macro-Segmentation on “Think” and “Feel” Dimensions

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

Takeaway

Even if the target segments are the same across countries, positioning may differ. And even where the positioning is the

same across countries, the segments might differ.

The reasons involve differing environmental conditions surrounding product usage and different competitive

situations.